Speaker 1: This is Bloomberg Wall Street Week. What's the state of
Speaker 1: corporate governance? The deficit is a real issue. The US
Speaker 1: economy continues to send mixed signals. The financial stories that
Speaker 1: cheap our world fed action to con concerns over dollar
Speaker 1: liquidity and encouraging China data. The five hundred wealthiest people
Speaker 1: in the world. Through the eyes of the most influential
Speaker 1: voices Larry Summers, the former Treasury Secretary, star Ward CEO
Speaker 1: Kevin Johnson sec Chairman J Clayton. Bloomberg wool Street Week
Speaker 1: with David Weston from Bloomberg Radio. Be careful what you
Speaker 1: wish for. More vaccines and seamulus point toward recovery, but
Speaker 1: it looks like it's going to be a bumpy ride.
Speaker 1: This is Bloomberg Wall Street Week. I'm David Weston. Maybe
Speaker 1: the most important development of the week, not just for markets,
Speaker 1: but for all of us was Johnson and Johnson joined
Speaker 1: the elite club of approved vaccine providers, adding its millions
Speaker 1: of doses to the battle against COVID. We talked to
Speaker 1: J and J chairman and CEO Alex Gorski about how
Speaker 1: they did it and how fast they can get that
Speaker 1: vaccine into people's arm. Look. From the very beginning, we
Speaker 1: tried to look at how could we design a the
Speaker 1: very best possible vaccine in terms of safety, efficacy, dosing,
Speaker 1: and and frankly administration and logistics and UH. And we
Speaker 1: had a platform that had been used in more than
Speaker 1: a hundred thousand patients that gave us a lot of
Speaker 1: confidence that the safety profile was very strong. We tested
Speaker 1: it thoroughly. And what's really important about our test, David,
Speaker 1: our clinical trials was we didn't start until September, and
Speaker 1: so just as we had come out of what I
Speaker 1: would say the low point over the summer and we
Speaker 1: started seeing cases increased, certainly across the United States, but
Speaker 1: more importantly around the world, that's when our trial began.
Speaker 1: So we were really into, you know, the the heat
Speaker 1: of the of the virus spread. Number two UH of
Speaker 1: our patients were in the United States, but we had
Speaker 1: about in Latin America, and we had about fifteen percent
Speaker 1: that we're actually in South Africa, so where you know,
Speaker 1: one of the most difficult strains of the South African straint.
Speaker 1: And by the way, of the fifteen thousand patients that
Speaker 1: we were working on, there are those that were infected
Speaker 1: actually had the South African variant UH, and so it
Speaker 1: gave us a lot of data, and what we saw
Speaker 1: were still very strong effectiveness rates in fact in serious
Speaker 1: cases and a hundred percent of the time as far
Speaker 1: as kept patients out of the hospital and kept them
Speaker 1: from dying. UH. So we know that this is going
Speaker 1: to be a really important tool for healthcare providers around
Speaker 1: the world. And so go forward and take give us
Speaker 1: a sense of where you're headed. Do you envision a
Speaker 1: world in which we have different versions of vaccine for
Speaker 1: different variants or do you think we know enough now
Speaker 1: to think we'll be able to have one version that
Speaker 1: will be good enough for all the variants. Well, David, look,
Speaker 1: I think all of these vaccines work extremely well, and
Speaker 1: the fact that we've seen these kind of results from
Speaker 1: three different platforms now is very encouraging. UM. And my
Speaker 1: recommendation is everybody needs to get a shot as soon
Speaker 1: as they possibly can, because every time this virus spreads,
Speaker 1: it's transmitted and UH it could has the potential to
Speaker 1: mutate to cause another variant, and so the faster we
Speaker 1: can get people vaccinated to stop that from happening, the
Speaker 1: likely better outcome we're going to have. But the good
Speaker 1: news is also is because of these new platforms that
Speaker 1: we have that are so much more adaptable, adaptable that
Speaker 1: right now companies and ours included as working on next
Speaker 1: generation should that be necessary. So we're gonna have to
Speaker 1: see how this plays out over the next sixth the
Speaker 1: next nine months. We could be in a situation where
Speaker 1: we see a precipitous decline in the virus. We could
Speaker 1: see some surgeons in the fall that we need to
Speaker 1: stay protective of, or we could see where we could
Speaker 1: need a booster shot or another shot further down the road,
Speaker 1: similar to what you do with the flu shot. But
Speaker 1: that being said, we're in a much better place today
Speaker 1: based upon all the great science, research and engineering that
Speaker 1: that we've been doing. But Alex, when you have the
Speaker 1: four million or who do you call to say worship
Speaker 1: ship them? Well, right now it's directly to the government.
