WEBVTT - Tariffs May Crowd Out Investment, Coronado Says 0:00:00.080 --> 0:00:12.960 Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. 0:00:13.480 --> 0:00:17.560 Daily we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.320 Bloomberg dot Com, and of course on the Bloomberg Wolis. 0:00:33.360 --> 0:00:35.800 Julia Cornado, we want to pause here before we get 0:00:35.800 --> 0:00:38.760 the g d P and the guestimates of it, with 0:00:39.040 --> 0:00:42.000 the photo of the week last week for me and frankly, 0:00:42.200 --> 0:00:45.559 is the photo of International Women's Day. If you just 0:00:45.680 --> 0:00:49.479 assume that all of accomplishment of men and women is 0:00:49.479 --> 0:00:54.400 about ability and smarts. What a wonderful photo of chair Yelling, 0:00:55.200 --> 0:00:59.320 Catherine Man, Julia Cornado and others assembled. I believe Ellen 0:00:59.400 --> 0:01:01.960 Zentner up I saw there from Morgan Stanley as well. 0:01:02.280 --> 0:01:05.520 Tell us about the energy in the room, and tell 0:01:05.640 --> 0:01:09.720 us what this meeting of the smartest minds of women economics, 0:01:09.959 --> 0:01:14.520 what it meant for the young kids that were invited there. Yeah, yeah, well, 0:01:14.560 --> 0:01:16.880 I mean it was it was a celebration of Janet 0:01:16.959 --> 0:01:19.600 Yellen and her accomplishments. We wanted to say thank you 0:01:19.640 --> 0:01:22.440 to her, and I think for everybody in that room. 0:01:22.520 --> 0:01:26.640 She has been such a powerful figure for us, a 0:01:26.680 --> 0:01:31.560 powerful inspiration. Uh and it was a really warm, warm environment. 0:01:31.720 --> 0:01:33.960 Lots of lots of love in that room. Tell us 0:01:33.959 --> 0:01:36.600 where we're going to be in five years or ten years. 0:01:36.640 --> 0:01:40.759 The loneliness of Cherry Yellen, the loneliness of Kathy Man 0:01:40.800 --> 0:01:44.080 at m I t a million years ago, Ellen Zetner 0:01:44.240 --> 0:01:46.520 all by herself at Namura on our way to the 0:01:46.560 --> 0:01:50.800 excellence at Morgan Stanley. And you've accomplished with particularly with 0:01:50.880 --> 0:01:54.720 your analysis of g d P. It was lonely. It's 0:01:54.800 --> 0:01:58.160 less lonely now where lonely? I mean, I I hope 0:01:58.160 --> 0:02:00.560 we're I hope it's even less lonely. I hope it's 0:02:00.600 --> 0:02:03.000 not a It doesn't make you unique to be a 0:02:03.080 --> 0:02:06.320 woman chief economist in ten years, I certainly hope that 0:02:06.440 --> 0:02:08.760 to be true. Um And I think that there's a 0:02:08.760 --> 0:02:11.320 lot of people, both men and women, who are focused 0:02:11.360 --> 0:02:15.680 on changing uh so so so I'm optimistic for that 0:02:17.360 --> 0:02:20.720 path breaking here we forget it. And it's someone that 0:02:20.800 --> 0:02:24.960 everyone in economics knows was the absolute courage of Joan 0:02:25.080 --> 0:02:31.960 Robinson in London and in England, hugely contentious economics debates 0:02:32.040 --> 0:02:34.200 coming out of World War Two. I think there's also 0:02:34.280 --> 0:02:37.320 just a real awareness from a business perspective that actually 0:02:37.320 --> 0:02:40.600 it brings huge amounts of benefits to have diversity. I 0:02:40.639 --> 0:02:42.920 can share you an anecdote. I can't name the names, 0:02:42.919 --> 0:02:45.120 but I know an individual that was an executive at 0:02:45.160 --> 0:02:48.320 a large apparel brand here in the United States, and 0:02:48.400 --> 0:02:51.640 the board were worried about female upper ourselves. And guess 0:02:51.680 --> 0:02:53.960 what the board was made up of, all males. They 0:02:53.960 --> 0:02:57.160 couldn't relate to women. And it's a problem the retailers 0:02:57.160 --> 0:03:00.000 have had that the board is so dominated by say, 0:03:00.000 --> 0:03:03.120 white males, they can't relate to most of the people 0:03:03.160 --> 0:03:06.079 that are actually selling product too, and therefore the company 0:03:06.200 --> 0:03:08.880 very quickly becomes stale. And Julia, that's the point I 0:03:08.880 --> 0:03:14.720 think is more important. Absolutely absolutely awareness that the benefits 0:03:14.760 --> 0:03:18.560 not about the stake of having numbers numbers fairness. It's 0:03:18.600 --> 0:03:21.400 about getting things right. And that is true in the 0:03:21.440 --> 0:03:24.639 retail industry, and that's also true in the finance industry. 