WEBVTT - ETFs Provided Key Liquidity Amid Turmoil: BlackRock's Cohen 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penl Podcast. I'm Paul swing you. 0:00:05.360 --> 0:00:07.680 Along with my co host Lisa brahma Witz. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.320 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.240 at Bloomberg dot com. You know, as we think about 0:00:21.239 --> 0:00:23.840 the volatility and we experienced the volatility in the markets, 0:00:23.880 --> 0:00:28.240 one new area of investing that wasn't as developed back 0:00:28.280 --> 0:00:30.720 in the financial crisis is E t F to get 0:00:30.720 --> 0:00:33.320 a sense of how that's sector of the market is 0:00:33.360 --> 0:00:36.440 performing or really fortunate to have Samura Cohen, head of 0:00:36.520 --> 0:00:39.400 I Shares Global Markets at black Rock, joining us on 0:00:39.440 --> 0:00:41.440 the phone. So Sama, give us a sense of how 0:00:41.520 --> 0:00:45.080 the world of E t F trading is behaving given 0:00:45.120 --> 0:00:48.959 these extraordinary market uh moves where we've been seeing. Hi, 0:00:49.040 --> 0:00:51.239 thanks very much for having me. So let me give 0:00:51.240 --> 0:00:55.040 you two stats in to your point. E t F 0:00:55.080 --> 0:00:57.520 trading has grown a lot over the last ten years, 0:00:57.880 --> 0:01:01.640 and even E t F trade was a significant portion 0:01:01.760 --> 0:01:05.880 of US equity treating, averaging at about twenty seven percent 0:01:06.480 --> 0:01:09.800 of a US equity volume on a daily basis. So 0:01:09.840 --> 0:01:11.600 what we have seen, and we've seen this in other 0:01:11.680 --> 0:01:15.400 high velocity markets before, although this one is really extraordinary, 0:01:15.560 --> 0:01:19.480 is that e t F usage is really positively correlated 0:01:19.480 --> 0:01:23.240 with volatility. When the VIX spikes, E t F usage spikes, 0:01:23.480 --> 0:01:26.480 and also when liquidity goes down, E t F usage 0:01:26.520 --> 0:01:29.040 goes up. So what we've seen over the past two 0:01:29.040 --> 0:01:32.400 weeks is e t fs. Remember that seven percent average 0:01:32.400 --> 0:01:38.520 in really hovering at thirty eight of volume of of 0:01:38.640 --> 0:01:41.600 US equity volumes on a daily basis. And by the way, 0:01:41.640 --> 0:01:44.320 the story is being repeated around the world with volumes 0:01:44.319 --> 0:01:46.880 being set in European e t s as well. A 0:01:46.880 --> 0:01:50.520 lot of people, including Eric Buns of Bloomberg Intelligence, has 0:01:50.560 --> 0:01:52.440 been talking about how e t f s have actually 0:01:52.480 --> 0:01:56.520 provided a host of liquidity at a very volatile time 0:01:56.600 --> 0:02:00.120 and when people are trying to discover the right levels. 0:02:00.960 --> 0:02:03.160 I think that that is born out with a lot 0:02:03.200 --> 0:02:05.880 of e t f s. There is a question, however, 0:02:06.080 --> 0:02:08.240 about the bond e t f s and some of 0:02:08.240 --> 0:02:11.640 the dislocations that we have seen, particularly uh with the 0:02:11.680 --> 0:02:16.440 shares trading significantly below, where the assets that underlie the 0:02:16.639 --> 0:02:19.560 t fs are valued at and I'm just wondering if 0:02:19.560 --> 0:02:21.919 you could speak to some of the dislocations and and 0:02:22.000 --> 0:02:24.480 sort of, uh, speak to some people who are saying 0:02:24.520 --> 0:02:28.400 this could just create a spiral, a downward spiral leading 0:02:28.440 --> 0:02:32.040 to for selling and further declines. Yeah. Absolutely, But let 0:02:32.040 --> 0:02:34.079 me get to your first point, to which is you 0:02:34.120 --> 0:02:36.480 know why our investors looking to e t s in 0:02:36.560 --> 0:02:39.240 times like this. I think you know, as we've been 0:02:39.280 --> 0:02:42.200 hearing in every market and listening to every news reports, 0:02:42.240 --> 0:02:45.240 these are times without a lot of transparency and without 0:02:45.240 --> 0:02:47.560 a lot of certainty. And what e t f s 0:02:47.600 --> 0:02:51.440 offer investors is