1 00:00:00,280 --> 00:00:02,599 Speaker 1: This is Bloomberg Wall Street Week. 2 00:00:02,680 --> 00:00:07,280 Speaker 2: The global push into infrastructure, breaking the IPO logjam in text. 3 00:00:07,160 --> 00:00:09,200 Speaker 1: The financial stories that shape. 4 00:00:08,920 --> 00:00:12,040 Speaker 2: Our work, cutting inflation without losing jobs. Do we need 5 00:00:12,119 --> 00:00:14,560 Speaker 2: rate cuts and if so, how many? Investing in the 6 00:00:14,560 --> 00:00:16,400 Speaker 2: time of geopolitical. 7 00:00:15,680 --> 00:00:18,520 Speaker 3: Turmoil Through the eyes of the most influential voices. 8 00:00:18,720 --> 00:00:22,480 Speaker 2: Ten Rogueff Economists of Harvard, former FDIC had Shila Bert 9 00:00:22,640 --> 00:00:27,360 Speaker 2: ge CEO, Larry Coulp, San Francisco FED President, Mary Daily Bloomberg. 10 00:00:26,840 --> 00:00:30,240 Speaker 3: Wall Street Week with David Weston from Bloomberg Radio. 11 00:00:30,360 --> 00:00:33,839 Speaker 2: A nation deals with the aftermath of an assassination attempt. 12 00:00:34,040 --> 00:00:36,960 Speaker 2: Republicans gather in Milwaukee to nominate Donald Trump for what 13 00:00:37,120 --> 00:00:40,920 Speaker 2: increasingly looks like may be his second term, and investors 14 00:00:41,000 --> 00:00:44,279 Speaker 2: react to both. This is Bloomberg Wall Street Week. I'm 15 00:00:44,360 --> 00:00:48,040 Speaker 2: David Weston. This week, Laura Tyson of Berkeley on what 16 00:00:48,120 --> 00:00:51,239 Speaker 2: the coming Ai Revolution could mean for the US economy. 17 00:00:51,600 --> 00:00:56,600 Speaker 4: All of the numbers say significant productivity growth. 18 00:00:56,880 --> 00:00:59,880 Speaker 2: Dan Tarullo of Harvard on what's ahead in banking regula. 19 00:01:00,640 --> 00:01:04,080 Speaker 5: There will be a kind of hold on regulation and 20 00:01:04,319 --> 00:01:07,160 Speaker 5: it would await the Trump appointees. 21 00:01:07,680 --> 00:01:10,440 Speaker 2: And Steve Rattner of Will and Advisors on investing in 22 00:01:10,520 --> 00:01:12,080 Speaker 2: the Trump trade. 23 00:01:12,120 --> 00:01:15,240 Speaker 6: Is probability of success is now too close to seventy percent, 24 00:01:15,680 --> 00:01:18,200 Speaker 6: and that has made the market wake up and say, okay, 25 00:01:18,319 --> 00:01:28,840 Speaker 6: so what are we looking at. 26 00:01:32,319 --> 00:01:35,080 Speaker 2: We start with the banking industry and what effect Washington 27 00:01:35,160 --> 00:01:37,840 Speaker 2: has on its future, with the Chair and CEO of 28 00:01:37,840 --> 00:01:40,600 Speaker 2: Bank of America, Brian Winhan. Great to have you back, Brian. 29 00:01:40,840 --> 00:01:42,360 Speaker 2: Let me ask you. You talk to a lot of 30 00:01:42,400 --> 00:01:45,080 Speaker 2: clients across the country of all sorts, what do they 31 00:01:45,160 --> 00:01:48,040 Speaker 2: tell you about Washington and how Washington may be affecting 32 00:01:48,080 --> 00:01:50,400 Speaker 2: their business for good or not so much for good. 33 00:01:50,560 --> 00:01:53,360 Speaker 7: Look, at the end of the day, banks reflect the economy. 34 00:01:53,560 --> 00:01:56,880 Speaker 7: So it's our customers on the commercial side doing something, 35 00:01:56,880 --> 00:01:59,560 Speaker 7: our customers and consumer side doing something, our institutional. 36 00:01:59,160 --> 00:02:00,240 Speaker 1: Customers doing so. 37 00:02:00,280 --> 00:02:02,480 Speaker 7: Our job is to transmit economy back and forth for 38 00:02:02,520 --> 00:02:04,680 Speaker 7: our clients, and we are product of the success in them. 39 00:02:04,960 --> 00:02:08,320 Speaker 7: When you talk to those clients today, they're saying, hey, 40 00:02:08,400 --> 00:02:10,959 Speaker 7: they want they want to win. They are big clients 41 00:02:10,960 --> 00:02:12,720 Speaker 7: that want to win on a global stage of little clients. 42 00:02:12,760 --> 00:02:14,480 Speaker 7: I want to win on a local stage, and they 43 00:02:14,480 --> 00:02:17,240 Speaker 7: want to win. And what they feel is as the 44 00:02:17,280 --> 00:02:24,040 Speaker 7: burdens of the regulation and rules impinge upon that they 45 00:02:24,240 --> 00:02:26,120 Speaker 7: get feedback and the feedback I get from this, they 46 00:02:26,160 --> 00:02:29,000 Speaker 7: feel the balances need to be rebalanced. That's what they 47 00:02:29,000 --> 00:02:31,679 Speaker 7: tell us. Meanwhile, they're still growing their business, they're still investing. 48 00:02:31,919 --> 00:02:33,520 Speaker 7: So you got to a little careful what they say 49 00:02:33,560 --> 00:02:35,880 Speaker 7: they want versus what they're doing. But the roality is 50 00:02:35,880 --> 00:02:37,800 Speaker 7: is they're saying, hey, get we got to swing the 51 00:02:37,800 --> 00:02:39,359 Speaker 7: penallum back a little bit because in the end of 52 00:02:39,400 --> 00:02:42,880 Speaker 7: the day, they are what America thrives on. We have 53 00:02:43,040 --> 00:02:45,280 Speaker 7: one hundred and a million people work in this country. 54 00:02:45,360 --> 00:02:48,519 Speaker 7: The dominant part work for private enterprises. Our success, the 55 00:02:48,560 --> 00:02:52,520 Speaker 7: ability to fund every governmental program, the defense, everything comes 56 00:02:52,520 --> 00:02:55,600 Speaker 7: from the tax is paid by corporations and individuals who 57 00:02:55,600 --> 00:02:58,280 Speaker 7: work for companies, honestly, so that's where the money comes from. 58 00:02:58,280 --> 00:03:00,240 Speaker 7: So if we're going to have a successful country, and 59 00:03:00,280 --> 00:03:03,120 Speaker 7: based on where we are in America in the world 60 00:03:03,160 --> 00:03:05,880 Speaker 7: right now, we can dominate if we let the capital 61 00:03:05,960 --> 00:03:08,800 Speaker 7: system run right, run with right guardrails run. 62 00:03:09,120 --> 00:03:12,519 Speaker 2: How much of Brian is actual the impingement of regulations 63 00:03:12,520 --> 00:03:14,840 Speaker 2: supposed to talk about it because I'll pick on some 64 00:03:14,840 --> 00:03:16,359 Speaker 2: one right now, and I trust something I know about. 65 00:03:16,400 --> 00:03:17,639 Speaker 1: I used to practice that trust law. 66 00:03:17,680 --> 00:03:20,000 Speaker 2: There's a lot of talk about a trust enforcement from 67 00:03:20,080 --> 00:03:22,720 Speaker 2: the current administration, when if we actually look what happened, 68 00:03:22,880 --> 00:03:24,360 Speaker 2: they didn't get a lot of that through the courts. 69 00:03:24,360 --> 00:03:25,560 Speaker 1: How much it was just the perception. 70 00:03:25,840 --> 00:03:28,359 Speaker 2: We're talking about regulation as opposed to actual regulation. 71 00:03:28,480 --> 00:03:30,519 Speaker 7: Well, in that case, if you think about what happened 72 00:03:30,560 --> 00:03:32,720 Speaker 7: with deals over the last couple of years, any deal 73 00:03:32,760 --> 00:03:35,480 Speaker 7: of size of US announced was purported to be challenged 74 00:03:35,520 --> 00:03:37,440 Speaker 7: in a lot of more. And so therefore, if you're 75 00:03:37,440 --> 00:03:39,560 Speaker 7: sitting in a boardroom saying I'm going to expose my 76 00:03:39,640 --> 00:03:43,720 Speaker 7: company as seller to a transaction a public company, and 77 00:03:43,760 --> 00:03:45,400 Speaker 7: I'm going to stabilize it for the period of time 78 00:03:45,440 --> 00:03:47,480 Speaker 7: it takes to get it done, and I feel that 79 00:03:47,520 --> 00:03:49,640 Speaker 7: it's going to have to go through multiple reviews and 80 00:03:49,640 --> 00:03:52,320 Speaker 7: and ultimately a challenge in court, you know what, We'll wait. 81 00:03:52,640 --> 00:03:55,200 Speaker 7: And that just slowed down deals because of all the 82 00:03:55,240 --> 00:03:57,520 Speaker 7: businesses we have in the company that the thing is 83 00:03:57,560 --> 00:04:01,560 Speaker 7: still there's great pipeline, but not coming through the system 84 00:04:01,680 --> 00:04:03,800 Speaker 7: is still the deal, the m and a deal flow. 85 00:04:03,840 --> 00:04:05,840 Speaker 7: We have a strong pipeline, it's ready to go, but 86 00:04:05,880 --> 00:04:08,320 Speaker 7: the feeling has to be and there's no in our industry, 87 00:04:08,360 --> 00:04:11,000 Speaker 7: we can't make an acquisition by law, we can't. But 88 00:04:11,000 --> 00:04:12,920 Speaker 7: the ability to get bank deals done is something you 89 00:04:13,000 --> 00:04:15,800 Speaker 7: here talked about a lot. Our colleagues want to emerge 90 00:04:15,800 --> 00:04:17,680 Speaker 7: and get better so they can compete with us and 91 00:04:18,240 --> 00:04:20,680 Speaker 7: in our the biggest banks and competitors compete on the 92 00:04:20,680 --> 00:04:22,920 Speaker 7: worldwide stage and they're struggling because they can't get the 93 00:04:22,960 --> 00:04:23,400 Speaker 7: deals done. 94 00:04:23,440 --> 00:04:25,880 Speaker 1: It takes so long. So that's the decision. It's not 95 00:04:25,880 --> 00:04:27,160 Speaker 1: necessarily the deal won't get done. 96 00:04:27,279 --> 00:04:28,440 Speaker 7: Is if it takes a year a year and a 97 00:04:28,440 --> 00:04:30,719 Speaker 7: half to get it through, that is just a very 98 00:04:30,720 --> 00:04:33,160 Speaker 7: destabilizing for the cell side of a company, and on 99 00:04:33,160 --> 00:04:35,000 Speaker 7: a buy side, they just want to grow their business 100 00:04:35,040 --> 00:04:37,800 Speaker 7: and be heroken take the competition, and not everybody has 101 00:04:37,800 --> 00:04:40,080 Speaker 7: a staying power to wait two years to say I'm 102 00:04:40,080 --> 00:04:41,960 Speaker 7: going to put on hold everything I do in a 103 00:04:42,040 --> 00:04:43,560 Speaker 7: unit because I'm going to buy a unit to make 104 00:04:43,600 --> 00:04:46,159 Speaker 7: it grow faster and make it more successful and win 105 00:04:46,279 --> 00:04:48,640 Speaker 7: and make my company the best of the world. 