0:03:24.680 --> 0:03:27.440 Are you going to get the world right? In economics? 0:03:27.600 --> 0:03:30.040 Are you going to forecast the world right if you 0:03:30.120 --> 0:03:34.880 don't have half of the population represented, and and and 0:03:34.920 --> 0:03:38.800 so representation matters not just a fairness but to getting things. 0:03:38.960 --> 0:03:41.120 Let's get it right right now? Does President Trump have 0:03:41.240 --> 0:03:45.800 it right that we can sustain make America great again GDP. 0:03:46.200 --> 0:03:49.440 I don't think that we can sustain three percent GDP. 0:03:49.640 --> 0:03:51.160 I think that we are going to have a very 0:03:51.160 --> 0:03:53.040 good year. I think that we are going to grow 0:03:53.120 --> 0:03:55.840 above trend. But I think that, you know, at least 0:03:55.840 --> 0:03:58.360 the way we economists would look at things, when you 0:03:58.440 --> 0:04:02.280 do fiscal stimulus at full employment, what happens do we 0:04:02.440 --> 0:04:07.160 even have the workers to push GDP um Where we 0:04:07.200 --> 0:04:10.120 saw in the basebook yesterday, the labor market's very tight. 0:04:10.200 --> 0:04:13.920 It's very hard to find the workers to generate additional growth, 0:04:14.000 --> 0:04:17.080 even to sustain the strong growth that we have. So 0:04:17.400 --> 0:04:19.600 what happens is, and we've seen this in Q one 0:04:19.640 --> 0:04:22.640 GDP numbers the trade. We start sourcing that growth abroad. 0:04:23.160 --> 0:04:26.520 Imports are rising. The trade deficit is actually, quite ironically 0:04:26.720 --> 0:04:32.200 right into the tariff debate today, which is if there's 0:04:32.200 --> 0:04:34.880 a dearth of exports. The other side of that, as 0:04:34.960 --> 0:04:39.159 you correctly state, as we're sourcing imports, right, we're sourcing imports. 0:04:39.160 --> 0:04:41.760 We're sourcing and you know when you do capex, actually 0:04:41.800 --> 0:04:45.400 a lot of the capex inputs are coming from abroad. 0:04:46.000 --> 0:04:48.839 Uh So we're gonna trade is going to subtract maybe 0:04:48.839 --> 0:04:51.280 even up to a percentage point off Q one GDP 0:04:52.440 --> 0:04:55.680 because we are seeing strong demand and we have to 0:04:55.680 --> 0:04:58.880 source it abroad. Uh And and what will the tariffs 0:04:58.920 --> 0:05:01.520 due to all of this, um well, that has the 0:05:01.520 --> 0:05:04.400 potential to crowd things out a bit, create a bit 0:05:04.400 --> 0:05:08.080 of inflation, crowd out some of the investment. Are we 0:05:08.160 --> 0:05:13.920 going to sustain a one percent decline in GDP looking 0:05:13.960 --> 0:05:17.440 at exports and imports, that's a that's a loaded question. Yeah. 0:05:17.480 --> 0:05:19.920 I mean, look, trade is very volatile, and and Q 0:05:20.160 --> 0:05:23.160 one is that's one of the areas that typically features 0:05:23.160 --> 0:05:25.720 in the week Q one pattern that we've had, so 0:05:25.920 --> 0:05:28.320 you don't want to extrapolate from that. But I think 0:05:28.640 --> 0:05:31.560 whether Q want Julia, no, no, no, it's not whether 0:05:31.680 --> 0:05:37.159 it's not whether it's statistical, it's season residual, seasonality. But 0:05:38.480 --> 0:05:40.719 I think in general, for the year as a whole, 0:05:40.800 --> 0:05:42.880 we should look for trade to be a bigger drag 0:05:42.960 --> 0:05:47.960 because of stronger imports and sourcing some of the demand 0:05:47.960 --> 0:05:50.320 that we need from abroad. Julia Cornado, thank you so 0:05:50.400 --> 0:05:53.560 much for joining us today. Julia Cornado and AMP Joseph Cohine. 