transparency in terms of what's in the 0:02:51.480 --> 0:02:54.560 fund and where you can transact it, and certainty of 0:02:54.639 --> 0:02:57.280 market access, and both of those things are valued highly, 0:02:57.320 --> 0:02:59.079 and that's what we're seeing in the velocity of e 0:02:59.200 --> 0:03:02.480 t F trade. So to get to your answer, to 0:03:02.560 --> 0:03:04.480 get to your question, let me give you a specific 0:03:04.600 --> 0:03:07.240 example that I think is instructive and indicative of what 0:03:07.280 --> 0:03:09.280 we've seen in e t s fixed income e t 0:03:09.520 --> 0:03:14.320 s across several asset classes, and that's taking our high 0:03:14.400 --> 0:03:17.560 yield e t S l q D, which, as you noted, 0:03:17.600 --> 0:03:21.480 traded at an unusually large discount to its n A 0:03:21.560 --> 0:03:25.120 V on Thursday, March twelve. That discount was about five percent. 0:03:25.600 --> 0:03:28.600 It's since normalized a bit too, about half of that 0:03:28.680 --> 0:03:32.839 to two percent. So on that day, l q D 0:03:32.880 --> 0:03:37.480 traded over eighty nine thousand times on exchange. If I 0:03:37.520 --> 0:03:42.080 look at its top holdings, which are bonds like Verizon 0:03:42.280 --> 0:03:47.880 cvs g S, those bonds traded on average thirty times each, 0:03:48.200 --> 0:03:50.880 between nine at the lowest and like fifty four at 0:03:50.880 --> 0:03:54.360 the highest. So what you're seeing is that trading is 0:03:54.360 --> 0:03:58.560 occurring in and and therefore price discovery is occurring in 0:03:58.760 --> 0:04:03.160 l q D much less so the underlying markets. And 0:04:03.200 --> 0:04:05.400 so therefore that five percent and if you dig a 0:04:05.400 --> 0:04:08.040 little bit more, what you will see is that five 0:04:08.120 --> 0:04:13.160 percent um UH lower price, much more closely tracked the 0:04:13.240 --> 0:04:17.720 more frequently treated um UH bonds that were in l 0:04:17.800 --> 0:04:21.000 q d's portfolio. So in these types of scenarios, what 0:04:21.040 --> 0:04:23.440 we say is l q d s price and that 0:04:23.520 --> 0:04:27.239 gap is transmitting a lot of real time information about 0:04:27.279 --> 0:04:30.160 bond market conditions which I know you've been reporting on, 0:04:30.480 --> 0:04:32.800 which are that bonds aren't trading. It is hard to 0:04:32.800 --> 0:04:35.640 find the other side of you know, uh, some of 0:04:35.680 --> 0:04:38.360 these top holdings, let alone the portfolio of bonds and 0:04:38.520 --> 0:04:42.920 l q D, and therefore for immediate liquidity and price discovery, 0:04:42.960 --> 0:04:45.680 investors are turning to l q D. So in these 0:04:45.680 --> 0:04:49.839 scenarios that UM, that information tells you the price of 0:04:49.960 --> 0:04:53.960 liquidity in this you know, really extraordinary and and at 0:04:53.960 --> 0:04:57.640 this time dislocated bond market a summer. Just give us 0:04:57.640 --> 0:05:00.320 a sense of fund flows in and out of EAT. Yes, 0:05:00.480 --> 0:05:03.080 you know, are there any notable moves that you're seeing 0:05:03.160 --> 0:05:06.400 in your various products? So look, I think notably we 0:05:06.440 --> 0:05:09.360 are seeing outflows in fixed income. But to put that 0:05:09.440 --> 0:05:12.800 in context, the outflows are a fraction of that on 0:05:13.000 --> 0:05:17.240 exchange trading, which again underscores the point as to UM 0:05:17.400 --> 0:05:20.560 conditions in the underlying bond market. So if we take 0:05:20.760 --> 0:05:24.120 h y G, which had a record volume week of 0:05:24.200 --> 0:05:27.880 about forty billion two weeks ago, right after the oil 0:05:27.920 --> 0:05:32.080 headline news UM in that week, h y G head 0:05:32.080 --> 0:05:34.680 outflows that were four hundred millions, So that was a 0:05:34.760 --> 0:05:39.080 ten to one ratio of volume trading in the secondary 0:05:39.160 --> 0:05:43.719 markets where no bond sword trading m versus actual flows 0:05:43.839 --> 0:05:46.720 out of the bond. So again importantly, the risk transfer 0:05:46.760 --> 0:05:50.480 and the velocity that we're seeing in in UM ETFs 0:05:50.600 --> 0:05:53.640 is really happening much more on exchange than in the 0:05:53.720 --> 0:05:56.479 underlying bond market, which is why I would very much 0:05:56.520 --> 0:05:59.760 take the other side of that statement, um, in terms 0:05:59.760 --> 0:06:04.760 of e t s um uh causing any sort of spiral. 