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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is your weekly

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Speaker 1: Washington policy Pulse, the Balance of Power podcast. I'm Joe Matthew.

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Speaker 1: Every Monday, Bloomberg Intelligence, senior policy analyst and friend of

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Speaker 1: the show, Nathan Dean shares his weekly call on upcoming

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Speaker 1: catalysts in the nation's capital. Listen for the most recent

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Speaker 1: and relevant policy research from our team at Bloomberg Intelligence.

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Speaker 1: Now with today's installment, here's Nathan Dean.

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Speaker 2: Good afternoon, everybody. My name is Nathan Dean. I'm a

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Speaker 2: senior policy analyst with Bloomberg Intelligence. We want to say

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Speaker 2: thank you for joining the Washington of the BI Washington

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Speaker 2: Policy Pulse, and I always just want to say thank

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Speaker 2: you to those of you who are listening via the

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Speaker 2: Balance of Power podcast. We always welcome your inclusion here.

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Speaker 2: This is going to be a short call this week,

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Speaker 2: one because you know, we are in a partial government shutdown,

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Speaker 2: and two because I was on vacation for the bulk

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Speaker 2: of last week. But first let's talk about the shutdown.

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Speaker 2: So obviously, we are in a partial shutdown at the moment.

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Speaker 2: A lot of DC workers aren't coming into the office today.

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Speaker 2: Traffic was actually fairly light, but where do we go

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Speaker 2: from here. Well, the Senate, as you may know, has

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Speaker 2: passed a bill that would fund five out of the

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Speaker 2: six remaining appropriation bills, to the last one being the DHS,

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Speaker 2: which would then get.

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Speaker 3: A two week continuing resolution.

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Speaker 2: Now this bill has been passed by the Senate, it

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Speaker 2: was passed for bipartisan they received over seventy votes.

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Speaker 3: Now gone to the House.

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Speaker 2: There's going to be a little bit of political hiccups here,

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Speaker 2: but I think ultimately the shutdown is going to end

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Speaker 2: this week, most likely tomorrow, if not Wednesday, this afternoon.

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Speaker 2: This is recording this Monday at ten three am Monday,

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Speaker 2: February second, But around four pm Eastern you're anticipated to

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Speaker 2: We're anticipated that the House Rules Committee is going to

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Speaker 2: look at this. That is going to be challenging for

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Speaker 2: the Republicans because, as you remember, this is a Senate

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Speaker 2: deal that was passed with negotiations with.

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Speaker 3: The White House.

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Speaker 2: House wasn't really involved here, and the House doesn't like

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Speaker 2: getting jammed up. So there are going to be a

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Speaker 2: House Republicans here saying, look, if Democrats are going to

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Speaker 2: be insisting on changes to this deal, then I want

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Speaker 2: to have changes to this deal. For example, there is

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Speaker 2: a bill out there that would require essentially everybody to

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Speaker 2: show identification or of their citizenship before voting. That it's

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Speaker 2: going to have to go through the House Rules Committee,

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Speaker 2: that's going to have to go through just the Republican caucus,

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Speaker 2: and Speaker Johnson essentially is going to have to try

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Speaker 2: and keep his party in order because any deviation from

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Speaker 2: that extends to shut down and actually extends this the

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Speaker 2: discord with this special election that occurred in Texas over

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Speaker 2: the weekend or yeah, over the weekend that essentially saw

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Speaker 2: a Democrat. Sorry, I'm getting things mixed up here. There

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Speaker 2: was a Senate at Saint Reese. Let me okay, I'm

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Speaker 2: just going to completely reset this with a special election

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Speaker 2: that occurred that is going to be seen sworn in

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Speaker 2: later today. The Republicans are going to have a one

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Speaker 2: person operating majority. If everybody shows up to the House

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Speaker 2: to vote. When you have one person, that is essentially

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Speaker 2: going to be extremely difficult for Speaker Johnson to keep

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Speaker 2: his party in line. And so going forward, you're going

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Speaker 2: to see a lot of bills, a lot of peaces

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Speaker 2: legislation like this require democratic votes. So that is where

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Speaker 2: the challenge of this is coming is that Speaker Johnson

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Speaker 2: has to keep his party aligned and if not, he's

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Speaker 2: going to have to get Democrats on board to come with. Now,

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Speaker 2: the Democratic perspective essentially is this that they are not

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Speaker 2: going to give the Republicans any inch or any ability

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Speaker 2: to essentially saying here, we're going to help you on this.