0:05:53.600 --> 0:06:08.560 We really wanted to put them together. We're bringing Peter 0:06:08.640 --> 0:06:11.760 Chat well, so we Missooi international head of European rate Strategy, 0:06:12.000 --> 0:06:15.080 and Jeffrey u UBS Private Banking head at UK Investment 0:06:15.120 --> 0:06:19.040 Office UBS Private Banking. He joined us right now. Jeff. 0:06:19.120 --> 0:06:20.599 Let's begin with you, sir, as you look at the 0:06:20.600 --> 0:06:23.200 forward gardeners from the e c B. It's a delicate 0:06:23.240 --> 0:06:25.159 shift that they've talked about for a year, but they've 0:06:25.200 --> 0:06:29.040 dropped that pledge. Your thoughts absolutely, and but also I 0:06:29.040 --> 0:06:31.320 think there'll be many in the market who are saying, look, guys, 0:06:31.320 --> 0:06:34.720 and what took you so long? Right? So it's clearly 0:06:34.880 --> 0:06:37.840 on that some people are not a position for this. Um. 0:06:37.880 --> 0:06:40.040 I think the ECB will still, you know, taken easy. 0:06:40.120 --> 0:06:41.960 Let's see what drug has to say. They're going to 0:06:42.000 --> 0:06:45.800 be keen on trying to avoid any type of a 0:06:46.200 --> 0:06:48.640 tantrum up ahead. But so far it looks like markets 0:06:48.640 --> 0:06:51.480 are taking this well. Pitter chat well, as Jeff points out, 0:06:51.520 --> 0:06:53.240 what did take so long? They've been talking about it 0:06:53.279 --> 0:06:55.279 for about two halve months. I guess it is relative 0:06:55.320 --> 0:06:58.640 to expectations. People just did not expect it to happen today, 0:06:58.680 --> 0:07:03.280 did you we We were not expecting this to go 0:07:04.240 --> 0:07:08.039 at this point. The only reason that we would expect 0:07:08.080 --> 0:07:11.080 that it could go here is if the e c 0:07:11.280 --> 0:07:16.040 B is also ready to make a change to some 0:07:16.120 --> 0:07:18.880 of their forward guidance on the timing and the pace 0:07:18.960 --> 0:07:21.400 of interest rate hikes. So that's the way that this. 0:07:22.040 --> 0:07:24.680 As long as they're clear about this and they prevent 0:07:24.720 --> 0:07:28.360 the market from from pricing imminent rate heights, then this 0:07:28.400 --> 0:07:32.480 won't turn into something more significant that leads to wider spread. 0:07:33.480 --> 0:07:36.320 But just having a lower buon price a higher bund yield, 0:07:36.800 --> 0:07:38.400 it's not the end of the world. I'm going to 0:07:38.520 --> 0:07:41.560 frame here after Bloomberg terminal, the sequence of headlines that 0:07:41.600 --> 0:07:43.640 I have out, I'll put that out on social for 0:07:43.680 --> 0:07:46.920 all of Bloomberg Radio and Jeff you what it is 0:07:46.920 --> 0:07:51.800 is just the tone of nine ten eleven headlines. It 0:07:51.880 --> 0:07:55.880 reminds me of Mark Kearney ten twelve months ago saying, 0:07:55.960 --> 0:07:58.640 you know, we have to wait until inflation goes up. 0:07:59.040 --> 0:08:03.280 Did Mr Drag blinked this morning? Um? I wouldn't say 0:08:03.320 --> 0:08:06.640 he's unblinking, But it's just more you realizing that some 0:08:06.760 --> 0:08:09.440 things you need to change, and at this point, and 0:08:09.600 --> 0:08:12.480 also knowing that the market probably is in a better 0:08:12.480 --> 0:08:15.240 position to actually accept change at this point. So it 0:08:15.360 --> 0:08:18.200 is really that dynamicism place. Um and again you know 0:08:18.360 --> 0:08:22.040 the markets take it well, even with further normalization prospect 0:08:22.080 --> 0:08:24.440 up ahead, then he'll be happy with the results. This 0:08:24.520 --> 0:08:27.000 is a real baby step though, Jeff. There'll be some 0:08:27.160 --> 0:08:29.640 listeners that are thinking, what are we getting excited about? 0:08:29.680 --> 0:08:32.720 What is this all about? As you said, Jeff, about time. 0:08:32.800 --> 0:08:34.719 But does this set us up for the removal of 0:08:34.800 --> 0:08:38.920 QA before the end of this year? Um? So, I 0:08:38.960 --> 0:08:42.800 think he is gradually laying the framework to actually push 0:08:42.920 --> 0:08:46.120 everyone in that direction, right, But so yes, you know, 0:08:46.200 --> 0:08:49.559 setting it up that is a clear intent that he's 0:08:49.559 --> 0:08:51.160 going to be looking at the reaction at the same time, 0:08:51.160 --> 0:08:54.280 and also bearing in mind financial conditions. Euro's higher on 0:08:54.320 --> 0:08:56.040 that he doesn't want to enforce it all the way 0:08:56.080 --> 0:08:58.040 up to one thirty either in the short right, Peter 0:08:58.160 --> 0:09:00.680 chat well also ter for you are so audience, but 0:09:00.760 --> 0:09:04.760 let's go There is the ten year German yield near 0:09:04.920 --> 0:09:10.199 a technical resistance where higher yields really denotes a breakout. 