1
00:00:02,520 --> 00:00:10,119
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

2
00:00:10,119 --> 00:00:13,880
Speaker 1: Bloomberg Balance of Power podcast. Catch us live weekdays at

3
00:00:13,920 --> 00:00:17,119
Speaker 1: noon and five pm Eastern on Apple, Cocklay and Android

4
00:00:17,160 --> 00:00:20,520
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

5
00:00:20,600 --> 00:00:25,120
Speaker 1: you get your podcasts, or watch us live on YouTube.

6
00:00:25,960 --> 00:00:28,560
Speaker 2: I'm Kayley Lines alongside Joe Matthew here in Washington where

7
00:00:28,560 --> 00:00:31,520
Speaker 2: we're looking at Capitol Hill today and the divergence we're

8
00:00:31,520 --> 00:00:35,040
Speaker 2: seeing between the two chambers and their paths, respective paths

9
00:00:35,479 --> 00:00:38,760
Speaker 2: to trying to achieve the legislative agenda of President Trump.

10
00:00:38,760 --> 00:00:40,760
Speaker 2: They're all trying to get to the same place. Pass

11
00:00:41,080 --> 00:00:45,000
Speaker 2: greater tax cuts, extending the twenty seventeen tax cuts, providing

12
00:00:45,000 --> 00:00:48,240
Speaker 2: more funding for the border and new immigration policy, energy,

13
00:00:48,280 --> 00:00:50,920
Speaker 2: more defense spending as well. It really is a question

14
00:00:51,560 --> 00:00:54,160
Speaker 2: of how they get there, and the Senate is suggesting

15
00:00:54,600 --> 00:00:56,600
Speaker 2: that you may not get there the way the House wants,

16
00:00:56,600 --> 00:00:59,080
Speaker 2: which is in one big package, so they better carve

17
00:00:59,120 --> 00:01:01,560
Speaker 2: an alternate route, and they are taking the first steps

18
00:01:01,800 --> 00:01:03,080
Speaker 2: toward doing so today.

19
00:01:02,840 --> 00:01:05,800
Speaker 3: Something Lindsey Graham calls Plan B. Now that Donald Trump

20
00:01:05,880 --> 00:01:09,679
Speaker 3: has endorsed the House plan, but maybe that skepticism is

21
00:01:09,760 --> 00:01:12,959
Speaker 3: warranted based on what we're hearing in these conversations. Either way,

22
00:01:13,000 --> 00:01:15,920
Speaker 3: we got a big voterama that's coming tonight. Jd Vance,

23
00:01:15,959 --> 00:01:18,000
Speaker 3: the Vice President, spoke at Sea Pack a little bit

24
00:01:18,000 --> 00:01:20,399
Speaker 3: earlier today, had this to say about the process.

25
00:01:21,400 --> 00:01:24,440
Speaker 4: So the Senate obviously has its own approach, and the

26
00:01:24,480 --> 00:01:26,760
Speaker 4: President has been very clear that his preference is to

27
00:01:26,800 --> 00:01:29,399
Speaker 4: put everything in one bill, and part of that is

28
00:01:29,440 --> 00:01:32,720
Speaker 4: just simple legislative strategy. I think the President has learned

29
00:01:32,760 --> 00:01:35,160
Speaker 4: a lot about how DC works, and I actually talked

30
00:01:35,160 --> 00:01:37,759
Speaker 4: to the President about this yesterday and he said to me, Look,

31
00:01:37,760 --> 00:01:40,959
Speaker 4: it's very rare that you can get two reconciliation bills

32
00:01:41,000 --> 00:01:44,160
Speaker 4: done in one Congress, which is why he thinks we've

33
00:01:44,200 --> 00:01:46,880
Speaker 4: got to do a lot with that one big beautiful bill,

34
00:01:46,920 --> 00:01:49,520
Speaker 4: that first reconciliation package that we're going to get through

35
00:01:49,800 --> 00:01:50,760
Speaker 4: the House and the Senate.

36
00:01:52,000 --> 00:01:53,720
Speaker 3: Now, if you're with us on a daily basis here

37
00:01:53,720 --> 00:01:55,840
Speaker 3: on balance of power, how many times have you heard

38
00:01:55,880 --> 00:01:57,960
Speaker 3: this argument on both sides. We're just going to keep

39
00:01:57,960 --> 00:02:00,720
Speaker 3: doing this apparently until like what the middle of March,

40
00:02:00,760 --> 00:02:03,200
Speaker 3: that's when we run out of money. Joining us someone

41
00:02:03,200 --> 00:02:06,040
Speaker 3: who's been in the middle of negotiations like these Patrick McHenry,

42
00:02:06,040 --> 00:02:08,880
Speaker 3: former Republican congressman who, of course chaired the House Financial

43
00:02:08,880 --> 00:02:11,639
Speaker 3: Services Committee and at one time held the speaker's gavel,

44
00:02:11,720 --> 00:02:14,040
Speaker 3: if only for a short time. Congressman, good to see you,

45
00:02:14,240 --> 00:02:16,600
Speaker 3: welcome back. What do you make of all of this?

46
00:02:16,639 --> 00:02:18,440
Speaker 3: Can you believe we're still talking about it? And is

47
00:02:18,480 --> 00:02:20,960
Speaker 3: a Plan B actually going to be necessary?

48
00:02:21,400 --> 00:02:23,880
Speaker 5: No, there's a Plan B is always necessary in Washington.

49
00:02:23,960 --> 00:02:28,720
Speaker 5: But look, the reconciliation process is to get around Senate

50
00:02:28,800 --> 00:02:31,440
Speaker 5: rules and the need for sixty votes in the Senate

51
00:02:31,520 --> 00:02:36,880
Speaker 5: to pass legislation. And it's been utilized before. But like

52
00:02:36,919 --> 00:02:40,480
Speaker 5: you just said, and like the Vice President Vance said,

53
00:02:40,560 --> 00:02:44,320
Speaker 5: is it's highly unlike you get two reconciliation bills out

54
00:02:44,360 --> 00:02:46,639
Speaker 5: of the same Congress. It's very difficult to achieve that.

55
00:02:47,560 --> 00:02:50,080
Speaker 5: In fact, it's a very difficult and high hurdle to

56
00:02:50,120 --> 00:02:55,079
Speaker 5: achieve one. So the president is now applying through his

57
00:02:55,200 --> 00:02:59,520
Speaker 5: vice president to say he does have a view. Everybody

58
00:02:59,560 --> 00:03:03,720
Speaker 5: wants Trump to President Trump to jump in and define

59
00:03:04,040 --> 00:03:08,000
Speaker 5: the very particulars of a tactic. He doesn't care about that.

60
00:03:08,440 --> 00:03:11,680
Speaker 5: He wants to get his policies enacted in whatever form

61
00:03:11,760 --> 00:03:15,280
Speaker 5: they can be enacted, like any president, and he is

62
00:03:15,280 --> 00:03:21,480
Speaker 5: his versed in the legislative politics on the procedural pieces

63
00:03:21,720 --> 00:03:26,320
Speaker 5: as any president. Right, even President Obama, who had served

64
00:03:26,320 --> 00:03:29,200
Speaker 5: in the Senate, did not have a deep understanding nor

65
00:03:29,240 --> 00:03:33,200
Speaker 5: experience with reconciliation until he became president. So these things

66
00:03:33,240 --> 00:03:36,560
Speaker 5: are always secondary questions, not the primary question. The primary

67
00:03:36,640 --> 00:03:39,320
Speaker 5: question is what is the policy you want enacted. You've

68
00:03:39,400 --> 00:03:42,480
Speaker 5: heard from Secretary Bessett, You've got great news out of

69
00:03:42,560 --> 00:03:46,640
Speaker 5: him today. You've now heard from the Vice President. They

70
00:03:46,640 --> 00:03:49,000
Speaker 5: have a view. They want one bill, they want to

71
00:03:49,040 --> 00:03:51,720
Speaker 5: maximize that one bill, which means that one bill will

72
00:03:51,760 --> 00:03:55,640
Speaker 5: not be fast, which is what Senator Thune, majority of

73
00:03:55,680 --> 00:03:59,120
Speaker 5: Leader Thune was trying to achieve. And Senator Graham is saying,

74
00:03:59,280 --> 00:04:03,839
Speaker 5: let's get police he wins fast and show progress. And

75
00:04:03,920 --> 00:04:08,440
Speaker 5: what you heard from the Treasury Secretary was what matters

76
00:04:08,520 --> 00:04:11,960
Speaker 5: is the economy and our economic impact, which is what

77
00:04:12,000 --> 00:04:15,640
Speaker 5: we need to get done fast and first, which means

78
00:04:15,840 --> 00:04:18,520
Speaker 5: you get a big bill and it goes a little longer,

79
00:04:18,520 --> 00:04:20,640
Speaker 5: but still faster than waiting for the fall for a

80
00:04:20,640 --> 00:04:21,120
Speaker 5: tax book.

81
00:04:21,320 --> 00:04:23,800
Speaker 2: So I understand that this is ultimately about just getting

82
00:04:23,800 --> 00:04:26,160
Speaker 2: to the end game, regardless of what mechanics have to

83
00:04:26,200 --> 00:04:28,680
Speaker 2: happen in both chambers to actually get there. But is

84
00:04:28,720 --> 00:04:31,880
Speaker 2: the endgame that this administration, the President specifically, is outlining,

85
00:04:31,960 --> 00:04:34,880
Speaker 2: actually realistic given the political reality in the House of

86
00:04:34,920 --> 00:04:38,400
Speaker 2: Representatives specifically, where the Ways and Means Committee has four

87
00:04:38,400 --> 00:04:41,360
Speaker 2: and a half trillion dollars of wiggle room essentially barely

88
00:04:41,480 --> 00:04:43,920
Speaker 2: enough to just extend the twenty seventeen tax cuts and

89
00:04:44,000 --> 00:04:46,640
Speaker 2: is being told spending cuts will have to be in

90
00:04:46,680 --> 00:04:49,680
Speaker 2: place as offsets for any other tax policy you want

91
00:04:49,720 --> 00:04:52,200
Speaker 2: to pursue, be it eliminating taxes and social security or

92
00:04:52,240 --> 00:04:55,279
Speaker 2: over time or lifting the salt cap. Are those cuts

93
00:04:55,400 --> 00:04:57,000
Speaker 2: really there? Where would they be found?

94
00:04:57,160 --> 00:04:59,479
Speaker 5: Oh, they can be found everywhere. We did this.

95
00:05:00,080 --> 00:05:02,200
Speaker 2: Does it go to medicaid, which the President said he

96
00:05:02,200 --> 00:05:02,920
Speaker 2: doesn't want to see?

97
00:05:03,080 --> 00:05:05,880
Speaker 5: Well, there's there's a lot of waste and a lot

98
00:05:05,920 --> 00:05:11,320
Speaker 5: of government as the doge TikTok is going around. But

99
00:05:11,839 --> 00:05:15,200
Speaker 5: let's step back when when the federal government is spending

100
00:05:15,279 --> 00:05:18,840
Speaker 5: dramatically more than it's ever spent before, our debt is

101
00:05:18,920 --> 00:05:23,520
Speaker 5: dramatically more than ever before, and our structural deficit is

102
00:05:24,160 --> 00:05:30,040
Speaker 5: quite severe, especially we've had the worst deficits of our

103
00:05:30,120 --> 00:05:34,719
Speaker 5: nation's history outside of war wartime in the last decade.

104
00:05:35,160 --> 00:05:36,880
Speaker 5: This is the thing that needs to be fixed for

105
00:05:36,960 --> 00:05:39,840
Speaker 5: us to be economically prosperous for the long term. So

106
00:05:39,920 --> 00:05:42,640
Speaker 5: you do need to get governmental savings, and you do

107
00:05:42,720 --> 00:05:46,960
Speaker 5: need to have a restriction on the on the on

108
00:05:47,000 --> 00:05:50,159
Speaker 5: the tax plane. We went through this in twenty seventeen

109
00:05:50,240 --> 00:05:54,320
Speaker 5: for the original Trump tax cuts. You had to actually

110
00:05:54,360 --> 00:05:57,279
Speaker 5: put a fence around the number and then contain policy

111
00:05:57,320 --> 00:06:00,160
Speaker 5: within those within that fence. That was a Senate operation.

