1 00:00:03,480 --> 00:00:07,160 Speaker 1: This is Bloomberg Surveillance. It's not the job of finance 2 00:00:07,240 --> 00:00:10,040 Speaker 1: ministers and central bank governors to accelerate a crisis. It's 3 00:00:10,039 --> 00:00:12,479 Speaker 1: our job to try and avoid a crisis. The danger 4 00:00:12,680 --> 00:00:15,920 Speaker 1: of what's going on in market at the moment is 5 00:00:15,960 --> 00:00:19,720 Speaker 1: that it does feedback to the real economy right now, 6 00:00:19,960 --> 00:00:23,400 Speaker 1: I don't think we need to do any new fiscal policy, 7 00:00:23,600 --> 00:00:26,640 Speaker 1: so it's really a question about what's going to happen 8 00:00:26,680 --> 00:00:30,200 Speaker 1: in the future. Bloomberg Surveillance your link to the world 9 00:00:30,200 --> 00:00:35,080 Speaker 1: of economics, finance, and investments on Bloomberg Radio. Good morning everyone, 10 00:00:35,120 --> 00:00:38,240 Speaker 1: without question, the conversation of the morning coming up next 11 00:00:38,320 --> 00:00:42,160 Speaker 1: and not Embody of Stanford and her comments on the 12 00:00:42,520 --> 00:00:46,720 Speaker 1: controversial decision of Neil cash Cary of Minnesota and of 13 00:00:46,800 --> 00:00:50,400 Speaker 1: Minneapolis to drive forward the too big to Fail debate. 14 00:00:50,440 --> 00:00:53,120 Speaker 1: Michael McKeon, now have that for you in a morment 15 00:00:53,240 --> 00:00:55,520 Speaker 1: right now for an exchange in a quiet day. The 16 00:00:55,600 --> 00:00:59,320 Speaker 1: Forex Brief brought you by Interactive Brokers in our f 17 00:00:59,480 --> 00:01:01,760 Speaker 1: X Weeks two thousand and fifteen award for the best 18 00:01:01,800 --> 00:01:04,920 Speaker 1: Retail for US training platform visit ib at I b 19 00:01:05,080 --> 00:01:08,720 Speaker 1: k R dot com slash for rex I mentioned weeken 20 00:01:10,240 --> 00:01:13,160 Speaker 1: Euro churning one ten o nine sterling with a nice 21 00:01:13,200 --> 00:01:17,199 Speaker 1: bid off that one thirty eight shock yesterday one fifty 22 00:01:17,240 --> 00:01:21,600 Speaker 1: four up seven uh pips dollar Canada well through one 23 00:01:22,040 --> 00:01:27,319 Speaker 1: seven Stronger Canada one one thirty six nineteen. I'm lonely, Mike. 24 00:01:27,360 --> 00:01:29,320 Speaker 1: I think we'll leave it that that, Mike, I want 25 00:01:29,319 --> 00:01:33,400 Speaker 1: you to set up this important interview by saying, who 26 00:01:33,480 --> 00:01:38,120 Speaker 1: is Neil Kashkari? Who is a Neil cash Car is, 27 00:01:38,160 --> 00:01:40,920 Speaker 1: of course the new president of the Federal Reserve Bank 28 00:01:41,040 --> 00:01:46,440 Speaker 1: of Minneapolis. Former Treasury Department official, a noted body, is 29 00:01:46,840 --> 00:01:51,200 Speaker 1: professor of Finance and Economics at Stanford University. She wrote 30 00:01:51,200 --> 00:01:53,920 Speaker 1: the book The Banker's New Clothes and UH. In a 31 00:01:53,960 --> 00:01:57,919 Speaker 1: way she has been done Quixote for years, warning about 32 00:01:58,040 --> 00:02:01,640 Speaker 1: the dangers of under capitaliz has poorly regulated banks and 33 00:02:01,720 --> 00:02:04,280 Speaker 1: what they could do to the economy. And she has 34 00:02:04,360 --> 00:02:07,600 Speaker 1: now in Mr cash Car and also John Vickers talking 35 00:02:07,600 --> 00:02:10,120 Speaker 1: about this over in England. Perhaps she has found her 36 00:02:10,160 --> 00:02:15,040 Speaker 1: Sancho Pazos not welcome back to the show. All of 37 00:02:15,080 --> 00:02:18,000 Speaker 1: a sudden you have some traction with some people who matter. 