0:09:12.760 --> 0:09:14.880 I think it's important. I mean, yes, if you look 0:09:14.880 --> 0:09:18.280 at at a chart you might get concerned that they 0:09:18.280 --> 0:09:22.240 could go a lot higher from here, but you've got 0:09:22.240 --> 0:09:24.960 to think about the implication that that would have on 0:09:25.080 --> 0:09:29.120 financial conditions for the euro Area. And when you're giving, 0:09:29.200 --> 0:09:31.400 when you're taking away on the one hand, saying that 0:09:31.480 --> 0:09:34.080 que is not going to be increased, then I think 0:09:34.080 --> 0:09:37.400 the ECB is likely to also give something back, which 0:09:37.480 --> 0:09:40.839 is to try and reinforce and push out some of 0:09:40.880 --> 0:09:44.040 the rate high expectations. So this is why I think 0:09:44.280 --> 0:09:47.720 I was going up to seventy seventy five basis points. 0:09:47.920 --> 0:09:49.839 Then it would probably still be viewed as a buying 0:09:50.000 --> 0:09:52.839 opportunity by investors. So Jeff, get me set up for 0:09:52.880 --> 0:09:55.439 the news conference that comes in about thirty forty minutes 0:09:55.480 --> 0:09:58.320 time with ECP President maryo Draki. Is it a hawker 0:09:58.400 --> 0:10:02.120 shift at seven five Eastern time? And then a dovish 0:10:02.160 --> 0:10:06.400 news conference forty five minutes later. Um. I think the 0:10:06.480 --> 0:10:08.800 best news conferences you know will the ones where euro 0:10:08.840 --> 0:10:11.280 dollar is actually training exactly the same level as when 0:10:11.320 --> 0:10:15.040 the continents compared to then started markets and now pricing 0:10:15.080 --> 0:10:16.880 in them to be relatively confish. As long as he 0:10:16.920 --> 0:10:18.920 actually doesn't push things about that, I think you'll be 0:10:19.000 --> 0:10:21.320 fine with it. Jeff. What's so important here to me 0:10:21.520 --> 0:10:24.120 is the tone of the set of headlines. I just 0:10:24.160 --> 0:10:27.319 put out my screen. They're all different. Jam Ferrells looks 0:10:27.360 --> 0:10:31.160 different than mine. Of ECB headlines and the colors in 0:10:31.160 --> 0:10:35.280 in Jeff, I just headlined to headline to headline, they're 0:10:35.320 --> 0:10:40.000 saying we're going to wait. Explain why they're waiting for 0:10:40.080 --> 0:10:43.200 more information. Is there just no inflation out there or 0:10:43.280 --> 0:10:47.640 is it something else? There are inflation expectations as always, 0:10:47.640 --> 0:10:49.679 and that they need to be anchored, right, So drag 0:10:49.920 --> 0:10:52.600 has always expressed this uson now let's see how the 0:10:52.760 --> 0:10:54.960 break evens and move as well. Um that he needs 0:10:55.000 --> 0:10:57.960 evidence that inflation expectations on that anchored, that they can 0:10:58.040 --> 0:11:00.560 be sustained for a period of time and then there 0:11:00.600 --> 0:11:02.600 will be fully ready for a game baby steps in 0:11:02.600 --> 0:11:05.719 that direction, but he needs more evidence that those expectations 0:11:05.720 --> 0:11:12.600 are here to stay an extended period waiting running until 0:11:12.760 --> 0:11:18.040 inflation path has sustainably adjusted. That the language that that 0:11:18.040 --> 0:11:20.000 that kind of tone is still dovish as far as 0:11:20.080 --> 0:11:23.280 I agree and Peter chatwell, this is still a dovish 0:11:23.440 --> 0:11:27.120 European Central Bank under President Trachy. They are not in 0:11:27.120 --> 0:11:30.160 a rush to remove accommodation. Regardless of this pickup we've 0:11:30.160 --> 0:11:33.720 seen over the last year for the general economy, I 0:11:33.800 --> 0:11:36.600 think they're not in a rush to remove accommodation, but 0:11:36.679 --> 0:11:40.000 the market needs reassurance. And see a lot of these 0:11:40.160 --> 0:11:43.880 these headlines that you're talking about, they're still pretty wishy washy. 