Speaker 1: So in the United States, the government determines it goes
Speaker 1: from basically our our distribution facility and ups trucks to Macksson,
Speaker 1: and then the government works very closely to distribute it
Speaker 1: to the states. They're working closely with the governors as
Speaker 1: well as with some of the large retail chains. And
Speaker 1: you know, the good news is, David, I think now
Speaker 1: that we have a third vaccine out there, and and
Speaker 1: by the way, kudos to Fiser and Maderna for also
Speaker 1: significantly increasing their output. I would predict that in the
Speaker 1: second quarter we're no longer going to be near as
Speaker 1: supply constraint, and as we get more doses out, we're
Speaker 1: going to be able to open up some of the
Speaker 1: requirements and restrictions regarding who can get the vaccine and
Speaker 1: who can't, And as a result, our throughput will go up.
Speaker 1: And I think we're going to see a big difference
Speaker 1: about the number of patients being vaccinated in the second
Speaker 1: quarter around our country, let alone the world. Finally, Alex,
Speaker 1: I know you know you think strategically, and it's become
Speaker 1: a commonplace for all us to say the world's never
Speaker 1: going be the same as it was pre pandemic. But
Speaker 1: what about for Johnson and Johnson for your industry. Can
Speaker 1: you see ways in which you're going to make different
Speaker 1: decisions about deployment of capital employment going forward? Does it
Speaker 1: change the nature Johnson Johnson's business, what we've been through
Speaker 1: here with this pandemic. We look, I said, there's a
Speaker 1: few things that are very important strategic considerations for us
Speaker 1: going forward. And the first is the importance of global
Speaker 1: public health. I mean, one thing that this pandemic has
Speaker 1: demonstrated that if we don't have strong resilient public health
Speaker 1: systems in place, we don't have national security, economics, security,
Speaker 1: or frankly security as a society. And so making that
Speaker 1: investment focusing more on durability, sustainability, and maybe even some
Speaker 1: redundancy versus just maniacally on effectiveness and efficiency is going
Speaker 1: to be critical for us. Whether it's storing ppe, creating
Speaker 1: vaccine capacity, or the way that we even think about
Speaker 1: handling surgeons in hospital is some isn't a very important lesson,
Speaker 1: I believe for our industry. The second one for me, David,
Speaker 1: is just technology, and whether it's the technology of the science,
Speaker 1: the way we were able to collect data quickly, take
Speaker 1: the genomic information, apply it to a platform, have three
Speaker 1: vaccines in a period of months versus what ordinarily would
Speaker 1: require years. The way we've been able to share data
Speaker 1: and information to understand where this virus is and it isn't.
Speaker 1: I think it represents just a significant increase in the
Speaker 1: way we use data and the way that we apply
Speaker 1: that in decision making and healthcare systems throughout the world.
Speaker 1: That was Johnson and Johnson chairman and CEO Alex Gorski
Speaker 1: coming up Walmart as your friendly neighborhood bank. We talked
Speaker 1: with former f d i C head Sheila Bear about
Speaker 1: the risks and the opportunities. That's next on Wall Street
Speaker 1: Week on Bloomberg. This is Bloomberg Wall Street Week with
Speaker 1: David Weston from Bloomberg Radio. We don't care what they
Speaker 1: do as a retailer, but we are concerned about the
Speaker 1: safety and soundness of the financial system. And this doesn't
Speaker 1: just relate to Walmart. It's any commercial industrial company getting
Speaker 1: into banking and the threats that could potentially caused. That
Speaker 1: was former Ohio Congressman Paul Gilmore in two thousand seven,
Speaker 1: after Walmart's failed attempt to get into banking. Fourteen years later,
Speaker 1: Walmart maybe taking another look at taking on Wall Street,
Speaker 1: this time with two veterans from Goldman Sachs Consumer Finance division.
Speaker 1: They left Goldman this week to join a fintech startup
Speaker 1: backed by Walmart and Ribbit Capital. Omar Isma'il was the
Speaker 1: head of Goldman's consumer bank named Marcus launched in two sixteen.