106 00:04:48,800 --> 00:04:51,000 Speaker 1: And if it takes me, you know, two years to 107 00:04:51,040 --> 00:04:53,599 Speaker 1: do that, that means I got to slow down the organic. 108 00:04:53,360 --> 00:04:55,440 Speaker 7: Effort because I think it'll be waste of money if 109 00:04:55,440 --> 00:04:58,719 Speaker 7: this comes in. If that took six months, you know, 110 00:04:58,760 --> 00:05:01,160 Speaker 7: then that changes the calculus. It's more about deal flow 111 00:05:01,200 --> 00:05:05,119 Speaker 7: and capabilities as opposed to what you might see actually 112 00:05:05,160 --> 00:05:07,400 Speaker 7: get stopped or not go or inquiries. 113 00:05:07,800 --> 00:05:10,039 Speaker 1: It's just a chill when it comes to regulation. This 114 00:05:10,120 --> 00:05:11,880 Speaker 1: report had quite a term. In this last term. 115 00:05:11,880 --> 00:05:14,359 Speaker 2: There are four different decisions that basically said we're not 116 00:05:14,360 --> 00:05:16,600 Speaker 2: going to defer to the regulatory agencies nearly as much, 117 00:05:16,760 --> 00:05:19,400 Speaker 2: so supposedly taking on the so called administrative state. At 118 00:05:19,400 --> 00:05:21,240 Speaker 2: the same time, that probably means a lot more litigation. 119 00:05:21,320 --> 00:05:22,960 Speaker 2: It's good for lawyers if you're a lawyer, and I 120 00:05:22,960 --> 00:05:25,080 Speaker 2: have nothing against lawyers making money, that's okay. At the 121 00:05:25,120 --> 00:05:27,320 Speaker 2: same time, do you think that's ultimately good for business 122 00:05:27,320 --> 00:05:29,200 Speaker 2: if the courts get more involved in it and take 123 00:05:29,240 --> 00:05:30,960 Speaker 2: some away from the regultary agencies. 124 00:05:31,200 --> 00:05:34,280 Speaker 7: I know you and I both reform lawyers, and so 125 00:05:34,760 --> 00:05:36,440 Speaker 7: you know, at the end of the day, we are 126 00:05:36,480 --> 00:05:39,840 Speaker 7: for good, clear, fair regulation. That's what our industry, That's 127 00:05:39,839 --> 00:05:41,279 Speaker 7: what I'm for, and that's what our industry is for. 128 00:05:41,480 --> 00:05:43,520 Speaker 7: Give us a set of rules, let us go after. 129 00:05:43,760 --> 00:05:45,880 Speaker 7: If you keep changing the rules back and forth based 130 00:05:45,920 --> 00:05:50,000 Speaker 7: on political movements, based on swings, based on personalities, based 131 00:05:50,000 --> 00:05:52,560 Speaker 7: on studies we may think are relevant not relevant, industry 132 00:05:52,960 --> 00:05:55,600 Speaker 7: that just goes on. So something like Basel three has 133 00:05:55,640 --> 00:05:57,800 Speaker 7: been going on for you know, years, and you're saying, 134 00:05:57,839 --> 00:05:59,479 Speaker 7: please just get it done so we can get on 135 00:05:59,560 --> 00:06:02,520 Speaker 7: with life. Figure out adjust the business model, but don't 136 00:06:02,520 --> 00:06:05,240 Speaker 7: be overburdening in it. So I think that's what you're 137 00:06:05,240 --> 00:06:06,920 Speaker 7: feeling with some of this, and I think the court 138 00:06:06,960 --> 00:06:09,320 Speaker 7: system is saying, wait a second. Whether it was a 139 00:06:09,440 --> 00:06:11,080 Speaker 7: you know, the Chevron doctor and all these, whether there 140 00:06:11,200 --> 00:06:14,160 Speaker 7: was a statement that you know, look, we need regulatory 141 00:06:14,200 --> 00:06:15,719 Speaker 7: agents to be able to go. 142 00:06:15,640 --> 00:06:16,480 Speaker 1: And do what they're doing. 143 00:06:16,640 --> 00:06:19,520 Speaker 7: Wait, maybe that's swung too far. There's too much activism 144 00:06:19,560 --> 00:06:21,760 Speaker 7: in the in the regulatory side as opposed to the 145 00:06:21,760 --> 00:06:23,240 Speaker 7: court side. And if you go back and read the 146 00:06:23,240 --> 00:06:26,840 Speaker 7: great civil rights cases, there was extreme activism to right 147 00:06:26,960 --> 00:06:29,000 Speaker 7: the wrongs of the past in the court side. 148 00:06:29,080 --> 00:06:30,960 Speaker 2: Brian, it's always such a great treat to heavy on 149 00:06:30,960 --> 00:06:33,280 Speaker 2: wills ruburgh, Thank you so much. That's Brian moynahan, and 150 00:06:33,320 --> 00:06:37,240 Speaker 2: he's chair and CEO of Bank of America. Bank regulators 151 00:06:37,279 --> 00:06:39,800 Speaker 2: went back to the drawing board on those proposed regulations 152 00:06:39,800 --> 00:06:42,799 Speaker 2: to meet the Basel three requirements, and Terry Powell says 153 00:06:42,839 --> 00:06:44,760 Speaker 2: that the new proposals we're going to see the later 154 00:06:44,880 --> 00:06:47,279 Speaker 2: this year are likely to look somewhat different from what 155 00:06:47,279 --> 00:06:49,400 Speaker 2: we saw the first time around. To take us through 156 00:06:49,440 --> 00:06:51,839 Speaker 2: what we should expect, we welcome back now former Federal 157 00:06:51,880 --> 00:06:55,200 Speaker 2: Reserve Board Governor Dan Trulo of Harvard. So, Dan, thank 158 00:06:55,200 --> 00:06:57,280 Speaker 2: you so much for being back with us. There's a 159 00:06:57,320 --> 00:06:59,000 Speaker 2: lot of speculations they're going to be cutting back. 160 00:06:58,880 --> 00:06:59,560 Speaker 1: In these regulations. 161 00:06:59,600 --> 00:07:02,400 Speaker 2: Let me ask basic question there to comply with Basil three, 162 00:07:02,520 --> 00:07:04,920 Speaker 2: how much leeway is there to cut back and still 163 00:07:04,960 --> 00:07:06,680 Speaker 2: be consistent with the commitments. 164 00:07:07,880 --> 00:07:11,160 Speaker 5: So there's a fair amount of leeway, David, particularly in 165 00:07:11,200 --> 00:07:14,760 Speaker 5: the proposals that the three agencies made last year. On 166 00:07:14,800 --> 00:07:19,720 Speaker 5: the credit side, they went well beyond what Basil three 167 00:07:19,920 --> 00:07:24,280 Speaker 5: had agreed to. There's a little bit less room in 168 00:07:24,320 --> 00:07:27,520 Speaker 5: the other areas, that is operational risk and market risk. 169 00:07:28,320 --> 00:07:32,200 Speaker 5: And actually I would not be surprised if on operational 170 00:07:32,320 --> 00:07:37,720 Speaker 5: risk the agencies depart some from the Basle agreement, because, 171 00:07:37,840 --> 00:07:41,000 Speaker 5: to be perfectly honest, the Basil Agreement on operational risk 172 00:07:41,160 --> 00:07:43,680 Speaker 5: was not especially well done. 173 00:07:44,040 --> 00:07:46,680 Speaker 2: So what do you expect, especially what we'll see when 174 00:07:46,680 --> 00:07:48,680 Speaker 2: the next route of proposal go on. Will they be 175 00:07:48,680 --> 00:07:50,040 Speaker 2: cutting back in the reserve requirements? 176 00:07:50,520 --> 00:07:50,720 Speaker 1: Oh? 177 00:07:50,800 --> 00:07:53,080 Speaker 4: Sure, no question about it. 178 00:07:53,280 --> 00:07:56,520 Speaker 5: I think Chair Powell has made no secret of the 179 00:07:56,560 --> 00:08:01,240 Speaker 5: fact that there'll be substantial changes, which means a significant 180 00:08:01,280 --> 00:08:05,280 Speaker 5: reduction in the required increase in capital. But I do 181 00:08:05,440 --> 00:08:09,600 Speaker 5: expect that the amount of increase will vary quite a 182 00:08:09,600 --> 00:08:11,280 Speaker 5: bit depending on the business. 183 00:08:10,920 --> 00:08:11,800 Speaker 1: Model of the bank. 184 00:08:12,280 --> 00:08:15,840 Speaker 5: I think you can expect to see the banks with 185 00:08:16,400 --> 00:08:20,280 Speaker 5: most market risk it is trading activity, capital markets and 186 00:08:20,320 --> 00:08:23,720 Speaker 5: the like, I think you can expect that their requirements 187 00:08:23,800 --> 00:08:28,880 Speaker 5: will go up more than banks that are straight traditional 188 00:08:28,960 --> 00:08:33,360 Speaker 5: lenders where most of it's traditional loans and deposit taking. 189 00:08:34,559 --> 00:08:38,559 Speaker 5: On the operational risk side, I still fear that we're 190 00:08:38,600 --> 00:08:41,079 Speaker 5: going to have a little bit of a perverse outcome 191 00:08:41,440 --> 00:08:44,800 Speaker 5: where some of the banks that have de risked get 192 00:08:44,880 --> 00:08:47,800 Speaker 5: hit a little bit by the operational risk charges on 193 00:08:47,880 --> 00:08:51,120 Speaker 5: things like wealth management. So I guess I would say, 194 00:08:51,160 --> 00:08:53,720 Speaker 5: if you're a bank with a lot of trading and 195 00:08:54,120 --> 00:08:59,000 Speaker 5: a fair degree of non credit operational risk, you're probably 196 00:08:59,040 --> 00:09:03,360 Speaker 5: going to see your our capital requirements go up more 197 00:09:03,400 --> 00:09:07,360 Speaker 5: than anybody else's. If you're a traditional regional bank, I 198 00:09:07,400 --> 00:09:10,600 Speaker 5: suspect the increase will be very very modest. 199 00:09:11,400 --> 00:09:13,920 Speaker 2: If Donald Trump is in fact elected, how might that 200 00:09:14,200 --> 00:09:15,200 Speaker 2: change the calculus? 