0:06:04.760 --> 0:06:07.600 I don't remember exactly what you said. In this market, 0:06:07.600 --> 0:06:11.360 ETFs are providing a release valve to exchange risks without 0:06:11.400 --> 0:06:15.320 tapping the underlying bond market. Samara, just I want to 0:06:15.400 --> 0:06:17.720 take a step back to wrap this all up. You 0:06:17.760 --> 0:06:21.479 talk about the incredible volatility and the incredible volumes and 0:06:21.520 --> 0:06:26.040 the price discovery mechanism that has become really the E 0:06:26.200 --> 0:06:29.119 t f S hallmark, and I'm wondering if you get 0:06:29.160 --> 0:06:32.640 a sense of who is behind a lot of this activity, 0:06:32.680 --> 0:06:35.039 I mean, does this really highlight how e t f 0:06:35.080 --> 0:06:37.800 s have become an institutional tool or are we seeing 0:06:37.880 --> 0:06:40.839 mom and pop investors turning to these in order to 0:06:40.839 --> 0:06:45.520 withdraw money or perhaps park money in cash. Like ETFs, 0:06:46.680 --> 0:06:49.400 et s are used broadly by lots of different types 0:06:49.440 --> 0:06:52.760 of investors. In this environment and this velocity of trade. 0:06:52.800 --> 0:06:55.480 Et f s are being used by thanks broker dealers 0:06:55.480 --> 0:07:00.000 as inventory management tools. UM, They're not being used uh 0:07:00.080 --> 0:07:03.880 in these volatle markets by by individual investors, but they 0:07:03.880 --> 0:07:08.080 are a really important tool to bond market participants across 0:07:08.120 --> 0:07:11.600 the board. Samerica and thank you so much for being 0:07:11.640 --> 0:07:14.360 with us, who really appreciated Samerica and head of I 0:07:14.520 --> 0:07:17.960 Shares Global Markets at black Rock, And it's really been 0:07:18.000 --> 0:07:20.160 important Paul to look at the E t F complex 0:07:20.200 --> 0:07:22.680 because of exactly what Samara was saying, which is the 0:07:22.680 --> 0:07:26.240 incredible volumes that we have seen in the incredible UH 0:07:26.520 --> 0:07:30.160 price action and and some of the questions around bond ETFs. 0:07:30.360 --> 0:07:33.160 Samara kind of highlighting the other side of people who 0:07:33.200 --> 0:07:35.920 are arguing about a death spiral, like Peter Sheer, I 0:07:36.000 --> 0:07:39.160 know of Accadabase securities, saying, you know, honestly, this is 0:07:39.200 --> 0:07:42.200 just a tool for price discovery and has served that function, 0:07:42.280 --> 0:07:45.040 and certainly we haven't necessarily seen, you know, the real 0:07:45.080 --> 0:07:48.520 sort of dire scenarios come to pass as a lot 0:07:48.600 --> 0:07:53.960 of people have postulated in the past. Let's bring in 0:07:54.000 --> 0:07:56.320 a mart van Ark. He's a chief economist at the 0:07:56.320 --> 0:08:00.400 Conference board UH, a regular guest with Lisa and mice Off. Bart, 0:08:00.400 --> 0:08:03.320 thanks so much for joining us. All right, let's try 0:08:03.360 --> 0:08:06.800 to reset a little bit here. Bart. We we know 0:08:07.440 --> 0:08:11.600 that this is uncharted territory. Give us your sense of 0:08:11.640 --> 0:08:15.400 what you think the economic impact will be from this 0:08:15.480 --> 0:08:20.360 virus for the remainder of Well, it's obviously daunting at 0:08:20.360 --> 0:08:23.160 a moment to put out any forecast because the situation 0:08:23.240 --> 0:08:26.840 is almost changing every moment. But you know today that 0:08:27.000 --> 0:08:30.320 you released our leading economic index for February. This was 0:08:30.400 --> 0:08:34.040 before uh, this whole episode started to involve involved in 0:08:34.040 --> 0:08:38.079 the Western world, um, and that was still up at 0:08:38.120 --> 0:08:40.640 that time. And actually that gives one little piece of evidence, 0:08:40.679 --> 0:08:42.640 and that they said, at least at the minimum, we're 0:08:42.840 --> 0:08:46.760 entering this very difficult period in a relatively good shape. 