WEBVTT - Surveillance: Fed's Virus Response With Kaplan & Bostic 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.400 Bloomberg dot Com, and of course on the Bloomberg. Let's 0:00:27.440 --> 0:00:30.160 focus on the economic it's a huge effort coming from 0:00:30.200 --> 0:00:33.400 the monetary policy side and the fiscal side as well. 0:00:33.520 --> 0:00:36.040 Phone again, I'm pleased to say, is Katherine Man, City 0:00:36.040 --> 0:00:40.360 Global Chief Economist. Katherine. This is about speed. Now, how 0:00:40.440 --> 0:00:42.680 quickly can this bill get to the President's desk and 0:00:42.720 --> 0:00:45.760 how quickly can that bill turn into real capital that 0:00:45.800 --> 0:00:48.400 gets injected into this economy. Are you hopeful we can 0:00:48.440 --> 0:00:51.479 do a lot of that quickly. Well, I think we 0:00:51.520 --> 0:00:53.800 can get the bills to the desk and so forth, 0:00:53.800 --> 0:00:56.000 and it can get sign But it is really about 0:00:56.080 --> 0:00:59.280 getting the financing out to the part of the economy 0:00:59.320 --> 0:01:02.240 that is desperate in need of it. Um. You know, 0:01:02.280 --> 0:01:05.959 there's fifty of the economy that does not UM doesn't 0:01:05.959 --> 0:01:09.520 borrow through bonds or through equities, and of the economy 0:01:09.760 --> 0:01:12.840 both the businesses and the workers. Those are the parts 0:01:12.880 --> 0:01:15.440 that I really worry about because it's much more difficult 0:01:15.440 --> 0:01:17.880 to get money to them. And if and if they 0:01:17.920 --> 0:01:22.160 are if businesses go bankrupt, if the workers become unemployed, 0:01:22.319 --> 0:01:24.399 then it's going to be very difficult to get to 0:01:24.480 --> 0:01:27.600 a rebound that a lot of people are forecasting to 0:01:27.680 --> 0:01:30.120 the economy in the second half. You cannot get to 0:01:30.200 --> 0:01:33.319 a strong rebound. Uh, that's gonna pull the economy out 0:01:33.319 --> 0:01:36.400 of procession unless you can keep those the lights on. 0:01:36.640 --> 0:01:40.520 At the of the economy book, the businesses and the workers, 0:01:40.800 --> 0:01:43.880 neither one of them have cash buffers. NATH is really 0:01:44.120 --> 0:01:46.000 really difficult. Le's get a read on the second half 0:01:46.080 --> 0:01:47.560 of this year. And I totally agree with you, and 0:01:47.560 --> 0:01:49.680 I'm sure many people listening to this program due to 0:01:50.080 --> 0:01:51.840 So let's try and assess the damage we're doing to 0:01:51.880 --> 0:01:54.400 the globe economy, the U S economy. Right now, we 0:01:54.480 --> 0:01:58.360 had a really ugly jobless claim sprint yesterday. Are you 0:01:58.400 --> 0:01:59.880 saying it could get a whole lot worse from hire 0:01:59.920 --> 0:02:03.040 but for it gets better? Thus, the general view is 0:02:03.080 --> 0:02:04.840 that it will get worse before it gets better. And 0:02:04.920 --> 0:02:06.800 the point is that we would that we would like 0:02:06.920 --> 0:02:09.440 to not have it get as bad as it could. 0:02:09.480 --> 0:02:12.239 I mean, in some sense, Uh, they're the numbers could 0:02:12.240 --> 0:02:14.600 be much much higher because the services component of the 0:02:14.639 --> 0:02:19.000 economy much more labor intensive, much more smaller business intensive. 0:02:19.240 --> 0:02:22.360 And so you know, saving the big corporate obviously that 0:02:22.520 --> 0:02:25.360 that's relevant for the stock market. That's that is a 0:02:25.400 --> 0:02:27.760 component of the of the fiscal plan. It's a very 0:02:27.800 --> 0:02:30.880 big component of the federal reserve program as well. But 0:02:30.919 --> 0:02:33.359 you know the rest of the economy, the half of 0:02:33.400 --> 0:02:36.640 the economy that is not in that category, the businesses 0:02:36.639 --> 0:02:38.680 and the workers, those are the essential ones that we 0:02:38.760 --> 0:02:42.959 have to have maintained in business ready to go when 0:02:42.960 --> 0:02:48.560 the when the virus finally dissipates. Catherine dr Fauci talks 0:02:48.600 --> 0:02:52.799 about the aspirations of the president to get back to work. 0:02:52.880 --> 0:02:56.280 I'm not going to ask a game Easter April twelve, 0:02:56.840 --> 0:03:00.480 but when do you suggest America as any sense of 0:03:00.600 --> 0:03:05.040 normal g d P. Let's just say a zero percent value. 