112
00:06:00,600 --> 00:06:03,680
Speaker 5: Now you're seeing the White House in this game, and

113
00:06:03,839 --> 00:06:06,840
Speaker 5: the Treasury in particular in this game to define what

114
00:06:06,839 --> 00:06:10,120
Speaker 5: that looks like. Because we have a map for treasuries

115
00:06:10,160 --> 00:06:14,560
Speaker 5: and treasury auctions that will make your eyes water the

116
00:06:14,680 --> 00:06:19,839
Speaker 5: volume and the dollar amount of indebtedness and this interest

117
00:06:19,920 --> 00:06:22,279
Speaker 5: rate reset the American people are going to face for

118
00:06:22,360 --> 00:06:24,320
Speaker 5: the cost of our government. So you do have to

119
00:06:24,320 --> 00:06:26,279
Speaker 5: put you have do have to constrain these things and

120
00:06:26,360 --> 00:06:29,719
Speaker 5: have government efficiency in order to in order for us

121
00:06:29,800 --> 00:06:31,880
Speaker 5: to have a sustainable path on the budget going forward.

122
00:06:31,920 --> 00:06:35,200
Speaker 3: Well, we talk about one big beautiful bill that's going

123
00:06:35,240 --> 00:06:39,920
Speaker 3: to take longer than say the fourteenth of March. Somebody's

124
00:06:39,960 --> 00:06:43,000
Speaker 3: got to fund the government a month from now. A

125
00:06:43,080 --> 00:06:48,120
Speaker 3: continuing resolution gets the freedom Caucus upset. Does that complicate

126
00:06:48,160 --> 00:06:51,040
Speaker 3: the math in a final vote on reconciliation in the House.

127
00:06:51,400 --> 00:06:53,440
Speaker 5: So this idea that the Freedom Caucus has a view

128
00:06:53,480 --> 00:06:57,560
Speaker 5: on a continued resolution, they don't like the continued resolutions

129
00:06:57,600 --> 00:06:59,320
Speaker 5: that they don't want, and they like the ones that

130
00:06:59,320 --> 00:06:59,640
Speaker 5: they want.

131
00:07:00,040 --> 00:07:01,880
Speaker 3: Them want to fire the speaker, Well.

132
00:07:02,400 --> 00:07:07,200
Speaker 5: Yeah, exactly, it just makes them dyspeptic, right, are more dyspeptic.

133
00:07:07,720 --> 00:07:11,800
Speaker 5: And so it's not a firmly held conviction moral principle

134
00:07:11,840 --> 00:07:14,120
Speaker 5: that we can't have a continued resolution. I think the

135
00:07:14,160 --> 00:07:16,520
Speaker 5: odds are you're going to have a continued resolution. And

136
00:07:16,600 --> 00:07:18,720
Speaker 5: second to that is a government shutdown. This is my

137
00:07:18,840 --> 00:07:22,119
Speaker 5: view from outside. Look, I'm sure you know just my view.

138
00:07:22,920 --> 00:07:25,720
Speaker 5: And then the third option is the funding for the

139
00:07:25,720 --> 00:07:28,280
Speaker 5: rest of the year in a normal way. I think

140
00:07:28,280 --> 00:07:32,720
Speaker 5: that has the lowest change what's happening. Right, you have

141
00:07:32,760 --> 00:07:35,320
Speaker 5: a higher likelihood of a government shutdown than a normal

142
00:07:35,400 --> 00:07:39,960
Speaker 5: appropriations process. Given where Hill Democrats are and they are

143
00:07:40,000 --> 00:07:44,560
Speaker 5: necessary for government funding reconciliation, Sands separate is a Republican

144
00:07:44,600 --> 00:07:49,239
Speaker 5: only proposition. Government funding has to be bipartisan, requires sixty

145
00:07:49,320 --> 00:07:52,400
Speaker 5: votes in the Senate. That is a difficult and mighty

146
00:07:52,600 --> 00:07:53,480
Speaker 5: nasty beast.

147
00:07:53,960 --> 00:07:55,960
Speaker 2: Well, speaking of mighty nasty beats, I want to return

148
00:07:56,040 --> 00:07:58,400
Speaker 2: to the conversation of the debt and deficit and your

149
00:07:58,480 --> 00:08:01,040
Speaker 2: talk about efficiency, because we were hearing from Stephen Miller

150
00:08:01,040 --> 00:08:02,920
Speaker 2: in the White House Press briefing about this notion of

151
00:08:02,960 --> 00:08:05,720
Speaker 2: the Doge dividend of taking some of those savings that

152
00:08:05,720 --> 00:08:08,240
Speaker 2: they're working so hard to find and just funneling it

153
00:08:08,280 --> 00:08:10,200
Speaker 2: back to taxpayers, and I wonder what you think of

154
00:08:10,200 --> 00:08:12,600
Speaker 2: that notion. Why not just put it all toward paying

155
00:08:12,600 --> 00:08:13,120
Speaker 2: down the debt.

156
00:08:13,400 --> 00:08:16,000
Speaker 5: Well, I think they want to connect this back to

157
00:08:16,000 --> 00:08:20,040
Speaker 5: the American people, and I think this is a visible

158
00:08:20,080 --> 00:08:25,880
Speaker 5: manifestation of that goal. But I think the better way

159
00:08:25,880 --> 00:08:28,640
Speaker 5: to explain this is that we need to peer down

160
00:08:28,640 --> 00:08:33,760
Speaker 5: the cost of government to save the American people money.

161
00:08:33,800 --> 00:08:36,520
Speaker 5: This is a literal way of showing that. I don't

162
00:08:36,520 --> 00:08:39,520
Speaker 5: think it's the most effective way. I think we need

163
00:08:39,559 --> 00:08:41,760
Speaker 5: to be more aggressive with the tax cuts. If there's

164
00:08:41,800 --> 00:08:44,240
Speaker 5: a Doge benefit, that would be the way to see this.

165
00:08:44,480 --> 00:08:46,720
Speaker 3: The Republican voters want to check in the mail though,

166
00:08:46,760 --> 00:08:49,880
Speaker 3: that the association of getting checks from the Biden administration

167
00:08:50,280 --> 00:08:53,400
Speaker 3: For me, yeah, right. It brings you back to COVID.

168
00:08:53,559 --> 00:08:56,000
Speaker 3: Why not pay off the deficits since that was the job,

169
00:08:56,120 --> 00:08:58,360
Speaker 3: or is it in fact proof of performance?

170
00:08:58,400 --> 00:08:59,920
Speaker 5: You know what, I got my money back. That's why

171
00:09:00,080 --> 00:09:01,920
Speaker 5: voted for Yeah. I think it's proof of performance. I

172
00:09:01,960 --> 00:09:04,800
Speaker 5: think that's the motivation behind it. And so, stepping back

173
00:09:04,840 --> 00:09:09,000
Speaker 5: from the literal mechanism of this, the point they're trying

174
00:09:09,040 --> 00:09:12,120
Speaker 5: to make is that the taxpayer actually benefits. We have

175
00:09:12,200 --> 00:09:15,160
Speaker 5: federal salaries that are much higher than the national media

176
00:09:15,160 --> 00:09:18,720
Speaker 5: in salary for the American people funding the government. That's

177
00:09:18,760 --> 00:09:20,840
Speaker 5: out of whack. We have a federal government that has

178
00:09:20,880 --> 00:09:23,559
Speaker 5: a highest head account we've ever had outside of wartime.

179
00:09:24,080 --> 00:09:26,559
Speaker 5: That is out of whack. We don't have the ability

180
00:09:26,600 --> 00:09:29,240
Speaker 5: to pay for government. Even if we double tax rates

181
00:09:29,640 --> 00:09:33,040
Speaker 5: and double tax income or double tax income, we would

182
00:09:33,080 --> 00:09:35,440
Speaker 5: still have a deficit. So we actually do need to

183
00:09:35,440 --> 00:09:38,040
Speaker 5: pay down government spending. It is a priority for the

184
00:09:38,080 --> 00:09:42,360
Speaker 5: American people, and they're just trying to manifest to They're

185
00:09:42,400 --> 00:09:44,640
Speaker 5: trying to explain this to the American people that it

186
00:09:44,679 --> 00:09:46,720
Speaker 5: does matter to them. That's what I hear out of it.

187
00:09:47,120 --> 00:09:49,320
Speaker 2: I want to ask you about something else, Congressman, that

188
00:09:49,400 --> 00:09:51,280
Speaker 2: has been dominating the news in the last several days,

189
00:09:51,280 --> 00:09:54,600
Speaker 2: and that is the now started negotiations are at least

190
00:09:54,679 --> 00:09:57,440
Speaker 2: very initial early talks to end the war in Ukraine,

191
00:09:57,520 --> 00:09:59,760
Speaker 2: talks to which Ukraine itself was not invited, And we

192
00:09:59,840 --> 00:10:03,360
Speaker 2: now have the President referring to Ukrainian President Zelensky as

193
00:10:03,360 --> 00:10:07,200
Speaker 2: a dictator. Do you see this as a means for negotiation,

194
00:10:07,520 --> 00:10:10,720
Speaker 2: a setting of a different kind of stage to bring

195
00:10:10,760 --> 00:10:13,760
Speaker 2: putin on side, or is this a signal that President

196
00:10:13,800 --> 00:10:17,319
Speaker 2: Trump actually intends to not allow Ukraine to pursue the

197
00:10:17,400 --> 00:10:19,480
Speaker 2: kind of deal that it wants to pursue.

198
00:10:19,520 --> 00:10:23,800
Speaker 5: Well, first, President Trump campaigned on this. This was a

199
00:10:23,880 --> 00:10:26,480
Speaker 5: campaign pledge that he would end the war in Ukraine.

200
00:10:26,679 --> 00:10:32,240
Speaker 5: Now I voted to arm Ukraine free people's wanting to

201
00:10:32,280 --> 00:10:36,040
Speaker 5: remain free against oppression. I think it is a vital

202
00:10:36,120 --> 00:10:39,040
Speaker 5: national interest in the United States. A land war in

203
00:10:39,080 --> 00:10:41,960
Speaker 5: Europe does implicate the United States and the global economy.

204
00:10:42,200 --> 00:10:44,920
Speaker 5: We have enemies abroad and we need to be serious

205
00:10:44,960 --> 00:10:47,160
Speaker 5: about it. And that's how I voted in Congress. The

206
00:10:47,200 --> 00:10:49,800
Speaker 5: President campaigned on something different, though, and he said we'd

207
00:10:49,800 --> 00:10:52,040
Speaker 5: bring it into the war. We don't have a means

208
00:10:52,080 --> 00:10:54,920
Speaker 5: and a goal for success, and we need to have

209
00:10:55,000 --> 00:10:57,400
Speaker 5: a view for what is this successful into the war

210
00:10:57,440 --> 00:11:00,920
Speaker 5: in Ukraine now, so he's falling through on his pledge. Okay,

211
00:11:01,120 --> 00:11:03,199
Speaker 5: the second piece of this information is what he said

212
00:11:03,200 --> 00:11:06,840
Speaker 5: about Zelensky. That is something new and different. This tells

213
00:11:06,880 --> 00:11:11,400
Speaker 5: me that this relationship has been mismanaged by the Ukrainians

214
00:11:11,600 --> 00:11:15,080
Speaker 5: such that Trump goes public with this, with this comment,

215
00:11:15,559 --> 00:11:18,880
Speaker 5: that should be bring greater that that should that should

216
00:11:19,600 --> 00:11:21,800
Speaker 5: really be a chilling effect for the Ukrainians that they

217
00:11:21,840 --> 00:11:25,600
Speaker 5: have mismanaged this their principal ally and their principal funder,

218
00:11:26,400 --> 00:11:29,199
Speaker 5: and the president being in a very bad way and

219
00:11:29,480 --> 00:11:33,400
Speaker 5: very bad view of President Zelensky. I think that is

220
00:11:33,440 --> 00:11:36,079
Speaker 5: problematic for the Ukrainian people, and I think it's problematic

221
00:11:36,120 --> 00:11:37,600
Speaker 5: for a successful into the war.