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Speaker 2: They're going to try and make the process as extremely

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Speaker 2: painful as possible. So I think the House Rules Committee

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Speaker 2: will actually work on it later today.

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Speaker 3: It eventually will pass, and.

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Speaker 2: Potentially there will be a vote tomorrow, and I think

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Speaker 2: that there will have to be it's going to be

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Speaker 2: a bipartisan vote where significant number of parties of members

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Speaker 2: of both parties are voting against this bill. But just

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Speaker 2: to remember, a lot of this is over ICE funding.

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Speaker 2: ICE funding was actually appropriated during the One Big Beautiful

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Speaker 2: Bill seventy five billion dollars through fiscal year twenty twenty nine.

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Speaker 2: And DHS funding not only does it incl ICE, but

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Speaker 2: also includes things like FEMA, Coastguard and the TSA. And

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Speaker 2: so when we're trying to predict how the future will

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Speaker 2: be in terms of cr you know, this is an

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Speaker 2: election year. So Congress has changed, changing from a governing

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Speaker 2: in Congress to a campaign in Congress, and when that

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Speaker 2: happens is you're going to have to take things into

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Speaker 2: account of, like, Okay, what is the TSA response going

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Speaker 2: to be? Well, Americans are shown they didn't like it

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Speaker 2: when their air travel was disrupted during the first shutdown,

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Speaker 2: So just again keep that in mind. But I think

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Speaker 2: the government shutdown is going to get resolved.

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Speaker 3: Now. I saw a question in the chat, and this

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Speaker 3: is where I was actually going to talk about.

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Speaker 2: The question was what is your view on the Worship's

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Speaker 2: confirmation process after Tillis's refusal?

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Speaker 3: Is the base case here that Trump pulls the Powell case.

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Speaker 2: Now, when it comes to Kevin Wealsh, obviously President Trump

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Speaker 2: decided to nominate him as the FED chair. I don't

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Speaker 2: have any opinions whatsoever on his monetary policy. I highly

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Speaker 2: recommend that you attend or contact Ira Jersey, our bi

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Speaker 2: Rates sorry, our BiH chief rate strategist. His dashboard is

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Speaker 2: BI Rates. He has a call that he does with

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Speaker 2: our Bloomberg Economics colleagues every Monday at eight thirty am.

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Speaker 2: One of the reason why this calls a little bit later,

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Speaker 2: they talked about Kevin Walsh's nomination I'm going to put

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Speaker 2: into our chat at the moment a link for those

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Speaker 2: of you who need it, highly recommend you go back,

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Speaker 2: and highly recommend you go back and I or even

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Speaker 2: put it into the chat perfect. So that's what you

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Speaker 2: should do when it comes to listening about what Kevin

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Speaker 2: Worsh's views on monetary policy. Now, when it comes to

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Speaker 2: his confirmation policy, it's this Senator Tom Tillis from North Carolina,

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Speaker 2: who is a Republican, sits on the Senate Banking Committee. Now,

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Speaker 2: the Senate Banking Committee is run thirteen to eleven, thirteen

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Speaker 2: Republicans to to eleven Democrats. Senator Tillis has said that

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Speaker 2: he's going to effectively block Worsh's nomination until the issue

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Speaker 2: with Jerome Poull and this DOJ investigation in his quote

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Speaker 2: unquote resolved, and he even said on Twitter last week

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Speaker 2: that he's doubly down on that. So he can effectively

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Speaker 2: block the nomination. There is a way to discharge the

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Speaker 2: nomination and to this is just real quickly for the chat.

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Speaker 2: This is for the webinar chat. So if you're listening

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Speaker 2: on Zoom, just go to the webinar chat and should

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Speaker 2: be in there. Otherwise just contact talk to me or

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Speaker 2: Ira afterwards at Indian Tanant Bloomberg dot net and we'll

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Speaker 2: get a copy.