Speaker 1: It was meant to get Goldman into the consumer business,
Speaker 1: but it's been slow to gain traction. Here's Stephanie Cohen
Speaker 1: of Goldman. Sachs. We want to be the leading digital
Speaker 1: banking platform, and the idea behind this is that we
Speaker 1: can be someone's holistic bank. Later this year, we planned
Speaker 1: to launch checking. We really think that's the final staff
Speaker 1: efforts by retailers and startups to begin offering core banking products.
Speaker 1: Pits fintech against Wall Street. You have fintech, big tech.
Speaker 1: You saw Walmart recently, so we just have to be
Speaker 1: prepared for intensified competition. We're ready for it. We're very
Speaker 1: competitive and we expect to win. That's Jamie Diamond of
Speaker 1: JP Morgan Chase. Walmart has been trying to get into
Speaker 1: the banking business since the late nineteen nineties. It first
Speaker 1: tried unsuccessfully to buy a bank in California. Then it
Speaker 1: tried again in two thousand and five, applying for an
Speaker 1: industrial bank charter in Utah, which had hoped to use
Speaker 1: to process credit and debit card transactions internally. But the
Speaker 1: retailer faced a firestorm of opposition from lawmakers and banking
Speaker 1: industry groups. After two years and several delays, Walmart ultimately
Speaker 1: withdrew its application. Here's Walmart CEO Doug McMillan. You can
Speaker 1: go away quickly if you're not moving to where the
Speaker 1: customer wants to be served in the future. So what
Speaker 1: we're trying to do here is to get people to
Speaker 1: be really open to embracing what's next. Sheilabart was the
Speaker 1: head of the f d i C when the agency
Speaker 1: temporarily suspended Walmart's banking ambitions and encouraged the retailed to
Speaker 1: partner with banks instead. I asked her, what is different
Speaker 1: this time around. I'm not sure much is different. There's
Speaker 1: a financial technology has uh created new opportunities to provide
Speaker 1: financial services, especially in the payments space, with with with
Speaker 1: larger returns. So it may be that Walmart used this
Speaker 1: as attractive um as you say that they tried to
Speaker 1: get an i LC charter in two thousand five and
Speaker 1: two thousand and six. I was actually chair of the
Speaker 1: f d i C when that was attempted. It was
Speaker 1: already an ongoing issue when I came to the f
Speaker 1: d i C and I placed a moratorium on their
Speaker 1: application because there was so much controversy about it and
Speaker 1: asked Congress to resolve this whether they really want a
Speaker 1: commercial entity like Walmart to own at an I l
Speaker 1: C which is essentially a bank, and Congress never really
Speaker 1: out with it. It's still permitted. Walmart at that point
Speaker 1: decided to withdraw the application, which I think was wise.
Speaker 1: The Great Financial Crisis was, you know, coming, and we
Speaker 1: had other things to worry about at the fdi C.
Speaker 1: So a lot of the policy arguments are the same.
Speaker 1: I think financial technology perhaps makes this more attractive now
Speaker 1: to Walmart. I can only speculate they haven't really provided
Speaker 1: much public information about what their plans are. As you say,
Speaker 1: most of the regulatory agencies disfavor a commercial entity owning
Speaker 1: a bank. There is an exception in this industrial bank
Speaker 1: sort of an interesting phenomenon. What are the risks from
Speaker 1: not having the full regulatory force applied to something like
Speaker 1: a Walmart? So yeah, so I think so their concentration
Speaker 1: of power. I think the traditional prohibition we've had on
Speaker 1: this is the concentration of power of commercial, very large
Speaker 1: commercial entities, you know, being able to build banking empires
Speaker 1: to That's that's a lot of concentrated power. So I
Speaker 1: think that's an issue. Also the impact on community banks,
Speaker 1: you know, given Walmart you know, could provide a lot
Speaker 1: of competition. Uh. I think there's a fear there that
Speaker 1: they could really hurt community banks. So that's really uh
Speaker 1: the policy arguments against it, um but it's you know,
Speaker 1: in terms of safety and soundness. The other difference with
Speaker 1: the regular bank charter is that there's no holding company supervision.