0:03:05.080 --> 0:03:07.680 I mean, is it a two thousand twenty event or 0:03:07.680 --> 0:03:09.240 do you have to be grimmer than that and go 0:03:09.320 --> 0:03:14.680 out further? So the the our our U S economist 0:03:14.720 --> 0:03:18.680 does have the year over year at growth rate in 0:03:19.520 --> 0:03:24.160 at negative point five U. But the trajectory moves UH 0:03:24.320 --> 0:03:28.440 the U S economy back into positive territory um by 0:03:28.440 --> 0:03:31.560 the end of the year. So so if if in fact, 0:03:31.600 --> 0:03:34.720 we can keep going uh keep the lights on at 0:03:35.480 --> 0:03:39.640 the economy and keep those people uh the workers balance 0:03:39.720 --> 0:03:43.040 sheets uh sane and that, then that's what the OA 0:03:43.760 --> 0:03:46.760 some of these programs are is to keep the households 0:03:46.760 --> 0:03:49.520 from going into the deep, deep pole that they went 0:03:49.560 --> 0:03:51.800 in the global financial crisis. But you're going to tell 0:03:51.840 --> 0:03:54.920 me the consumer. I don't know what the income shares 0:03:55.000 --> 0:03:58.040 in the United States, but it's a huge number. To 0:03:58.160 --> 0:04:00.520 John's point, is this just a starting point? I mean, 0:04:00.720 --> 0:04:05.480 are we talking about twelve and fourteen trillion dollars of 0:04:05.560 --> 0:04:09.040 stimulus to get us out to the city group trajectory 0:04:09.160 --> 0:04:13.000 months and months away. I don't you know. It's it's 0:04:13.040 --> 0:04:15.800 it's about to make to my view, it's it's the 0:04:15.840 --> 0:04:19.039 money matters, of course, but it's also the speed. The 0:04:19.080 --> 0:04:21.680 point is is if if if we can't keep the 0:04:21.960 --> 0:04:25.880 businesses in business and the worker balance sheets uh sane 0:04:26.360 --> 0:04:30.479 uh stable, then the recession gives is deeper, and once 0:04:30.520 --> 0:04:34.000 the recession gets deeper, it's much more expensive and hard 0:04:34.040 --> 0:04:36.039 to get out. So the reason we need to go 0:04:36.120 --> 0:04:38.760 move fast to get the money out to the to 0:04:38.880 --> 0:04:42.280 the businesses and the workers is because if they if 0:04:42.320 --> 0:04:45.960 they go bankrupt, if the workers go on un employment conversation, UH, 0:04:46.000 --> 0:04:48.680 if their balance sheets get messed up because you know 0:04:48.720 --> 0:04:50.400 they don't they don't have enough money to to pay 0:04:50.400 --> 0:04:53.280 the rent, to feed the family, then then the recession 0:04:53.360 --> 0:04:55.640 is deeper. And once you're into the hole, then it's 0:04:55.760 --> 0:04:58.400 much more expensive to get out. And you know, your 0:04:58.440 --> 0:05:00.760 death sustainability, there are people out there who worry about 0:05:00.800 --> 0:05:03.599 such things. Uh, your death sustainability is also at risk. 0:05:03.680 --> 0:05:05.719 So do it now, do it fast, do it big, 0:05:06.000 --> 0:05:08.440 do it fast and big well, do it fast is 0:05:08.480 --> 0:05:10.800 sort of anathema to Congress. And we're seeing that we're 0:05:10.800 --> 0:05:13.039 seeing the move at lightning speed, and yet they still 0:05:13.040 --> 0:05:14.800 haven't gotten it passed. And once they get it past, 0:05:14.839 --> 0:05:16.520 it's unclear when they can get the checks in the 0:05:16.520 --> 0:05:18.560 mail and when they can actually get the SBA up 0:05:18.560 --> 0:05:20.720 and running and giving those loans. Is a fact going 0:05:20.720 --> 0:05:24.000 to be doing the heavy lifting here. So I think 0:05:24.200 --> 0:05:26.520 one thing is it said that there's uh, there's uh. 0:05:27.240 --> 0:05:30.600 Part of the discussion is on UM getting the financial 0:05:30.600 --> 0:05:34.960 institutions directly into connection with firms