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Speaker 3: Of that to you.

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Speaker 2: So Senator Tillis can effectively block this nomination from going forward. Now,

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Speaker 2: the way you get around this is you discharge the nomination.

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Speaker 2: You bypass the committee that currently under the Senate rules

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Speaker 2: takes sixty votes. You're not going to get sixty votes.

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Speaker 2: You would need Democrats to go on board with that. Now,

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Speaker 2: to change the rules of the Senate, you would need

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Speaker 2: fifty votes. So you know, theoretically you would have to

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Speaker 2: change You have to try the discharge process, have it fail,

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Speaker 2: then you have to change the actual Senate rules process.

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Speaker 3: Get that fifty votes.

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Speaker 2: And when Senator Tillis has already said he's a no,

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Speaker 2: Senator Murkowski has said she's a no, you can see

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Speaker 2: where I'm I'm going with this. Most likely things, you know,

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Speaker 2: Kevin Worrish's nomination is going to be blocked. Now, a

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Speaker 2: couple of things here. One is what's the definition of

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Speaker 2: quote unquote resolved? You know, that's something to keep in mind.

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Speaker 2: Also keep in mind is that, you know, while I

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Speaker 2: could see President Trump, I don't want to get into

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Speaker 2: whether or not President Trump will say pull the Powell case,

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Speaker 2: because then you're talking about the independence of the DOJ,

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Speaker 2: and that's not something really what I focus on.

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Speaker 3: I tell you to contact my colleague Elliott Stein on that.

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Speaker 2: But what I'll say is is that I wouldn't be

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Speaker 2: surprised if you saw something come out over the next

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Speaker 2: few months or maybe even a few weeks that essentially

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Speaker 2: says that Powell's case is sort of just disappearing. But again,

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Speaker 2: I'm just talking high level here, because you know, this

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Speaker 2: is an effective block. And Trump made a statement on

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Speaker 2: Air Force One over the weekend. He said, well, maybe

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Speaker 2: we'll just you know, we'll wait around till Senator Tillis

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Speaker 2: is no longer here. That's January of twenty twenty seven,

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Speaker 2: you know, because even though he's not running for reelection,

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Speaker 2: he's still a member of Congress. Hiltonvill January twenty twenty seven.

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Speaker 2: That's a long time from now. So I do into

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Speaker 2: say debates something to be resolved, and I don't anticipate

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Speaker 2: Senator Tillis changing his mind.

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Speaker 3: So great follow up question here.

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Speaker 2: Once Tillis's becomes comfortable with the Powell Cook process, how

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Speaker 2: long when you estimated it takes to get through the

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Speaker 2: confirmation process quickly. The Senate Banking Committee was led by

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Speaker 2: Republican Senator Tim Scott of South Carolina. He can put

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Speaker 2: something together fairly quickly. So if the Senate Banking Committee

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Speaker 2: decides that they want to have a confirmation hearing, and look,

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Speaker 2: they may have a confirmation hearing before Senator Tillis removes

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Speaker 2: his block because I I think, you know, i'd have to.

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Speaker 2: I may be wrong here, Senate watchers may get me

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Speaker 2: on this, but essentially I think what happens here is

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Speaker 2: is that I'm going to go with the fact that

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Speaker 2: I think Tillis is blocking the vote from the floor.

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Speaker 2: I don't think he can block the Senate commit Banking

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Speaker 2: Committee confirmation hearing. But you know, Senator Scott can have

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Speaker 2: a confirmation hearing. They can go through the ram at.

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Speaker 2: You know, Tillis said, look, Kevin Walsh's is a good pick.

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Speaker 2: You know I'm paraphrasing. He said, it's good pick. So

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Speaker 2: you know you are going to see questions in this

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Speaker 2: hearing from the Democrats about independence of the Federal Reserve.

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Speaker 2: But you're not going to see Republicans really.

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Speaker 3: Bash Kevin worsh on this.

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Speaker 2: If it were to ever come up for a vote,

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Speaker 2: you know, he most likely would get the votes.