222
00:11:37,840 --> 00:11:40,680
Speaker 3: I suspect we're going to hear about this, maybe everything

223
00:11:40,720 --> 00:11:42,959
Speaker 3: we've discussed so far less than two weeks. When Donald

224
00:11:42,960 --> 00:11:45,240
Speaker 3: Trump is in front of a joint session of Congress,

225
00:11:45,720 --> 00:11:49,040
Speaker 3: it's the State of the Union, without actually calling him that.

226
00:11:49,320 --> 00:11:52,680
Speaker 3: In his first year back, you've been through a couple

227
00:11:52,760 --> 00:11:55,040
Speaker 3: of these, and the last few were pretty chippy when

228
00:11:55,080 --> 00:11:58,000
Speaker 3: you consider the decorum in the room. Marjorie Taylor Green,

229
00:11:58,080 --> 00:12:02,760
Speaker 3: Lauren Bolbert yelling everyone remembers the the the images, Joe

230
00:12:02,800 --> 00:12:06,719
Speaker 3: Biden riffing with the Republican Conference. What are we in

231
00:12:06,800 --> 00:12:11,160
Speaker 3: for when Donald Trump makes his return? Does the decorum shift?

232
00:12:11,160 --> 00:12:13,760
Speaker 3: Are you gonna have Democrats yelling at the roster.

233
00:12:15,240 --> 00:12:19,000
Speaker 5: Shifts? It's this is look, this is fight club in America.

234
00:12:19,080 --> 00:12:22,920
Speaker 5: This is this is Prime Minister's questions. Now, that's effectively

235
00:12:22,920 --> 00:12:24,880
Speaker 5: what the state of Union is like because the jeering

236
00:12:24,960 --> 00:12:27,839
Speaker 5: is like that. So that oh my gosh, it's two

237
00:12:27,880 --> 00:12:31,240
Speaker 5: weeks from now, Joe. This is this is the reason why,

238
00:12:31,760 --> 00:12:36,040
Speaker 5: like you have much must watch TV, right, we're all

239
00:12:36,080 --> 00:12:39,280
Speaker 5: in this Trump era where each hour is different. This

240
00:12:39,800 --> 00:12:43,120
Speaker 5: Joe Biden, it was like glacier's moving and glaciers melting.

241
00:12:43,160 --> 00:12:45,120
Speaker 5: And I won't get into all the other jokes to

242
00:12:45,160 --> 00:12:48,040
Speaker 5: go along with that about the president himself. But but

243
00:12:48,440 --> 00:12:52,320
Speaker 5: the era of Trump is such a fast paced place.

244
00:12:52,360 --> 00:12:54,720
Speaker 5: So in two weeks we may not be talking about

245
00:12:54,760 --> 00:12:58,280
Speaker 5: any of this stuff, that's right, but it will be

246
00:12:58,480 --> 00:13:02,920
Speaker 5: wild to watch the super Bowl of politics now, absolutely.

247
00:13:03,080 --> 00:13:04,760
Speaker 2: And of course we'll have a cover for you here

248
00:13:04,800 --> 00:13:05,840
Speaker 2: on Bloomberg.

249
00:13:05,400 --> 00:13:05,960
Speaker 3: By all means.

250
00:13:06,000 --> 00:13:07,760
Speaker 2: As this White House Press briefing, by the way, is

251
00:13:07,800 --> 00:13:10,319
Speaker 2: still ongoing, and they're marking one month of Trump and

252
00:13:10,400 --> 00:13:12,559
Speaker 2: office that's why all these characters are gathered.

253
00:13:12,320 --> 00:13:17,640
Speaker 3: Here one single month today incredible and what we've covered.

254
00:13:18,120 --> 00:13:22,320
Speaker 3: Does this pace continue? For our course, it does four years?

255
00:13:22,360 --> 00:13:26,240
Speaker 5: Does this is? This is in the nature of Donald

256
00:13:26,280 --> 00:13:29,040
Speaker 5: Trump and what he does the media cycle. It's it's

257
00:13:29,200 --> 00:13:34,920
Speaker 5: amazing what he does. But to me on substance on policy,

258
00:13:34,960 --> 00:13:37,840
Speaker 5: on substance on regulational law, you have to look to

259
00:13:38,120 --> 00:13:42,160
Speaker 5: folks like Secretary Bessett on where where is the administration

260
00:13:42,280 --> 00:13:45,520
Speaker 5: moving on these policy goals to get the economy right well?

261
00:13:45,559 --> 00:13:47,440
Speaker 2: And folks like the former Chair of the House Financial

262
00:13:47,480 --> 00:13:50,440
Speaker 2: Services Commits, Congressman Patrick mcchenry here with us in our Washington,

263
00:13:50,480 --> 00:13:52,400
Speaker 2: d C. Studio. Green is always to see you. Thank

264
00:13:52,440 --> 00:13:54,000
Speaker 2: you so much for joining us.

265
00:13:54,600 --> 00:13:58,080
Speaker 1: You're listening to the Bloomberg Balance of Power podcast. Catch

266
00:13:58,160 --> 00:14:02,120
Speaker 1: us live weekdays at noon and den on Apple, Cocklay

267
00:14:02,120 --> 00:14:04,880
Speaker 1: and Android Auto with the Bloomberg Business App. You can

268
00:14:04,920 --> 00:14:08,360
Speaker 1: also listen live on Amazon Alexa from our flagship New

269
00:14:08,440 --> 00:14:12,840
Speaker 1: York station Just Say Alexa played Bloomberg eleven thirty.

270
00:14:14,480 --> 00:14:16,360
Speaker 3: Just down the river. If you squint your eyes, you

271
00:14:16,400 --> 00:14:20,120
Speaker 3: see down by the Wilson Bridge. There there's there's that

272
00:14:20,200 --> 00:14:24,360
Speaker 3: amusement park looking resort down there. That's where seapack is

273
00:14:24,400 --> 00:14:27,320
Speaker 3: getting underway right now. You get on the big ferris wheel.

274
00:14:27,360 --> 00:14:29,160
Speaker 3: You listen to JD. Evans this morning, it's like a

275
00:14:29,160 --> 00:14:31,840
Speaker 3: whole day out with the family. Donald Trump will be

276
00:14:31,880 --> 00:14:34,120
Speaker 3: the keynote there tomorrow and we'll talk more about that

277
00:14:34,160 --> 00:14:36,840
Speaker 3: coming up as we consider the next step here when

278
00:14:36,840 --> 00:14:40,280
Speaker 3: it comes to the Doge, and based on what we're hearing,

279
00:14:40,400 --> 00:14:43,400
Speaker 3: it's the Pentagon. In fact, the Doge has already showed up.

280
00:14:43,600 --> 00:14:45,960
Speaker 3: The Defense Secretary is starting to dig into this now. Pete.

281
00:14:45,960 --> 00:14:48,680
Speaker 3: Hegseth out with a memo you likely right about by

282
00:14:48,720 --> 00:14:52,720
Speaker 3: now on the terminal that plans to reduce projected military

283
00:14:52,720 --> 00:14:55,080
Speaker 3: spending by eight percent the next five years. And you

284
00:14:55,120 --> 00:14:59,560
Speaker 3: wonder why Palenteer is dropping today, why the defense contractors

285
00:14:59,560 --> 00:15:02,840
Speaker 3: have been ruggling on Wall Street. Some areas we're told

286
00:15:02,880 --> 00:15:05,280
Speaker 3: will be spared. And we're joined by the expert on

287
00:15:05,320 --> 00:15:07,400
Speaker 3: all of this. He made his way over just to

288
00:15:07,400 --> 00:15:10,240
Speaker 3: talk to us from the Pentagon. Tony Capassio, Bloomberg Pentagon

289
00:15:10,280 --> 00:15:13,240
Speaker 3: reporter who had his hands on that memo last week,

290
00:15:13,560 --> 00:15:14,120
Speaker 3: Good to see you.

291
00:15:14,200 --> 00:15:16,120
Speaker 6: Well, I had it hit yesterday, but we broke the

292
00:15:16,120 --> 00:15:18,760
Speaker 6: story on it Friday. So that was last week, right,

293
00:15:18,960 --> 00:15:21,480
Speaker 6: I didn't have the memo. Okay, I knew what the contents.

294
00:15:21,560 --> 00:15:23,800
Speaker 3: See how honest this guy is. Are we really going

295
00:15:23,840 --> 00:15:25,240
Speaker 3: to see an eight percent cut? I thought we were

296
00:15:25,240 --> 00:15:27,200
Speaker 3: about to get the first trillion dollar defense budget.

297
00:15:27,280 --> 00:15:29,440
Speaker 6: Yeah, so this is an interesting issue. It's not a

298
00:15:29,600 --> 00:15:32,120
Speaker 6: cut in the classic sense that the Pentagon is going

299
00:15:32,160 --> 00:15:34,280
Speaker 6: to lose the money, got it. It's going to be

300
00:15:34,400 --> 00:15:37,600
Speaker 6: a shift. The original memo or the memo wasn't very

301
00:15:37,600 --> 00:15:40,800
Speaker 6: clear on that. Then a major news organization yesterday, not Bloomberg,

302
00:15:41,560 --> 00:15:45,480
Speaker 6: and played implied massive shifts in the spending cuts that

303
00:15:45,600 --> 00:15:49,760
Speaker 6: hurt market. Last night, at about seven o'clock, they put

304
00:15:49,760 --> 00:15:52,600
Speaker 6: out a statement saying, oh no, it's the The impact

305
00:15:52,640 --> 00:15:56,080
Speaker 6: in fiscal twenty six will be about fifty billion dollars.

306
00:15:56,760 --> 00:16:00,200
Speaker 6: That's their eight percent. They put out a list of

307
00:16:00,240 --> 00:16:04,560
Speaker 6: seventeen exempted programs that were among the biggest defense programs,

308
00:16:04,560 --> 00:16:09,640
Speaker 6: like nuclear modernization from one Virginia class submarine. The one

309
00:16:09,680 --> 00:16:11,920
Speaker 6: they didn't put out there for an exemption from these

310
00:16:11,960 --> 00:16:15,240
Speaker 6: cuts is the F thirty five, the biggest defense program

311
00:16:15,240 --> 00:16:17,400
Speaker 6: in the world. So I'd be a little nervous if

312
00:16:17,440 --> 00:16:19,680
Speaker 6: I was an F thirty five Officionado.

313
00:16:19,840 --> 00:16:22,000
Speaker 3: So when you talk winners and losers, here there's one

314
00:16:22,000 --> 00:16:23,440
Speaker 3: potential loser. Who are the winners.

315
00:16:24,320 --> 00:16:30,360
Speaker 6: The winners are missile defense, the shipbuilders, seeing junior enlisted

316
00:16:30,400 --> 00:16:33,880
Speaker 6: pay rays. But we're talking. And then then there's military

317
00:16:33,880 --> 00:16:37,200
Speaker 6: construction contracts for Indo Pacific and some of the other

318
00:16:37,280 --> 00:16:42,680
Speaker 6: combat commanders. And then there's the drone makers autonomous one

319
00:16:42,720 --> 00:16:46,160
Speaker 6: way drones. Those are winners. That would be Arrow Environment

320
00:16:46,280 --> 00:16:49,280
Speaker 6: be one company that comes to mind. But the interesting

321
00:16:49,320 --> 00:16:51,920
Speaker 6: thing is the loser parts. The Pentagon has until like

322
00:16:51,960 --> 00:16:55,360
Speaker 6: the Tuesday to come up with these lists to give

323
00:16:55,400 --> 00:16:59,040
Speaker 6: to the Controller's office. There's interesting conversions here. Joe, the

324
00:16:59,080 --> 00:17:01,480
Speaker 6: House Armed Services Committee about a week ago asked the

325
00:17:01,560 --> 00:17:05,480
Speaker 6: services for lists of their obsolete programs that could be cut,

326
00:17:05,720 --> 00:17:08,240
Speaker 6: and those lists are due like next early next month.

327
00:17:08,440 --> 00:17:12,520
Speaker 6: So you've got this perfect storm of wow hask which

328
00:17:12,520 --> 00:17:14,600
Speaker 6: a week leaked right away in terms of the programs,

329
00:17:14,720 --> 00:17:17,679
Speaker 6: and then you've got this twenty five budget drill going on.

330
00:17:17,840 --> 00:17:22,119
Speaker 6: So it's a perfect convergence of a storm for defense company.