201 00:09:15,559 --> 00:09:19,679 Speaker 5: Well, in the first place, David, given the intent to repropose, 202 00:09:20,280 --> 00:09:24,920 Speaker 5: it's very unlikely that a final rule could be done 203 00:09:25,360 --> 00:09:27,760 Speaker 5: before the end of the year, much less before election day. 204 00:09:28,360 --> 00:09:33,080 Speaker 5: And so if past pattern patterns hold, there will be 205 00:09:33,200 --> 00:09:37,679 Speaker 5: a kind of hold on regulation, and it would await 206 00:09:38,160 --> 00:09:43,120 Speaker 5: the Trump appointees, certainly to the FDIIC and the OCC 207 00:09:44,240 --> 00:09:48,640 Speaker 5: to make their own decisions. So that probably means that 208 00:09:49,720 --> 00:09:52,000 Speaker 5: at the very least there'd be a further delay and 209 00:09:52,320 --> 00:09:55,600 Speaker 5: you could quite possibly have additional changes. 210 00:09:56,480 --> 00:09:58,760 Speaker 2: This week we learned who the nominee for Vice President 211 00:09:58,800 --> 00:10:00,880 Speaker 2: of publican side will be as well. Jd Vance, the 212 00:10:00,880 --> 00:10:03,280 Speaker 2: Senator from Ohio, And normally I would say, well, it's 213 00:10:03,280 --> 00:10:05,200 Speaker 2: a vice president, let's not worry about it. But he, 214 00:10:05,280 --> 00:10:07,320 Speaker 2: as I understand it from you, has had some things 215 00:10:07,320 --> 00:10:08,200 Speaker 2: to say about banks. 216 00:10:09,080 --> 00:10:12,320 Speaker 5: Oh sure, he's on the Senate Banking Committee and his 217 00:10:12,640 --> 00:10:15,920 Speaker 5: you know, you can't you wouldn't. You would make a 218 00:10:15,960 --> 00:10:19,000 Speaker 5: mistake if you try to just slot him as you know, 219 00:10:19,160 --> 00:10:24,240 Speaker 5: bank or industry friendly or antagonistic. I think he has 220 00:10:24,240 --> 00:10:28,120 Speaker 5: his own set of views. He's said some things and 221 00:10:28,720 --> 00:10:31,960 Speaker 5: assigned onto some bills that are kind. 222 00:10:31,840 --> 00:10:32,959 Speaker 4: Of pro regulatory. 223 00:10:33,080 --> 00:10:36,640 Speaker 5: He eventd some skepticism about the growth of very large banks. 224 00:10:37,760 --> 00:10:39,960 Speaker 5: On the other hand, obviously in a lot of areas 225 00:10:40,000 --> 00:10:42,600 Speaker 5: he thinks there's been too much regulation, But I would 226 00:10:42,640 --> 00:10:46,800 Speaker 5: say on banking there's at least a chance that that's 227 00:10:46,960 --> 00:10:49,200 Speaker 5: one of the areas because of his service on the 228 00:10:49,240 --> 00:10:52,360 Speaker 5: Banking Committee, in which he takes a real interest if 229 00:10:52,640 --> 00:10:55,280 Speaker 5: they if the Trump Banks ticket should be elected. 230 00:10:55,760 --> 00:10:57,400 Speaker 2: And finally, Dan, let me return to something you and 231 00:10:57,400 --> 00:10:59,560 Speaker 2: I have talked about before, which is the so called 232 00:10:59,600 --> 00:11:03,280 Speaker 2: non banks out there and the difference in the banks 233 00:11:03,320 --> 00:11:05,560 Speaker 2: and the growth of the non banks and what they're doing. 234 00:11:05,840 --> 00:11:08,280 Speaker 2: One of the things you've pointed out is perhaps a 235 00:11:08,400 --> 00:11:10,960 Speaker 2: change is they're becoming frontemies, if I can put it 236 00:11:10,960 --> 00:11:13,760 Speaker 2: that way. They're increasingly cooperating one with the other. And 237 00:11:13,800 --> 00:11:16,200 Speaker 2: I wonder what rapplications that might have for the system, 238 00:11:16,320 --> 00:11:18,840 Speaker 2: particularly not understanding the way you do, whether in fact 239 00:11:18,880 --> 00:11:20,840 Speaker 2: systemic risks could come in through the back door. 240 00:11:21,679 --> 00:11:23,960 Speaker 5: Yeah, I'm not sure I understand it either, David, which 241 00:11:24,000 --> 00:11:26,800 Speaker 5: probably point I understand the scope of it, and I 242 00:11:26,800 --> 00:11:29,360 Speaker 5: think that points to maybe the biggest issue right now, 243 00:11:29,360 --> 00:11:33,400 Speaker 5: which is one of having the data, the information to 244 00:11:33,480 --> 00:11:37,199 Speaker 5: make an evaluation on this. You do the agencies both 245 00:11:37,280 --> 00:11:42,120 Speaker 5: domestically and internationally. Know the degree to which you know 246 00:11:42,360 --> 00:11:47,120 Speaker 5: a hedge fund or a private credit fund has credit relationships, 247 00:11:47,200 --> 00:11:52,040 Speaker 5: contingent funding relationships with banks, the degree to which asset 248 00:11:52,440 --> 00:11:56,120 Speaker 5: funds may take some of the synthetic risk that's being 249 00:11:56,160 --> 00:12:01,280 Speaker 5: transferred by the banks, the derivatives, counterparty real relationships. I 250 00:12:01,320 --> 00:12:05,560 Speaker 5: don't think we've got the kind of information and the 251 00:12:05,600 --> 00:12:08,920 Speaker 5: form that's needed in order to make an assessment there. 252 00:12:09,280 --> 00:12:11,400 Speaker 5: And you know, one doesn't want to be alarmist, but 253 00:12:11,679 --> 00:12:16,840 Speaker 5: obviously the trend towards more interaction between non banks and 254 00:12:16,920 --> 00:12:22,000 Speaker 5: banks has continued, and you know, the Financial Stability Oversight 255 00:12:22,120 --> 00:12:25,800 Speaker 5: Committee and the US the Financial Stability Board internationally, we're 256 00:12:25,840 --> 00:12:28,280 Speaker 5: just going to have to do more to try to 257 00:12:28,320 --> 00:12:31,439 Speaker 5: get their arms around exactly where the risks may arise. 258 00:12:32,040 --> 00:12:33,720 Speaker 2: And it's always so helpful to have you with us. 259 00:12:33,760 --> 00:12:35,520 Speaker 2: Thank you so much for your time. That is Professor 260 00:12:35,600 --> 00:12:40,560 Speaker 2: Dan Tarulo of Harvard. Coming up at the end of 261 00:12:40,559 --> 00:12:44,120 Speaker 2: a week, the odds of Donald Trump being re elected rise. 262 00:12:44,280 --> 00:12:47,520 Speaker 2: We talk with investor Stephen Rattner Wilder Advisors about what 263 00:12:47,679 --> 00:12:52,000 Speaker 2: it could mean for his portfolio. That's an Next Time 264 00:12:52,040 --> 00:12:53,640 Speaker 2: Wall Street Week on Bloomberg. 265 00:12:54,920 --> 00:12:59,720 Speaker 3: This is Bloomberg Wall Street Week with David Weston from Bloomberg. 266 00:13:00,120 --> 00:13:07,680 Speaker 2: You this is Wall Street Week. 267 00:13:07,720 --> 00:13:08,520 Speaker 1: I'm David Weston. 268 00:13:08,559 --> 00:13:11,880 Speaker 2: The attempted assassination of former President Trump and the tragic 269 00:13:11,880 --> 00:13:15,040 Speaker 2: shooting of innocent bystanders shook a nation already in the 270 00:13:15,080 --> 00:13:18,640 Speaker 2: throes of a tumultuous presidential campaign and added to the 271 00:13:18,679 --> 00:13:21,520 Speaker 2: momentum that mister Trump was already experiencing in the race 272 00:13:21,840 --> 00:13:24,240 Speaker 2: to take us through the market reaction what a second 273 00:13:24,400 --> 00:13:28,000 Speaker 2: term of a Trump presidency could mean for investors. Welcome now, 274 00:13:28,280 --> 00:13:31,760 Speaker 2: Stephen Ratner, chairman of Willed Advisors, which invests the personal 275 00:13:31,800 --> 00:13:35,600 Speaker 2: and philanthropic assets of Michael Bloomberg, our founder and majority shareholder. 276 00:13:35,960 --> 00:13:37,600 Speaker 2: I always a treat to have you here, Steve. Thank 277 00:13:37,640 --> 00:13:38,280 Speaker 2: you for going back. 278 00:13:38,320 --> 00:13:39,360 Speaker 1: Thanks for having me, David. 279 00:13:39,520 --> 00:13:40,920 Speaker 2: So, one of the themes of this week is, so 280 00:13:40,960 --> 00:13:43,720 Speaker 2: this so called Trump trade, given what's going on, apparently 281 00:13:43,800 --> 00:13:45,400 Speaker 2: we don't know about what's going on. Apparently in the 282 00:13:45,440 --> 00:13:49,120 Speaker 2: campaign it seems like at least there's a substantial possibility 283 00:13:49,320 --> 00:13:51,960 Speaker 2: that Donald Trump will be our next president. What is 284 00:13:52,040 --> 00:13:54,000 Speaker 2: in the Trump trade? What are people reacting to in 285 00:13:54,040 --> 00:13:54,440 Speaker 2: the market. 286 00:13:54,600 --> 00:13:55,160 Speaker 1: Well, well, first of. 287 00:13:55,160 --> 00:13:56,560 Speaker 6: All, there's a number of different things going on in 288 00:13:56,559 --> 00:13:57,800 Speaker 6: the market at the moment. There are a lot of 289 00:13:57,800 --> 00:13:59,640 Speaker 6: cross currents and so forth. But if we want to 290 00:13:59,679 --> 00:14:02,800 Speaker 6: just focus on the Trump trade, his probability of success 291 00:14:02,880 --> 00:14:05,720 Speaker 6: is now too close to seventy percent, and that has 292 00:14:06,080 --> 00:14:07,960 Speaker 6: made the market wake up and say, okay, so what 293 00:14:08,000 --> 00:14:09,040 Speaker 6: are we looking at? 294 00:14:09,080 --> 00:14:10,400 Speaker 1: And so it really. 295 00:14:10,640 --> 00:14:14,079 Speaker 6: Spans a huge gamut of things, everything from gun manufacturers, 296 00:14:14,600 --> 00:14:17,120 Speaker 6: for profit education which thinks they're going to benefit if 297 00:14:17,120 --> 00:14:20,080 Speaker 6: he stops us through the loan forgiveness, to the GSS 298 00:14:20,120 --> 00:14:23,560 Speaker 6: Fanny and Freddy because maybe he won't, he won't take 299 00:14:23,560 --> 00:14:28,760 Speaker 6: the dividends sweep anymore, energy stocks, manufacturing companies that might 300 00:14:28,800 --> 00:14:32,280 Speaker 6: benefit from the tariffs, and so investors are rushing around 301 00:14:32,280 --> 00:14:34,640 Speaker 6: looking for all the different places they think they would 302 00:14:34,680 --> 00:14:36,840 Speaker 6: benefit from another Trump presidency. 