0:08:46.760 --> 0:08:49.240 But that's particularly important when it comes to the labor 0:08:49.240 --> 0:08:51.400 markets and when it comes to consumption. Simply the fact 0:08:51.400 --> 0:08:54.839 that unemployment was low, that household balance sheets were pretty strong, 0:08:54.920 --> 0:08:57.880 and therefore consumption strong helps to cushing the effects possibly. 0:08:57.920 --> 0:09:01.280 But obviously that index is all news now because we 0:09:01.520 --> 0:09:06.199 have to look forward. Actually just mentioned unemployment claims are 0:09:07.200 --> 0:09:10.280 up in a in a very worrying way. That really 0:09:10.320 --> 0:09:13.480 concerns us a lot. That's the first thing to look at, 0:09:13.520 --> 0:09:15.800 whether the labor market is going to move. We had 0:09:15.800 --> 0:09:19.440 a hope that companies would hold on to the workers 0:09:19.880 --> 0:09:21.920 for for the time being, it might very well be 0:09:21.960 --> 0:09:25.040 that these unemployment claims are primarily small and medium enterprises. 0:09:25.040 --> 0:09:27.720 But if there's one thing necessary, it is for government, 0:09:28.400 --> 0:09:31.400 federal and state, as well as businesses to think of 0:09:31.480 --> 0:09:34.240 any tool an instrument to keep people on the payroll, 0:09:34.320 --> 0:09:37.600 because that would really turns out. Consumer confidence is the 0:09:37.640 --> 0:09:39.920 next thing that will fall if the labor market is 0:09:39.920 --> 0:09:43.040 going to weaken um and that would really put us 0:09:43.120 --> 0:09:46.120 into a very weak territory for the next quarter, next 0:09:46.160 --> 0:09:49.280 quarter or two probably part Anecdotally, we are hearing about 0:09:49.360 --> 0:09:53.240 major airlines for lowing staff without pay. We're hearing about 0:09:53.440 --> 0:09:58.480 major restaurant companies also cutting back staff. To your point 0:09:58.640 --> 0:10:01.200 that you're wondering whether people would hold on the staff, 0:10:01.240 --> 0:10:02.880 and a lot of people are arguing ahead of this 0:10:03.360 --> 0:10:06.000 that people would want to hold onto the workers because 0:10:06.000 --> 0:10:07.600 they would think that it would be so much harder 0:10:07.800 --> 0:10:11.560 to hire them back afterwards. Are you changing that narrative? 0:10:11.559 --> 0:10:14.880 Do you think that that narrative is now incorrect, that 0:10:14.920 --> 0:10:17.679 there is sort of a pressure just to stay in 0:10:17.800 --> 0:10:20.800 business cut all costs because revenues have gone to zero 0:10:21.160 --> 0:10:24.679 in a number of industries. Yeah, we're worried about that. Again, 0:10:24.679 --> 0:10:27.040 these unemployment claims. You really have to kind of unpack 0:10:27.120 --> 0:10:29.160 them a little bit to see where is this happening, 0:10:29.200 --> 0:10:31.840 which states is happening because states have somewhat different policies 0:10:31.840 --> 0:10:35.240 when it comes to finding these unemployment claims. Sometimes you 0:10:35.320 --> 0:10:38.120 have to go in person to to to to an 0:10:38.160 --> 0:10:40.800 employment office to claim them. Sometimes you can do it online. 0:10:40.840 --> 0:10:42.679 So you've got to look at these kinds of things. 0:10:42.720 --> 0:10:46.640 But I think it's absolutely critical to see where is 0:10:46.679 --> 0:10:50.240 this happening. And there's a real difference between furloughs and 0:10:50.320 --> 0:10:53.800 pay cuts. First letting people go because you know, we're 0:10:53.800 --> 0:10:56.480 in the middle of this change towards the new normal. 