and and and UH 0:05:35.000 --> 0:05:38.279 bypassing the s p A UH the SBA has got 0:05:38.279 --> 0:05:42.240 a different timetable usually for what they do. And so 0:05:42.360 --> 0:05:45.520 the objective is to to have the financial institutions go directly, 0:05:46.000 --> 0:05:49.039 have firms come directly to the financial institutions, uh, and 0:05:49.120 --> 0:05:51.760 not have to go through the SBA process because the 0:05:51.800 --> 0:05:54.040 feed is of the essence. As I say, most of 0:05:54.080 --> 0:05:56.560 those businesses they have a cash flow buffer of maybe 0:05:56.560 --> 0:05:58.680 a month, maybe less than a month. We're already two 0:05:58.760 --> 0:06:01.680 or three weeks into this, so uh, you know when 0:06:01.680 --> 0:06:04.159 they say I have to let you go, I have 0:06:04.200 --> 0:06:06.320 to close my business. But by the way, I've been 0:06:06.360 --> 0:06:08.599 told to close my business, and and you know you 0:06:08.680 --> 0:06:10.680 have you have a payroll, You can't you don't have 0:06:10.680 --> 0:06:13.880 any cash buffer. So we have to yeah, keep those 0:06:14.080 --> 0:06:16.480 companies going. Well. I guess the reason why I say, 0:06:16.560 --> 0:06:19.279 is the FED taking the focus here because they're supporting 0:06:19.279 --> 0:06:22.320 the financial markets because that is the transmission of credit 0:06:22.560 --> 0:06:24.680 that's much more efficient than trying to go through some 0:06:24.720 --> 0:06:27.599 of the governmental agencies that from from a number of 0:06:27.600 --> 0:06:31.200 reports have been understaffed. Even I'm just wondering what that 0:06:31.240 --> 0:06:33.640 means for the Fed's power going forward. I mean, they 0:06:33.640 --> 0:06:37.400 already have taken some unprecedented measures, how much more are 0:06:37.480 --> 0:06:39.599 they going to do in taking the front role here, 0:06:40.880 --> 0:06:43.800 So you're right there. The you know, the financial system 0:06:43.839 --> 0:06:46.160 is the mechanism through which you get credit, but the 0:06:46.480 --> 0:06:49.560 Federal Reserve is also taking on this role of Um. 0:06:49.600 --> 0:06:51.719 You know, it's a policy put on every part of 0:06:51.760 --> 0:06:55.000 your portfolio. You know, you got some funds, you know, 0:06:55.080 --> 0:06:57.880 you've got treasuries. Uh, you know, and you get the 0:06:57.880 --> 0:07:00.200 only very little bit that the Fed is it is 0:07:00.400 --> 0:07:02.360 going to go out there and buy. So you know, 0:07:02.440 --> 0:07:03.960 as I say, it used to be a policy put 0:07:03.960 --> 0:07:06.719 on the treasuries. Now it's the entire entire portfolio. So 0:07:06.760 --> 0:07:09.280 there's some I think going, You've got to do that 0:07:09.320 --> 0:07:13.560 now I know that. But if I think that, uh, 0:07:13.920 --> 0:07:16.760 it reduces the power of the Fed going in the 0:07:16.880 --> 0:07:20.960 longer term because it ties its hands, because you end 0:07:21.000 --> 0:07:22.920 up with a problem of how do you do monetary 0:07:22.960 --> 0:07:28.240 policy normalization when you've got everything on your balance sheet? Um, 0:07:28.280 --> 0:07:31.520 it makes it very difficult to to to be the 0:07:31.640 --> 0:07:36.040 arbiter of monetary policy normalization. We're thinking about this way 0:07:36.040 --> 0:07:38.600 out in the future. It's not something we should think 0:07:38.640 --> 0:07:40.640 about now. But but you know, in the back of 0:07:40.680 --> 0:07:44.080 your mind you're gonna say, you know, I'm all in here, Um, 0:07:44.120 --> 0:07:46.840 how do I get out? Catherine Man, great you Thos 0:07:46.840 --> 0:07:49.040 this morning special thanks to you in the same over 0:07:49.080 --> 0:07:52.280 a city city global chief economists, A policy put on 0:07:52.360 --> 0:07:54.560 every part of your portfolio. It felt that way for 0:07:54.680 --> 0:07:56.240 much of this weight. We'll talk about it a little 0:07:56.240 --> 0:08:01.160 bit later on this program. We would like to welcome 0:08:01.200 --> 0:08:04.600 Propert Capitlan to Bloomberg