38 00:02:18,400 --> 00:02:21,960 Speaker 1: I know, it's amazing. Suddenly somebody would make a noise. 39 00:02:22,040 --> 00:02:25,680 Speaker 1: It was more important than I am. And um, you know, 40 00:02:25,760 --> 00:02:29,680 Speaker 1: suddenly people are curious about what's going on and so 41 00:02:29,720 --> 00:02:33,880 Speaker 1: we can talk. You have for years said that banks 42 00:02:33,919 --> 00:02:39,240 Speaker 1: needed more capital. Would you agree with Mr cash Carry 43 00:02:39,560 --> 00:02:44,640 Speaker 1: that they should be somehow broken up? Well, the question 44 00:02:44,800 --> 00:02:47,480 Speaker 1: is if you start with a breakup or you or 45 00:02:47,520 --> 00:02:52,760 Speaker 1: the breakup happens because they can't live in markets with equity, 46 00:02:52,880 --> 00:02:55,919 Speaker 1: so it's not inconsistent. I think that they are too 47 00:02:55,919 --> 00:03:00,639 Speaker 1: big to manage to regulate their monstrous insta tuitions by 48 00:03:00,680 --> 00:03:02,760 Speaker 1: any measure that you can look at. So something is 49 00:03:02,880 --> 00:03:06,960 Speaker 1: very wrong with them. How you get there is sort 50 00:03:06,960 --> 00:03:11,600 Speaker 1: of the question what part of the business model is 51 00:03:11,960 --> 00:03:14,360 Speaker 1: too big in the sense of if they were to 52 00:03:14,440 --> 00:03:19,040 Speaker 1: hive something off, what what makes them dangerous? Well, I 53 00:03:19,080 --> 00:03:21,840 Speaker 1: think they're just a lot of things that we see. 54 00:03:21,880 --> 00:03:24,840 Speaker 1: What we see is big enough, and what's sort of 55 00:03:24,919 --> 00:03:29,160 Speaker 1: lurking around them is almost as scary. The fact that 56 00:03:29,280 --> 00:03:31,760 Speaker 1: I don't think we understand all the risks and derivatives 57 00:03:31,880 --> 00:03:35,280 Speaker 1: and in the various subsidiaries that they have. And I 58 00:03:35,280 --> 00:03:37,600 Speaker 1: think that the lines of business to just have become 59 00:03:37,920 --> 00:03:40,680 Speaker 1: kind of out of control for one corporation. I mean, 60 00:03:40,720 --> 00:03:44,160 Speaker 1: we don't see any corporations being being as big, being 61 00:03:44,200 --> 00:03:52,040 Speaker 1: as as complicated m HM, A professor body to frame 62 00:03:52,080 --> 00:03:55,440 Speaker 1: the debate and in President Caush Carr has been very 63 00:03:55,440 --> 00:03:58,040 Speaker 1: good about saying there will be a symposium and I 64 00:03:58,080 --> 00:04:01,400 Speaker 1: think everyone in the debate would be honored if you attended, 65 00:04:01,880 --> 00:04:07,200 Speaker 1: whether they agree or disagree with you. I'm going I'm fourth, 66 00:04:07,520 --> 00:04:10,600 Speaker 1: uh and and I'm one of the speakers in the announcements. 67 00:04:10,600 --> 00:04:13,160 Speaker 1: I think I sent okay, well you know, I'm sorry. 68 00:04:13,200 --> 00:04:17,360 Speaker 1: I mean my people didn't you know I I failed. 