303 00:14:37,040 --> 00:14:38,560 Speaker 2: One of the things I think we've seen is in 304 00:14:38,600 --> 00:14:41,920 Speaker 2: the bond curve, basically for treasuries, because there's a sense 305 00:14:41,960 --> 00:14:44,360 Speaker 2: that actually there's going to be higher rates out there 306 00:14:44,400 --> 00:14:46,720 Speaker 2: in the long end of the curve, which changes a 307 00:14:46,720 --> 00:14:49,960 Speaker 2: fair number of things. What is the possibility of Trump 308 00:14:50,040 --> 00:14:53,440 Speaker 2: presidency with these economic policies leading to more inflation, therefore 309 00:14:53,440 --> 00:14:55,040 Speaker 2: the Fed babe having to raise rates again. 310 00:14:55,120 --> 00:14:57,280 Speaker 6: Well, the bond trade's a little complicated because we did 311 00:14:57,320 --> 00:14:59,000 Speaker 6: have that good in the sense of being a slightly 312 00:14:59,040 --> 00:15:01,760 Speaker 6: soft jobs number, and the predicted number of FED rate 313 00:15:01,800 --> 00:15:04,560 Speaker 6: cuts is now up to something over too, and therefore 314 00:15:04,640 --> 00:15:07,080 Speaker 6: the ten years started to come down. And now you 315 00:15:07,160 --> 00:15:09,320 Speaker 6: have the Trump piece layering on that, pushing it up 316 00:15:09,360 --> 00:15:11,680 Speaker 6: a little bit, but not hugely. But I don't think 317 00:15:11,680 --> 00:15:14,880 Speaker 6: there's a lot of doubt that his fiscal policies, as 318 00:15:14,920 --> 00:15:19,880 Speaker 6: express would be, would be inflationary and therefore biased toward 319 00:15:19,960 --> 00:15:20,880 Speaker 6: higher interest rates. 320 00:15:21,080 --> 00:15:23,440 Speaker 2: So we talk about that tax Cutting Jobs Act. So 321 00:15:23,640 --> 00:15:25,840 Speaker 2: we had Scott bessin on last week and he said, oh, no, 322 00:15:25,840 --> 00:15:26,480 Speaker 2: don't worry about it. 323 00:15:26,480 --> 00:15:27,480 Speaker 1: We're gonna save a lot of money. 324 00:15:27,560 --> 00:15:30,280 Speaker 2: We're gonna save a trillion dollars a year from the 325 00:15:30,320 --> 00:15:33,720 Speaker 2: basically undoing the Inflation Reduction Act. We're gonna save another 326 00:15:33,760 --> 00:15:36,800 Speaker 2: trillion by redoing Medicare. And now I will note that 327 00:15:36,840 --> 00:15:38,600 Speaker 2: when President Trump had came in the first time, he 328 00:15:38,600 --> 00:15:40,360 Speaker 2: said they were going to get rid of Obamacare. That 329 00:15:40,400 --> 00:15:42,520 Speaker 2: would save us low money. But one of the prospects 330 00:15:42,560 --> 00:15:44,800 Speaker 2: that actually would cut back into of the spending under 331 00:15:44,800 --> 00:15:45,520 Speaker 2: the Bid administration. 332 00:15:45,560 --> 00:15:47,760 Speaker 6: Well, remember that we didn't get rid of Obamacare because 333 00:15:47,800 --> 00:15:51,320 Speaker 6: John McCain and because while he had technically had control 334 00:15:51,360 --> 00:15:54,360 Speaker 6: of both Houses of Congress, he lost a Republican that 335 00:15:54,440 --> 00:15:56,840 Speaker 6: costs him that. So a lot of this is going 336 00:15:56,840 --> 00:15:59,560 Speaker 6: to depend on what happens to Congress. If both Houses 337 00:15:59,560 --> 00:16:02,480 Speaker 6: of Congress scoe Republican, then he's obviously got much more 338 00:16:02,480 --> 00:16:04,280 Speaker 6: scope to do a bunch of stuff. 339 00:16:04,400 --> 00:16:06,400 Speaker 1: Whether he really would do it or not, who knows. 340 00:16:06,680 --> 00:16:09,400 Speaker 6: The record of the first Trump presidency was not good 341 00:16:09,640 --> 00:16:11,600 Speaker 6: from a fiscal point of view. The deficit went up 342 00:16:11,600 --> 00:16:14,800 Speaker 6: by hundreds of billions of dollars before COVID ever arrived, 343 00:16:15,120 --> 00:16:18,120 Speaker 6: in large part because the TCJA never came close to 344 00:16:18,160 --> 00:16:20,280 Speaker 6: paying for itself. It was close to two trillion dollar 345 00:16:20,360 --> 00:16:23,440 Speaker 6: costs with no offsets in spending and no real revenues 346 00:16:23,440 --> 00:16:24,280 Speaker 6: associated with it. 347 00:16:24,480 --> 00:16:26,760 Speaker 2: So that's all on the text. The revenue side is 348 00:16:26,760 --> 00:16:28,800 Speaker 2: that were What about tariffs? The one thing in Prisident 349 00:16:28,880 --> 00:16:31,760 Speaker 2: Trouble has always seemed to enjoy is been imposing tariffs, 350 00:16:31,800 --> 00:16:34,200 Speaker 2: particularly on China, but not only on China. Frankly, he 351 00:16:34,280 --> 00:16:36,560 Speaker 2: likes tariffs. That does, of course increase the cost to 352 00:16:36,600 --> 00:16:38,800 Speaker 2: the consumers, and therefore I guess inflation. 353 00:16:38,880 --> 00:16:41,640 Speaker 6: Sure, And by the way, his last set of tariffs, 354 00:16:41,680 --> 00:16:44,040 Speaker 6: which were far less robust than what he's talking about now. 355 00:16:44,280 --> 00:16:46,040 Speaker 6: Hra he'sed something like thirty billion of revenue. I thought 356 00:16:46,080 --> 00:16:48,320 Speaker 6: you were going to ask about revenue, very little contribution 357 00:16:48,400 --> 00:16:48,920 Speaker 6: to revenue. 358 00:16:49,120 --> 00:16:50,520 Speaker 1: The evidence is overwhelming. 359 00:16:51,040 --> 00:16:54,240 Speaker 6: Many economists have studied this that essentially one hundred percent 360 00:16:54,360 --> 00:16:56,360 Speaker 6: ninety five, one hundred and five percent something in that 361 00:16:56,400 --> 00:16:59,240 Speaker 6: ballpark was paid for by consumers. None of it was 362 00:16:59,280 --> 00:17:01,440 Speaker 6: paid for by child Maybe a little of it came 363 00:17:01,480 --> 00:17:03,800 Speaker 6: out of the companies in terms of profit margins, but 364 00:17:03,920 --> 00:17:06,800 Speaker 6: essentially it was paid for by consumers and was therefore inflationary. 365 00:17:06,800 --> 00:17:09,280 Speaker 6: Now they were very limited tariffs. Start talking about ten 366 00:17:09,320 --> 00:17:11,600 Speaker 6: percent across the board on all imports, you're in a 367 00:17:11,640 --> 00:17:12,639 Speaker 6: different ballgame when we. 368 00:17:12,640 --> 00:17:14,639 Speaker 2: Talk about inflation. One of the things we naturally think 369 00:17:14,680 --> 00:17:15,720 Speaker 2: about is the feder Reserve. 370 00:17:15,760 --> 00:17:18,360 Speaker 1: It's their job. Actually, it has price stability. Right. 371 00:17:19,040 --> 00:17:21,800 Speaker 2: There's a lot of speculation, not necessarily coming from Donald 372 00:17:21,800 --> 00:17:25,600 Speaker 2: Trump himself, it's from people around him like Peter Navarro, 373 00:17:25,760 --> 00:17:26,800 Speaker 2: who's talked about firing J. 374 00:17:26,920 --> 00:17:27,200 Speaker 1: Powell. 375 00:17:27,520 --> 00:17:30,040 Speaker 2: But what are the prospects of really undermining to some 376 00:17:30,119 --> 00:17:31,600 Speaker 2: extent the independence of the Fed. 377 00:17:32,040 --> 00:17:35,600 Speaker 6: That's to me incredibly scary. I think the independence of 378 00:17:35,640 --> 00:17:38,400 Speaker 6: the FED. They don't get everything right. They got inflation wrong. 379 00:17:38,440 --> 00:17:40,359 Speaker 6: Will stipulate to that they got some stuff wrong in 380 00:17:40,400 --> 00:17:43,160 Speaker 6: twenty nineteen. They may have gotten some stuff wrong coming 381 00:17:43,200 --> 00:17:45,120 Speaker 6: out of the GFC, although they did a great job 382 00:17:45,160 --> 00:17:48,639 Speaker 6: generally in the GFC. But let's just stipulate the independence 383 00:17:48,640 --> 00:17:52,000 Speaker 6: of the FED is critical and central to our economic success. 384 00:17:52,080 --> 00:17:54,440 Speaker 6: There's no if sands or butts about that. You would 385 00:17:54,440 --> 00:17:56,400 Speaker 6: not want the Congress or the White House in charge 386 00:17:56,400 --> 00:17:59,280 Speaker 6: of monetary policy. And so any step to undermine the 387 00:17:59,320 --> 00:18:02,399 Speaker 6: FED by any president of either party should be something 388 00:18:02,440 --> 00:18:04,600 Speaker 6: that we all push back as strongly as possible. 389 00:18:05,680 --> 00:18:08,240 Speaker 2: So overall, why do we find so many investors who 390 00:18:08,240 --> 00:18:09,560 Speaker 2: are backing President Trump. 391 00:18:09,680 --> 00:18:12,040 Speaker 6: They have a variety of reasons that I understand their reasons. 392 00:18:12,280 --> 00:18:14,720 Speaker 6: For example, one of the biggest reasons you hear is 393 00:18:14,760 --> 00:18:17,560 Speaker 6: the regulatory stuff. There's no question, and now, in fairness 394 00:18:17,640 --> 00:18:19,959 Speaker 6: to the President, although he appointed these people, they are 395 00:18:19,960 --> 00:18:23,159 Speaker 6: independent regulatory agencies. But nonetheless a lot of what the 396 00:18:23,200 --> 00:18:25,240 Speaker 6: FTC has been trying to do, a lot of what 397 00:18:25,320 --> 00:18:27,600 Speaker 6: the SEC has been trying to do, even the FCC, 398 00:18:27,680 --> 00:18:31,800 Speaker 6: the FDA really has upset business and they simply feel 399 00:18:31,840 --> 00:18:34,520 Speaker 6: that this president is too progressive, and they feel that 400 00:18:34,560 --> 00:18:37,560 Speaker 6: his vice president, should she become president, he's even more progressive, 401 00:18:37,920 --> 00:18:39,600 Speaker 6: and they don't like any of that. And there are 402 00:18:39,640 --> 00:18:41,880 Speaker 6: other reasons, but that's a good example, maybe the main 403 00:18:41,920 --> 00:18:44,199 Speaker 6: example of what they just don't think this is a 404 00:18:44,200 --> 00:18:46,919 Speaker 6: pro business administration. I would say, even though I do 405 00:18:46,960 --> 00:18:51,120 Speaker 6: support the president, attacking businessmen with some regularity is really 406 00:18:51,119 --> 00:18:52,320 Speaker 6: not the way to get their support. 