Television and Radio worldwide. Thank you 0:08:04.640 --> 0:08:08.000 for joining us this morning. Obviously only one time to 0:08:08.040 --> 0:08:11.200 be here. Everybody's minds. The House expected to pass the 0:08:11.200 --> 0:08:14.200 fiscal stimulus bill this morning, and then I guess you'll 0:08:14.200 --> 0:08:17.200 be in business. But what business is that going to be? 0:08:17.320 --> 0:08:20.800 The Treasury could give you as much as four billion 0:08:20.920 --> 0:08:24.960 dollars from this bill, which could leverage up to four 0:08:25.000 --> 0:08:27.920 point five trillion dollars. Even for an old Golden Sacks 0:08:27.960 --> 0:08:31.360 guy like you. That seems like a lot of money. Yeah, 0:08:31.400 --> 0:08:35.679 I mean. The key, the key to uh, the proposal 0:08:36.200 --> 0:08:38.440 from the Fed point of view is there's a number 0:08:38.480 --> 0:08:42.839 of special purpose vehicles that are being created to implement 0:08:42.920 --> 0:08:47.160 these programs to buy assets from commercial paper to asset 0:08:47.240 --> 0:08:52.760 backed securities, to corporate bonds to municipal commercial paper, and 0:08:52.840 --> 0:08:57.520 so each of these special purpose vehicles requires approximate ten 0:08:57.559 --> 0:09:02.880 billion dollars to seed, and so UH the money from 0:09:02.880 --> 0:09:05.640 from the bill will be used to see these various 0:09:05.640 --> 0:09:09.000 programs that we've already announced. The bill also suggests to 0:09:09.120 --> 0:09:12.280 new lending programs from the FED, one for companies and 0:09:12.559 --> 0:09:16.240 one for the small business or the main street lending 0:09:16.320 --> 0:09:19.440 program that you guys talked about. What's the difference between 0:09:19.440 --> 0:09:22.960 the two. What is the main street program? Well, it's 0:09:23.000 --> 0:09:25.880 the details is still being worked out. That The long 0:09:25.960 --> 0:09:28.720 and the short of it is, UH, we would help 0:09:29.559 --> 0:09:32.200 lend to small businesses, but we would do it through 0:09:32.480 --> 0:09:36.800 most likely through commercial banks, but we will provide credit 0:09:36.880 --> 0:09:41.040 support to those banks so that they can h they 0:09:41.040 --> 0:09:43.880 can step forward and make loans that that that are 0:09:43.920 --> 0:09:47.080 that are appropriate, but they can do it with confidence 0:09:47.440 --> 0:09:50.160 that they have credit support. That program is still being 0:09:50.160 --> 0:09:52.440 developed and we're still working on the details of that 0:09:53.040 --> 0:09:55.880 well still being developed. The need is immediate. How soon 0:09:55.920 --> 0:09:58.520 do you think you can start getting cash to companies? 0:09:59.800 --> 0:10:03.240 I we I would think very quickly. UH. I've been 0:10:03.280 --> 0:10:07.000 careful to avoid setting exact timetable, but you can be 0:10:07.080 --> 0:10:12.079 sure that we're working furiously here at the FED to 0:10:12.480 --> 0:10:15.400 UH to put the team to have the teams in 0:10:15.440 --> 0:10:18.200 place and work out the details and get those programs ready, 0:10:18.240 --> 0:10:20.960 and you can have confidence that we will do that. 0:10:21.640 --> 0:10:23.439 You're also going to have the ability to lend to 0:10:23.679 --> 0:10:26.640 states and cities. Give me an idea of how that 0:10:26.679 --> 0:10:32.719 would work. Well, primarily, Uh, we we've already announced UH 0:10:32.960 --> 0:10:36.280 that we will be buying through another special purpose vehicle, 0:10:36.559 --> 0:10:42.000 the commercial paper of cities and states municipalities, and that 0:10:42.040 --> 0:10:46.079 program is already a well underway in terms of being formed. UH. 0:10:46.120 --> 0:10:50.640 And it's going to be primarily through the purchase of 0:10:50.720 --> 0:10:54.240 the commercial paper that's issuance that's issued. Some of this 0:10:54.720 --> 0:10:58.720 lending seems to put monetary policy squarely in the fiscal camp. 0:10:58.880 --> 0:11:03.000 How do you feel about that? Uh, in this environment, 0:11:03.080 --> 