69 00:04:17,360 --> 00:04:21,880 Speaker 1: I was not a superbuss today at Maddy. But but importantly, Professor, 70 00:04:22,279 --> 00:04:25,760 Speaker 1: the dialogue is between and not at Madhi and Stephen Ratner, 71 00:04:25,800 --> 00:04:29,240 Speaker 1: who appeared with us yesterday and he said to his 72 00:04:29,400 --> 00:04:32,760 Speaker 1: good and esteemed colleague with public service in this nation 73 00:04:33,120 --> 00:04:36,120 Speaker 1: that Neil cash Kari is just flat out I can't remember, 74 00:04:36,200 --> 00:04:41,040 Speaker 1: Mike the exact language. Where is Steve Rattner off the mark? Oh, 75 00:04:41,160 --> 00:04:45,800 Speaker 1: I didn't listen to this, so I faith two. I 76 00:04:45,839 --> 00:04:48,160 Speaker 1: have a day job. So but but within your day 77 00:04:48,279 --> 00:04:52,240 Speaker 1: job is the idea that he said? He said that 78 00:04:52,360 --> 00:04:57,960 Speaker 1: the banks are doing fine and that regulation is the solution. No, 79 00:04:58,279 --> 00:05:00,440 Speaker 1: that I agree with for sure, that and fine, I 80 00:05:00,480 --> 00:05:03,080 Speaker 1: don't agree. I mean fine by what measures. You know, 81 00:05:03,760 --> 00:05:06,480 Speaker 1: you could be driving down the highway to have fifty 82 00:05:07,200 --> 00:05:10,200 Speaker 1: and you know you're doing fine while you're making a turn. 83 00:05:10,320 --> 00:05:13,640 Speaker 1: But I don't think. I don't think we should feel 84 00:05:13,680 --> 00:05:16,279 Speaker 1: that they're fine. I don't feel they're fine. I don't. 85 00:05:17,360 --> 00:05:20,599 Speaker 1: I think they were very endangered by them, and there's 86 00:05:20,640 --> 00:05:22,640 Speaker 1: no reason they should be so dangerous. So I think 87 00:05:22,680 --> 00:05:25,640 Speaker 1: that these are falster insurances. I don't know what Steve 88 00:05:25,760 --> 00:05:29,080 Speaker 1: Rasner has to go by to us to make those assertions. 89 00:05:29,440 --> 00:05:32,200 Speaker 1: I think he suggested, as I have a number of 90 00:05:32,240 --> 00:05:36,120 Speaker 1: people that with the additional capital that banks are being 91 00:05:36,160 --> 00:05:38,840 Speaker 1: required to hold, and with the additional regulation that's been 92 00:05:38,839 --> 00:05:42,240 Speaker 1: imposed by that Frank, especially the costs of complying with 93 00:05:42,279 --> 00:05:46,039 Speaker 1: that regulation, that banks are significantly safer than they were 94 00:05:46,240 --> 00:05:49,880 Speaker 1: going into the financial crist. That's not a measure for me. 95 00:05:50,200 --> 00:05:54,080 Speaker 1: And obviously they were not safe going into the financial market, 96 00:05:54,360 --> 00:05:57,720 Speaker 1: and like a bysmally not safe and everybody suffers the consequences. 97 00:05:57,800 --> 00:06:00,159 Speaker 1: So being safe for it is not much of or 98 00:06:00,160 --> 00:06:02,560 Speaker 1: resurance for me. The question is that they as safe 99 00:06:02,600 --> 00:06:06,280 Speaker 1: as they should be. Now. Those that say, oh, regulations 100 00:06:06,279 --> 00:06:08,800 Speaker 1: have done this, and dot Frank has done that, I 101 00:06:08,960 --> 00:06:12,039 Speaker 1: actually look at that, and I actually am involved in 102 00:06:12,040 --> 00:06:13,760 Speaker 1: a few of the pieces of the dog Frank, and 103 00:06:13,800 --> 00:06:16,520 Speaker 1: I can tell you that I am not happy with 104 00:06:16,560 --> 00:06:19,120 Speaker 1: the way the dog Frank is being implemented. And the 105 00:06:19,200 --> 00:06:21,760 Speaker 1: cost of compliance are high because the regulations are way 106 00:06:21,800 --> 00:06:24,800 Speaker 1: too complex. For example, they're telling you the two Big 107 00:06:24,800 --> 00:06:26,720 Speaker 1: two fail is over because they have some death that 108 00:06:26,760 --> 00:06:32,240 Speaker 1: will absorb losses. Tom Honey gave a speech saying, it's 109 00:06:32,360 --> 00:06:34,960 Speaker 1: very strange to take a very fragile system and think 110 00:06:35,000 --> 00:06:37,479 Speaker 1: that death is the thing that will make it stable. 