Speaker 1: So with an i l C, for a regular bank
Speaker 1: that's owned by another entity, the FED exercises authority regulatory
Speaker 1: supervisory authority over that holding company. With an i l C,
Speaker 1: you don't have that. However, in the case of Walmart,
Speaker 1: I'm not really sure that's an issue. First, the f
Speaker 1: D i C always when they prove these I l
Speaker 1: C charters contractually require the parent to provide financial support
Speaker 1: to to the i l C. And also, obviously Walmart
Speaker 1: has very deep pockets, so it's hard to imagine the
Speaker 1: situation where a bag of theirs would would get in
Speaker 1: trouble for one of the ability of the parent to
Speaker 1: support it. So I think safety and sands is less
Speaker 1: of an issue in this content X, but certainly consumer
Speaker 1: protection and the impact of the competition are very, very
Speaker 1: very real issues you mentioned shield of the possible squeeze
Speaker 1: on local and community banks. If the Walmarts of this
Speaker 1: world get into that business, could there also be a
Speaker 1: squeeze on the bigger banks as a practical matter, as
Speaker 1: more and more big commercial energies come into their neighborhood
Speaker 1: and compete with them, for example, for a deposit taking, Well,
Speaker 1: they could very well be And you know again it's
Speaker 1: that may be a benefit. It's uh one you know
Speaker 1: we've had with this terrible pandemic. We've had an accelerating
Speaker 1: trend towards you know, a lot of branches closing remote
Speaker 1: provision of financial services. It's less cost, it doesn't involve
Speaker 1: people personally interacting with each other, which has become an
Speaker 1: issue with this pandemic. But there are still a lot
Speaker 1: of people who want a physical location to go to
Speaker 1: for their banking services. And Walmart can provide that with
Speaker 1: all its stores of elderly people, you know, people lowering
Speaker 1: some people who don't have access to the internet. The
Speaker 1: the ability of also provide not just technology to allogically
Speaker 1: remote services, but also a physical location, I think is
Speaker 1: an advantage that that Walmart could provide in a benefit
Speaker 1: to that segment of the population that still wants wants
Speaker 1: an actual banking physical space to go to. So yes,
Speaker 1: and in that context, their their vast array of stores
Speaker 1: could be highly competitive with these larger banks branch operations.
Speaker 1: So as you're right, it's not clear that it would
Speaker 1: just be an impact to community banks. Well, you raise
Speaker 1: a very interesting possibility. I think we have talked for
Speaker 1: some time about the unbanked and the underbanked in the
Speaker 1: United States, typically in poor communities, suggest and how we
Speaker 1: address that. We haven't been successful terribly in doing that.
Speaker 1: Could a Walmart moving in actually help address that problem
Speaker 1: in the country. Well, I think they could. I mean,
Speaker 1: I think lower income and lower middle income Americans are
Speaker 1: are are very big part of Walmart's UH customer base,
Speaker 1: and so they're coming to those stores already. So yeah,
Speaker 1: I mean, I think we need to know what Walmart plans.
Speaker 1: They just plan to, you know, fatten their profit margins. Well,
Speaker 1: good for them, but you know, that's not really a
Speaker 1: public policy reason to provide the charter a group the charter.
Speaker 1: But if yeah, if they can leverage that reach that
Speaker 1: they have with the unbank and undermank populations to provide
Speaker 1: a fuller panic ply of financial services at low cost,
Speaker 1: at mainstream cost. Right, So people can go to payday
Speaker 1: lenders and pawn shops now and get financial services that
Speaker 1: are very high cost. But if Walmart can democratize for
Speaker 1: the democratized credit and banking services and provided the same
Speaker 1: cost that you and I get, and I think that
Speaker 1: would be hugely beneficial. So, you know, we need to
Speaker 1: stay tuned in terms of what Walmart is, what the
Speaker 1: value proposition is that they're contemplating, But there's certainly a
Speaker 1: lot of potential there. That was Sheila Bear, former head
Speaker 1: of the f d i C, coming up what broke
Speaker 1: the supply chain on chips just when we needed it most.
Speaker 1: We talked with supply chain expert Ndia Vakil of Wrestling.
Speaker 1: That's next on Wall Street Week on Bloomberth. This is
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: The world's manufacturing supply chains are showing signs of strain,
Speaker 1: and semiconductors or chips, are among the hardest hit. The
Speaker 1: combination of the pandemic, policy decisions and the growing demand
Speaker 1: for electric vehicles created a perfect storm for the industry.