331
00:17:22,200 --> 00:17:25,600
Speaker 3: If you're a Lockheed, since you called them out, you're

332
00:17:25,640 --> 00:17:27,520
Speaker 3: doing a lot of stuff right. You've got the f

333
00:17:27,560 --> 00:17:29,760
Speaker 3: thirty five program. That could be a problem. But you're

334
00:17:29,760 --> 00:17:32,760
Speaker 3: also making missiles that the Pentagon's going to buy more from.

335
00:17:32,880 --> 00:17:34,600
Speaker 3: Does does that end up being a wash?

336
00:17:34,840 --> 00:17:37,320
Speaker 6: I don't think it's an awesome But Lockheed makes the

337
00:17:37,400 --> 00:17:39,480
Speaker 6: Pack three along with the Wraith, and they make parts

338
00:17:39,520 --> 00:17:41,720
Speaker 6: of it. They make the THAD missile, They're making the

339
00:17:41,800 --> 00:17:44,960
Speaker 6: long the long range, the Loraz and the long range

340
00:17:44,960 --> 00:17:47,679
Speaker 6: anti ship missile. But nothing makes up for the F

341
00:17:47,720 --> 00:17:51,480
Speaker 6: thirty five. Last earlier this year, the Air Force projected

342
00:17:51,760 --> 00:17:54,880
Speaker 6: that for fiscal twenty five they would buy forty eight

343
00:17:55,119 --> 00:17:58,520
Speaker 6: F thirty five's and the total bill for the would

344
00:17:58,560 --> 00:18:02,240
Speaker 6: be like thirteen billion dollars, including six billion in procurement

345
00:18:02,280 --> 00:18:04,680
Speaker 6: for F y twenty five. The rest of it's milk

346
00:18:04,680 --> 00:18:07,000
Speaker 6: con and R and D and olly L. But it's

347
00:18:07,040 --> 00:18:09,280
Speaker 6: a rich target if you're looking for a program that

348
00:18:09,320 --> 00:18:10,520
Speaker 6: Elon Musk doesn't like.

349
00:18:10,720 --> 00:18:14,040
Speaker 3: Fascinating, not just the eight percent cuts here, and that's

350
00:18:14,040 --> 00:18:19,359
Speaker 3: over five years. Apparently every year, over every year, we

351
00:18:19,400 --> 00:18:21,680
Speaker 3: may see a dismissal of generals of flag officers. What

352
00:18:21,720 --> 00:18:22,679
Speaker 3: are you hearing about.

353
00:18:22,400 --> 00:18:26,000
Speaker 6: That this is in the romance stage, really rumant stage.

354
00:18:26,280 --> 00:18:29,879
Speaker 6: I don't have any insight into it, and it's so ruminant.

355
00:18:29,920 --> 00:18:32,040
Speaker 6: I mean it's started with a tweet from some reporter

356
00:18:32,119 --> 00:18:34,760
Speaker 6: and it said they're considering firing.

357
00:18:34,920 --> 00:18:37,239
Speaker 3: Understood, this is one of these This purge that we're

358
00:18:37,240 --> 00:18:40,119
Speaker 3: seeing in other federal agencies is not landing at the Pentagon.

359
00:18:40,240 --> 00:18:44,440
Speaker 6: Well, it's landing in terms of probationary employees. It could

360
00:18:44,440 --> 00:18:46,920
Speaker 6: be like saw I heard one figure like fifty five

361
00:18:47,000 --> 00:18:50,960
Speaker 6: thousand employees. But the Night of the Generals isn't there yet.

362
00:18:51,480 --> 00:18:53,880
Speaker 6: You know, you can say anything's being considered. You'll never

363
00:18:53,920 --> 00:18:55,640
Speaker 6: be wrong if you say it's being considered.

364
00:18:55,720 --> 00:18:58,080
Speaker 3: Well, look, you talk about the bureaucracy you work, and

365
00:18:58,119 --> 00:19:00,560
Speaker 3: I believe what is the biggest office in the world.

366
00:19:00,640 --> 00:19:03,080
Speaker 6: Correct, right, with good restaurants though too.

367
00:19:04,560 --> 00:19:06,600
Speaker 3: I'm sure most people don't know about that. But what

368
00:19:06,640 --> 00:19:10,440
Speaker 3: I mean it's a building full of civilian bureaucrats as well. Correct.

369
00:19:10,880 --> 00:19:13,280
Speaker 6: Yeah, it's a it's a little minute. It's a mini city.

370
00:19:13,560 --> 00:19:15,320
Speaker 6: After nine to eleven, they did a great job of

371
00:19:15,359 --> 00:19:18,600
Speaker 6: putting making a better lit You can find a way

372
00:19:18,640 --> 00:19:20,920
Speaker 6: a rattle, lot of user there's Kentucky that cut the lights,

373
00:19:20,960 --> 00:19:25,120
Speaker 6: but now Kentucky Fried Chicken, Panda Cafe's there's a lot

374
00:19:25,160 --> 00:19:27,240
Speaker 6: of light the Pana Express at the Pana Express.

375
00:19:27,240 --> 00:19:29,560
Speaker 3: Excuse how about that? I really need to come visit

376
00:19:29,560 --> 00:19:29,960
Speaker 3: you over there.

377
00:19:30,000 --> 00:19:31,439
Speaker 6: Sometimes I don't know if you can be cleared to

378
00:19:31,440 --> 00:19:31,760
Speaker 6: get in.

379
00:19:32,880 --> 00:19:35,560
Speaker 3: They wouldn't let me in the building. The war in

380
00:19:35,640 --> 00:19:40,560
Speaker 3: Ukraine is supposedly winding down. I don't have any timeline

381
00:19:40,560 --> 00:19:42,359
Speaker 3: for you on that, but you know the story about

382
00:19:42,359 --> 00:19:45,639
Speaker 3: the talks. You see a ceasefire in place right now.

383
00:19:45,720 --> 00:19:48,520
Speaker 3: Don't know how long that'll last. In Gaza. Do developments

384
00:19:48,560 --> 00:19:51,920
Speaker 3: like these change our plans for procurement, for spending, et cetera.

385
00:19:52,040 --> 00:19:54,320
Speaker 3: We were in the middle of multiple hot wars a

386
00:19:54,320 --> 00:19:55,960
Speaker 3: couple of months ago. We might not be a couple

387
00:19:56,040 --> 00:19:56,600
Speaker 3: months from now.

388
00:19:56,760 --> 00:19:59,880
Speaker 6: Now now, we're in the replenishment phase. They used many,

389
00:20:00,080 --> 00:20:03,119
Speaker 6: any many missiles against the Hoodies in and in Iran

390
00:20:03,240 --> 00:20:07,640
Speaker 6: last year. Expensive missiles, the SM six, the Navy's best.

391
00:20:07,640 --> 00:20:10,200
Speaker 6: They's fired like eighty of those against Hoodie targets. Those

392
00:20:10,240 --> 00:20:12,320
Speaker 6: are about four and a half million apiece. So we're

393
00:20:12,320 --> 00:20:15,879
Speaker 6: in the replenishment phase for precision weapons and also the

394
00:20:15,920 --> 00:20:19,120
Speaker 6: build up phase for one five to five millimeters shells.

395
00:20:19,200 --> 00:20:21,960
Speaker 6: So you got to wonder, if there's a Ukraine cease fire,

396
00:20:22,400 --> 00:20:24,919
Speaker 6: let's hope that something does happen like that. We're going

397
00:20:24,960 --> 00:20:27,400
Speaker 6: to have a surfit, a surplus excuse me, of one

398
00:20:27,440 --> 00:20:29,800
Speaker 6: five to five shells and a capacity to build those.

399
00:20:29,840 --> 00:20:32,359
Speaker 6: But we're in the replenishment phase. The big issue is

400
00:20:32,359 --> 00:20:34,959
Speaker 6: going to be the into Pacific and how this replicator

401
00:20:35,000 --> 00:20:38,879
Speaker 6: program plays out. It's cloaked in mystery. It's drones up

402
00:20:38,880 --> 00:20:41,199
Speaker 6: the gazoo, so to speak, but it's supposed to be

403
00:20:41,200 --> 00:20:43,720
Speaker 6: in thousands in place by next August. I think that's

404
00:20:43,720 --> 00:20:46,439
Speaker 6: where a lot of the Heckxit attention is going to

405
00:20:46,480 --> 00:20:49,560
Speaker 6: turn to because he wants to focus more closely on China.

406
00:20:49,720 --> 00:20:52,879
Speaker 3: So these drone makers are the hottest thing going right

407
00:20:52,960 --> 00:20:55,159
Speaker 3: now when it comes to kindagon spending.

408
00:20:55,840 --> 00:20:58,560
Speaker 6: I would think that people should take a look at them.

409
00:20:58,600 --> 00:21:00,360
Speaker 6: Not that I'm giving an investments, but.

410
00:21:00,320 --> 00:21:03,600
Speaker 3: They're But the replicator program is something that you've identified here.

411
00:21:03,640 --> 00:21:05,040
Speaker 6: It's going to be a big deal. And then the

412
00:21:05,040 --> 00:21:08,800
Speaker 6: command and control links for a replicator underwater drones. I

413
00:21:08,800 --> 00:21:11,560
Speaker 6: mean those are areas that are they're not on the

414
00:21:11,640 --> 00:21:14,280
Speaker 6: hit list, that they're kind of on the excluded list.

415
00:21:14,280 --> 00:21:16,600
Speaker 3: They they've been They've got carve outs here because we

416
00:21:16,640 --> 00:21:19,080
Speaker 3: need to do some spending in that area to catch up, right,

417
00:21:19,160 --> 00:21:21,760
Speaker 3: if you're an old line defense contractor getting back to

418
00:21:21,760 --> 00:21:24,240
Speaker 3: this though, if you're a Raytheon, if you're a Lockeyed,

419
00:21:24,280 --> 00:21:28,119
Speaker 3: that replenishment job sounds like a pretty lucrative year ahead.

420
00:21:28,160 --> 00:21:29,960
Speaker 6: It certainly does. A lot of this is made in

421
00:21:30,240 --> 00:21:34,040
Speaker 6: an Alabama, in Troy, Alabama in those areas, the High

422
00:21:34,040 --> 00:21:37,879
Speaker 6: Mars missile, the High Mars Carrier, the THAD missile, the

423
00:21:37,920 --> 00:21:41,040
Speaker 6: Patriot which is split with Raythiana, I want to note,

424
00:21:41,400 --> 00:21:44,720
Speaker 6: but now they have a good backdrop of missiles and

425
00:21:44,760 --> 00:21:47,480
Speaker 6: fire control systems. The F thirty five though, is a

426
00:21:47,520 --> 00:21:49,439
Speaker 6: huge part of their revenue. I think it was like

427
00:21:49,440 --> 00:21:53,840
Speaker 6: twenty five percent locked excuse me for Lockeed. But the

428
00:21:53,880 --> 00:21:58,760
Speaker 6: replenishment part, and he Hexit's Melmo does specifically singles out

429
00:21:59,040 --> 00:22:02,440
Speaker 6: for an exemption munitions. So this is a very constrained

430
00:22:02,440 --> 00:22:05,880
Speaker 6: amount of what's left. And the interesting part the game

431
00:22:05,880 --> 00:22:09,400
Speaker 6: in Washington will be what are those programs being cut?

432
00:22:09,760 --> 00:22:12,080
Speaker 3: Fascinating always to spend time with Tony Caposio in our

433
00:22:12,080 --> 00:22:13,680
Speaker 3: remaining moment, are we going to get a new fifth

434
00:22:13,680 --> 00:22:18,320
Speaker 3: generation fighter jet in this new administration? Something in the

435
00:22:18,359 --> 00:22:20,480
Speaker 3: air or on the sea that we've never seen before.

436
00:22:20,560 --> 00:22:22,600
Speaker 6: No, No, maybe on the sea. We're going to see

437
00:22:22,600 --> 00:22:25,440
Speaker 6: some underwater programs under what are drone programs? We haven't

438
00:22:25,480 --> 00:22:28,840
Speaker 6: seen unmanned under man but I don't see the next generation.