111 00:06:38,240 --> 00:06:41,440 Speaker 1: In order for the te lacks of their to work, 112 00:06:41,880 --> 00:06:44,680 Speaker 1: You're gonna have to have the courage to declare JP 113 00:06:44,800 --> 00:06:48,760 Speaker 1: Morgan Chase insolvent when it has it and how other 114 00:06:48,760 --> 00:06:50,160 Speaker 1: banks And I'm not I don't mean to point to 115 00:06:50,240 --> 00:06:52,640 Speaker 1: JP Morgan Chase. It's among the stronger one maybe, but 116 00:06:53,200 --> 00:06:55,600 Speaker 1: that either of them. So why are we counting on 117 00:06:55,760 --> 00:06:57,920 Speaker 1: death that would magically convert to equity when we can 118 00:06:57,920 --> 00:07:01,120 Speaker 1: put equity in its place, so it is much simpler. 119 00:07:01,279 --> 00:07:03,440 Speaker 1: The lawyers might have less work to do, and that 120 00:07:03,520 --> 00:07:06,320 Speaker 1: would be less compliance if you just have them retain 121 00:07:06,360 --> 00:07:09,280 Speaker 1: their earnings. If we understand that there was bank failure, 122 00:07:09,880 --> 00:07:13,640 Speaker 1: there were clearly makes mistakes made. Even the most stangeous 123 00:07:13,640 --> 00:07:17,720 Speaker 1: bank defender agrees with that. And if we have new regulation, 124 00:07:18,280 --> 00:07:23,480 Speaker 1: how do you expect US banks to compete internationally if 125 00:07:23,520 --> 00:07:28,120 Speaker 1: we give up size and scale. Well, you know, international 126 00:07:28,680 --> 00:07:32,280 Speaker 1: competition is all good and well, except when it comes 127 00:07:32,280 --> 00:07:34,880 Speaker 1: on the back of taxpayers. So what I say is, 128 00:07:35,160 --> 00:07:38,600 Speaker 1: you know, we can control only what we can control. 129 00:07:38,880 --> 00:07:43,680 Speaker 1: It's not a national objective that our banks be competitive globally. 130 00:07:44,600 --> 00:07:48,040 Speaker 1: You know, the Irish banks were competitive in their Icelandic 131 00:07:48,080 --> 00:07:50,360 Speaker 1: banks were competitive for one look where it took them. 132 00:07:50,920 --> 00:07:54,680 Speaker 1: So it definitely an objective. Yeah, I mean, Mike, I 133 00:07:54,680 --> 00:07:57,040 Speaker 1: think we have to harken back to the Irish lesson 134 00:07:57,760 --> 00:08:00,160 Speaker 1: is part of this debate. Again, whatever the polar any 135 00:08:00,200 --> 00:08:03,840 Speaker 1: of the debate is completely You know, everybody can succeed 136 00:08:03,840 --> 00:08:06,160 Speaker 1: if you give them enough subsidies. If you know, so, 137 00:08:06,360 --> 00:08:08,320 Speaker 1: the competing to harm it's not it's not the kind 138 00:08:08,320 --> 00:08:10,480 Speaker 1: of competition I want. They're competing with the rest of 139 00:08:10,520 --> 00:08:13,040 Speaker 1: the economy. They're taking you know that we may have 140 00:08:13,080 --> 00:08:16,040 Speaker 1: two biggest financial sector. I want