0:11:07.920 it's necessary in that UM, while it's unusual and a 0:11:08.000 --> 0:11:12.600 number of these authorities are unprecedented, I think we I 0:11:12.600 --> 0:11:15.560 think it's critical that we adapt to the reality on 0:11:15.600 --> 0:11:17.840 the ground and we adapt to the challenge, and that's 0:11:17.880 --> 0:11:21.040 what we're doing. So I think it's it's in this situation, 0:11:21.120 --> 0:11:24.240 it's quite appropriate. Can you get out of this when 0:11:24.280 --> 0:11:29.280 it's all over, Yes, I mean, we'll obviously have to 0:11:29.800 --> 0:11:32.040 work on how to do that. All that in an 0:11:32.040 --> 0:11:36.040 appropriate way. But but yes, I I believe. I believe 0:11:36.080 --> 0:11:39.839 that we will. Everybody understands our country understands this is 0:11:39.880 --> 0:11:43.880 an unusual time. And the reason we're implementing these programs 0:11:44.040 --> 0:11:49.559 is these either municipalities or businesses or other entities don't 0:11:49.600 --> 0:11:52.800 have cash flow because we've asked them to shut down. 0:11:53.559 --> 0:11:56.600 Once they're up and running again and they have their 0:11:56.640 --> 0:12:00.280 own cash flow, UH, it will be able too, I 0:12:00.360 --> 0:12:04.120 would think withdraw from some of these programs. But in 0:12:04.200 --> 0:12:08.079 the void, we want to make sure that these small businesses, 0:12:08.600 --> 0:12:13.520 big larger businesses, medium sized businesses, and municipalities continue to function. 0:12:13.880 --> 0:12:17.480 And I think that's critical as we as we do 0:12:17.520 --> 0:12:20.040 the things we need to do to social distance and 0:12:20.120 --> 0:12:23.160 quarantine in some cases in order to defeat this virus. 0:12:23.720 --> 0:12:26.280 A trillion here, a trillion there, to paraphrase Everett Dirks. 0:12:26.280 --> 0:12:29.920 And you start to talk about real money, might billion 0:12:30.080 --> 0:12:33.199 at the time, because when you when you look at 0:12:33.280 --> 0:12:36.360 that kind of real money going into the economy, do 0:12:36.440 --> 0:12:42.640 you worry about inflation? Uh so some right now I 0:12:42.679 --> 0:12:46.040 would call what we're doing into the category of quote 0:12:46.120 --> 0:12:52.840 unquote relief, meaning, uh, this is intended to keep uh. 0:12:53.720 --> 0:12:57.240 All the bills, including the fiscal bills are to keep 0:12:57.800 --> 0:13:01.800 individuals functioning and being able to pay their bills, small 0:13:01.840 --> 0:13:08.400 businesses functioning, municipalities functioning, larger businesses functioning, so that when 0:13:08.720 --> 0:13:11.880 the virus is defeated, we can walk and then we 0:13:11.960 --> 0:13:14.000 can run, and then we can sprint out of this. 0:13:14.720 --> 0:13:18.800 UH and so um UH in that regard, I don't 0:13:18.840 --> 0:13:22.520 know how inflationary it will be, because it's more relief 0:13:22.600 --> 0:13:26.920 than stimulus. I think a lot of the forces, unfortunately 0:13:26.960 --> 0:13:28.880 on the other end, as we come out of this, 0:13:28.960 --> 0:13:32.320 might in fact be deflationary, and that we're likely to 0:13:32.400 --> 0:13:35.960 have a spike in the unemployment rate. We will work 0:13:36.040 --> 0:13:39.800 that down, will have more excess capacity. I think a 0:13:39.920 --> 0:13:43.560 number of those forces actually will be deflationary. We're speaking 0:13:43.559 --> 0:13:46.320 with Robert Taplan, the Dallas Fed Bank President, on BLUEBIRG 0:13:46.360 --> 0:13:50.400 radio and television. UH. One of your colleagues, speaking of unemployment, 0:13:50.440 --> 0:13:54.200 says we could see and decline in GDP in the 0:13:54.240 --> 0:13:57.600 second quarter. What kind of numbers do you see? So 0:13:57.679 --> 0:14:00.720 our our forecast to the Dallas Fed is is not 0:14:00.920 --> 0:14:04.079 on that scale, and that UM, we think you'll see 0:14:04.120 --> 0:14:08.640 a substantial contraction in the second quarter. Our own estimates 0:14:08.760 --> 0:14:10.880 is it won't be. Uh, it won't be that big, 0:14:11.040 --> 