Speaker 1: Here's GM CEO Mary Bara, this is an industry issue.
Speaker 1: Of course, we're working every single day with a cross
Speaker 1: functional team to look for opportunities of how do we
Speaker 1: minimize the impact. In January, Honda said it will cut
Speaker 1: domestic output at one of its Japanese factories, while Nissan
Speaker 1: is adjusting production of its note hatchback model. GM announced
Speaker 1: this week that it's extending temporary shutdowns that's three of
Speaker 1: its North American plants because of the ongoing semiconductor shortage. Well,
Speaker 1: the first quarter we have had some disruptions and idled
Speaker 1: some of our plants, but it is still a volatile situation.
Speaker 1: That's diner CEO Ola COLLINEUS. It's not just harmmakers. A
Speaker 1: shortage of chips affects everything from five G phones to
Speaker 1: medical devices. Here's Whahwei's Andy Perdy combination of a coronavirus
Speaker 1: and the the impact on not to be two technical
Speaker 1: the entity list, but the ability of American companies to
Speaker 1: sell the lesson others. It's really had a very negative
Speaker 1: effect on us. The shortage has gotten so bad that
Speaker 1: President Biden stepped in this week with an executive order
Speaker 1: directing a government wide supply chain review for critical goods.
Speaker 1: We need to make sure these supply chains are secure
Speaker 1: and reliable. I'm directing senior officials and my administration to
Speaker 1: work with industrial leaders to identify solutions to this semiconductor shortfall.
Speaker 1: The problem has been brewing since two thousand nine, and
Speaker 1: President Donald Trump's trade war with China also played a
Speaker 1: part in the supply crunch. Roughly ten percent of the
Speaker 1: world's chip production comes from s m i C, a
Speaker 1: semiconductor company that's partially owned by the Chinese government. In
Speaker 1: two thousand and twenty, the US restricted American companies from
Speaker 1: selling to sm i C. So by dealing with the
Speaker 1: availability of high tech, particularly semi conductors, to AWE and
Speaker 1: to ZE, we've slowed that down. That was former Commerce
Speaker 1: Secretary Wilburt Ross. To get a better sense of just
Speaker 1: how bad the problem is and what can be done
Speaker 1: about it. We talked with Benda Vakil, CEO of Resiling,
Speaker 1: the leading provider of supply chain mapping services, and she
Speaker 1: said that the problem has been a long time coming.
Speaker 1: This has been building since last year, and now we
Speaker 1: are looking at an extremely constrained environment. It started with
Speaker 1: two big battery fires at Japanese semiconductor plants, one in July,
Speaker 1: one in October. Then there were some labor strikes that
Speaker 1: ship making facilities in Europe, and then you combine that
Speaker 1: with the upheaval from COVID. We had fired in California
Speaker 1: record hurricane season winter storm to continue issues that we
Speaker 1: have experienced container shortages. And then we saw Boeing seven
Speaker 1: seven seven grounding, which grounds, which affects airshipment capacity. And
Speaker 1: just last week we heard that in Taiwan there is
Speaker 1: a water shortage that is creating constrained water supplies which
Speaker 1: are very essential for way for fabrication assembly operations. So
Speaker 1: it's a very interesting situation. Well and is it just
Speaker 1: a fluke I mean? Or were there fundamental underlying weaknesses
Speaker 1: and the supply chain because what you just described sounds
Speaker 1: like who could have predicted all those things would come
Speaker 1: together at one time. Um, the world of supply chain risks,
Speaker 1: I have to say, is it is a constant thing.
Speaker 1: There are in a given year resuling monitors over three
Speaker 1: hundred factory buyers alone. Add to that supply chain risks
Speaker 1: due to hurricanes, arthquakes, labor strike, transportation issues, and what
Speaker 1: you have is a situation and supply chain where normal
Speaker 1: is is disrupted. Now we have the bud imustration saying
Speaker 1: we're gonna get our arms around this. We're gonna start
Speaker 1: with information, making sure we know what's going on something
Speaker 1: I think you may have some insight into and resoling.