0:10:56.520 --> 0:10:58.400 We're not in a new normal yet, we're kind of 0:10:58.440 --> 0:11:00.760 in a sort of panic mode. And to actually let 0:11:00.800 --> 0:11:03.080 people go in that situation and then may bee in, 0:11:03.360 --> 0:11:04.920 you know, a couple of weeks time and things are 0:11:04.920 --> 0:11:07.120 beginning to normalize. Won't be good, but at least beginning 0:11:07.120 --> 0:11:09.200 to normalize. And you suddenly see you let staff go 0:11:09.720 --> 0:11:11.640 that you may not be able to get easily back. 0:11:11.679 --> 0:11:14.400 So finding ways to keep people on your pay roll, 0:11:14.520 --> 0:11:16.480 even if you have to pay a price or as 0:11:16.520 --> 0:11:18.920 a cost, or even if the workers themselves have to 0:11:19.000 --> 0:11:21.280 forgo some of the cuts. I think it's a very 0:11:21.280 --> 0:11:23.880 different way than just letting people go. So holding onto 0:11:23.920 --> 0:11:25.520 your people, I think is the key thing that we're 0:11:25.520 --> 0:11:28.720 looking at. So Bart, I mean, I think the early 0:11:29.040 --> 0:11:33.680 stages of this crisis, i'mthing in just several weeks ago, Uh, 0:11:33.960 --> 0:11:37.640 many accountoms were suggesting a V shaped economic cycle here 0:11:37.679 --> 0:11:40.640 where we're gonna have a sharp downturn in the second quarter. Uh, 0:11:40.840 --> 0:11:42.480 but then pick right back up in the third and 0:11:42.600 --> 0:11:46.360 fourth quarter. Um, do you have any sense or any 0:11:46.400 --> 0:11:48.640 confidence in that or or is it just two fluid 0:11:48.720 --> 0:11:51.680 right now? Yeah, that's a really important point. I mean, 0:11:51.720 --> 0:11:54.360 instead of just looking at the numbers, whether the context 0:11:54.480 --> 0:11:56.320 is going to be two percent or five percent or 0:11:56.320 --> 0:11:59.080 ten percent, it's much more important to look at that 0:11:59.360 --> 0:12:02.320 shape of the curve. So yeah, there quite a few 0:12:02.320 --> 0:12:05.960 forecasts out there that show very deep contraction happening now, 0:12:06.000 --> 0:12:09.559 but then expect the quick rebounds uh later on. That's 0:12:09.559 --> 0:12:12.079 a V shaped curve. I think that one really is 0:12:12.160 --> 0:12:14.440 unlikely for for a whole bunch of reasons. One of 0:12:14.480 --> 0:12:17.680 them very importantly is that the first hit is really 0:12:17.720 --> 0:12:20.000 on a lot of services sectors. So you know, if 0:12:20.000 --> 0:12:21.640 you don't take your meal now, you're not going to 0:12:21.760 --> 0:12:23.880 take two meals next month, if you see what I mean. 0:12:23.920 --> 0:12:25.840 And that's true for many of these issues. So I 0:12:25.880 --> 0:12:29.520 think V shape is unlikely. The U shape as we 0:12:29.600 --> 0:12:32.280 call it, which means that you know, we're spreading this, 0:12:32.520 --> 0:12:34.280 This is going to be spread out over time, to me, 0:12:34.360 --> 0:12:37.880 seems more likely. Let's assumed that the attempt to flatten 0:12:37.960 --> 0:12:40.480 the curve of new cases to avoid the peak, but 0:12:40.640 --> 0:12:43.520 flattened the curve of new cases over over two quarters 0:12:43.600 --> 0:12:46.600 or pass even more. That's a good thing because it 0:12:46.640 --> 0:12:49.679 really reduces the health challenges that we're having. But from 0:12:49.679 --> 0:12:52.040 an economic point of view, we're also spreading the pain 0:12:52.120 --> 0:12:54.600 over time. That's why I think, you know, we might 0:12:54.720 --> 0:12:57.640 at the minimum see two quarters of contraction. Maybe not, 0:12:57.760 --> 0:13:00.040 may not be as deep as some people think, but 0:13:00.080 --> 0:13:02.240 it will be better for quite a while. My biggest 0:13:02.240 --> 0:13:04.320 worry is what we call an L shape, and an 0:13:04.440 --> 0:13:06.320 L shape is that you know, this goes on for 0:13:06.320 --> 0:13:08.439 a much longer time. You know, maybe it gets a 0:13:08.440 --> 0:13:10.400 little bit less over the summer, who knows, but then 0:13:10.600 --> 0:13:12.559 we're back into this by the end of the year, 0:13:13.040 --> 0:13:15.560 and then it could actually permanently lower the level of 0:13:15.600 --> 0:13:18.920 economic activity. It's in what was already a fairly slow 0:13:18.960 --> 0:13:21.120 economy to begin with, and that would of course be 0:13:21.440 --> 0:13:23.600 a real new normal that could be better for quite 0:13:23.600 --> 0:13:25.679 a while. Very hard to say, but I think for 0:13:25.760 --> 0:13:28.280 US economists to really think that through and how businesses 0:13:28.280 --> 0:13:30.640 to understand what it means for the long term planning. 