0:11:44.000 --> 0:11:46.880 So the market doesn't really know what and how long 0:11:46.920 --> 0:11:50.640 an extended period is. The market doesn't know how quickly 0:11:50.880 --> 0:11:53.440 rates will go up. And so these are the points 0:11:53.480 --> 0:11:56.680 that the ECB needs to make much more transparent in 0:11:56.720 --> 0:12:00.559 their forward guidance or in the press conference going award 0:12:00.600 --> 0:12:03.079 to prevent there from being what they what they call 0:12:03.160 --> 0:12:06.920 an unwarranted tiening of monetary conditions. But hold on a minute, Jeff, 0:12:07.160 --> 0:12:10.080 I remember the Federal Reserve using exactly the same language 0:12:10.320 --> 0:12:13.320 that the rates wouldn't rise until an extended period of time. 0:12:13.520 --> 0:12:15.199 Are they just taken a leaf out of the Federal 0:12:15.240 --> 0:12:19.800 Reserves forward guidance playbook from several years ago? Well, I 0:12:19.840 --> 0:12:21.800 think if you look at how they said handled rate 0:12:21.880 --> 0:12:24.000 hikes last year, you know when there was sort of 0:12:24.000 --> 0:12:26.520 a shift, especially around the March meeting, from not much 0:12:26.559 --> 0:12:28.360 being priced for suddenly a lot being priced for the 0:12:28.400 --> 0:12:31.080 market absorbed it. Well, that's a very good playbook to follow. 0:12:31.200 --> 0:12:33.720 But again, going back to that sustain period, we've seen 0:12:33.760 --> 0:12:36.440 invasion data surprised to the upsides and surround like June 0:12:36.720 --> 0:12:39.280 last year. So again that's barely a yeah, barely nine 0:12:39.280 --> 0:12:41.120 months at this point. They need a bit more time. 0:12:42.000 --> 0:12:44.120 And the problem Tom that the ECB is going to 0:12:44.200 --> 0:12:46.480 have an extended period of time for Mario drag is 0:12:46.480 --> 0:12:48.280 going to be a very different extendard period of time 0:12:48.280 --> 0:12:51.120 for Yen's Wideman, and I imagine the governing Council is 0:12:51.120 --> 0:12:53.760 going to be a lot more fragile and broken up 0:12:53.760 --> 0:12:57.240 divided as we approach your end. This has been wonderful Jeffrey, 0:12:57.240 --> 0:13:00.280 You Pierre chat well away from their clients to today. 0:13:00.400 --> 0:13:04.520 We greatly appreciate you being with us with these ECB announcements. 0:13:14.640 --> 0:13:18.880 Joining us now are really wonderful. Guest, Isaac Boltanski is 0:13:18.880 --> 0:13:21.560 with a compass point and he is knee deep in 0:13:21.600 --> 0:13:27.040 the minutia of policy at Washington and particularly financial policy, 0:13:27.559 --> 0:13:30.800 and joins us now with comments that maybe most of 0:13:30.880 --> 0:13:35.160 us can understand. Um, Isaac, I'm gonna frame this for 0:13:35.240 --> 0:13:40.120 the politically accessible, is the senator from Massachusetts against the 0:13:40.200 --> 0:13:44.360 known world? Uh. For cable TV, it's great to have 0:13:44.480 --> 0:13:47.680 Senator Warren on. She always creates a motion whether you 0:13:47.679 --> 0:13:51.079 agree or disagree with her. I get that. But is 0:13:51.480 --> 0:13:56.520 that as simple as financial regulation is, Dodd Frank, Senator 0:13:56.559 --> 0:13:59.719 Warren Or is there a greater complexity to what's going 0:13:59.800 --> 0:14:02.960 on right now? You know, I think you've really hit 0:14:03.000 --> 0:14:06.600 on something there. The the issue at hand is this 0:14:06.920 --> 0:14:12.040 regulatory relief bill for banks, and the proponents for this 0:14:12.080 --> 0:14:15.320 bill argue that it's going to usher in a new 0:14:15.360 --> 0:14:20.080 wave of lending and and economic growth. The opponents, such 0:14:20.120 --> 0:14:23.480 as Senator Warren, suggests that it's going to do unleash 0:14:23.600 --> 0:14:27.440 this sort of mad Max hellscape on the lending environment, 0:14:27.480 --> 0:14:30.960 and and and hearken back to the predatory lending days 0:14:31.040 --> 0:14:35.600 of of a decade plus ago. As with almost everything 0:14:35.600 --> 0:14:39.720 