439
00:22:28,960 --> 00:22:31,200
Speaker 6: That was the endged program with g air Force put

440
00:22:31,280 --> 00:22:31,840
Speaker 6: on hold.

441
00:22:32,200 --> 00:22:34,920
Speaker 3: Amazing. Great to spend time with Tony Capossio. He even

442
00:22:34,960 --> 00:22:38,320
Speaker 3: brought the memo over with us, Panda Express, Kentucky Fried Chicken.

443
00:22:38,320 --> 00:22:43,400
Speaker 3: What else do you have over there? De Pago, Baskinger Robbins.

444
00:22:43,480 --> 00:22:45,200
Speaker 3: Really you guys reading ice cream over there too?

445
00:22:46,119 --> 00:22:48,200
Speaker 6: There's a good Lebanese to verna that just opened.

446
00:22:48,440 --> 00:22:50,200
Speaker 3: See how about it? All right, if you can get

447
00:22:50,200 --> 00:22:51,480
Speaker 3: me in the building, I'd like to come see it

448
00:22:51,520 --> 00:22:55,679
Speaker 3: first Clearances to Clearances with Tony Capossio. I'm Joe, Matthew

449
00:22:55,720 --> 00:22:57,879
Speaker 3: and Washington. Glad you're with us here on the fastest

450
00:22:57,880 --> 00:23:01,240
Speaker 3: show in politics. It's the Thursday edition We are Balance

451
00:23:01,280 --> 00:23:01,680
Speaker 3: of Power.

452
00:23:03,040 --> 00:23:06,520
Speaker 1: You're listening to the Bloomberg Balance of Power podcast. Catch

453
00:23:06,560 --> 00:23:10,000
Speaker 1: us live weekdays at noon and five pm Eastern on Apple,

454
00:23:10,080 --> 00:23:13,440
Speaker 1: Cockley and Android Auto with the Bloomberg Business App. Listen

455
00:23:13,520 --> 00:23:16,600
Speaker 1: on demand wherever you get your podcasts, or watch us

456
00:23:16,640 --> 00:23:18,960
Speaker 1: live on YouTube.

457
00:23:19,600 --> 00:23:21,520
Speaker 3: So we had the voice of Michael Bright, CEO of

458
00:23:21,560 --> 00:23:25,160
Speaker 3: the Structured Finance Association here in Washington. Michael, welcome back.

459
00:23:25,200 --> 00:23:25,960
Speaker 3: It's great to see you.

460
00:23:26,040 --> 00:23:26,879
Speaker 6: Yeah, great, Thanks for me.

461
00:23:26,960 --> 00:23:28,959
Speaker 3: I want to ask you about your take on Fanny

462
00:23:29,000 --> 00:23:30,760
Speaker 3: and Freddie, which you've been writing a lot about and

463
00:23:30,800 --> 00:23:32,240
Speaker 3: it's going to be a big story in a minute

464
00:23:32,240 --> 00:23:34,000
Speaker 3: here in Washington. But first, your take on what we

465
00:23:34,200 --> 00:23:39,800
Speaker 3: just heard here the consideration of elevated inflation and its

466
00:23:39,840 --> 00:23:43,760
Speaker 3: impact on the contours of the bond market, the treasury

467
00:23:43,800 --> 00:23:46,320
Speaker 3: market specifically. A lot of people think this looks like

468
00:23:46,400 --> 00:23:49,040
Speaker 3: Janet Yellen's treasury more than what they expected from Trump.

469
00:23:49,080 --> 00:23:49,520
Speaker 5: What do you think.

470
00:23:51,160 --> 00:23:52,399
Speaker 7: I mean, this is going to be a challenge for

471
00:23:52,440 --> 00:23:54,480
Speaker 7: them for a very long time. I mean, inflation is

472
00:23:54,520 --> 00:23:58,159
Speaker 7: still sticky high, and the Fed can do you know,

473
00:23:58,440 --> 00:24:00,920
Speaker 7: so many, so much. But if we got here because

474
00:24:00,920 --> 00:24:02,679
Speaker 7: of too much spending, we certainly got here because of

475
00:24:02,680 --> 00:24:05,199
Speaker 7: too much quantitative easing. I think, you know, everybody can

476
00:24:05,200 --> 00:24:07,639
Speaker 7: look back at sort of that twenty twenty one period

477
00:24:07,720 --> 00:24:10,120
Speaker 7: and say some of that spending, you know, probably contributed

478
00:24:10,160 --> 00:24:12,240
Speaker 7: to this. The Fed was wrong and thinking that it

479
00:24:12,280 --> 00:24:15,080
Speaker 7: was transitory, and so it's been a long way out.

480
00:24:15,280 --> 00:24:17,720
Speaker 7: They did get us down from nine on CPI to

481
00:24:18,000 --> 00:24:20,400
Speaker 7: in the threes without really taking the economy and keeping

482
00:24:20,400 --> 00:24:22,760
Speaker 7: it kept unemployment low. But you know, three four percent

483
00:24:22,840 --> 00:24:24,359
Speaker 7: CPI is not going to cut it. You know, the

484
00:24:24,400 --> 00:24:26,639
Speaker 7: Fed really needs to get it down below two to

485
00:24:26,800 --> 00:24:29,520
Speaker 7: maintain their credibility. And so spending is going to be

486
00:24:29,359 --> 00:24:32,280
Speaker 7: a big part of whether or not that's successful spending.

487
00:24:32,359 --> 00:24:34,320
Speaker 3: My goodness, well, we're about to have a grand debate

488
00:24:34,359 --> 00:24:35,879
Speaker 3: over that right now. A lot of people are writing

489
00:24:35,880 --> 00:24:38,120
Speaker 3: off the ear when it comes to interest rate cuts,

490
00:24:38,119 --> 00:24:39,560
Speaker 3: are you among them?

491
00:24:40,160 --> 00:24:43,880
Speaker 7: They can't cut until it's credibly it's credible that CPI's

492
00:24:44,200 --> 00:24:46,280
Speaker 7: heading down. I mean, because what will happen is that

493
00:24:46,280 --> 00:24:48,480
Speaker 7: the Fed cuts rates and the market doesn't really believe

494
00:24:48,480 --> 00:24:50,360
Speaker 7: that they have inflation under control. The longer term rates

495
00:24:50,400 --> 00:24:52,560
Speaker 7: are just going to go up, so there's nothing that

496
00:24:52,600 --> 00:24:54,560
Speaker 7: you can do. So inflation is the boundary condition on

497
00:24:54,600 --> 00:24:57,120
Speaker 7: what the Fed can do. It really is their primary mandate.

498
00:24:57,160 --> 00:25:00,840
Speaker 7: And so yeah, I've been bearish on the prospect for

499
00:25:00,840 --> 00:25:02,400
Speaker 7: some of these rate cuts. I was actually wrong when

500
00:25:02,600 --> 00:25:04,640
Speaker 7: they cut fifty. I thought they should only gone twenty five.

501
00:25:05,440 --> 00:25:07,480
Speaker 7: Then that they wouldn't only get twenty five. I think

502
00:25:07,640 --> 00:25:09,840
Speaker 7: that was probably the right call actually, you know, because

503
00:25:09,920 --> 00:25:11,840
Speaker 7: you saw longer term reach check up because the markets

504
00:25:11,840 --> 00:25:13,280
Speaker 7: are to get concerned again about information.

505
00:25:13,680 --> 00:25:16,119
Speaker 3: Well, it's interesting. Another thing that people thought was a

506
00:25:16,160 --> 00:25:19,120
Speaker 3: likelihood of Donald Trump won the election would be action

507
00:25:19,240 --> 00:25:21,240
Speaker 3: on Fanny and Freddie. And it's something that you've been

508
00:25:21,320 --> 00:25:24,360
Speaker 3: engaged in. Bill Ackman really got people's hopes up when

509
00:25:24,400 --> 00:25:27,000
Speaker 3: he issued this was the end of December. His thoughts

510
00:25:27,000 --> 00:25:29,040
Speaker 3: on this, sent out a series of tweets and said

511
00:25:29,080 --> 00:25:32,760
Speaker 3: that they're particularly interesting today versus any other time in history.

512
00:25:32,760 --> 00:25:35,120
Speaker 3: As he wrote that there's a credible path for their

513
00:25:35,119 --> 00:25:39,280
Speaker 3: removal from conservatorship in the relative short term and by

514
00:25:39,280 --> 00:25:42,840
Speaker 3: that he means the next two years. Now, you say, fine,

515
00:25:42,920 --> 00:25:45,960
Speaker 3: but not without reforms. And you've suggested in an op

516
00:25:46,119 --> 00:25:49,560
Speaker 3: ed a series of reforms. Simply releasing Fanny and Freddy

517
00:25:50,240 --> 00:25:53,200
Speaker 3: to the private world would, for instance, hurt lower end

518
00:25:53,200 --> 00:25:55,560
Speaker 3: borrowers in your take, So what do you do about it?

519
00:25:55,600 --> 00:25:57,919
Speaker 7: Well, I think, look, this is a very complicated debate.

520
00:25:58,680 --> 00:26:00,640
Speaker 7: So they've been in conservatorship fifteen years.

521
00:26:00,680 --> 00:26:02,280
Speaker 3: Imagine that's been fifteen years.

522
00:26:02,280 --> 00:26:05,040
Speaker 7: It's pretty crazy, right, But there there's reasons for that.

523
00:26:05,080 --> 00:26:08,560
Speaker 7: I mean, ending it is going to be very, very complicated.

524
00:26:08,800 --> 00:26:11,120
Speaker 7: So I don't think you can do it just by Congress,

525
00:26:11,200 --> 00:26:15,160
Speaker 7: Congress acting on its own without leadership from the administration. Conversely,

526
00:26:15,200 --> 00:26:18,240
Speaker 7: I don't think it's why to do it with administrative

527
00:26:18,280 --> 00:26:21,480
Speaker 7: action only. There are things that need to be codified

528
00:26:21,920 --> 00:26:23,879
Speaker 7: by Congress in order to get the system sort of

529
00:26:23,960 --> 00:26:25,439
Speaker 7: to the right place where it's going to be. So

530
00:26:25,520 --> 00:26:27,919
Speaker 7: one of them would be of course, you know, we

531
00:26:28,000 --> 00:26:30,080
Speaker 7: lived what I kind of called the big lie for

532
00:26:30,119 --> 00:26:33,480
Speaker 7: a very long time, which was said that these bonds

533
00:26:33,520 --> 00:26:35,760
Speaker 7: were not backed by the federal government, that the NBS,

534
00:26:35,760 --> 00:26:38,159
Speaker 7: the mortgage backed securities they issue were not backed. If

535
00:26:38,160 --> 00:26:40,359
Speaker 7: you look at a perspective prior to the financial crisis,

536
00:26:40,359 --> 00:26:42,240
Speaker 7: it says these are not backed by the full faith

537
00:26:42,280 --> 00:26:44,520
Speaker 7: and credit of the United States. But everybody kind of

538
00:26:44,560 --> 00:26:48,160
Speaker 7: assumed that they probably would be, but unclear about that,

539
00:26:48,400 --> 00:26:51,080
Speaker 7: and so it kind of culminated at this one anecdote

540
00:26:51,080 --> 00:26:52,480
Speaker 7: that I don't know if you remember, but during the

541
00:26:52,520 --> 00:26:55,000
Speaker 7: two thousand and eight financial crisis is also coincided with

542
00:26:55,000 --> 00:26:57,760
Speaker 7: the Beijing Olympics, and then Secretary of State John Pulson

543
00:26:57,760 --> 00:27:00,560
Speaker 7: had to go and reassure the Chinese, we are going

544
00:27:00,600 --> 00:27:02,800
Speaker 7: to back these companies up, I promise, please don't sell

545
00:27:03,040 --> 00:27:05,680
Speaker 7: all the bonds that you own or you know, otherwise

546
00:27:05,760 --> 00:27:08,520
Speaker 7: US interestrates with skyrocket. That's a that's a risk that

547
00:27:08,560 --> 00:27:12,120
Speaker 7: we'd be facing again if they are released from conservatorship

548
00:27:12,320 --> 00:27:16,440
Speaker 7: only through administrative action. It's possible to Bill Lackman's point

549
00:27:17,080 --> 00:27:19,879
Speaker 7: that this could be one of the confluence of administrative

550
00:27:20,359 --> 00:27:24,840
Speaker 7: leadership on the issue. If it's coupled with congressional reforms,

551
00:27:24,880 --> 00:27:27,000
Speaker 7: that would be very helpful. There's other things that Congress

552
00:27:27,000 --> 00:27:29,040
Speaker 7: need to do as well, some of those I outlined.