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Speaker 3: The issue is not there.

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Speaker 2: So I think the confirmation hearing happens fairly quick, the

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Speaker 2: vote can happen fairly quick after that. So all being

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Speaker 2: said is that Kevin Worsh can happen really quick. But

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Speaker 2: just remember it can't happen until after Jerome Powell's term ends,

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Speaker 2: so you can get everything set up ready to go,

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Speaker 2: but you know, obviously it has to happen when Poulall

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Speaker 2: not's it. And if Worsh isn't confirmed, you know, Cherman

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Speaker 2: Paul sticks around. Just remember is that, you know, and

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Speaker 2: you should really talk to ir about this because he's

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Speaker 2: really our FOMC watcher here. But the FOMC is separate

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Speaker 2: than the Federal Reserve Board. The FOMC has its own

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Speaker 2: process of actually developing who is the chairman of the

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Speaker 2: FOMC versus the chairman of the Federal Reserve. So again,

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Speaker 2: you know, it's a different process here. So even though

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Speaker 2: Kevin Walsh is being nominated for the Federal Reserve Governors

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Speaker 2: as the chair, it's a different process than the FOMC.

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Speaker 2: Now I'm not saying Kevin worsh isn't going to be

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Speaker 2: the chair of the FOMC. I'm just saying it's a

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Speaker 2: different process. So but there's a lot of questions here,

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Speaker 2: and so what I would suggest is that if you

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Speaker 2: want a deeper dive, contact me, contact Iirah, let's put

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Speaker 2: together a call.

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Speaker 3: We do this all the time for our clients.

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Speaker 2: So just reach out, we can put together a call

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Speaker 2: and we can actually explain this to you in greater detail.

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Speaker 3: So a couple other things happening today.

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Speaker 2: At one o'clockish, there is going to be a meeting

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Speaker 2: at the White House, not with President Trump, with White

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Speaker 2: House staff on this idea of cryptocurrency and stable coin

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Speaker 2: yield debate. There's going to be representatives from the banks here,

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Speaker 2: There's going to be representatives from the cryptocurrency industry here

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Speaker 2: as well. Last week we saw the Senate ag pass

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Speaker 2: its markup of their version of this Clarity Act. Fairly,

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Speaker 2: I would argue that it's not that controversial. The Democrats

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Speaker 2: obviously were not happy because this was a Republican bill,

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Speaker 2: this wasn't a bipartisan bill. There's still negotiations that are

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Speaker 2: going to be taking place. But again I've said this

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Speaker 2: from the beginning that the Senate ad Committee is not

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Speaker 2: really where the hiccups for this bill is. It's on

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Speaker 2: the Senate banking side. And that is what this crypto

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Speaker 2: meeting is going to take place later today. So if

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Speaker 2: we see statements coming out tonight this afternoon saying that

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Speaker 2: from the White House saying look there is some solution here,

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Speaker 2: or they're building a solution or so forth, in my mind,

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Speaker 2: that actually votes well for.

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Speaker 3: This bill's passage.

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Speaker 2: Now, the solution going into this is that is, remember,

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Speaker 2: the Genius Act prevents yield from being paid by both

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Speaker 2: bank issuers and non bank issuers, but non bank issuers

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Speaker 2: can work with third party platforms like.

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Speaker 3: Coinbase to offer rewards. That's different.

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Speaker 2: And so the idea going into this meeting was is

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Speaker 2: that rather than paying rewards off of balances, you pay

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Speaker 2: rewards off of activity, like a airline credit card reward program. Again,

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Speaker 2: see what happens. But I'm still sticking with my sixty

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Speaker 2: percent chance that a bill passes in the first half

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Speaker 2: of this year because ultimately, yes, there are some folks

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Speaker 2: in the crypto world that say no bill is better

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Speaker 2: than a bad bill, but no bill a can be

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Speaker 2: over to any type of regulatory framework that the FCC

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Speaker 2: and CFDC what comes with can be overturned if a

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Speaker 2: Democratic sec or CFTC comes in charge in twenty twenty

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Speaker 2: eight and b this is your best shot of getting

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Speaker 2: a bill because with Polymarket and Kalshi giving an eighty

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Speaker 2: five percent chance of the House of Representatives turning into

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Speaker 2: the Democrats next year, you're not going to have as

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Speaker 2: much ability to get a bill through the House Financial

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Speaker 2: Services Committee of Maxine Waters as your chairwoman.