in d C and surely everything in the financial regulatory regime, 0:14:40.080 --> 0:14:44.960 the truth is far more nuanced and the the bill 0:14:45.040 --> 0:14:50.200 that's in question here is honestly a very targeted, narrow 0:14:50.680 --> 0:14:56.440 measured bill that would almost exclusively benefit the country's smallest banks, 0:14:56.800 --> 0:14:59.880 and generally there I'm speaking about banks below ten bill. 0:15:00.040 --> 0:15:05.000 In yes, of course, there are examples of larger banks 0:15:05.480 --> 0:15:09.040 having benefits in this bill as well. Um it raises 0:15:09.280 --> 0:15:14.240 the UH the city or c car threshold from fifty 0:15:14.280 --> 0:15:17.920 billion to two d and fifty billion over time, which 0:15:17.920 --> 0:15:21.760 will provide some modicum of relief for those banks. And 0:15:21.920 --> 0:15:25.320 it has a custodian bank carve out which should help 0:15:25.400 --> 0:15:27.880 Sade Street and Bank of New York Mellon Northern Trust. 0:15:28.360 --> 0:15:33.600 But on balance, this bill is skewed towards benefiting smaller banks, 0:15:33.640 --> 0:15:36.480 but you wouldn't know that from the rhetoric and the 0:15:36.560 --> 0:15:39.640 rhetoric here I think is is red hot in part 0:15:39.760 --> 0:15:43.400 because we're coming up on ten years from the crisis, 0:15:43.440 --> 0:15:49.040 but also because there are seventeen Democrats right now in 0:15:49.080 --> 0:15:52.960 the Senate who are supporting this bill, and so it's 0:15:53.000 --> 0:15:56.040 the first time that we've actually been a bipartisan push 0:15:56.280 --> 0:16:00.000 to alter the roles. That's what I can't say fair enough. 0:16:00.040 --> 0:16:04.080 How unusual that is. Yeah, extraordinarily unusual, ISAI? What do 0:16:04.080 --> 0:16:06.080 you make of the retric then why do we still 0:16:06.120 --> 0:16:07.760 have this? And it can't just be because of the 0:16:07.800 --> 0:16:11.200 financial crisis that's gone by. The people think seriously that 0:16:11.240 --> 0:16:14.120 the regulatory regime that we have right now is good. 0:16:16.160 --> 0:16:19.120 I think that I think that the inherent complexy of 0:16:19.200 --> 0:16:23.800 financial policy makes it easier for hyperbole on both sides. 0:16:24.280 --> 0:16:26.800 And that's why what I think that we're seeing firsthand 0:16:26.800 --> 0:16:31.800 here UM the explaining the supplementary leverage ratio and its 0:16:31.840 --> 0:16:37.640 impact the capital management is not exactly a political sound bite, 0:16:38.120 --> 0:16:43.280 but hitting the bank bill for rolling back Dodd Frank 0:16:43.360 --> 0:16:47.080 regulations is something that some senators are actually fundraising on 0:16:47.320 --> 0:16:50.360 right now. You know, I look, Isaac, and I just 0:16:50.360 --> 0:16:52.280 did this, folks, and you know I knew where I 0:16:52.280 --> 0:16:57.080 was going, but not really. JP Morgan operating income thirty 0:16:57.120 --> 0:17:00.760 six billion, on its way to forty five billion. A 0:17:00.800 --> 0:17:05.680 big bank, PNC Financial of Pittsburgh operating incomes seven billion. 0:17:06.119 --> 0:17:10.560 So it's Isaac, forty five is compared to seven And 0:17:10.640 --> 0:17:13.280 the answer is that's a big That's a comparison of 0:17:13.280 --> 0:17:17.240 a super bank to a big, big, big regional bank. 0:17:17.840 --> 0:17:20.959 Are we treating all our banks too much the same? 0:17:21.160 --> 0:17:27.560 Within our legislation, our regulation, within the Washington ballet, it's 0:17:27.600 --> 0:17:31.840 something where yes, the the simple and unquestionable answer is yes. 0:17:32.119 --> 0:17:38.880 And I think that UM regulation tends to benefit scale players. 