0:14:12.920 but it will be, but it could be in the 0:14:13.000 --> 0:14:16.120 twenties in our view on an and and just to 0:14:16.160 --> 0:14:19.600 point out on an annualized basis, it will be in 0:14:19.640 --> 0:14:22.160 the twenties. And we can have some decline also at 0:14:22.200 --> 0:14:24.480 least in the first part of the third quarter. And 0:14:24.560 --> 0:14:27.800 our own internal forecast here at the Dallas said, as 0:14:27.880 --> 0:14:30.840 you could see the unemployment rate peak in the low 0:14:30.960 --> 0:14:34.520 to mid teens, but we would expect that would quickly, 0:14:35.120 --> 0:14:40.080 um be would quickly decline. We would hope to something 0:14:40.160 --> 0:14:43.840 like seven or eight percent by the end of the year. 0:14:43.960 --> 0:14:50.040 And then we'ld have to spend working that unemployment right down. Uh, 0:14:50.080 --> 0:14:53.640 but we'll have an elevated level of unemployment for sure. 0:14:54.200 --> 0:14:56.240 As as we come out of this, well, do you 0:14:56.320 --> 0:14:59.800 see a v shaped recovery of you just be a 0:15:00.040 --> 0:15:06.520 very long slow recovery. I listen, everything we're doing, uh, 0:15:06.600 --> 0:15:09.560 and that and and and in addition to fiscal response, 0:15:10.200 --> 0:15:14.880 is all with the intention that once this virus is defeated, 0:15:15.240 --> 0:15:19.760 we will move forward as expeditiously and quickly and strongly 0:15:19.840 --> 0:15:23.640 as possible. The thing that that I don't know and 0:15:23.680 --> 0:15:27.560 we'll have to see as we go UM is what 0:15:27.680 --> 0:15:30.920 will be the effect on small businesses? And I've talked 0:15:31.000 --> 0:15:33.320 I talked to lots of small businesses as well as 0:15:33.400 --> 0:15:36.560 larger businesses. You know, a lot of small businesses may 0:15:36.640 --> 0:15:40.920 come out of this either smaller. Some small businesses may 0:15:41.000 --> 0:15:43.480 conclude that they don't want to continue to operate out 0:15:43.520 --> 0:15:47.760 of this UM given their businesses were not as strong 0:15:47.840 --> 0:15:51.400 even going into this UH and bigger businesses are going 0:15:51.440 --> 0:15:53.880 to have to assess how much demand do they have, 0:15:54.040 --> 0:15:57.960 what's the size of their business? UM and and rescale 0:15:58.160 --> 0:16:02.120 and reconfigure what they're doing and so UM and then 0:16:02.120 --> 0:16:05.280 the consumer behavior, we're gonna have to learn what consumer 0:16:05.360 --> 0:16:07.960 behavior is on the other side of this. I would 0:16:08.000 --> 0:16:10.680 think consumers and we think of it elas that consumers 0:16:10.680 --> 0:16:13.680 are liable to be more cautious, may well save more. 0:16:13.760 --> 0:16:17.400 You can understand why UH and UH and and they're 0:16:17.400 --> 0:16:19.960 spending habits maybe a little bit different than they were, 0:16:20.680 --> 0:16:23.600 and they'll have a higher unemployment rate. So I think 0:16:23.640 --> 0:16:25.920 these are all things that it's a little too soon 0:16:25.960 --> 0:16:29.280 to gauge, but we're gonna We're gonna climb out of this. 0:16:29.880 --> 0:16:31.760 It's just a question of how fast do we go 0:16:31.840 --> 0:16:36.000 again from walking to running to sprinting and uh, and 0:16:36.000 --> 0:16:38.680 we're still trying to come to groups with that question, well, 0:16:38.720 --> 0:16:41.600 what are you seeing in Dallas in the Dallas district? 0:16:42.040 --> 0:16:45.400 What are companies telling you they're about their prospects. So 0:16:46.120 --> 0:16:48.000 we're hearing a lot of things, but I think that 0:16:48.280 --> 0:16:51.360 we're hearing around the country for small businesses, they're worried 0:16:51.360 --> 0:16:55.200 about survival UM and and that's probably true of even 0:16:55.240 --> 0:16:58.640 small and medium sized businesses where they've just never they've 0:16:58.760 --> 0:17:01.400 they've mapped a lot of areas, but never mapped the 0:17:01.440 --> 0:17:04.280 scenario where literally they were asked to shut down, a 0:17:04.359 --> 