407 00:18:52,440 --> 00:18:54,159 Speaker 1: I don't think. That's not what my mother taught me. 408 00:18:55,119 --> 00:18:57,000 Speaker 2: See, let's talk about the rest of the world as 409 00:18:57,040 --> 00:19:00,520 Speaker 2: it were, and particularly those big tech companies. They have 410 00:19:00,600 --> 00:19:02,920 Speaker 2: been getting so much money with huge I would say, 411 00:19:03,000 --> 00:19:05,040 Speaker 2: huge capital investment about AI. 412 00:19:06,040 --> 00:19:08,200 Speaker 1: Yeah, look, those companies have had a great run. 413 00:19:08,280 --> 00:19:10,879 Speaker 6: Obviously in Vidia we all know about, but Microsoft, Google 414 00:19:10,880 --> 00:19:14,840 Speaker 6: and so forth, Amazon. And the question really is whether 415 00:19:15,520 --> 00:19:20,000 Speaker 6: the market is valuing this situation appropriately. You're talking about 416 00:19:20,240 --> 00:19:24,119 Speaker 6: massive capex by some estimates anywhere from six hundred billion 417 00:19:24,119 --> 00:19:27,040 Speaker 6: to one point two trillion dollars per year on this 418 00:19:27,119 --> 00:19:29,639 Speaker 6: kind of stuff, And the question the market is starting 419 00:19:29,640 --> 00:19:31,680 Speaker 6: to ask itself is are the revenues going to be 420 00:19:31,720 --> 00:19:35,359 Speaker 6: there to offset it? And that cap x is not 421 00:19:35,440 --> 00:19:37,600 Speaker 6: just a cash expense, but it runs through the income 422 00:19:37,640 --> 00:19:40,639 Speaker 6: statement and depreciation and so forth, and so it affects 423 00:19:40,680 --> 00:19:43,399 Speaker 6: their margins. It affects their profits, and you have to 424 00:19:43,440 --> 00:19:46,240 Speaker 6: earn You have to create a huge amount of revenue 425 00:19:46,400 --> 00:19:48,879 Speaker 6: to justify the magnitude of the capex. 426 00:19:48,480 --> 00:19:50,640 Speaker 1: That is going on right as we speak. 427 00:19:50,880 --> 00:19:53,400 Speaker 2: So see back in the olden days, a capsiities for general, 428 00:19:53,400 --> 00:19:55,479 Speaker 2: when I was running budgets, if I had a capital expense, 429 00:19:55,520 --> 00:19:57,440 Speaker 2: I had to show what the projections were about when 430 00:19:57,480 --> 00:19:59,919 Speaker 2: I would save that money back just and we us 431 00:20:00,160 --> 00:20:01,960 Speaker 2: had a rule about a couple of years, maybe two 432 00:20:01,960 --> 00:20:03,440 Speaker 2: and a half years, we had to earn it back. 433 00:20:03,880 --> 00:20:06,800 Speaker 2: Is anybody taking pencil and paper, if they have it anymore, 434 00:20:06,880 --> 00:20:09,600 Speaker 2: and doing that with AI. Is anybody actually thinking about 435 00:20:09,640 --> 00:20:11,479 Speaker 2: where do we really see this in the real economy 436 00:20:11,520 --> 00:20:13,160 Speaker 2: in terms of increased productivity? 437 00:20:13,200 --> 00:20:15,520 Speaker 6: Well, that's exactly what's happening now to some degree, and 438 00:20:15,600 --> 00:20:17,320 Speaker 6: why you're starting to see a bit of a rotation. 439 00:20:17,400 --> 00:20:19,480 Speaker 6: It might be just a mean reversion after a big run. 440 00:20:19,720 --> 00:20:21,480 Speaker 6: It might be people doing what you talk about, but 441 00:20:21,520 --> 00:20:23,960 Speaker 6: people are doing it. And by the way, this is 442 00:20:23,960 --> 00:20:26,840 Speaker 6: a very debated subject. There's not a preponderance of view 443 00:20:27,040 --> 00:20:28,720 Speaker 6: on one side or the other. And I don't even 444 00:20:28,760 --> 00:20:31,960 Speaker 6: frankly have conviction myself. I think you could argue either way, 445 00:20:32,200 --> 00:20:34,480 Speaker 6: although I think the numbers are pretty daunting. But what 446 00:20:34,600 --> 00:20:36,760 Speaker 6: you're starting to see the analysts do is exactly what 447 00:20:36,760 --> 00:20:39,320 Speaker 6: you said. They're starting to pencil into their projections. This 448 00:20:39,359 --> 00:20:41,399 Speaker 6: is the level of capex, This is a level of 449 00:20:41,440 --> 00:20:43,720 Speaker 6: depreciation we're going to be taking for it. This is 450 00:20:43,760 --> 00:20:46,040 Speaker 6: the amount of revenue we have to generate to justify 451 00:20:46,040 --> 00:20:48,200 Speaker 6: that and achieve the kind of paybacks you're talking about. 452 00:20:48,440 --> 00:20:51,000 Speaker 6: And you say to yourself, is this really plausible? Are 453 00:20:51,040 --> 00:20:52,919 Speaker 6: we really going to you know, is Microsoft really going 454 00:20:52,960 --> 00:20:55,280 Speaker 6: to be able to generate thirty billion dollars of revenue 455 00:20:55,280 --> 00:20:57,720 Speaker 6: from AI I think that's actually a roughly right number 456 00:20:57,760 --> 00:21:00,199 Speaker 6: in the next over the two years from now. And 457 00:21:00,560 --> 00:21:02,960 Speaker 6: given that at the moment this stuff is essentially free. 458 00:21:03,000 --> 00:21:04,920 Speaker 6: You might pay ten dollars a month for this or that, 459 00:21:05,400 --> 00:21:07,720 Speaker 6: it's a real open question whether those kind of revenues 460 00:21:07,760 --> 00:21:08,120 Speaker 6: are there. 461 00:21:08,280 --> 00:21:09,720 Speaker 1: Let me just make one other point, which. 462 00:21:09,640 --> 00:21:13,280 Speaker 6: Is that if you think back on the success of Microsoft, Google, Facebook, 463 00:21:13,359 --> 00:21:15,719 Speaker 6: they were essentially software companies. I mean, there were certainly 464 00:21:15,720 --> 00:21:18,359 Speaker 6: some capex involved in that, but nothing on the scale 465 00:21:18,400 --> 00:21:20,679 Speaker 6: of what we're talking about here, and so we're in 466 00:21:20,680 --> 00:21:23,320 Speaker 6: a whole different world, a whole different ballgame for these companies. 467 00:21:23,400 --> 00:21:26,040 Speaker 6: And by the way, it's also a competitive ballgame. Open 468 00:21:26,040 --> 00:21:29,160 Speaker 6: AI is not going to own all of AI. Microsoft 469 00:21:29,200 --> 00:21:31,600 Speaker 6: is not going to own all of AI. It's going 470 00:21:31,640 --> 00:21:33,840 Speaker 6: to be they all have to protect their market share, 471 00:21:34,040 --> 00:21:35,800 Speaker 6: and it's going to be a pretty competitive world. 472 00:21:36,000 --> 00:21:38,159 Speaker 2: When you're looking at this phenomenon, you're looking at the 473 00:21:38,280 --> 00:21:40,680 Speaker 2: videos of this world, and Microsoft and others just take 474 00:21:40,720 --> 00:21:41,080 Speaker 2: off like. 475 00:21:41,040 --> 00:21:41,680 Speaker 1: A rocket ship. 476 00:21:42,520 --> 00:21:45,000 Speaker 2: It must be difficult to stay out of it. 477 00:21:45,160 --> 00:21:48,119 Speaker 6: Yes, this has been a challenge for active investors this 478 00:21:48,200 --> 00:21:51,600 Speaker 6: year because these big companies, Microsoft is something like a 479 00:21:51,680 --> 00:21:54,439 Speaker 6: seven point three or seven point five percent waiting in 480 00:21:54,520 --> 00:21:57,639 Speaker 6: the SMP. Very few money managers have a seven percent 481 00:21:57,680 --> 00:22:01,359 Speaker 6: position in anything, and so it it's when you know, 482 00:22:01,400 --> 00:22:03,880 Speaker 6: you know the numbers, when you disaggregate the magnificent seven 483 00:22:03,920 --> 00:22:06,240 Speaker 6: from the rest of the market, what the differences are, 484 00:22:06,280 --> 00:22:08,440 Speaker 6: And so it's been very tough for active management. That's 485 00:22:08,480 --> 00:22:11,240 Speaker 6: point one point two is, Look, this is no different 486 00:22:11,280 --> 00:22:14,200 Speaker 6: than any other investment. You do your best work, you 487 00:22:14,240 --> 00:22:15,919 Speaker 6: figure it out as best you can, and you make 488 00:22:15,960 --> 00:22:19,240 Speaker 6: a bet and sometimes you're right, sometimes you're wrong. I 489 00:22:19,240 --> 00:22:21,639 Speaker 6: would say we tend to be pretty conservative in our 490 00:22:21,720 --> 00:22:23,920 Speaker 6: view of this stuff, and a little bit of the 491 00:22:24,000 --> 00:22:26,760 Speaker 6: view that we've seen some of these movies before and 492 00:22:26,800 --> 00:22:29,240 Speaker 6: we want to be a little careful about piling in, 493 00:22:29,400 --> 00:22:31,040 Speaker 6: especially late in the game. 494 00:22:31,480 --> 00:22:34,840 Speaker 2: Is there a risk that the enormous success of that 495 00:22:34,880 --> 00:22:36,840 Speaker 2: Magnificent seven what are you going to call them, is 496 00:22:36,960 --> 00:22:39,320 Speaker 2: masking other weakness in stock markets? 