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Speaker 3: So again that's why I'm at sixty percent right now.

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Speaker 2: But again I said that i'd give it to around

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Speaker 2: Valentine's Day and see what the momentum is coming out

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Speaker 2: and before we change those odds. And then finally, I

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Speaker 2: want to just give you a heads up on two

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Speaker 2: hearings later this week. On February fourth, Treasury Secretary Scott

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Speaker 2: Bessant is going to be testifying to the House Financial

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Speaker 2: Services Committee, and then he'll be testifying to the Senate

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Speaker 2: Banking Committee on February fifth. The February fourth hearing is

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Speaker 2: the one that you want to watch because when all

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Speaker 2: fifty five members want to get there, you know five

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Speaker 2: minutes with the Treasury Secretary, there's only so many questions

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Speaker 2: you can ask, so they ask a much more broad

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Speaker 2: set of questions than they do over the Senate Banking Committee.

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Speaker 2: So the House one is the one you want to watch.

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Speaker 2: It's so fortunate for us it's the first one. Now,

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Speaker 2: the Treasurer Secretary, this is a hearing about the Financial

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Speaker 2: Stability Oversight Council and the safety and soundness of the

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Speaker 2: US banking system. Normally, the Treasury Secretaries don't get all

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Speaker 2: into the weeds because look, we're talking about FED rules

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Speaker 2: or SEC rules or CFTC rules. But this is a

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Speaker 2: little bit different because Treasury Secretary, you know, Scott Besson,

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Speaker 2: has shown that he wants to have a little bit

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Speaker 2: more hands on approach here when it comes to bank deregulations.

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Speaker 2: So I'm gonna be looking to see if he can

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Speaker 2: give us any types of timing in terms of when

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Speaker 2: the FED and the OECC is going to be working

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Speaker 2: on things like you know, the Buzle three end game

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Speaker 2: and the Jesus Charge. Lots of questions about regional bank relief.

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Speaker 2: Is that going to come after the large bank relief?

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Speaker 3: You know?

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Speaker 2: Right now, our our view is is that the regional

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Speaker 2: bank relief is going to be in the second half

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Speaker 2: of this year as a proposal, not finalization, so I'm

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Speaker 2: hoping the Treasure's Secretary can actually give us some more

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Speaker 2: insight on that.

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Speaker 3: You may also hear some more stuff.

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Speaker 2: Related to d banking, just because you know, the House

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Speaker 2: Republicans and the House Financial Services Committee love to talk

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Speaker 2: about operations choke point two point.

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Speaker 3: Zero, et cetera.

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Speaker 2: You're gonna hear some talk about that, but you know,

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Speaker 2: we'll see what happens. I'm gonna be watching the hearing,

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Speaker 2: and then if you have any questions post hearing, or

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Speaker 2: if you just needed a synopsis, just please reach out

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Speaker 2: and let me know.

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Speaker 3: With that, I'm going to say thank you very much.

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Speaker 2: I'm just going to do one more quick check to

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Speaker 2: make sure that I answered everybody's questions.

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Speaker 3: It looks like I have have a wonderful week.

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Speaker 2: I hope you all are, you know, staying warm, thawing out,

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Speaker 2: trying to get this no crete that's here in DC

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Speaker 2: off the roads, and if we can ever be of

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Speaker 2: the service, please don't hesitate to reach out.

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Speaker 1: Thanks our thanks to Nathan Dean, Bloomberg Intelligence Senior policy

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Speaker 1: analyst bringing you the latest installment of his weekly Washington

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Speaker 1: Policy Pulse. For more from Bi or to join this

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Speaker 1: call live each week, you can email Nathan at ndan

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Speaker 1: at bloomberg dot net. That's n D e A n

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Speaker 1: at Bloomberg dot net and come back to the podcast

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Speaker 1: later today for the latest edition of Balance of Power.