0:17:08.720 revenue just stopped. And so there's a lot of great concern, 0:17:09.240 --> 0:17:12.639 particularly among small businesses about whether they can make it 0:17:12.680 --> 0:17:15.800 to the other side, even with the loan assistance that 0:17:15.920 --> 0:17:18.879 we're talking about. For even bigger businesses, detaining on what 0:17:18.960 --> 0:17:21.919 industry and they're in, we're also having the same discussion 0:17:22.400 --> 0:17:25.800 in that UM they're just trying to assess how long, 0:17:27.080 --> 0:17:29.720 how to how to manage their people, how to protect 0:17:29.720 --> 0:17:33.240 their people, but also how to manage their business during 0:17:33.240 --> 0:17:36.760 a period where their revenue is dramatically declined and and 0:17:37.160 --> 0:17:41.080 great concern and in particular, which is what we're working 0:17:41.119 --> 0:17:44.720 on we'll have availability of capital. UM. The big, the 0:17:44.800 --> 0:17:47.600 big other issue we deal with in Texas that most 0:17:47.640 --> 0:17:51.280 states are not is energy. We had, in addition to 0:17:51.280 --> 0:17:56.000 the coronavirus, an unprecedented energy shock that happened about two 0:17:56.080 --> 0:17:59.680 or three weeks ago with Saudi and UH and Russia. 0:17:59.680 --> 0:18:02.560 Is so from the coronavirus, we were going to be 0:18:02.600 --> 0:18:06.920 globally oversupplied on energy to begin with. And the Russia 0:18:07.400 --> 0:18:11.720 UM saw they dispute UH and and desire to pump 0:18:11.760 --> 0:18:15.720 even more makes this oversupply even worse. So we have 0:18:15.800 --> 0:18:20.320 a dramatic global oversupply issue for oil, which is dramatically 0:18:20.560 --> 0:18:23.000 hurt the price of oil. And so you're gonna see 0:18:23.080 --> 0:18:29.760 lots of restructuring, some failures, and lots of challenges in 0:18:29.800 --> 0:18:32.440 the Permian basin. And we think we think the Permian 0:18:32.480 --> 0:18:35.679 will actually shrink this year. We thought it would before 0:18:35.720 --> 0:18:38.240 this happened, we thought it would grow more slowly. Now 0:18:38.280 --> 0:18:41.080 we actually think the production from the Permian basin is 0:18:41.200 --> 0:18:44.040 likely to shrink. And the only reason you won't see 0:18:44.040 --> 0:18:47.200 it shrinking faster is some of these firms have forward 0:18:47.240 --> 0:18:50.480 commitments to sell their product. But as those laps, you'll 0:18:50.520 --> 0:18:54.920 see a shrinkage across the industry. The last question, as 0:18:54.960 --> 0:18:58.320 everybody looks to the Federal Reserve to sort of pull 0:18:58.440 --> 0:19:02.760 us out of this, what's your message to people who 0:19:02.800 --> 0:19:09.320 maybe saw Chairman Powell yesterday say we're probably in recession now, Well, 0:19:09.400 --> 0:19:13.080 the messages, we knew we were going to be in 0:19:13.080 --> 0:19:16.679 a recession. We've it's a self mandated recession. It's a 0:19:16.680 --> 0:19:20.160 different kind of recession. Normally, recessions are things we want 0:19:20.160 --> 0:19:22.880 to we we avoid at all costs, or we avoid. 0:19:23.320 --> 0:19:26.520 This is a recession that we've induced. We needed to 0:19:26.600 --> 0:19:30.520 do this in order to fight this virus. Having said that, 0:19:31.040 --> 0:19:33.920 we were strong before we went into this, and we 0:19:33.960 --> 0:19:37.000 believe we've got a great chance to come out of 0:19:37.000 --> 0:19:41.240 this very strong. But everything, the messages, everything the Federal 0:19:41.280 --> 0:19:45.879 Reserve is doing, and in addition, all the fiscal responses 0:19:45.920 --> 0:19:49.200 that you're seeing are with the intention of as we 0:19:49.400 --> 0:19:52.359 as we defeat the virus and we climb out of 0:19:52.400 --> 0:19:55.960 this situation, we do it as strong as possible and 0:19:56.080 --> 0:20:01.000 increase the probability that we're going to be uh uh. 0:20:01.320 --> 0:20:03.600 We'll have a new normal as we come out of this. 0:20:03.680 --> 0:20:06.120 But we'll come out of this strong and we'll get 0:20:06.160 --> 0:20:09.760 stronger as we end this year and go into next year. 0:20:10.400 --> 0:20:12.720 Dallas Fed President Robert Caplan, thank you so much for 0:20:12.800 --> 0:20:16.040 joining us this morning. Stay safe down there in Texas. 