497 00:22:39,320 --> 00:22:40,840 Speaker 1: As you say, you look at the rest of. 498 00:22:40,840 --> 00:22:42,680 Speaker 2: The market, it has not done all that well, and 499 00:22:42,760 --> 00:22:44,400 Speaker 2: yet we tend to gloss over that and say. 500 00:22:44,280 --> 00:22:46,919 Speaker 6: A market and the aggregate boys good, great, it's totally 501 00:22:46,960 --> 00:22:49,480 Speaker 6: masking it. If you take the Magnificent seven out and 502 00:22:49,520 --> 00:22:52,520 Speaker 6: you start looking at some sectors, especially things like manufacturing, 503 00:22:52,520 --> 00:22:55,400 Speaker 6: industrial stuff like that. Markets actually had a pretty poor 504 00:22:55,480 --> 00:22:57,760 Speaker 6: run over the last certainly this year and even I 505 00:22:57,760 --> 00:23:00,640 Speaker 6: think last year. And so yes, I think we're starting 506 00:23:00,640 --> 00:23:03,399 Speaker 6: to see when we listen to companies, we listen to 507 00:23:03,440 --> 00:23:07,880 Speaker 6: our managers, we are starting to see signs of softness 508 00:23:07,880 --> 00:23:11,280 Speaker 6: in the economy on the consumer side, on the manufacturing side, 509 00:23:11,280 --> 00:23:13,520 Speaker 6: and so forth. I don't think the economy is falling 510 00:23:13,600 --> 00:23:16,080 Speaker 6: out of bed, but we definitely are in the later 511 00:23:16,119 --> 00:23:17,560 Speaker 6: stages of an expansion. 512 00:23:17,800 --> 00:23:18,280 Speaker 1: Let me ask you. 513 00:23:18,200 --> 00:23:21,000 Speaker 2: About an ancillary part to the AI. If we talk 514 00:23:21,040 --> 00:23:24,360 Speaker 2: about Nvidia and much of things, but the power required 515 00:23:24,400 --> 00:23:27,880 Speaker 2: to drive this general AI is enormous. I mean, I'm 516 00:23:27,960 --> 00:23:29,720 Speaker 2: hearing stories now. There's just really in a lot of 517 00:23:29,720 --> 00:23:32,440 Speaker 2: story and that's really driving a lot of demand for power. 518 00:23:32,800 --> 00:23:34,400 Speaker 2: Is that an investment opportunity? 519 00:23:34,800 --> 00:23:39,000 Speaker 6: We have invested around this opportunity? I would say modestly. 520 00:23:39,000 --> 00:23:41,119 Speaker 6: We were actually kind of early to it. Others have 521 00:23:41,200 --> 00:23:42,600 Speaker 6: now caught on to it. And if you look at 522 00:23:42,600 --> 00:23:45,600 Speaker 6: the stocks, for example, of nuclear utilities that have less 523 00:23:45,640 --> 00:23:48,439 Speaker 6: regulated power and also clean power, which is important to 524 00:23:48,480 --> 00:23:51,520 Speaker 6: these hyperscalers, they've shot up. I think people have woken 525 00:23:51,600 --> 00:23:55,360 Speaker 6: up to the fact that the conventional projections of electricity 526 00:23:55,359 --> 00:23:58,360 Speaker 6: demand over the next five to ten years we're ridiculously 527 00:23:58,440 --> 00:24:01,080 Speaker 6: conservative relative to what's going to happen, and we're going 528 00:24:01,119 --> 00:24:03,000 Speaker 6: to face a major I believe we're going to face 529 00:24:03,000 --> 00:24:07,000 Speaker 6: a significant power crunch in this country unless we do something. 530 00:24:07,040 --> 00:24:09,840 Speaker 6: And so we're running to the conflict between the desire 531 00:24:09,880 --> 00:24:12,720 Speaker 6: to reduce our dependence on fossil fuels and the need 532 00:24:12,720 --> 00:24:14,200 Speaker 6: for power that's right in front of us. 533 00:24:14,320 --> 00:24:15,760 Speaker 2: That's just what I was going to ask because this 534 00:24:15,880 --> 00:24:18,440 Speaker 2: goes right against the need to deal with the climate 535 00:24:18,600 --> 00:24:21,000 Speaker 2: where were trying to give up the fossil fuels, and 536 00:24:21,040 --> 00:24:23,639 Speaker 2: this drives us back into it unless you go, for example, 537 00:24:23,680 --> 00:24:25,800 Speaker 2: to nuclear. Maybe there's small modular reactors. 538 00:24:26,400 --> 00:24:28,080 Speaker 6: As you know, I think you may even talk about 539 00:24:28,200 --> 00:24:29,880 Speaker 6: your show. Bill Gates has a project I think out 540 00:24:29,880 --> 00:24:32,879 Speaker 6: in Wyoming or someplace to build not a small reactor, 541 00:24:32,920 --> 00:24:37,439 Speaker 6: but a new technology that involves less less heat and 542 00:24:37,600 --> 00:24:40,119 Speaker 6: less water and so on and so forth. But it's 543 00:24:40,119 --> 00:24:41,600 Speaker 6: going to be done in twenty thirty. He doesn't have 544 00:24:41,640 --> 00:24:43,960 Speaker 6: a permit for it, so we're a long way. I 545 00:24:44,359 --> 00:24:47,399 Speaker 6: think we're a long way from nuclear happening. It could happen. 546 00:24:47,680 --> 00:24:50,080 Speaker 6: I think the technology is there, whether it's small nuclear 547 00:24:50,119 --> 00:24:53,280 Speaker 6: reactors or different kinds of nuclear technology, but I see 548 00:24:53,320 --> 00:24:56,040 Speaker 6: no support at all from people to do it. And 549 00:24:56,080 --> 00:24:58,600 Speaker 6: so the result is we're going to have probably some 550 00:24:58,680 --> 00:25:00,679 Speaker 6: coal staying around longer than any of us would like, 551 00:25:01,040 --> 00:25:05,080 Speaker 6: probably building more what are called ccgt's natural gas generating 552 00:25:05,119 --> 00:25:08,480 Speaker 6: facilities in order to support the renewables, because obviously the 553 00:25:08,480 --> 00:25:10,560 Speaker 6: sun doesn't always shine, the wind doesn't always blow. We 554 00:25:10,600 --> 00:25:13,480 Speaker 6: all know that, so you have to baseload power, and 555 00:25:13,520 --> 00:25:15,159 Speaker 6: we're going to find that we are doing more with 556 00:25:15,200 --> 00:25:16,960 Speaker 6: fossil fuels than any of us would like. 557 00:25:17,320 --> 00:25:19,359 Speaker 2: Okay, Steve, it is such a treat I have you here. 558 00:25:19,400 --> 00:25:21,840 Speaker 2: Thank you so much that it's Stephen Rattner of will 559 00:25:21,880 --> 00:25:23,119 Speaker 2: It Advisors. 560 00:25:24,680 --> 00:25:25,080 Speaker 1: Coming up. 561 00:25:25,119 --> 00:25:28,920 Speaker 2: An exceptional US economy is driving investments. How long can 562 00:25:28,960 --> 00:25:32,360 Speaker 2: it last? And what could carry it forward or get 563 00:25:32,400 --> 00:25:32,960 Speaker 2: in its way? 564 00:25:33,240 --> 00:25:34,240 Speaker 1: We ask Laura. 565 00:25:34,000 --> 00:25:36,080 Speaker 2: Tyson, have you see Berkeley Hush School of. 566 00:25:36,040 --> 00:25:40,480 Speaker 4: Business promising signals that AI will lead to a significant 567 00:25:40,480 --> 00:25:42,000 Speaker 4: boost in productivity growth. 568 00:25:43,640 --> 00:25:45,840 Speaker 1: That's next on Wall Street Week on Bloomberg. 569 00:25:47,119 --> 00:25:51,359 Speaker 3: This is Bloomberg Wall Street Week with David Weston from 570 00:25:51,480 --> 00:25:58,119 Speaker 3: Bloomberg Radio. 571 00:25:59,119 --> 00:26:01,480 Speaker 2: This is Wall Street Week. I'm David Weston. The US 572 00:26:01,520 --> 00:26:03,440 Speaker 2: economy continues to outpace. 573 00:26:03,160 --> 00:26:04,639 Speaker 1: Much or all the rest of the world. 574 00:26:04,960 --> 00:26:07,560 Speaker 2: What is driving that economy and can we expect it 575 00:26:07,600 --> 00:26:10,680 Speaker 2: to continue? Welcome back now, Laura Tyson of the UC 576 00:26:10,840 --> 00:26:13,800 Speaker 2: Berkeley Host School of Business. Doctor Tyson served under President 577 00:26:13,840 --> 00:26:16,120 Speaker 2: Clinton as the chair of the Council Black and Equad 578 00:26:16,119 --> 00:26:19,080 Speaker 2: Advisors and then as Director of the National Economic Council. 579 00:26:19,160 --> 00:26:21,000 Speaker 2: So doctor Tyson, thank you so much for being back 580 00:26:21,040 --> 00:26:23,680 Speaker 2: with us. So give us your analysis of why we 581 00:26:23,760 --> 00:26:25,840 Speaker 2: see the American economy so strong a lot of people 582 00:26:25,840 --> 00:26:27,520 Speaker 2: are surprised at how strong it is at this point. 583 00:26:29,200 --> 00:26:31,280 Speaker 4: I think, I want to say that the majority of 584 00:26:31,359 --> 00:26:34,800 Speaker 4: economists are probably surprised, and I think the FED we 585 00:26:34,840 --> 00:26:37,520 Speaker 4: heard today from jerom Pell, I think he's surprised the 586 00:26:37,560 --> 00:26:41,720 Speaker 4: resilience of the economy given that we've had high interest rates. 587 00:26:41,720 --> 00:26:44,280 Speaker 4: We've had them the highest in three decades, we've had 588 00:26:44,320 --> 00:26:46,359 Speaker 4: them for a long time. That should have slowed the 589 00:26:46,359 --> 00:26:50,959 Speaker 4: economy down. It did not. So what is what is 590 00:26:51,040 --> 00:26:55,480 Speaker 4: the driver here? I think the investment strategy that has 591 00:26:55,560 --> 00:27:01,080 Speaker 4: been unleashed by the private sector in response to Biden's 592 00:27:01,080 --> 00:27:06,240 Speaker 4: industrial policy and semiconductors, his industrial policy in overall manufacturing, 593 00:27:06,600 --> 00:27:12,280 Speaker 4: his climate policies, those texts cuts, those text incentives for 594 00:27:12,480 --> 00:27:17,280 Speaker 4: climate investment have unleashed a lot of investment. And so 595 00:27:17,359 --> 00:27:21,040 Speaker 4: if you think about this, this is spending that's investing 596 00:27:21,080 --> 00:27:24,280 Speaker 4: in the productivity of the future. I want to add 597 00:27:24,320 --> 00:27:29,000 Speaker 4: to this AI a lot of investment in AI because 598 00:27:29,040 --> 00:27:31,440 Speaker 4: of the anticipated effects on productivity. 