Speaker 1: Is that the right first step? Absolutely? In fact, I
Speaker 1: would say the direction that the government is going with
Speaker 1: supply chain right now. They first most critical. They have
Speaker 1: caused supply chain resilience a matter of national security. This
Speaker 1: is the first thing that they needed to do and
Speaker 1: they have finally done it. Um Understanding the supply chain landscape,
Speaker 1: who the critical players are, what are the global sites
Speaker 1: and regions that are critical to the supply chain. This
Speaker 1: is the first step in helping us make informed decisions
Speaker 1: about what are those sources of constraint supply that we
Speaker 1: need to address, where we need to hold back up supplies,
Speaker 1: where we need to hold extra inventory, and what it
Speaker 1: is that we need to do to avoid the similar
Speaker 1: problems that we experienced in ppech shortages last year that
Speaker 1: brought the healthcare industry to their needs. So it's really
Speaker 1: criticals and and mapping supply chains and understanding those global
Speaker 1: dependencies is the first step have we been spending too
Speaker 1: little on our supply chain, because as I listened to
Speaker 1: you and as you talk about increased inventories, increased capacity,
Speaker 1: that sounds like money that we in fact, we've been
Speaker 1: running a two tight a tolerance. Absolutely. But the FoST
Speaker 1: thing we did in the last twenty years is we
Speaker 1: went overseas and globalized. Not the wrong thing to do.
Speaker 1: You not only globalize your supply chain to take advantage
Speaker 1: of lower cost supplies, you take advantage of emerging markets
Speaker 1: and the demand there as well. That has been vacill
Speaker 1: CEO of residents. Coming up, we wrap up the week
Speaker 1: as always with our special contributor Larry Summers of Harvard.
Speaker 1: This is Wall Street Week on Bloomberg. This is Bloomberg
Speaker 1: Wall Street with David Weston from Bloomberg Radio, and we're
Speaker 1: gonna conclude our week as we do every single week,
Speaker 1: with our special contrainion Larry Summers of Harvard. So Larry,
Speaker 1: thanks so much for being back. One of the big
Speaker 1: events of the week was Fitchair J. Pale, speaking in
Speaker 1: a Wall Street Journal event. Talked about a lot of things,
Speaker 1: including the body yield things like that, but one of
Speaker 1: the things he addressed was inflation, and he admitted is
Speaker 1: how they're keeping a close eye on it maybe because
Speaker 1: of some of the things you've said, frankly, uh, and
Speaker 1: that they are not going to repeat the mistakes of
Speaker 1: the sixties and seventies as here before I do it.
Speaker 1: What does he need to do to avoid that. I
Speaker 1: sure hope they don't repeat the mistakes to the sixties
Speaker 1: and seventies, because they were hugely important, not just for inflation,
Speaker 1: not just for macroeconomics stability, but for the whole politics
Speaker 1: and attitude of the country. They're gonna need to look
Speaker 1: in hardheaded ways and to be prepared to not make
Speaker 1: excuses each month pointing to a different factor when inflation
Speaker 1: ficks up, and they're gonna need to remember that their
Speaker 1: priority is the macro economy. When I see them say
Speaker 1: they won't raise rates until UM diversity groups unemployment rates
Speaker 1: are appropriate, I get nervous because the FED can't really
Speaker 1: control those issues. Those are issues for antidiscrimination law, those
Speaker 1: are issues for fiscal policy, UH, those are issues for
Speaker 1: labor market UH programs. And so if the FED sets
Speaker 1: out to target the unemployment rate of particular groups without
Speaker 1: regard to inflation, that would be a good way to
Speaker 1: make really serious uh inflation. If they take inflation seriously,
Speaker 1: they monitor closely, and they're prepared to cause pain, they
Speaker 1: will be able to control inflation. But if instead they say, oh,
Speaker 1: we've got credibility inflation, expectations are anchored and inflation is
Speaker 1: not something we have to worry about. Ironically, the more
Speaker 1: optimistic they are about inflation being under control, the less
Speaker 1: likely it is to actually be under control. So fed
Speaker 1: Cherrich Powell gave us a little bit of a hint
Speaker 1: about how he's going to approach this because he addressed
Speaker 1: a couple of things. He said, some of the upticking
Speaker 1: prices that we're expecting is going to be base effects,
Speaker 1: as there's a reopening effect as people come back. And
Speaker 1: also there may be some particular choke points in the
Speaker 1: supply chain. We're not going to pay much attention to
Speaker 1: those because that's transient. How do you tell the difference
Speaker 1: between transient inflation something more troubling. That's why they've got
Speaker 1: a staff of a few hundred economists and precisely to
Speaker 1: make those distinctions, and they got to look at all
Speaker 1: the data they can. What I'm worried about when I
Speaker 1: hear that kind of talk is not that it isn't right.