553
00:27:28,840 --> 00:27:31,199
Speaker 3: Well, I mean, just but to begin with just to

554
00:27:31,280 --> 00:27:34,520
Speaker 3: think that we're talking about this in this moment politically

555
00:27:35,280 --> 00:27:38,000
Speaker 3: with a Republican majority of what could be one at

556
00:27:38,000 --> 00:27:42,000
Speaker 3: some point by spring, is Washington really prepared to have

557
00:27:42,040 --> 00:27:43,560
Speaker 3: a grown up conversation about this.

558
00:27:44,560 --> 00:27:47,840
Speaker 7: There's a reason it's taken fifteen years. Yeah, you know,

559
00:27:48,160 --> 00:27:52,320
Speaker 7: there have been bipartisan legislative efforts that had some momentum

560
00:27:52,320 --> 00:27:55,080
Speaker 7: but didn't get over the finish line. There would been

561
00:27:55,160 --> 00:27:57,680
Speaker 7: purely administrative efforts. In fact, in the Trump one point

562
00:27:57,720 --> 00:28:00,200
Speaker 7: zero administration, there were there was quite a strong push

563
00:28:00,280 --> 00:28:03,639
Speaker 7: for that, I think because it was administrative only. You know,

564
00:28:03,680 --> 00:28:05,520
Speaker 7: there was a negative market reaction that kind of put

565
00:28:05,560 --> 00:28:09,959
Speaker 7: a pause on that. So is it likely in the

566
00:28:09,960 --> 00:28:14,200
Speaker 7: next two years. I disagree with the thought that it's like, okay,

567
00:28:14,240 --> 00:28:16,480
Speaker 7: I think that we do have a unique alignment of

568
00:28:17,600 --> 00:28:21,040
Speaker 7: administrative leadership and potential congressional willingness to do it, but

569
00:28:21,080 --> 00:28:22,720
Speaker 7: it would need to be a bipartisan in my opinion,

570
00:28:22,720 --> 00:28:23,560
Speaker 7: in order to really.

571
00:28:23,400 --> 00:28:26,600
Speaker 3: So this is just in case basically what you're laying

572
00:28:26,640 --> 00:28:29,879
Speaker 3: out here. So let's talk about lower loan limits on

573
00:28:29,960 --> 00:28:33,840
Speaker 3: mortgages they can guarantee you suggest sensible restrictions on the

574
00:28:33,880 --> 00:28:37,960
Speaker 3: activities of GSS. Those two alone would be considered pretty

575
00:28:38,160 --> 00:28:38,840
Speaker 3: major feats.

576
00:28:39,120 --> 00:28:40,360
Speaker 6: Yeah, that would be helpful.

577
00:28:40,400 --> 00:28:43,840
Speaker 7: So one of the premises that I'm coming to this with,

578
00:28:44,440 --> 00:28:46,760
Speaker 7: and that is important to our market that we represent,

579
00:28:46,800 --> 00:28:49,120
Speaker 7: which is serving a lot of private borrowers very well.

580
00:28:49,160 --> 00:28:52,800
Speaker 7: So predominantly the private securitization market is serving borrowers that

581
00:28:52,840 --> 00:28:55,520
Speaker 7: are above the loan limits of Fanny and Freddy conservatives

582
00:28:55,560 --> 00:28:58,959
Speaker 7: sort of super prime jumbo mortgages, and those barbers are

583
00:28:58,960 --> 00:29:02,280
Speaker 7: getting rates some times even lower than Fanny and Freddie rates.

584
00:29:02,480 --> 00:29:05,960
Speaker 7: But built into the law right now is that the

585
00:29:06,000 --> 00:29:08,840
Speaker 7: GSE loan limits have to go up with home price appreciation.

586
00:29:09,400 --> 00:29:13,080
Speaker 7: Now we've seen enormous home price appreciation and we've seen

587
00:29:13,120 --> 00:29:15,280
Speaker 7: the loan limits continue to go up along with that.

588
00:29:15,320 --> 00:29:19,160
Speaker 7: So you've got government sponsored enterprises backing loans of a

589
00:29:19,200 --> 00:29:21,400
Speaker 7: million and a half dollars in a lot of areas.

590
00:29:22,120 --> 00:29:23,960
Speaker 7: As a lot of people argue, and I would be

591
00:29:24,000 --> 00:29:26,480
Speaker 7: one of them, that this is actually contributing to the

592
00:29:26,480 --> 00:29:28,719
Speaker 7: increase in home prices, that's making, you know, causing an

593
00:29:28,720 --> 00:29:29,640
Speaker 7: affordability crisis.

594
00:29:29,680 --> 00:29:31,040
Speaker 6: So I think that.

595
00:29:31,400 --> 00:29:34,080
Speaker 7: It us Congress too, if these guys are going to

596
00:29:34,120 --> 00:29:36,200
Speaker 7: come out of conservatorship to say, great, but we're going

597
00:29:36,280 --> 00:29:38,200
Speaker 7: to have them focus more on their core mission as

598
00:29:38,200 --> 00:29:40,160
Speaker 7: opposed to letting them, you know, juice up home prices

599
00:29:40,200 --> 00:29:41,680
Speaker 7: at the super upper end of the market.

600
00:29:41,800 --> 00:29:44,200
Speaker 3: Does any arrangement if there's a congressional deal, which I

601
00:29:44,240 --> 00:29:46,280
Speaker 3: think we're assuming here, otherwise none of this is probably

602
00:29:46,320 --> 00:29:49,080
Speaker 3: going to be considered some sort of a supervisory or

603
00:29:49,120 --> 00:29:52,600
Speaker 3: is there a probationary period following their release?

604
00:29:52,800 --> 00:29:55,480
Speaker 7: Well that that hopefully there'll be a lot of regulation,

605
00:29:55,600 --> 00:29:59,280
Speaker 7: So you certainly need a strong regulator of them. You know,

606
00:29:59,320 --> 00:30:02,040
Speaker 7: there are some idea that you could have charter authority

607
00:30:02,120 --> 00:30:03,960
Speaker 7: to have more of them, so they are some of

608
00:30:04,000 --> 00:30:07,600
Speaker 7: the bipartisan buils in the past suggested having several, you know, small,

609
00:30:07,720 --> 00:30:10,600
Speaker 7: smaller gcs so that they could be resolved if there

610
00:30:10,640 --> 00:30:12,440
Speaker 7: was a problem without it sort of taking down the market.

611
00:30:12,440 --> 00:30:14,520
Speaker 7: And then that leads kind of into the third point,

612
00:30:14,520 --> 00:30:17,120
Speaker 7: which was, you really do need a credible resolution regime

613
00:30:17,120 --> 00:30:19,320
Speaker 7: for anything if it's a private company. So if you're

614
00:30:19,320 --> 00:30:22,480
Speaker 7: going to privatize them, again, I have some skepticism on

615
00:30:22,520 --> 00:30:25,440
Speaker 7: the idea of a private government sponsored enterprise. It feels

616
00:30:25,480 --> 00:30:28,520
Speaker 7: a little bit oxymoronic to me. But if you're going

617
00:30:28,520 --> 00:30:30,040
Speaker 7: to do that, and you want the market to believe

618
00:30:30,040 --> 00:30:32,360
Speaker 7: that these are companies that could go insolvent, then you

619
00:30:32,400 --> 00:30:34,600
Speaker 7: do need a credible resolution regime that says we could

620
00:30:34,640 --> 00:30:37,880
Speaker 7: put somebody you know away while with the market continuing

621
00:30:37,880 --> 00:30:40,480
Speaker 7: to function. And that really is where I think congressional

622
00:30:40,720 --> 00:30:43,959
Speaker 7: you know, a stamp on the NBS itself that's well

623
00:30:44,000 --> 00:30:46,800
Speaker 7: behind a bunch of private capital would be important.

624
00:30:46,800 --> 00:30:48,560
Speaker 3: I'm just glad to talk to somebody who's thought this

625
00:30:48,640 --> 00:30:51,800
Speaker 3: through on the level that you have here. We're work time.

626
00:30:51,960 --> 00:30:55,520
Speaker 3: It's been fifteen years. It's been fifteen years. Maybe not

627
00:30:55,560 --> 00:30:57,680
Speaker 3: in the next two you say will it be before

628
00:30:57,720 --> 00:31:01,920
Speaker 3: twenty go by? No, So we're just talking for the

629
00:31:01,920 --> 00:31:05,040
Speaker 3: fun of it here always. Wow, that's Washington everyone. You

630
00:31:05,080 --> 00:31:07,080
Speaker 3: just saw it in a real time Michael Brake. Great

631
00:31:07,080 --> 00:31:08,840
Speaker 3: to have you back here. Check out when he was

632
00:31:08,880 --> 00:31:11,680
Speaker 3: writing the op eds in the American Bank Correct CEO

633
00:31:11,960 --> 00:31:14,720
Speaker 3: Structured Finance Association. But we brought it to you right

634
00:31:14,760 --> 00:31:16,800
Speaker 3: here on the fastest show in politics. We'll assemble our

635
00:31:16,840 --> 00:31:19,320
Speaker 3: panel next, Rick and Genie. Right here on Bloomberg.

636
00:31:20,760 --> 00:31:24,240
Speaker 1: You're listening to the Bloomberg Balance of Power Podcast. Catch

637
00:31:24,320 --> 00:31:27,360
Speaker 1: us live weekdays at noon and five pm Eastern on

638
00:31:27,480 --> 00:31:30,720
Speaker 1: Apple Cockley and Android Auto with the Bloomberg Business App.

639
00:31:30,760 --> 00:31:33,800
Speaker 1: You can also listen live on Amazon Alexa from our

640
00:31:33,800 --> 00:31:39,040
Speaker 1: flagship New York station, Just say Alexa, play Bloomberg eleven thirty.

641
00:31:40,640 --> 00:31:43,000
Speaker 3: Around this time yesterday, we were waiting for a judge's

642
00:31:43,040 --> 00:31:47,320
Speaker 3: ruling on Eric Adams. It never came. District Judge dale

643
00:31:47,360 --> 00:31:49,880
Speaker 3: Hoe did not make a decision and what was a

644
00:31:49,960 --> 00:31:52,880
Speaker 3: ninety minute hearing after he instructed parties to be prepared

645
00:31:52,920 --> 00:31:57,360
Speaker 3: to discuss why the corruption case against him, Eric Adams,

646
00:31:57,360 --> 00:32:00,720
Speaker 3: that is, should be thrown out or not. So maybe

647
00:32:00,720 --> 00:32:03,400
Speaker 3: where you left off on this whole story was Kathy Hokl,

648
00:32:03,440 --> 00:32:07,200
Speaker 3: the governor of New York considering removing Eric Adams from office.

649
00:32:07,200 --> 00:32:11,120
Speaker 3: It's unclear whether that is going to happen. It is

650
00:32:11,200 --> 00:32:15,560
Speaker 3: clear the walls are closing in. This is coming now

651
00:32:15,600 --> 00:32:18,760
Speaker 3: from New York One. In a fascinating development in this

652
00:32:18,840 --> 00:32:23,200
Speaker 3: whole saga, Kathy Hochel considering sanctions now against Eric Adams

653
00:32:24,080 --> 00:32:26,680
Speaker 3: New York One, says. The governor's team developing legislation that

654
00:32:26,680 --> 00:32:30,480
Speaker 3: would need city council and state legislative approval. Details still developing,

655
00:32:30,560 --> 00:32:35,000
Speaker 3: expected to include legal limits on the mayor's power as executive.

656
00:32:35,680 --> 00:32:39,719
Speaker 3: But he just hangs out there living with these restrictions.