599 00:27:31,880 --> 00:27:33,679 Speaker 2: So let's continue on that if we could. Because in 600 00:27:33,680 --> 00:27:35,800 Speaker 2: the past, you and I've talked about when you were 601 00:27:35,800 --> 00:27:37,640 Speaker 2: in the White House and you saw the internet kick 602 00:27:37,680 --> 00:27:40,639 Speaker 2: in that really affected productivity. Now that we know a 603 00:27:40,640 --> 00:27:43,159 Speaker 2: bit more about AI, do you think we're maybe on 604 00:27:43,240 --> 00:27:44,840 Speaker 2: the threshold of something like that. 605 00:27:45,280 --> 00:27:47,720 Speaker 4: You know, I think we could be. I have done 606 00:27:47,720 --> 00:27:49,800 Speaker 4: some work on this. Look, we don't have a lot 607 00:27:49,840 --> 00:27:52,520 Speaker 4: of evidence right now, but all the evidence we have, 608 00:27:53,080 --> 00:27:57,920 Speaker 4: whether we do it through how does a programer benefit 609 00:27:58,000 --> 00:28:02,160 Speaker 4: from working with AI? How does a call center operator 610 00:28:02,200 --> 00:28:05,200 Speaker 4: benefit from working for AI? All of the numbers say 611 00:28:05,760 --> 00:28:12,359 Speaker 4: significant productivity growth. So I think it's largely anecdotal larger 612 00:28:12,440 --> 00:28:15,520 Speaker 4: case studies. We don't have enough yet, but boy, the 613 00:28:15,720 --> 00:28:21,359 Speaker 4: promising promising signals that AI will lead to a significant 614 00:28:21,400 --> 00:28:25,040 Speaker 4: boost in productivity growth, which is it was the major 615 00:28:25,119 --> 00:28:28,240 Speaker 4: surprise in the nineteen sixties, and it may indeed be 616 00:28:28,320 --> 00:28:31,639 Speaker 4: the major surprise in the next five to ten years. 617 00:28:31,800 --> 00:28:33,840 Speaker 2: So you're an economist at the same time, when you 618 00:28:33,840 --> 00:28:35,159 Speaker 2: were in the West, you had to pay attention to 619 00:28:35,160 --> 00:28:38,000 Speaker 2: the politics as well. Given the fact that you see 620 00:28:38,000 --> 00:28:40,040 Speaker 2: the economy as strong as is, why are so many 621 00:28:40,120 --> 00:28:44,040 Speaker 2: people so dissatisfied, even some of them angry with who 622 00:28:44,120 --> 00:28:44,959 Speaker 2: we are economically? 623 00:28:45,400 --> 00:28:48,720 Speaker 4: You know, there's no simple answer to if you look 624 00:28:48,760 --> 00:28:52,240 Speaker 4: at all of the numbers, The only number that does 625 00:28:52,360 --> 00:28:58,080 Speaker 4: not generate the same kind of benefit for the population. 626 00:28:58,480 --> 00:29:01,720 Speaker 4: Are the inflation numbers. If you look at GDP growth, 627 00:29:01,800 --> 00:29:03,480 Speaker 4: or you look at employment growth, you look at the 628 00:29:03,560 --> 00:29:06,040 Speaker 4: unemployment rate, you look at vacancy rate, you look at 629 00:29:06,040 --> 00:29:07,840 Speaker 4: every end. You look at the rate of growth of 630 00:29:07,880 --> 00:29:11,800 Speaker 4: real wages. Now since January twenty three, those are positive numbers. 631 00:29:12,760 --> 00:29:18,080 Speaker 4: The thing that really gets people, I understand this is 632 00:29:18,880 --> 00:29:22,480 Speaker 4: the prices of things that they need are higher. They 633 00:29:22,480 --> 00:29:26,080 Speaker 4: are higher. They're not inflation is We're not going to disinflate. 634 00:29:26,160 --> 00:29:29,160 Speaker 4: Prices are not going to go down for most things, 635 00:29:29,400 --> 00:29:32,400 Speaker 4: so prices are higher. And I think there you have 636 00:29:32,600 --> 00:29:36,360 Speaker 4: a lot of service prices people people going out to 637 00:29:36,440 --> 00:29:40,600 Speaker 4: restaurants now and realizing that the price includes the price 638 00:29:40,920 --> 00:29:44,800 Speaker 4: is higher service charge. It costibar to do it. I 639 00:29:44,840 --> 00:29:49,920 Speaker 4: would say housing. Housing is a huge national problem, and 640 00:29:50,040 --> 00:29:53,200 Speaker 4: I think we've only recently seen the last quarter quarter 641 00:29:53,280 --> 00:29:56,240 Speaker 4: two of this year we began to see some easing 642 00:29:56,320 --> 00:29:58,240 Speaker 4: in the inflation rate of housing. 643 00:29:59,040 --> 00:30:00,920 Speaker 2: Part of the issue is economy. Part is how you 644 00:30:00,960 --> 00:30:03,520 Speaker 2: communicated about the economy. You worked under somebody that I 645 00:30:03,520 --> 00:30:05,880 Speaker 2: think was a very strong communicator. You can agree with 646 00:30:05,880 --> 00:30:08,600 Speaker 2: President Clinton or disagree, but boy, he was a good communicator, 647 00:30:08,800 --> 00:30:10,720 Speaker 2: and he would explain what's going on in the economy. 648 00:30:11,480 --> 00:30:14,280 Speaker 2: How do we avoid the popular street that we're seeing 649 00:30:14,320 --> 00:30:16,320 Speaker 2: right now, because I think a lot of Americans, whether 650 00:30:16,440 --> 00:30:19,320 Speaker 2: rightly or wrongly, are saying that inflation is linked to 651 00:30:19,320 --> 00:30:20,360 Speaker 2: some of the investments that you. 652 00:30:20,320 --> 00:30:21,040 Speaker 1: Think is a good thing. 653 00:30:22,120 --> 00:30:24,320 Speaker 4: Well, I think we have to you know, again, if 654 00:30:24,360 --> 00:30:26,640 Speaker 4: you listen to and I'm not sure that this is 655 00:30:26,680 --> 00:30:29,480 Speaker 4: a populist message, but if you listen to your own 656 00:30:29,520 --> 00:30:33,680 Speaker 4: pal today, he would say, Okay, look, we had a 657 00:30:33,840 --> 00:30:37,160 Speaker 4: very set of tight supply change as a result of COVID. 658 00:30:37,600 --> 00:30:40,880 Speaker 4: That that's a tightness in the product market, lasted a 659 00:30:40,920 --> 00:30:44,800 Speaker 4: long time, longer than we expected. Okay, But then you 660 00:30:44,920 --> 00:30:50,040 Speaker 4: have that unleashed. You have the prices in good starting 661 00:30:50,080 --> 00:30:53,120 Speaker 4: to slow or even come down somewhat, and that what 662 00:30:53,160 --> 00:30:55,520 Speaker 4: are people spending their money on? They're penned up. Demand 663 00:30:55,600 --> 00:30:59,320 Speaker 4: is on services, is on vacations, it's on going to restaurants, 664 00:30:59,360 --> 00:31:04,000 Speaker 4: it's on having a normal life outside of COVID, and 665 00:31:04,160 --> 00:31:08,400 Speaker 4: those prices go up. I am very concerned by the way, 666 00:31:08,520 --> 00:31:11,320 Speaker 4: and you haven't raised it yet, but I'm going to 667 00:31:11,360 --> 00:31:16,800 Speaker 4: go to immigration here. If you think that there are 668 00:31:16,880 --> 00:31:24,480 Speaker 4: numbers on this. The employment rate of Native born working 669 00:31:24,520 --> 00:31:30,160 Speaker 4: age Americans has been stable. Okay, it's not gone down 670 00:31:30,240 --> 00:31:33,160 Speaker 4: from twenty nineteen. It's not gone up from twenty nineteen. 671 00:31:33,440 --> 00:31:37,640 Speaker 4: What's going on here, The employment the number of working 672 00:31:37,920 --> 00:31:43,440 Speaker 4: age Native Americans is going down. It's going down. So 673 00:31:43,640 --> 00:31:47,360 Speaker 4: all of the employment growth that we've seen over the 674 00:31:47,400 --> 00:31:53,600 Speaker 4: past three years has been non Native born working age 675 00:31:53,920 --> 00:31:58,520 Speaker 4: population immigrants, and they are the ones that are filling 676 00:31:58,920 --> 00:32:02,320 Speaker 4: the service jobs and the manufacturing jobs, and the care 677 00:32:02,480 --> 00:32:07,160 Speaker 4: economy jobs and the restaurant jobs. And if we actually 678 00:32:07,440 --> 00:32:15,360 Speaker 4: dramatically deport millions of immigrants who have some status that 679 00:32:16,200 --> 00:32:21,040 Speaker 4: the President Trump would want to undo, then we are 680 00:32:21,080 --> 00:32:25,280 Speaker 4: going to create a labor market shortage really really fast. 681 00:32:25,520 --> 00:32:28,560 Speaker 4: That is going to be a major slow down variable 682 00:32:28,840 --> 00:32:30,000 Speaker 4: for the US economy. 683 00:32:30,280 --> 00:32:31,400 Speaker 1: Let's talk also about tariffs. 684 00:32:31,440 --> 00:32:33,440 Speaker 2: We could, since we're talking about the possibility of a 685 00:32:33,440 --> 00:32:36,840 Speaker 2: Trump presidency coming up now, tariffs, because there is a 686 00:32:36,920 --> 00:32:39,960 Speaker 2: sense that the so called China Shock was not good 687 00:32:40,040 --> 00:32:43,640 Speaker 2: for portions of the American working public. 688 00:32:43,840 --> 00:32:45,120 Speaker 1: It wasn't across the board, but. 689 00:32:45,080 --> 00:32:46,880 Speaker 2: There were portions that were really hit hard by that 690 00:32:47,120 --> 00:32:48,760 Speaker 2: may have been a mistake, and people are worried about 691 00:32:48,800 --> 00:32:52,240 Speaker 2: a second China shock. Now, what about the popular appeal 692 00:32:52,280 --> 00:32:54,160 Speaker 2: of saying, let's compose some tariffs here. 693 00:32:55,160 --> 00:32:57,239 Speaker 4: Well, I think I would start with the view that 694 00:32:57,320 --> 00:33:01,760 Speaker 4: tariffs are an inflationary tax. Who pays the tariffs? It's not. 695 00:33:01,920 --> 00:33:04,440 Speaker 4: And I heard Trump of the debate say he doesn't 696 00:33:04,440 --> 00:33:08,920 Speaker 4: believe this, but it's just true. China doesn't play the tariffs. 