0:20:19.000 --> 0:20:21.360 We would like to welcome the Atlanta Fed Bank President 0:20:21.440 --> 0:20:24.760 Robai Albostic to Bluebrick Television and Radio worldwide. Thank you 0:20:24.800 --> 0:20:28.639 for joining us this morning. Um. How expected to pass 0:20:28.760 --> 0:20:31.840 the fiscal Stimulus Bill, then you get lots of money 0:20:31.920 --> 0:20:35.600 from the treasury according to the bill. Uh, what is 0:20:35.600 --> 0:20:39.720 the plan the main street lending program that you talked about, 0:20:40.280 --> 0:20:42.000 what is that going to be? Well, first of all, 0:20:42.000 --> 0:20:44.360 good morning, Mike, it's good to be on with you, 0:20:44.480 --> 0:20:48.400 and good morning to everyone. Oh, just to provide some context, 0:20:48.560 --> 0:20:51.840 you know, coming out of this crisis or coming into 0:20:51.840 --> 0:20:54.760 the crisis. But we saw with a lot of financial 0:20:54.800 --> 0:20:58.480 mortgage really trying to break down in terms of their funding, 0:20:58.920 --> 0:21:03.320 and so we announced a number of facilities that we're 0:21:03.320 --> 0:21:06.720 going to be designed to help those markets function more smoothly. 0:21:07.280 --> 0:21:10.000 And a lot of the funding and the bill is 0:21:10.040 --> 0:21:13.240 really oriented towards providing the backstop, so that we can 0:21:13.280 --> 0:21:16.080 do that in an appropriate way that that meets with 0:21:16.119 --> 0:21:19.720 our authorities. The main street Lending program is another one 0:21:19.760 --> 0:21:23.080 of these UM that has been designed to really try 0:21:23.119 --> 0:21:26.440 to help small businesses is you know, many small businesses 0:21:26.480 --> 0:21:31.640 don't have an extended buffer to UH to weather weeks 0:21:31.720 --> 0:21:35.000 of not having revenues, and so they're under a lot 0:21:35.000 --> 0:21:38.400 of stress. And so the way the program is conceived 0:21:38.400 --> 0:21:41.680 conceptually is to provide them with the bridge that allows 0:21:41.760 --> 0:21:45.840 them to UH to really stay in business, keep their 0:21:45.880 --> 0:21:49.359 employees on board and UM and get us to the 0:21:49.400 --> 0:21:52.439 other side of the program UM, the other side of 0:21:52.440 --> 0:21:55.760 the crisis. This hasn't fully been worked out, and you know, 0:21:55.840 --> 0:21:58.480 I've been on calls pretty much continuously for the last 0:21:58.480 --> 0:22:01.560 two days trying to work through all the little details. 0:22:01.600 --> 0:22:03.480 There's a there's a lot. As you know, this is 0:22:03.840 --> 0:22:07.000 quite unprecedented for the FED, a reserved to be trying 0:22:07.000 --> 0:22:08.840 to do this. So we want to make sure we 0:22:08.880 --> 0:22:11.199 do this right in a way that doesn't lead to 0:22:11.680 --> 0:22:14.760 problems down the road, but also in a way that 0:22:14.760 --> 0:22:17.560 that gets the money out as quickly as possible. Well, 0:22:17.600 --> 0:22:19.879 how do you do that? Do people line up outside 0:22:19.920 --> 0:22:22.719 the Atlanta FED with loan applications or how's this going 0:22:22.760 --> 0:22:27.560 to work? Well, the end of the FED doesn't typically 0:22:27.600 --> 0:22:31.480 do direct lending like that. Uh, My expectation is that 0:22:31.600 --> 0:22:34.720 this will work through the bank institutions that already have 0:22:35.000 --> 0:22:37.800 relationships with many of the businesses that are going to 0:22:37.880 --> 0:22:41.520 be needing to support. So, you know, we're already working 0:22:41.520 --> 0:22:46.480 with small businesses with banks to to address some of 0:22:46.520 --> 0:22:50.400 the small business constraints. We're encouraging them to think about 0:22:50.640 --> 0:22:54.760 modifying some loan terms, differring requirements or principle and interest 0:22:54.840 --> 0:22:58.040