657
00:32:39,760 --> 00:32:42,719
Speaker 3: Let's get the panel's take on this before we move

658
00:32:42,760 --> 00:32:44,800
Speaker 3: on to some other topics. This is just breaking right now,

659
00:32:44,840 --> 00:32:46,600
Speaker 3: and glad to say we have Rick and Jenie both

660
00:32:46,600 --> 00:32:50,600
Speaker 3: with us today. Bloomberg Politics contributors Genie Shanzino, of course,

661
00:32:50,720 --> 00:32:55,240
Speaker 3: democratic strategist and political science professor at Iona University. Rick Davis,

662
00:32:55,280 --> 00:33:00,400
Speaker 3: republican strategist and partner at Stone Court Capital. Does this

663
00:33:00,480 --> 00:33:05,080
Speaker 3: sound realistic to you? How does Eric Adams continue running

664
00:33:05,080 --> 00:33:08,680
Speaker 3: the city under sanctions if that's in fact Kathy Hokal's choice.

665
00:33:09,920 --> 00:33:13,080
Speaker 8: Yeah, Joe, you say sanctions, I think we're talking about Russia,

666
00:33:13,240 --> 00:33:15,680
Speaker 8: and yet no, we're talking about the mayor of New

667
00:33:15,760 --> 00:33:20,840
Speaker 8: York City. It's you know, it's astonishing. Apparently, if what

668
00:33:20,880 --> 00:33:24,040
Speaker 8: we're hearing is to be believed, what they're really talking

669
00:33:24,080 --> 00:33:26,760
Speaker 8: about is legislation that would go through the New York

670
00:33:26,760 --> 00:33:30,520
Speaker 8: State Assembly, the Legislature, and the Senate and get approved

671
00:33:30,560 --> 00:33:34,680
Speaker 8: by the New York City Council that would sanction and

672
00:33:34,800 --> 00:33:38,600
Speaker 8: limit the power of the New York City mayor. I

673
00:33:38,640 --> 00:33:42,480
Speaker 8: think that this is a far fetched idea. I think

674
00:33:42,520 --> 00:33:45,960
Speaker 8: it is an indication that the governor does not feel

675
00:33:46,080 --> 00:33:48,240
Speaker 8: she is ready to try to take the step to

676
00:33:48,280 --> 00:33:51,440
Speaker 8: remove him, and so I think that they are thinking

677
00:33:51,440 --> 00:33:54,239
Speaker 8: of this as sort of a backstop. But it is

678
00:33:54,520 --> 00:33:58,040
Speaker 8: highly problematic, and let's not forget New York City is

679
00:33:58,080 --> 00:34:02,080
Speaker 8: facing an election for mayor this year. She didn't move

680
00:34:02,160 --> 00:34:05,000
Speaker 8: when he was indicted. I'm not sure we have a

681
00:34:05,040 --> 00:34:07,760
Speaker 8: good reason from her yet that she should move either

682
00:34:07,840 --> 00:34:11,080
Speaker 8: to sanctions or to a some kind of removal at

683
00:34:11,080 --> 00:34:11,959
Speaker 8: this point.

684
00:34:12,680 --> 00:34:15,680
Speaker 3: So, Rick, does this sound like Mayor Eric Adams keeps

685
00:34:15,719 --> 00:34:17,239
Speaker 3: his job at least for now.

686
00:34:18,880 --> 00:34:22,280
Speaker 9: Yeah, I mean this is the most non action action

687
00:34:22,520 --> 00:34:24,960
Speaker 9: I've seen taken by a chief executive of the state

688
00:34:24,960 --> 00:34:26,799
Speaker 9: in a long time. And maybe you can just rack

689
00:34:26,880 --> 00:34:29,800
Speaker 9: it up to democratic politics in New York. Genny would

690
00:34:29,800 --> 00:34:31,279
Speaker 9: know more about that stuff than I do.

691
00:34:31,400 --> 00:34:34,080
Speaker 3: But this is this is nuts.

692
00:34:35,040 --> 00:34:39,200
Speaker 9: Either either think he's violated the law and done a

693
00:34:39,239 --> 00:34:42,560
Speaker 9: deal with the Trump Administration's inappropriate and he ought to

694
00:34:42,600 --> 00:34:46,080
Speaker 9: be removed, or leave him alone. Just what we need

695
00:34:46,560 --> 00:34:48,600
Speaker 9: is more strings attached to run in the City of

696
00:34:48,600 --> 00:34:50,680
Speaker 9: New York, by the by the Albany.

697
00:34:50,800 --> 00:34:53,280
Speaker 3: Oh great, great strategy. Governor.

698
00:34:54,280 --> 00:34:57,240
Speaker 9: My guess is she's just got those footsteps Andrew colemo

699
00:34:57,280 --> 00:34:59,400
Speaker 9: on in the back of her mind. The idea that

700
00:34:59,480 --> 00:35:02,479
Speaker 9: somehow she would elevate his chances of being mayor would

701
00:35:02,560 --> 00:35:07,439
Speaker 9: absolutely destroyer. And that's too bad because instead of doing

702
00:35:07,440 --> 00:35:10,319
Speaker 9: the right thing, she's got this convoluted mess that she's

703
00:35:10,360 --> 00:35:13,400
Speaker 9: now going to expose to the voters and people of

704
00:35:13,440 --> 00:35:13,919
Speaker 9: New York.

705
00:35:15,239 --> 00:35:20,800
Speaker 3: Wow. Well, I'm just loving listening to your instant reactions here, Genie.

706
00:35:20,800 --> 00:35:22,320
Speaker 3: While this may be good news, I guess in the

707
00:35:22,360 --> 00:35:24,680
Speaker 3: short term for Eric Adams, what does it mean for

708
00:35:24,719 --> 00:35:26,600
Speaker 3: potential long term damage to the office.

709
00:35:28,640 --> 00:35:31,839
Speaker 8: There's so much potential damage to the office. And Rick

710
00:35:31,960 --> 00:35:35,520
Speaker 8: is absolutely right. What about the people of the city

711
00:35:35,600 --> 00:35:39,400
Speaker 8: of New York. We have had four aids to the

712
00:35:39,760 --> 00:35:43,319
Speaker 8: mayor have resigned, as we know over the weekend. You know,

713
00:35:43,600 --> 00:35:46,799
Speaker 8: New York City has over eight million people. It is

714
00:35:46,880 --> 00:35:50,080
Speaker 8: a complicated Some people say it's the second hardest job

715
00:35:50,560 --> 00:35:55,239
Speaker 8: in the country besides yours, Joe Matthew. And so you know,

716
00:35:55,840 --> 00:35:59,360
Speaker 8: we're having somebody do this under indictment, under all of

717
00:35:59,400 --> 00:36:02,160
Speaker 8: this pressure. It is very, very tough to imagine. But

718
00:36:02,239 --> 00:36:05,200
Speaker 8: I also think from Kathy Hochl's perspective, it is another

719
00:36:05,320 --> 00:36:09,160
Speaker 8: and a long line of reminders to people that she

720
00:36:09,400 --> 00:36:12,000
Speaker 8: doesn't seem to be able to exhibit the kind of

721
00:36:12,480 --> 00:36:17,080
Speaker 8: strength that people want in a governor, the decisive action

722
00:36:17,239 --> 00:36:21,040
Speaker 8: that people are hoping for. She is holding meetings, now,

723
00:36:21,080 --> 00:36:24,840
Speaker 8: she's thinking about removal, now she's thinking about sanctions. I

724
00:36:24,880 --> 00:36:26,760
Speaker 8: don't think either one is a good deal.

725
00:36:27,200 --> 00:36:28,279
Speaker 9: But here she.

726
00:36:28,320 --> 00:36:32,440
Speaker 8: Goes now throwing out another trial balloon. It is not good.

727
00:36:32,600 --> 00:36:35,080
Speaker 8: By the way, today she has also deployed the National

728
00:36:35,120 --> 00:36:37,880
Speaker 8: Guard because of a prison strike. And she's got Donald

729
00:36:37,920 --> 00:36:41,360
Speaker 8: Trump breathing down her neck about congestion pricing. So Kathy

730
00:36:41,400 --> 00:36:44,360
Speaker 8: Local has her hands full. But this is a really

731
00:36:44,440 --> 00:36:46,520
Speaker 8: tough moment, and I don't think this makes sense.

732
00:36:47,480 --> 00:36:49,720
Speaker 3: Well, you know, I just wonder what the Trump effect

733
00:36:49,800 --> 00:36:51,799
Speaker 3: is here, Rick, what do you think a day after

734
00:36:51,840 --> 00:36:55,120
Speaker 3: the congestion pricing move. You know, he's pals with Eric Adams.

735
00:36:55,120 --> 00:36:58,080
Speaker 3: Now that's why this case is being ordered to be

736
00:36:58,200 --> 00:37:01,520
Speaker 3: thrown out despite all the resignations. Is Kathy Hilchel afraid

737
00:37:01,520 --> 00:37:01,960
Speaker 3: of Trump?

738
00:37:03,400 --> 00:37:05,920
Speaker 9: Yeah, if she's afraid of Trump, then she ought to

739
00:37:05,960 --> 00:37:09,920
Speaker 9: resign herself as governor of New York. She's got an

740
00:37:09,920 --> 00:37:13,120
Speaker 9: obligation to serve the people in New York, as Genie said,

741
00:37:13,440 --> 00:37:16,319
Speaker 9: and that includes everybody in New York City. She thinks

742
00:37:16,320 --> 00:37:18,600
Speaker 9: something's wrong occurred, then she had to say so and

743
00:37:18,680 --> 00:37:22,359
Speaker 9: act accordingly. If not, then then shut up and go

744
00:37:22,400 --> 00:37:24,439
Speaker 9: back to Albany and see what you can do about

745
00:37:24,480 --> 00:37:26,840
Speaker 9: saving your state, because it's got enough problems.

746
00:37:26,440 --> 00:37:26,960
Speaker 3: On its own.

747
00:37:27,280 --> 00:37:30,360
Speaker 9: Look, I mean, this is just another example of half

748
00:37:30,440 --> 00:37:33,600
Speaker 9: measures trying to equate to managing a crisis. They have

749
00:37:33,640 --> 00:37:36,920
Speaker 9: a crisis in New York City right now, and and

750
00:37:36,920 --> 00:37:40,719
Speaker 9: and fomented in part because of what looks like a

751
00:37:41,160 --> 00:37:44,520
Speaker 9: you know, sort of devil's bargain with the Justice Department

752
00:37:44,600 --> 00:37:47,400
Speaker 9: to do the bidding of the you know, Czar of

753
00:37:47,800 --> 00:37:51,360
Speaker 9: Immigration in New York City in return for getting off

754
00:37:51,719 --> 00:37:55,160
Speaker 9: a indictment. I mean, like that should be what we're

755
00:37:55,160 --> 00:37:58,480
Speaker 9: talking about today, not this idea that somehow you're going

756
00:37:58,560 --> 00:38:01,480
Speaker 9: to put strings attached to being mayor of New York.

757
00:38:02,280 --> 00:38:04,560
Speaker 9: By the way, do those all go away if he

758
00:38:04,600 --> 00:38:05,600
Speaker 9: doesn't win reelection?

759
00:38:05,760 --> 00:38:07,000
Speaker 5: I mean, like it's nuts.

760
00:38:07,120 --> 00:38:08,480
Speaker 3: They won't even get it done.

761
00:38:08,239 --> 00:38:10,960
Speaker 9: By the time the election occurs in New York City.

762
00:38:11,000 --> 00:38:13,400
Speaker 9: And what chances do this guy have of getting re

763
00:38:13,520 --> 00:38:16,440
Speaker 9: elected with the problems that he's created for himself.

764
00:38:17,360 --> 00:38:19,160
Speaker 3: Wow, this is Rick and Genie at their best here.

765
00:38:19,160 --> 00:38:20,840
Speaker 3: I mean, we may as well go from one crisis

766
00:38:20,840 --> 00:38:23,600
Speaker 3: to another. Can we call it a crisis? What's happening

767
00:38:23,600 --> 00:38:26,440
Speaker 3: on Capitol Hill right now? We're walking up on a

768
00:38:26,480 --> 00:38:29,760
Speaker 3: funding deadline here. We've got this massive agenda. Donald Trump

769
00:38:29,760 --> 00:38:31,840
Speaker 3: wants in one big bill in the Senate. In meantime,

770
00:38:31,920 --> 00:38:34,800
Speaker 3: is going ahead this afternoon with a two bill plan.