0:13:30.640 --> 0:13:33.120 We have the word belief that's really important. Now we're 0:13:33.240 --> 0:13:36.600 speaking with Bart van Are, chief economist at the Conference Board, 0:13:37.040 --> 0:13:39.040 and at Bart, I want to pick up on what 0:13:39.080 --> 0:13:42.520 you said, the idea of an L shaped non recovery, 0:13:42.559 --> 0:13:46.480 that this could just permanently lower the overall growth rate 0:13:46.720 --> 0:13:50.679 for I mean permanent whatever that means, I guess going forward. 0:13:51.360 --> 0:13:53.760 I'm curious what that means in terms of are you 0:13:53.840 --> 0:13:57.200 forecasting an increasing likelihood of this sort of depression like 0:13:57.320 --> 0:14:01.120 scenario or is this just you know, grinding ahead at 0:14:01.120 --> 0:14:05.640 an even slower pace than we already were. Look, it's 0:14:05.679 --> 0:14:07.920 tempting at this point in time to think about worst 0:14:07.920 --> 0:14:11.280 case scenarios and and of course companies have to think 0:14:11.320 --> 0:14:12.800 about this now. You've got you have to be in 0:14:12.800 --> 0:14:16.200 this scenario mode now and plan for those. So, yeah, 0:14:16.240 --> 0:14:18.200 a worst case scenario like that that this could be 0:14:18.200 --> 0:14:21.120 with us for three years and could permanently depress the economy, 0:14:21.160 --> 0:14:24.240 whether it's whether it's continuous contraction or really slow growth. 0:14:24.280 --> 0:14:26.600 I don't know. I think that it is tempting to do, 0:14:26.720 --> 0:14:28.000 and I think you have to do some of this, 0:14:28.080 --> 0:14:30.920 But I think it's much more likely that once after 0:14:31.000 --> 0:14:32.800 two or three weeks, we're going to set in this 0:14:32.880 --> 0:14:35.800 sort of new normal, that we have to begin to 0:14:35.840 --> 0:14:38.440 think how we're going to do business in the in 0:14:38.800 --> 0:14:41.120 the in the next few months in this kind of environment. 0:14:41.200 --> 0:14:44.360 You know, manufacturing firms who are now working A and 0:14:44.360 --> 0:14:46.400 B ships with fewer people on the shop floor at 0:14:46.400 --> 0:14:47.920 one point in time, how are you going to do 0:14:48.000 --> 0:14:50.200 that and how they can you keep your capacity up? 0:14:50.720 --> 0:14:54.800 Um services firms where everybody is working remote. Those are 0:14:54.840 --> 0:14:57.240 the real questions that businesses have to work themselves through. 0:14:57.280 --> 0:15:00.400 How can we do business in this kind of new environment. Yes, 0:15:00.520 --> 0:15:03.640 at the background are these worst case scenarios. We're not 0:15:03.720 --> 0:15:05.720 yet at the point to begin to frame those out, 0:15:06.000 --> 0:15:07.960 but obviously you know in the medium term that's what 0:15:08.000 --> 0:15:10.040 we will need to do. Bart van Art, thanks so 0:15:10.120 --> 0:15:12.960 much for joining us. We really appreciate your perspective. Bart 0:15:13.040 --> 0:15:19.520 van our chief economist at the conference board. Let's get 0:15:19.520 --> 0:15:22.000 a sense of what's going on in Washington, d C. 0:15:22.240 --> 0:15:27.080 In terms of coronavirus fiscal stimulus coming out of the Capitol. 