Speaker 1: He's right about the base here, effects he's right about
Speaker 1: specific sectors. But every great inflation is made by central
Speaker 1: bank that dismisses it as due to transient factors. And
Speaker 1: so at a certain point, when you start having a
Speaker 1: transient factor every month, then you maybe got a permanent
Speaker 1: factor going over going overall. So it takes a lot
Speaker 1: of worry about inflation to make their not be uh inflation.
Speaker 1: This is a classic example of self denying prophecy. The
Speaker 1: more the fat is fearful of inflation, the more likely
Speaker 1: they are to avoid it. The more the fat is
Speaker 1: complacent about inflation, the more likely they are to have
Speaker 1: So Larry, one of the things that's a big item
Speaker 1: in the agenda now as we are working our way
Speaker 1: through the stimulus package is infrastructure. President Biden has said
Speaker 1: that he wants to go onto that. He had meetings
Speaker 1: at the White House this week to talk about it.
Speaker 1: So we've talked in the past about the stimulus package,
Speaker 1: maybe what should have been done, what could have been
Speaker 1: done before we get started. I FRA structure. Give us
Speaker 1: some advice. How do you do it the right way
Speaker 1: and how do you do it the wrong way. Here
Speaker 1: to broad principles, UH, David. One is Democrats are right
Speaker 1: that we need much more money on infrastructure, and Republicans
Speaker 1: are right that we need much more efficient regulation, much
Speaker 1: more rapid environmental approvals, and much more efficient procurement. And
Speaker 1: we need to do the politics of both add rather
Speaker 1: than either or when it comes to infrastructure. The other
Speaker 1: thing is this is an area where the public sector
Speaker 1: and the private sector have to UH collaborate. Some infrastructure
Speaker 1: is public repairing the potholes and the roads in New
Speaker 1: York City. Some is private building out a five G
Speaker 1: wireless UH system. Some is UH joint UH toll roads, bridges,
Speaker 1: electric utility, these UH and the like. We've got to
Speaker 1: find creative ways to bringing the public and private sectors
Speaker 1: together around the infrastructure UH issues. And we need to
Speaker 1: understand that infrastructure is much more than bricks and mortar.
Speaker 1: So infrastructure is good for all of us because it
Speaker 1: makes our lives better presumently, but there's another purpose as well,
Speaker 1: which is increased productivity as we go forward. It's future growth. Essentially,
Speaker 1: we're investing in a lot of us haven't had the
Speaker 1: experience you've had being a macro economist in the US government,
Speaker 1: we've run companies or parts of companies. When we make
Speaker 1: a decision about capital investment, we take a look at
Speaker 1: the payback. When do we get the payback, what's the
Speaker 1: long what's the prospects of payback? Do you look at
Speaker 1: it that way? I mean, how do you decide which
Speaker 1: projects are the most likely to really increase productivity and
Speaker 1: increase growth in the outyears. And if you've got to
Speaker 1: look at the overall social return. Some of that is
Speaker 1: the extra money that's going to get produced. Some of
Speaker 1: that is the carbon that's going to get mitigated that
Speaker 1: otherwise would have a substantial uh social costs. Some of
Speaker 1: that is the incremental business activity that's going to be enabled.
Speaker 1: Some of that is and it's not always easy putting
Speaker 1: a valuation on amenities that people are going to enjoy.
Speaker 1: Central Park is a kind of infrastructure. Very hard to
Speaker 1: put a price on Central Park, but even harder to
Speaker 1: imagine New York City than out Central Park. And so
Speaker 1: we need to think very broadly as we think about
Speaker 1: the benefits of infrastructure. There's a spack frenzy some people
Speaker 1: think of the country right now, and so we treat
Speaker 1: you as an expert, which you certainly are. But let's
Speaker 1: treat you as a fact witness the way I used
Speaker 1: to when I put witnesses on in the courtroom. You
Speaker 1: actually have gotten involved in this. Back here, as I understanding,
Speaker 1: you're an investor in a company that now is being
Speaker 1: acquired by us. Back tell us about It's called the
Speaker 1: States Title Right, I'm on the I'm on the board
Speaker 1: and have been uh an investor for a number of years.