the markets to work. 141 00:08:16,080 --> 00:08:19,800 Speaker 1: I think it's all distorted by subsidies and by you know, 142 00:08:20,000 --> 00:08:23,240 Speaker 1: recklessness and bloated and so I want to see the 143 00:08:23,280 --> 00:08:27,320 Speaker 1: market work. When you go up to Minneapolis on April fourth, 144 00:08:27,480 --> 00:08:31,080 Speaker 1: what are you going to tell the president cash carry 145 00:08:31,160 --> 00:08:34,080 Speaker 1: other than turn off the heat case. I have a 146 00:08:34,120 --> 00:08:37,439 Speaker 1: lot to say. In fact, every much the time they 147 00:08:37,440 --> 00:08:39,920 Speaker 1: give me, I will and I and I'm actually telling 148 00:08:39,960 --> 00:08:42,679 Speaker 1: them what I think they should emphasize. Which are the 149 00:08:42,760 --> 00:08:45,200 Speaker 1: kinds of things I want to get into for the 150 00:08:45,280 --> 00:08:48,320 Speaker 1: last six years before we once we remove all the 151 00:08:48,440 --> 00:08:51,719 Speaker 1: fog and all the and all the flawed claims, which is, 152 00:08:52,000 --> 00:08:55,400 Speaker 1: how do we measure anything there? I am not happy 153 00:08:55,520 --> 00:08:59,680 Speaker 1: with the way we even understand the risks from these markets. 154 00:08:59,679 --> 00:09:02,200 Speaker 1: So I trust the measures. I don't trust to risk weight. 155 00:09:02,440 --> 00:09:05,680 Speaker 1: All of those things are enormous problems. So you know, 156 00:09:05,720 --> 00:09:10,840 Speaker 1: I don't see capital as measured as the as necessarily 157 00:09:10,880 --> 00:09:13,839 Speaker 1: the silver bullet. And if you tell me that they 158 00:09:13,880 --> 00:09:17,079 Speaker 1: measure it is as you know in five is that 159 00:09:17,240 --> 00:09:19,960 Speaker 1: I'm going back to sleep. So there's plenty to talk 160 00:09:20,000 --> 00:09:23,840 Speaker 1: about regarding you know, the scope of banking, the type 161 00:09:23,840 --> 00:09:27,840 Speaker 1: of reporting. You know they still rely on credit rating agencies, 162 00:09:27,920 --> 00:09:32,319 Speaker 1: all kinds of things. I'm not fabulous. Let's come back 163 00:09:32,360 --> 00:09:35,520 Speaker 1: with another body. I'm sorry one block today and not 164 00:09:35,720 --> 00:09:38,600 Speaker 1: thank you so much. We really need not We would 165 00:09:38,679 --> 00:09:40,960 Speaker 1: kill I'm gonna book you right now. We would kill 166 00:09:41,640 --> 00:09:45,720 Speaker 1: to have you on somewhere around that important April meeting 167 00:09:46,480 --> 00:09:50,160 Speaker 1: in Minneapolis. We need to make every effort to do that. 168 00:09:50,280 --> 00:09:53,840 Speaker 1: Professor and not of body at Stanford, truly that the 169 00:09:53,960 --> 00:10:00,320 Speaker 1: nation's leader on um careful, measured and respectful criticism of 170 00:10:00,320 --> 00:10:04,600 Speaker 1: our bank and financial institutions. Well, Chris Whalen, Uh, Michael 171 00:10:04,640 --> 00:10:08,440 Speaker 1: McKee was active today out talking about ker flatness as 172 00:10:08,480 --> 00:10:13,240 Speaker 1: being a challenge to bank profitability. Well, sure, um and 173 00:10:13,480 --> 00:10:16,080 Speaker 1: uh it's a difficult time period because that is sort 174 00:10:16,080 --> 00:10:19,200 Speaker 1: of out of the hands of the regulators and our 175 00:10:19,320 --> 00:10:22,760 Speaker 1: kindest thanks to Stephen