0:17:39.240 --> 0:17:43.119 They have the capital and the personnel necessary to build 0:17:43.119 --> 0:17:45.440 the system. Where's the president on that? Does he want 0:17:45.440 --> 0:17:50.520 to help the small banks and the mere mortal regional banks. Yes? 0:17:50.560 --> 0:17:52.440 I think there is a bias, and thus far, all 0:17:52.480 --> 0:17:54.640 we've really seen as the president so far he met 0:17:54.680 --> 0:17:57.760 with the smallest bankers a few months ago and met 0:17:57.800 --> 0:18:00.399 with the credit unions a few weeks go, so we 0:18:00.440 --> 0:18:03.560 haven't seen him decided to meet with the larger players yet. 0:18:03.600 --> 0:18:06.640 But yes, I think that there is an undeniable bias 0:18:06.840 --> 0:18:10.120 in DC on both sides of the aisle to help 0:18:10.200 --> 0:18:13.240 smaller banks. The question here is just how do you 0:18:13.280 --> 0:18:17.000 define that and what is the legislative vehicle that carries that. 0:18:17.359 --> 0:18:19.640 I said, this has been the policy push that's happened 0:18:19.680 --> 0:18:21.760 in the background throughout the last week, front and center 0:18:21.800 --> 0:18:25.560 has being issues around trade. Your thoughts somewhere this is 0:18:25.600 --> 0:18:29.720 going and whether we have actually got an administration that 0:18:29.800 --> 0:18:32.760 ultimately is together on the same page and this is 0:18:32.800 --> 0:18:36.199 a negotiation tactic that they started the extreme and then 0:18:36.200 --> 0:18:40.320 they come in. Is that what this is? It appears 0:18:40.359 --> 0:18:44.840 that once again that framework is playing with the with 0:18:45.000 --> 0:18:48.720 the signals that there's a softening on the country exemptions 0:18:48.800 --> 0:18:52.320 for Canada in Mexico as it relates to the terraces. 0:18:53.000 --> 0:18:57.600 I am still unsure if that is strategy or or 0:18:57.840 --> 0:19:02.359 bending to the broader pressure. It was striking to see 0:19:02.400 --> 0:19:07.359 how unified. Both parties were in their opposition in particular 0:19:07.560 --> 0:19:11.879 because Republicans want to run on the economic benefits of 0:19:11.920 --> 0:19:14.639 the tax cuts, and there is a real concern that 0:19:14.680 --> 0:19:18.119 these tariffs would eat into those benefits, and so you 0:19:18.119 --> 0:19:21.600 can always count on actors in d C looking for 0:19:21.640 --> 0:19:24.400 their own self interest. Isaac Bill Tansky, thank you so much. 0:19:24.400 --> 0:19:27.320 At the compass Point today, an update there on bipartisan 0:19:27.320 --> 0:19:30.199 banking legislation. I can't remember when the last time I 0:19:30.280 --> 0:19:45.320 said this A thrilled death. Cynthia Coon's with us with 0:19:45.320 --> 0:19:49.240 Bloomberg News, who has been more than patient over the time, 0:19:49.960 --> 0:19:54.040 over the years and following the drug slash pharmaceutical business. 0:19:54.040 --> 0:19:58.640 Today's theme, I believe is the distribution of the pharmaceuticals. 0:19:58.880 --> 0:20:05.119 Cynthia Coon's. What is express Scripts actually do well? This 0:20:05.280 --> 0:20:07.360 is this takes a long time to explain, so I'll 0:20:07.400 --> 0:20:11.159 try to keep it quick. But basically, what express Scripts 0:20:11.240 --> 0:20:16.639 does essentially is manage the drug benefit plans as there 0:20:17.840 --> 0:20:22.280 used for insurers and payers to determine what drugs to 0:20:22.400 --> 0:20:25.120 patients actually pay and how much we pay. So express 0:20:25.160 --> 0:20:28.520 Scripts is a line in the middle. They're considered a middleman, 0:20:28.840 --> 0:20:31.520 and what they do is they negotiate the drug prices 0:20:31.600 --> 0:20:35.280 with the actual manufacturers, and they make determinations about what 0:20:35.440 --> 0:20:38.000 is a preferred draw first year, seconds year. So your 0:20:38.040 --> 0:20:40.919 co pay is dependent on decisions a lot of times 0:20:40.920 --> 0:20:43.760 made by Expressed Scripts. And the reason needs to get 0:20:43.800 --> 0:20:48.160 a little bit tricky is primarily because of exclusivity contracts, 0:20:48.160 --> 0:20:51.320 and so drug makers, really powerful drug makers can negotiate 0:20:51.640 --> 0:20:55.960 exclusivity contracts and get preferred status on these formularias, and 0:20:56.560 --> 0:21:00.000 other drugs that even might clinically be considered better alternative 0:21:00.080 --> 0:21:02.439 is aren't necessarily getting coveraged. And all of this is 0:21:02.480 --> 0:21:06.040 happening through a system known as rebating, and drug makers 0:21:06.040 --> 