Speaker 1: Our company has the potential to transform title insurance, the
Speaker 1: type of insurance where most of the time there's the
Speaker 1: highest ratio of premiums paid two benefits paid out. And
Speaker 1: this company is going to transform its sufficiency by using
Speaker 1: artificial intelligence. It's a huge business opportunity ultimately to transform
Speaker 1: the process of buying a house and make it pleasant
Speaker 1: and fast rather than excruciating and slow. This is the
Speaker 1: most exciting thing that I've been part of in the
Speaker 1: fintech area, in the business area since I was on
Speaker 1: the board of Square before it became a unicorn. And
Speaker 1: I think there's a similar possibility for financial innovation, not
Speaker 1: for the benefit of money, but for the benefit of
Speaker 1: making people's lives better and at at all important juncture
Speaker 1: for all of us when uh we're buying a home.
Speaker 1: And I think the spack is going to enable this
Speaker 1: company to raise more capital, more quickly, for more growth
Speaker 1: and more transformation than ever would have been possible even
Speaker 1: several years ago. So let's wrap this up with a
Speaker 1: rapid fire. Summer says Number. When we talked about j.
Speaker 1: Powe the Federal Research here earlier, do you expect him
Speaker 1: to be reappointed? He should be. He certainly should be.
Speaker 1: He's done a great job and continuity in that role
Speaker 1: is a very important thing. On the other side, we
Speaker 1: learned this week that Near Attendon's nomination to be the
Speaker 1: Director of Office Manage a Budget has been withdrawn. You
Speaker 1: know her, Who do you expect to succeed her? Nobody
Speaker 1: who will be able to do that job as well
Speaker 1: as uh she could have. She is a formidable uh talent,
Speaker 1: a person of great intellectual capacity, great editor, energy and spirit,
Speaker 1: and I am just really disappointed that the nation's not
Speaker 1: going to have her in that role. But knowing how
Speaker 1: resilient she is, I know she will go on to
Speaker 1: serve and to serve with great distinction UM in President
Speaker 1: Biden's administration. And finally, A Larry what's the future of
Speaker 1: the minimum wage. It looks like it's not gonna be
Speaker 1: part of this stimulus package. What's the future? My guesses
Speaker 1: will have a minimum wage that will be way above
Speaker 1: seven but won't reach fifteen dollars, and I think that's
Speaker 1: probably the right kind of prudent compromise. Okay, thank you
Speaker 1: so much, Larry. That's Larry Summers, our special contributor, and
Speaker 1: of course he's from Harvard. Finally, one more thought. We
Speaker 1: lost a giant this week, and by we, I mean
Speaker 1: those who walk the corridors of power in Washington, those
Speaker 1: who sit in the boardrooms of our corporations, those who
Speaker 1: care about racial justice, those of us who care about
Speaker 1: our country. Vernon Jordan did it all or all it
Speaker 1: that truly matters, and he changed it all. First as
Speaker 1: a civil rights lawyer and leader at the nub A
Speaker 1: c P, the United Negro College Fund, and the National
Speaker 1: Urban League, and then when he saw we needed changing
Speaker 1: from the inside, he became an influential lawyer and lobbyist
Speaker 1: in Washington, an investment banker in New York, a corporate
Speaker 1: board director, and a close advisor to presidents. He was
Speaker 1: larger than life in every way. In his stature, in
Speaker 1: his deep baritone voice, and measured tones in that twinkle
Speaker 1: in his eye, but most of all in his quiet
Speaker 1: moral authority he brought to every gathering and to every decision,
Speaker 1: And for those of us blessed to witness it firsthand,
Speaker 1: it was sometimes as much how he did it as
Speaker 1: what he did, A loyal and true friend, always there
Speaker 1: to listen, to remind us of our true north. At
Speaker 1: a time of so much division, so much bickering, we
Speaker 1: need a Vernon Jordan more than ever the grace, the wisdom,
Speaker 1: and most of all the respect act he showed everyone,
Speaker 1: respect for those he agreed with, and every bit as
Speaker 1: much for those with whom he could not agree. Yes,
Speaker 1: we lost a giant this week. I fear we will
Speaker 1: not see his like again, but I so hope that
Speaker 1: I'm wrong, for all of our sakes. That does it
Speaker 1: for this episode of Wall Street Week. I'm David Weston.
Speaker 1: This is Bloomberg. See you next week.