0:15:27.480 --> 0:15:30.720 Steven Dennis Bloomberg, Senate reporter, joins us. Steve, thanks so 0:15:30.800 --> 0:15:33.000 much for joining us. Give us the latest on kind 0:15:33.000 --> 0:15:36.040 of where we are with the various pieces of legislation 0:15:36.480 --> 0:15:41.440 within Congress any administration. Yeah, so Senate Republicans this morning 0:15:41.480 --> 0:15:45.000 are compiling a very large simulus package. You're expecting it 0:15:45.080 --> 0:15:49.000 to be well over a trillion dollars UM, but we 0:15:49.080 --> 0:15:52.520 don't yet have the exact details. You know, they had 0:15:52.520 --> 0:15:56.360 three task forces putting it together over the past day 0:15:56.400 --> 0:15:59.920 and a half. They hope to get something to major 0:16:00.040 --> 0:16:03.120 or leader Men McConnell this morning so he can compile 0:16:03.200 --> 0:16:07.160 it and then walk across the hallway and start negotiating 0:16:07.160 --> 0:16:10.600 with Chuck Schumer, who has his own nearly trillion dollar 0:16:10.760 --> 0:16:15.760 package UM with very different ideas UM. And then you've 0:16:15.760 --> 0:16:20.160 got House Democrats, you know, various House Democrats are proposing 0:16:20.480 --> 0:16:23.760 various plans of their own, whether it be Ilhan Omar 0:16:23.840 --> 0:16:28.680 who wants similar big checks to what Secret Treasury Secretary 0:16:28.720 --> 0:16:33.320 Minutition has talked about. Maxine Waters wants even bigger checks UM. 0:16:33.360 --> 0:16:35.680 A lot of other Democrats want things that are more 0:16:35.720 --> 0:16:39.640 traditional aid things like food stamps and unemployment insurance. But 0:16:39.760 --> 0:16:43.200 two ideas that have gotten a traction in both parties 0:16:43.680 --> 0:16:46.520 is this idea of sending everybody a check, maybe with 0:16:46.640 --> 0:16:50.160 some means testing, um, trying to figure out what the 0:16:50.240 --> 0:16:53.400 level is, whether it's one thousand or two thousand dollars 0:16:53.880 --> 0:16:57.080 or more. And then the second thing that has pretty 0:16:57.120 --> 0:17:01.400 widespread support is a lot of support for small businesses 0:17:02.080 --> 0:17:06.800 planned by Susan Collins and Marco Rubio would send three 0:17:06.920 --> 0:17:12.520 hundred billion dollars covering all of their expenses, uh until 0:17:12.600 --> 0:17:17.600 this crisis is over, and that would initially be alone, 0:17:17.720 --> 0:17:20.520 but if they don't lay people off, it becomes like grant. 0:17:20.720 --> 0:17:23.680 So that's a huge support for small businesses. Stephen, That's 0:17:23.680 --> 0:17:26.040 exactly where I wanted to go, because people say that 0:17:26.080 --> 0:17:28.840 the helicopter money. Sending a thousand dollars to every American 0:17:29.320 --> 0:17:31.040 is great and all, but it's going to take a 0:17:31.040 --> 0:17:32.600 couple of weeks and it's not going to cover the 0:17:32.600 --> 0:17:34.840 mortgage payment in a lot of places, plus all the 0:17:34.880 --> 0:17:37.480 food expenses, et cetera. For people who are out of work. 0:17:37.880 --> 0:17:40.879 People have been pointing very much to the small business 0:17:41.000 --> 0:17:43.879 kind of grants or loans as a way to just 0:17:44.000 --> 0:17:47.000 keep people from getting fired. And I'm wondering, how quickly 0:17:47.000 --> 0:17:48.840 do we have a sense of how quickly that could 0:17:48.840 --> 0:17:52.399 be up and running. Yeah, I think that one of 0:17:52.440 --> 0:17:55.400 the things that they're looking to do is using existing 0:17:55.400 --> 0:17:59.760 authorities through the Small Business Administration that would then tap 0:17:59.800 --> 0:18:02.600 in two banks, so you'd end up having, you know, 0:18:02.640 --> 0:18:06.159 your normal lenders who are already around it would have 0:18:06.280 --> 0:18:10.440 these federally guaranteed loans that they could make, and then 0:18:10.520 --> 0:18:14.200 they'd sorted out later as far as, uh, the forgiveness 0:18:14.240 --> 0:18:17.119 process of that loan, where basically the federal government is 0:18:17.240 --> 0:18:22.880 ultimately paying these loans off. As far as how fast 0:18:22.920 --> 0:18:24.560 they could get up and running, they are hoping to 0:18:24.560 --> 0:18:27.320 get this up and running in weeks. But you know, 0:18:27.400 --> 0:18:30.320 in the meantime, as we know, if we've gotten these 0:18:30.320 --> 0:18:33.920 ancdotal reports from a lot of these states, the unemployment 0:18:34.000 --> 0:18:37.240 claims are soaring. In just the last few days, a 0:18:37.240 --> 0:18:39.400 lot of senators saying that they're getting reports from their 0:18:39.440 --> 0:18:42.080 states that you know, in like the last two or 0:18:42.119 --> 0:18:46.119 three days, they're getting an entire month's worth of of layoffs. 