Ratner UM yesterday on the show 176 00:10:22,760 --> 00:10:25,920 Speaker 1: with Willow Advisors. We should point out as disclaimer one 177 00:10:25,920 --> 00:10:29,640 Speaker 1: of the managers of our owner, Michael Bloomberg's money. Michael 178 00:10:29,679 --> 00:10:32,480 Speaker 1: Bloomberg is a founder and leader of the company and 179 00:10:32,520 --> 00:10:36,199 Speaker 1: Bloomberg Radio. But the polarity between Ratner and Mahia is 180 00:10:36,280 --> 00:10:40,600 Speaker 1: what it's what this show is all about. Different different views, 181 00:10:40,840 --> 00:10:44,480 Speaker 1: different people with different views. Futures green up four down, 182 00:10:44,520 --> 00:10:47,720 Speaker 1: features up forty one. They yield one point seven four 183 00:10:52,640 --> 00:10:54,079 Speaker 1: And let's take him with John Tucker, I get the 184 00:10:54,160 --> 00:10:57,720 Speaker 1: latest world in National Headby's John, Thanks, Michael and Tom 185 00:10:57,800 --> 00:11:01,520 Speaker 1: with five days Availa before Super Tuesday. Republican rivals of 186 00:11:01,600 --> 00:11:04,959 Speaker 1: Donald Trump looking to challenge the GOP front runner during 187 00:11:04,960 --> 00:11:08,120 Speaker 1: tonight's debate. He in Houston, Marco Rubio Ted Cruz have 188 00:11:08,280 --> 00:11:10,640 Speaker 1: so far shown a little willingness to take on Trump 189 00:11:10,920 --> 00:11:14,200 Speaker 1: in a high profile setting that could, of course change tonight. 190 00:11:14,600 --> 00:11:17,240 Speaker 1: A storm systems have brought tornadoes to the East Coast, 191 00:11:17,280 --> 00:11:20,880 Speaker 1: killing four people in Virginia, including a two year old. 192 00:11:21,040 --> 00:11:24,760 Speaker 1: Virginia got A Terry McCaul off declaring a state of emergency. Elsewhere, 193 00:11:24,760 --> 00:11:27,000 Speaker 1: Officials in South Carolina say a man was killed when 194 00:11:27,040 --> 00:11:30,600 Speaker 1: a tree film on him. The World Health Organization says 195 00:11:30,640 --> 00:11:33,199 Speaker 1: women breastfeeding their babies in countries hit by the ZEKEA 196 00:11:33,280 --> 00:11:36,520 Speaker 1: virus should continue to do so, who says there's no 197 00:11:36,559 --> 00:11:40,120 Speaker 1: proof the disease can spread to infants that way. Global 198 00:11:40,160 --> 00:11:42,200 Speaker 1: News twenty four hours a day, powered by a twenty 199 00:11:42,240 --> 00:11:45,360 Speaker 1: four journalists more than one hundred fifty news bureaus around 200 00:11:45,400 --> 00:11:48,400 Speaker 1: the world. I'm John Tucker, Michael and to Fry, John, 201 00:11:48,440 --> 00:11:50,599 Speaker 1: thanks so much. We're gonna get a one thirteen Perdanion 202 00:11:50,720 --> 00:11:54,320 Speaker 1: week Er two days in a row, one sterling front 203 00:11:54,320 --> 00:12:01,040 Speaker 1: and center, one stronger Sterling off the horror of yesterday worldwide. 204 00:12:01,160 --> 00:12:07,480 Speaker 1: Bloomberg's Surveillance Market Driver is brought to you by your 205 00:12:07,480 --> 00:12:09,840 Speaker 1: Mercedes Benz Tri State Dealer. When it comes to winter elements, 206 00:12:09,880 --> 00:12:12,200 Speaker 1: put your best four wheels forward with Mercedes Benz four 207 00:12:12,280 --> 00:12:14,960 Speaker 1: Radical wheel Drive. This is your Mercedes Benz Tri State 208 00:12:14,960 --> 00:12:17,120 Speaker 1: Dealer for a test drive today