697 00:33:09,040 --> 00:33:12,720 Speaker 4: The foreign country doesn't play the tariffs. The American consumer 698 00:33:12,960 --> 00:33:16,280 Speaker 4: who wants to buy foreign products pays the tariff. And 699 00:33:16,320 --> 00:33:19,560 Speaker 4: there are some very good studies now which indicate that 700 00:33:19,680 --> 00:33:24,240 Speaker 4: at the tariff rates that Trump is proposing, it would 701 00:33:24,240 --> 00:33:27,960 Speaker 4: cost the average family, a typical family in the middle 702 00:33:28,040 --> 00:33:30,880 Speaker 4: of the income distribution, it would cost him about seventeen 703 00:33:31,040 --> 00:33:35,080 Speaker 4: hundred dollars extra a year to buy the goods and 704 00:33:35,120 --> 00:33:39,720 Speaker 4: services they want. So tariffs are inflation a price increasing 705 00:33:40,080 --> 00:33:44,120 Speaker 4: and they are therefore, I think consider it a kind 706 00:33:44,160 --> 00:33:45,400 Speaker 4: of inflationary tax. 707 00:33:45,720 --> 00:33:47,880 Speaker 1: Laura, it's always so helpful to have you on Walshreutig. 708 00:33:47,920 --> 00:33:48,680 Speaker 1: Thank you so very much. 709 00:33:48,760 --> 00:33:52,160 Speaker 2: That's Professor Laura Tyson of the Host School of Business. 710 00:33:51,720 --> 00:33:52,840 Speaker 1: At you See Berkeley. 711 00:33:53,880 --> 00:33:55,880 Speaker 2: We began the week trying to come to terms with 712 00:33:55,920 --> 00:33:59,400 Speaker 2: an attempt to assassinate former President Trump and ended it 713 00:33:59,440 --> 00:34:03,000 Speaker 2: with his being nominated as the Republican presidential candidate. As 714 00:34:03,040 --> 00:34:06,800 Speaker 2: investors focus more intently just what a second Trump term 715 00:34:06,920 --> 00:34:10,040 Speaker 2: could mean for them, So our one more thought this 716 00:34:10,080 --> 00:34:12,800 Speaker 2: week comes from a Republican member of the House Financial 717 00:34:12,840 --> 00:34:16,920 Speaker 2: Services Committee, Congressman French Hill of Arkansas, and how things 718 00:34:17,000 --> 00:34:19,800 Speaker 2: might be different from what we saw during President Trump's 719 00:34:19,840 --> 00:34:21,560 Speaker 2: first term in office. 720 00:34:23,000 --> 00:34:25,640 Speaker 8: I think President Trump comes into this position in a 721 00:34:25,680 --> 00:34:29,920 Speaker 8: tougher economic scenario, but more experienced in the sense that 722 00:34:29,960 --> 00:34:33,000 Speaker 8: he had four years in office and he knows many 723 00:34:33,000 --> 00:34:35,120 Speaker 8: of the challenges that our presidents face and how to 724 00:34:35,160 --> 00:34:35,960 Speaker 8: work with Congress. 725 00:34:36,000 --> 00:34:39,000 Speaker 2: But how does extending the tax cuts from twenty seventeen 726 00:34:39,200 --> 00:34:42,719 Speaker 2: help that situation? Because again CBO is projecting that in fact, 727 00:34:42,760 --> 00:34:45,840 Speaker 2: only twenty percent of those tax cuts actually paid for themselves. 728 00:34:45,920 --> 00:34:47,479 Speaker 1: They did not pay themselves, So. 729 00:34:47,360 --> 00:34:49,960 Speaker 2: How does extending that improve the situation fiscally? 730 00:34:50,760 --> 00:34:52,799 Speaker 8: I think he's going out to work with Congress to 731 00:34:52,840 --> 00:34:56,879 Speaker 8: determine on those that are expiring, how to focus on 732 00:34:57,040 --> 00:35:01,680 Speaker 8: growth and focus on responsibility give the now budget deficit 733 00:35:03,200 --> 00:35:06,719 Speaker 8: unsustainable budget debthics. I think he's inheriting from what would 734 00:35:06,760 --> 00:35:10,960 Speaker 8: be his predecessor. This is a bipartisan challenge. Spending in 735 00:35:11,080 --> 00:35:14,000 Speaker 8: Washington is a bipartisan challenging. Trying to find a way 736 00:35:14,040 --> 00:35:16,440 Speaker 8: to balance the budget is a bipartisan No one. 737 00:35:16,280 --> 00:35:17,520 Speaker 1: Has clean hands here. 738 00:35:19,000 --> 00:35:22,719 Speaker 8: But I am saying he's going to be constrained in 739 00:35:22,840 --> 00:35:28,880 Speaker 8: spending authorities and constrained in picking and choosing and working 740 00:35:28,880 --> 00:35:32,240 Speaker 8: with Congress on how to deal with the tax cuts 741 00:35:32,239 --> 00:35:35,480 Speaker 8: and expiration. I think it's going to be very difficult 742 00:35:35,560 --> 00:35:38,640 Speaker 8: in the first few days. What are some other constraints 743 00:35:39,520 --> 00:35:43,000 Speaker 8: the need for national defense spending. We have never had 744 00:35:43,120 --> 00:35:49,000 Speaker 8: more people challenging US, our allied nations and Western values 745 00:35:49,280 --> 00:35:53,000 Speaker 8: like now. The access of evil that George Bush, George W. 746 00:35:53,080 --> 00:35:57,920 Speaker 8: Bush talked about decades ago now is really infruition and 747 00:35:57,960 --> 00:36:02,319 Speaker 8: in full flower. North Korea, China, Russia, Iran and their 748 00:36:02,320 --> 00:36:08,040 Speaker 8: proxies are actively challenging and actively at war with America 749 00:36:08,080 --> 00:36:12,240 Speaker 8: and American allies at home from a terror threat elevation 750 00:36:12,840 --> 00:36:17,160 Speaker 8: and abroad. So that's a constraint on how to have 751 00:36:17,200 --> 00:36:20,160 Speaker 8: spending priorities. And this is why I argue that we 752 00:36:20,200 --> 00:36:25,640 Speaker 8: need a solid president vice president active, working seven days 753 00:36:25,640 --> 00:36:27,880 Speaker 8: a week, twenty four hours a day, working with Congress 754 00:36:27,920 --> 00:36:29,200 Speaker 8: to face the realities that we have. 755 00:36:29,520 --> 00:36:33,720 Speaker 2: You mentioned trade in tariffs. Some people who are close 756 00:36:33,760 --> 00:36:36,279 Speaker 2: to President Trump say that would be a revenue source, 757 00:36:36,320 --> 00:36:38,080 Speaker 2: so it would be good on the deficit. At the 758 00:36:38,120 --> 00:36:40,040 Speaker 2: same time, a lot of comments are saying it also 759 00:36:40,160 --> 00:36:43,400 Speaker 2: is inflationary because although it does put money in the treasury, 760 00:36:43,400 --> 00:36:45,520 Speaker 2: it doesn't come from China, it doesn't come from foreign countries. 761 00:36:45,600 --> 00:36:48,319 Speaker 2: It comes from US consumers in higher prices. How do 762 00:36:48,400 --> 00:36:52,000 Speaker 2: you both raise tariffs and avoid inflation? 763 00:36:52,520 --> 00:36:54,719 Speaker 1: Smart question. I think there are two. 764 00:36:56,200 --> 00:36:59,719 Speaker 8: Reversals of the global trend that we've witnessed in our 765 00:36:59,760 --> 00:37:02,719 Speaker 8: career over the past three decades. One of them is 766 00:37:03,680 --> 00:37:08,480 Speaker 8: having redundant supply chains, not single source, not just in 767 00:37:08,560 --> 00:37:13,680 Speaker 8: time and reshoring, having those supply chains in maybe safer 768 00:37:13,719 --> 00:37:16,600 Speaker 8: hands than just the lowest cost provider in an Asian 769 00:37:16,680 --> 00:37:20,280 Speaker 8: nation like China, for example. That's going to cost money 770 00:37:20,280 --> 00:37:23,520 Speaker 8: and time. That's an inflationary trend. And you're right. 771 00:37:23,840 --> 00:37:24,720 Speaker 1: Across the board. 772 00:37:24,760 --> 00:37:29,200 Speaker 8: Tariffs, if put in place, in left in place, are inflationary, 773 00:37:29,280 --> 00:37:31,920 Speaker 8: its attacks, and it is borne by the American consumer. 774 00:37:32,360 --> 00:37:37,000 Speaker 8: I think where President Trump demonstrated his ability to negotiate 775 00:37:37,480 --> 00:37:40,280 Speaker 8: was using them, as I said earlier, as a cudgel. 776 00:37:39,920 --> 00:37:41,919 Speaker 1: To bring people to the table for a. 777 00:37:41,840 --> 00:37:46,759 Speaker 8: Positive outcome, not just simply leave them in place. And 778 00:37:46,800 --> 00:37:50,440 Speaker 8: I'm concerned, for example, when I spoke out in general 779 00:37:50,480 --> 00:37:54,319 Speaker 8: opposition to the across the board stealing aluminum tariffs back 780 00:37:54,520 --> 00:37:58,240 Speaker 8: early in the administration when they were imposed the first time, saying, 781 00:37:58,320 --> 00:38:01,360 Speaker 8: demonstrate to me that you actually across the board and 782 00:38:01,400 --> 00:38:07,240 Speaker 8: steal an aluminum domestic product, manufacturing new production as opposed 783 00:38:07,280 --> 00:38:10,480 Speaker 8: to just higher prices. And I still think that's a 784 00:38:10,520 --> 00:38:12,960 Speaker 8: mixed report. And that's why I think you have to 785 00:38:13,040 --> 00:38:17,719 Speaker 8: use tariffs very targeted and obtain the trade benefits. And 786 00:38:17,960 --> 00:38:22,760 Speaker 8: I do believe that former Ambassador lighthauser who advised President Trump, 787 00:38:23,040 --> 00:38:28,600 Speaker 8: did achieve that in several places Japan, China selectively, and 788 00:38:28,640 --> 00:38:31,600 Speaker 8: then they had a big success with redoing the North 789 00:38:31,640 --> 00:38:37,719 Speaker 8: American Free Trade Agreement into the USMCA. So again we 790 00:38:37,760 --> 00:38:40,719 Speaker 8: are cognizant we're in a different situation than we were 791 00:38:40,760 --> 00:38:43,640 Speaker 8: in twenty sixteen from a macroeconomic. 792 00:38:42,880 --> 00:38:43,359 Speaker 1: Point of view. 793 00:38:44,280 --> 00:38:47,160 Speaker 2: That was Republican Representative French Hill of Arkansas. 794 00:38:47,600 --> 00:38:48,160 Speaker 1: That does it. 795 00:38:48,200 --> 00:38:50,600 Speaker 2: For this episode of Wall Street Week, I'm David Weston. 796 00:38:50,719 --> 00:38:56,280 Speaker 1: This is Bloomberg. See you next week.