771
00:38:36,480 --> 00:38:39,880
Speaker 3: This is pretty remarkable, Rick Davis. Lindsey Graham, who you

772
00:38:39,960 --> 00:38:42,879
Speaker 3: knew well in your years working in the Senate, says, yeah,

773
00:38:42,880 --> 00:38:46,800
Speaker 3: the President prefers one big, beautiful bill, but you always

774
00:38:46,880 --> 00:38:50,279
Speaker 3: need a plan B around here. Will he get credit for.

775
00:38:50,280 --> 00:38:54,799
Speaker 9: It in the end, probably not. My guess is no

776
00:38:54,880 --> 00:38:57,719
Speaker 9: good deed goes unpunished on Capitol Hill, and this is

777
00:38:57,760 --> 00:39:00,759
Speaker 9: going to go into that category. You know, we'll see

778
00:39:00,760 --> 00:39:05,319
Speaker 9: what happens. We know that the House of Representatives is

779
00:39:05,320 --> 00:39:07,799
Speaker 9: not a reliable partner. They don't have enough of a

780
00:39:07,880 --> 00:39:12,400
Speaker 9: margin to guarantee outcomes, and so I think the idea is,

781
00:39:12,440 --> 00:39:15,319
Speaker 9: so let let let both these flowers bloom and see

782
00:39:15,320 --> 00:39:19,720
Speaker 9: what comes of it. I think that's probably as best

783
00:39:19,760 --> 00:39:21,799
Speaker 9: an option as you can get when you have the

784
00:39:21,840 --> 00:39:24,960
Speaker 9: President United States trying to make legislative strategy for these

785
00:39:25,000 --> 00:39:29,120
Speaker 9: guys and and frankly tying them up quite a bit

786
00:39:29,200 --> 00:39:32,000
Speaker 9: after saying whatever you guys, bring me works for me.

787
00:39:32,920 --> 00:39:36,160
Speaker 9: Don't know what changed Trump's mind, but it has caused

788
00:39:36,200 --> 00:39:37,680
Speaker 9: a lot of trouble on Capitol Hill.

789
00:39:38,640 --> 00:39:42,440
Speaker 3: Well yeah, you know, so, enter Senate Democrats, Genie. This

790
00:39:42,600 --> 00:39:44,960
Speaker 3: means it's time for the voter rama, and it's going

791
00:39:45,040 --> 00:39:47,160
Speaker 3: to be a late night, if not an early morning.

792
00:39:47,200 --> 00:39:50,160
Speaker 3: Maybe they're still underway at this time tomorrow, but we're

793
00:39:50,160 --> 00:39:52,080
Speaker 3: expecting a lot of amendments. This is part of the

794
00:39:52,080 --> 00:39:54,960
Speaker 3: pleasure of working in the Senate here, and I bet

795
00:39:55,000 --> 00:39:57,480
Speaker 3: Rick has many scars to show for the late nights

796
00:39:57,760 --> 00:40:00,640
Speaker 3: when it came time for voter rama. Schumer's going to

797
00:40:00,719 --> 00:40:02,120
Speaker 3: strategy here, what's it going to be?

798
00:40:04,000 --> 00:40:05,919
Speaker 8: Well, I think they are going to try to put

799
00:40:06,000 --> 00:40:08,839
Speaker 8: up so the Republicans have to take as many hard

800
00:40:08,880 --> 00:40:11,680
Speaker 8: votes as they can force them to make. You know,

801
00:40:12,160 --> 00:40:15,560
Speaker 8: the fascinating thing here, I think is for all the

802
00:40:15,560 --> 00:40:19,600
Speaker 8: distractions that Donald Trump presents and just I guess today

803
00:40:19,719 --> 00:40:22,680
Speaker 8: is one month. I can't believe it. One month he's

804
00:40:22,719 --> 00:40:26,160
Speaker 8: been in office. Seems like an eternity. But the most

805
00:40:26,239 --> 00:40:30,040
Speaker 8: important thing that can define his presidency is going to

806
00:40:30,120 --> 00:40:33,600
Speaker 8: be what we're talking about now, which is legislation. For

807
00:40:33,719 --> 00:40:36,600
Speaker 8: all the eos and all of this stuff that he

808
00:40:36,680 --> 00:40:39,560
Speaker 8: has been doing, it can all be easily overturned or

809
00:40:39,840 --> 00:40:43,680
Speaker 8: relatively easily overturned by whoever comes in next, whatever Democrat

810
00:40:43,840 --> 00:40:47,080
Speaker 8: next gets in office. But legislation is much harder. So

811
00:40:47,200 --> 00:40:49,960
Speaker 8: this is really where the rubber meets the road. And

812
00:40:50,000 --> 00:40:52,200
Speaker 8: that's why I think we see the President saying to

813
00:40:52,239 --> 00:40:55,400
Speaker 8: the House, you know, we want you and Senate, we

814
00:40:55,440 --> 00:40:57,640
Speaker 8: want you as this backup, so all of you keep

815
00:40:57,680 --> 00:41:01,960
Speaker 8: going full steam ahead. The reality is, though, is that

816
00:41:02,000 --> 00:41:04,720
Speaker 8: it is going to be very tough to get either

817
00:41:04,800 --> 00:41:08,080
Speaker 8: one of these bills through, and so of course the

818
00:41:08,120 --> 00:41:10,920
Speaker 8: Democrats in the opposition are going to play that up

819
00:41:10,960 --> 00:41:13,680
Speaker 8: as much as possible, and you know, Chuck Schumer does

820
00:41:13,719 --> 00:41:16,360
Speaker 8: have a game plan. But this is all really about

821
00:41:16,400 --> 00:41:17,880
Speaker 8: the Republicans at this point.

822
00:41:18,880 --> 00:41:21,719
Speaker 3: Yeah, you wonder what John Thune is in for and

823
00:41:21,760 --> 00:41:23,880
Speaker 3: how he can control all of this later on. But

824
00:41:23,920 --> 00:41:27,360
Speaker 3: as I consider the Republican majority leader and his challenges

825
00:41:27,400 --> 00:41:29,799
Speaker 3: ahead here, Rick, the news about Mitch McConnell today is

826
00:41:29,840 --> 00:41:33,640
Speaker 3: worth mentioning. Says he's not going to seek the honor

827
00:41:33,640 --> 00:41:36,400
Speaker 3: of serving in the Senate an eighth time. His current

828
00:41:36,480 --> 00:41:40,440
Speaker 3: term will be his last. What does this tell us

829
00:41:40,480 --> 00:41:43,239
Speaker 3: not only about his career, but the makeup of the

830
00:41:43,360 --> 00:41:43,960
Speaker 3: upper Chamber.

831
00:41:45,560 --> 00:41:47,600
Speaker 9: Yeah, I think it's kind of one of the last

832
00:41:47,640 --> 00:41:51,160
Speaker 9: tumblers to fall from a Republican party that was really

833
00:41:51,200 --> 00:41:54,920
Speaker 9: born out of the nineteen eighties, the Reagan Revolution, And

834
00:41:55,719 --> 00:41:59,080
Speaker 9: there aren't many of those stormtroopers left, and Mitt McColl's

835
00:41:59,120 --> 00:42:01,640
Speaker 9: obviously one of them. Also, the Senate will be losing,

836
00:42:02,239 --> 00:42:05,640
Speaker 9: you know, one of its master strategists, somebody who you

837
00:42:05,680 --> 00:42:10,400
Speaker 9: know led the Republican Caucus for the longest time in history.

838
00:42:10,960 --> 00:42:14,880
Speaker 9: Uh and and was was relatively successful in that endeavor.

839
00:42:15,000 --> 00:42:19,320
Speaker 9: So uh, it'll it'll change the institution. And and frankly,

840
00:42:20,000 --> 00:42:22,799
Speaker 9: you know, it's kind of an interesting dynamic. He's an

841
00:42:22,880 --> 00:42:27,080
Speaker 9: outspoken critic of Donald Trump's and yet probably one of

842
00:42:27,080 --> 00:42:30,160
Speaker 9: the things that will be remembered most is his unwillingness

843
00:42:30,200 --> 00:42:34,040
Speaker 9: to support a second impeachment, which you know, killed it

844
00:42:34,040 --> 00:42:37,080
Speaker 9: in the cradle in the United States Senate. And uh

845
00:42:37,239 --> 00:42:40,000
Speaker 9: and likely that will define some of his tenure as

846
00:42:40,040 --> 00:42:43,160
Speaker 9: a senator. So it's a it's a passing of the torch.

847
00:42:43,560 --> 00:42:48,400
Speaker 9: There's no question the chamber is moving more MAGA uh

848
00:42:48,480 --> 00:42:52,279
Speaker 9: in its complexion rather than the traditional GOP and this

849
00:42:52,320 --> 00:42:54,880
Speaker 9: will this will make a big lurch in that direction.

850
00:42:55,960 --> 00:42:58,319
Speaker 3: That's very well put, Genie. What can John Thune learn

851
00:42:58,360 --> 00:43:01,680
Speaker 3: from Mitch McConnell. How does he chanre Mitch McConnell in

852
00:43:01,760 --> 00:43:04,280
Speaker 3: shepherding through this budget resolution?

853
00:43:05,640 --> 00:43:08,000
Speaker 8: Yeah, I'm not sure he wants to channel Mitch McConnell

854
00:43:08,120 --> 00:43:10,880
Speaker 8: at this point. You know, I think what Mitch McConnell

855
00:43:11,200 --> 00:43:16,080
Speaker 8: ending shows is that the party has moved away, far away.

856
00:43:16,080 --> 00:43:18,799
Speaker 8: As Rick was just talking about from where he was,

857
00:43:18,880 --> 00:43:22,480
Speaker 8: and you know, he was elected in nineteen eighty four.

858
00:43:22,960 --> 00:43:26,279
Speaker 8: When you talked to freshman in college today, many of

859
00:43:26,320 --> 00:43:28,719
Speaker 8: them were born in like two thousand and six, two

860
00:43:28,719 --> 00:43:33,040
Speaker 8: thousand and seven, and oh, but nineteen eighty four to

861
00:43:33,160 --> 00:43:37,040
Speaker 8: them sounds like seventeen fifty two. So you know, Mitch

862
00:43:37,080 --> 00:43:40,040
Speaker 8: McConnell has been there a long time and the party

863
00:43:40,120 --> 00:43:43,839
Speaker 8: has quite frankly moved on. So so there are things

864
00:43:43,880 --> 00:43:46,160
Speaker 8: that any of us can learn. But I think, you know,

865
00:43:46,200 --> 00:43:49,520
Speaker 8: from the democratic perspective, there is still a lot of

866
00:43:49,600 --> 00:43:53,840
Speaker 8: animosity towards Mitch McConnell for what he did. For instance,

867
00:43:53,880 --> 00:43:58,640
Speaker 8: with Merrick Garland, he really for Republicans and conservatives shaped

868
00:43:58,719 --> 00:44:02,400
Speaker 8: the Supreme Court for democrats, he ushered in the loss

869
00:44:02,440 --> 00:44:05,520
Speaker 8: of really critical liberties and rights. So you know, it

870
00:44:05,640 --> 00:44:08,279
Speaker 8: is a very mixed legacy. But he did give a

871
00:44:08,400 --> 00:44:11,240
Speaker 8: very emotional speech on before today, that's for certain.

872
00:44:12,280 --> 00:44:14,480
Speaker 3: Well, we all feel really old now, Genie, I mean

873
00:44:14,520 --> 00:44:18,359
Speaker 3: really Van Halen nineteen eighty four. Come on, guys, our

874
00:44:18,400 --> 00:44:24,880
Speaker 3: signature panel, Rick Davis and Genie Shanzano. Thanks for listening

875
00:44:24,960 --> 00:44:28,239
Speaker 3: to the Balance of Power podcast. Make sure to subscribe

876
00:44:28,320 --> 00:44:31,000
Speaker 3: if you haven't already. At Apple, Spotify, or wherever you

877
00:44:31,040 --> 00:44:33,799
Speaker 3: get your podcasts, and you can find us live every

878
00:44:33,840 --> 00:44:37,640
Speaker 3: weekday from Washington, DC at noontime Eastern at Bloomberg dot

879
00:44:37,680 --> 00:44:38,040
Speaker 3: com