0:18:46.200 --> 0:18:49.159 And if they don't act quickly and assure those businesses 0:18:49.640 --> 0:18:51.880 that they're going to get paid. It's going to get 0:18:51.960 --> 0:18:54.359 much worse. So they want to have a bill done 0:18:54.800 --> 0:18:59.160 potentially out of the Senate this weekend to assure businesses 0:18:59.200 --> 0:19:01.960 so they don't actually fire people. Um. But you know, 0:19:02.080 --> 0:19:03.879 this thing still has to go through the House. You 0:19:04.000 --> 0:19:06.480 still have a lot of negotiations to do. It's going 0:19:06.520 --> 0:19:08.320 to take a while to get things up and running. 0:19:08.400 --> 0:19:12.520 So you know, this is warp speed, as as Mitch 0:19:12.600 --> 0:19:15.840 McConnell has said for the Senate. But warp speed is 0:19:15.880 --> 0:19:19.080 still you know, way behind this virus which is getting 0:19:19.240 --> 0:19:22.840 worse and worse every day. You're seeing the cases in Maryland, 0:19:22.920 --> 0:19:27.040 for example, are up eighty three in two days, um, 0:19:27.520 --> 0:19:30.280 and there's now a hundred and seven cases in Maryland. 0:19:30.480 --> 0:19:34.720 People are worried about shortages at hospitals. Another thing that 0:19:34.760 --> 0:19:37.520 the Democrats are talking about, and you're seeing some talk 0:19:37.600 --> 0:19:40.760 about this from the administration as well, is forbearance on 0:19:40.960 --> 0:19:45.480 all sorts of loans, whether it be mortgages. Uh, maybe 0:19:45.520 --> 0:19:49.400 you extend those mortgages. Uh, you don't have to pay 0:19:49.440 --> 0:19:51.720 them up front. You can you know, sort of skip 0:19:51.720 --> 0:19:53.960 a month. That kind of thing. Same thing with a 0:19:53.960 --> 0:19:56.320 lot of loans and other kinds of loans so that 0:19:56.400 --> 0:20:00.720 people aren't declaring bankruptcy in the next few months. So Steve, 0:20:00.760 --> 0:20:04.280 there's also been aside from getting money to consumers as 0:20:04.359 --> 0:20:07.399 quickly as possible, as also a lot of industry groups 0:20:07.400 --> 0:20:10.159 are saying we need help from the federal government. Is 0:20:10.240 --> 0:20:14.439 Comer's going to take up those industry specific bailout issues 0:20:14.640 --> 0:20:18.240 separately and another later date. What's the feeling there. I 0:20:18.280 --> 0:20:22.320 think there's there's Uh, this is evolving by the hour, 0:20:22.720 --> 0:20:25.199 and I think that there's more and more of a 0:20:25.240 --> 0:20:31.080 sense that they can't go home without dealing with bigger businesses. Um, 0:20:31.280 --> 0:20:36.520 you've got the airlines in particular and other industries. Uh. 0:20:36.560 --> 0:20:39.639 You know, initially we're talking about loans. Now we're talking 0:20:39.680 --> 0:20:43.640 about maybe having some equity stakes and companies if they 0:20:43.800 --> 0:20:47.119 need aid. You know, we saw that with TARP, We 0:20:47.160 --> 0:20:50.280 saw that with the some of the auto bailouts. You know, 0:20:51.080 --> 0:20:55.640 this is looking more and more like the two thousand 0:20:55.640 --> 0:20:58.880 and eight financial crisis, and all the stops are being 0:20:58.920 --> 0:21:01.560 pulled out. Know, if you're a company and you don't 0:21:01.600 --> 0:21:05.760 have a big cash cushion, uh, you know, there's going 0:21:05.800 --> 0:21:08.840 to be a need for some process for keeping them 0:21:08.840 --> 0:21:13.000 afloat Stevendenz, we are speaking with Bloomberg Senate reporter, and 0:21:13.000 --> 0:21:15.359 I'd love to get your perspective and exactly that the 0:21:15.480 --> 0:21:21.199 sort of uncomfortable feeling that certain Republicans probably have considering 0:21:21.200 --> 0:21:23.760 the fact that there was some high criticism of the 0:21:23.760 --> 0:21:28.399 bailouts that were enrolled and used to rescue the auto 0:21:28.520 --> 0:21:31.760 companies the banks back in two thousand and eight. And 0:21:31.800 --> 0:21:35.760