0:21:09.399 are basically able to give rebates to Express Scripts. I 0:21:10.560 --> 0:21:12.640 read into a physician the other day that said, we've 0:21:12.680 --> 0:21:15.920 basically had a tipping point of American fraud in pricing 0:21:16.000 --> 0:21:19.919 of drugs. Do you know how profitable Express Scripts is 0:21:20.480 --> 0:21:24.639 by looking at their accounting statements or is it? Is 0:21:24.680 --> 0:21:27.960 it almost to the point where there's cash flows or 0:21:28.040 --> 0:21:33.080 agreements or exclusive at ease that we don't observe. It's 0:21:33.119 --> 0:21:35.800 really hard to know. So it's easy to see, Okay, 0:21:35.840 --> 0:21:38.960 these are their profits and what theyre etcetera. But really 0:21:39.000 --> 0:21:41.440 what everyone wants is a little bit of a line 0:21:41.440 --> 0:21:44.639 of sight into the agreements that how much and you 0:21:44.680 --> 0:21:46.760 don't know that makers are paying for access and we 0:21:46.800 --> 0:21:49.640 can't see that. And there are commercial concerns that these 0:21:49.640 --> 0:21:52.520 guys have longsighted as to why they don't make that clear. 0:21:52.600 --> 0:21:56.320 So their their negotiations with a big employer like like 0:21:56.840 --> 0:21:58.760 JP Morgan are obviously going to be different than our 0:21:58.760 --> 0:22:00.720 small employer, and that's sort of glee and so on. 0:22:01.119 --> 0:22:04.240 But where it gets really tricky is you have drugs 0:22:04.240 --> 0:22:07.600 that might be clinically superior and they're fighting or they're 0:22:07.640 --> 0:22:11.119 even equivalent, um, and they're fighting to get onto formularies 0:22:11.119 --> 0:22:13.480 and and companies are saying they can't get access and 0:22:13.520 --> 0:22:16.640 they think that's anti competitive. So we've seen suits along 0:22:16.640 --> 0:22:20.880 those lines. And that's where did they do this deal 0:22:20.920 --> 0:22:23.560 because of Jeff Bezos? Is this just about Amazon and 0:22:23.600 --> 0:22:26.200 everybody's trying to get out in front of Jeff Bezos 0:22:26.280 --> 0:22:30.800 running a you know, a bulldozer through the industry. I mean, 0:22:30.840 --> 0:22:33.720 that's a very astute observation and it very well may 0:22:33.720 --> 0:22:36.639 have played into the thinking of what can we do 0:22:36.840 --> 0:22:41.119 now from sickness perspective, how do we necessarily become something 0:22:41.440 --> 0:22:45.600 that's more valuable than a standalone ensure, and so that's 0:22:45.640 --> 0:22:48.439 not necessarily that's a very you know, that's a very 0:22:48.480 --> 0:22:50.920 smart thought. It's just very hard to know what what 0:22:51.040 --> 0:22:52.600 Amazon is going to do and how they're going to 0:22:52.680 --> 0:22:55.520 do it. And I think Amazon's impact, yes, it could 0:22:55.800 --> 0:22:59.480 uh disintermediate the PBMs in the system. That they also 0:22:59.520 --> 0:23:02.240 will have a very big impact on drugs and drug pricing, 0:23:02.280 --> 0:23:04.320 and so there's a whole other dimension to that. So 0:23:04.840 --> 0:23:07.560 getting ahead of Amazon, yes, that's one way of thinking 0:23:07.640 --> 0:23:10.600 about it, but we're still in very early innings of 0:23:10.640 --> 0:23:12.520 knowing what Amazon is going to do and how they're 0:23:12.560 --> 0:23:15.000 going to disrupt this part of the supply chain. There 0:23:15.080 --> 0:23:17.400 is a huge dance going on at the moment, Cynthia 0:23:17.440 --> 0:23:19.520 that we should point out. Signal and Anthem were meant 0:23:19.560 --> 0:23:22.919 to get together. It didn't happen. Anthem drop express Scripts 0:23:22.920 --> 0:23:26.359 at the same time Anthem go alone. So essentially you're 0:23:26.440 --> 0:23:28.199 left with these two that wanted a dance partner and 0:23:28.240 --> 0:23:30.159 haven't got one, and they need to get bigger. Is 0:23:30.200 --> 0:23:32.159 that what needs to happen in this space at the moment, 0:23:32.240 --> 0:23:36.000 Just get bigger and find a dance partner. Well, it's certainly, 0:23:36.520 --> 0:23:38.560 it's sort of like, because that's happening, it's going to 0:23:38.600 --> 0:23:41.320