WEBVTT - China Orders Boeing Jet Delivery Halt 0:00:02.720 --> 0:00:10.560 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.560 --> 0:00:14.480 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:14.560 --> 0:00:18.479 Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 0:00:18.600 --> 0:00:21.840 Listen on demand wherever you get your podcasts, or watch 0:00:21.920 --> 0:00:23.040 us live on YouTube. 0:00:23.720 --> 0:00:25.439 One of the big news items out there in today 0:00:25.600 --> 0:00:27.720 is China. Over the last twenty four hours, AT's say 0:00:27.960 --> 0:00:30.800 China saying we're not going to buy any more Boeing jets. 0:00:30.840 --> 0:00:33.960 So just another escalation in the trade war between the 0:00:34.040 --> 0:00:36.520 US and Canada. I'm looking at the Boeing stock today, 0:00:36.520 --> 0:00:39.720 it's off about nine tenths of one percent. George Ferguson 0:00:39.760 --> 0:00:42.680 joins us. He's a senior Aerospace, Defense and Airlines zentos 0:00:42.720 --> 0:00:46.800 for Bloomberg Intelligence. George talk to us about China and Boeing. 0:00:46.800 --> 0:00:48.479 How big of an issue is this for Boeing? 0:00:49.760 --> 0:00:52.199 So I don't see it as being a big issue, right. 0:00:52.200 --> 0:00:55.000 So this is one of those things that the relationship 0:00:55.040 --> 0:00:59.480 has deteriorated over a period of time. You know, we 0:00:59.480 --> 0:01:01.840 were basically writing right now a focus idea on. 0:01:01.840 --> 0:01:04.160 Boeing we'll publish in the Bloomberg Terminal. 0:01:04.160 --> 0:01:08.000 And as we're doing that research, we took another look 0:01:08.040 --> 0:01:12.000 at when we saw orders from the Chinese airlines for Boeing, 0:01:12.480 --> 0:01:16.800 and there's been like fifteen or sixteen this decade. I 0:01:16.800 --> 0:01:20.880 think fifteen came in I think last year of two 0:01:20.959 --> 0:01:23.880 hundred and forty two orders. 0:01:23.440 --> 0:01:26.280 From China that are on the books right now. 0:01:26.600 --> 0:01:30.600 The last real material size and orders from the big 0:01:30.720 --> 0:01:34.480 Chinese airlines we saw back in twenty eighteen. So this 0:01:34.600 --> 0:01:37.959 is a relationship that's been broken for a while. Frankly, 0:01:38.000 --> 0:01:41.480 the Chinese haven't really been, like I said, ordering from Boeing. 0:01:41.640 --> 0:01:44.840 So the bigger issue here, I think is Boeing delivering 0:01:44.840 --> 0:01:47.600 some of the airplanes they've already built for the Chinese. 0:01:47.680 --> 0:01:50.120 Like I said, there's some two hund forty of them. 0:01:50.040 --> 0:01:51.560 Sitting in the order books. 0:01:51.880 --> 0:01:54.800 I suspect a bunch of them are already made and 0:01:54.880 --> 0:01:56.560 Boeing would like to get rid of them. Part of 0:01:56.640 --> 0:02:00.000 the shadow factory elimination they're trying to do to streamline 0:02:00.160 --> 0:02:01.640 operations is the pain in the neck to have an 0:02:01.640 --> 0:02:04.720 airplane on the tarmac that's sold that you've got to maintain, 0:02:05.120 --> 0:02:07.000 but the customer isn't taking delivery of. 0:02:07.400 --> 0:02:08.400 It'll slow that down. 0:02:08.440 --> 0:02:12.120 I think it might hasten some of Boeing's push to 0:02:12.200 --> 0:02:14.640 sell some of those airplanes. The Indians have bought a 0:02:14.639 --> 0:02:17.880 bunch of them, maybe they're game for more, But I 0:02:17.960 --> 0:02:22.320 just don't This is China admitting what they've already been doing. 0:02:22.360 --> 0:02:25.519 Frankly, So, George, what exactly is the goal here? I mean, 0:02:25.560 --> 0:02:28.399 to your point, and also Jeffrey's analysts, they're noting that 0:02:28.480 --> 0:02:31.040 Boeing has largely de risked from China, they said of 0:02:31.080 --> 0:02:34.360 the country contributing roughly about five percent of the skyline 0:02:34.400 --> 0:02:37.360 over the next couple of years. But also a source 0:02:37.440 --> 0:02:39.960 of upside. What do you think the goal is here 0:02:40.000 --> 0:02:42.799 if there seems to be marginal impact here to Boeing. 0:02:43.840 --> 0:02:44.680 Yeah, look, I think. 0:02:44.520 --> 0:02:46.760 It's splashy right for the Chinese to make this kind 0:02:46.800 --> 0:02:51.400 of commentary. And look, I do think there's potentially some upside. 0:02:51.440 --> 0:02:54.200 So look, there's a couple of things that's been going 0:02:54.200 --> 0:02:57.280 on right China. One is growing a lot slower since 0:02:57.320 --> 0:03:00.080 the pandemic. Prior to the pandemic, China would take in 0:03:00.360 --> 0:03:03.200 three hundred narrow bodies a year, more than half of 0:03:03.240 --> 0:03:06.160 them would be Boeing. And so you know, since the 0:03:06.200 --> 0:03:09.040 pandemic last year, we saw about one hundred and fifty 0:03:09.080 --> 0:03:13.639 deliveries of narrow bodies in a China. They were Airbus airplanes. 0:03:14.120 --> 0:03:17.560 So and look, you know, in a global trade battle, 0:03:18.040 --> 0:03:21.040 China could see a diminishing GDP. Right this is a 0:03:21.240 --> 0:03:25.799 country grown eight percent last decade, fourish percent this decade. 0:03:26.040 --> 0:03:27.760 But if they get that, you know, if they decide 0:03:27.760 --> 0:03:30.160 they're going to negotiate with the US, they get some 0:03:30.280 --> 0:03:33.440 of that growth back on the rails. I think inside 0:03:33.520 --> 0:03:37.160 some of that negotiation you could see a requirement to 0:03:37.360 --> 0:03:40.960 order Boeing airplanes. Donald Trump cut a similar deal in 0:03:41.000 --> 0:03:45.640 his last administration, So there is some silver lining. And 0:03:45.680 --> 0:03:48.360 like I said, I think the Chinese sort of they 0:03:48.520 --> 0:03:51.200 know that the Boeing is at one of our biggest exporters. 0:03:51.520 --> 0:03:53.600 They know they'll get some good headlines out of saying 0:03:53.600 --> 0:03:55.920 we're not going to take any more bowing airplanes. But 0:03:55.960 --> 0:03:59.360 again I think this is already this is a microcosm 0:03:59.440 --> 0:04:02.840 of the US a kind of beginning uncoupled from China 0:04:03.000 --> 0:04:03.440 right now. 0:04:03.560 --> 0:04:06.520 So this isn't a major headwind here for Boeing Boeing, 0:04:06.560 --> 0:04:08.960 But what do you think are some headwinds that they 0:04:08.960 --> 0:04:11.360 could be facing? What are some near term hurdles. 0:04:13.000 --> 0:04:16.440 You know, I think Boeing has been down for so 0:04:16.600 --> 0:04:20.000 long that I think most of the hurdles are clearing 0:04:20.040 --> 0:04:21.599 and you're going to see a pretty good year. I 0:04:21.600 --> 0:04:23.640 think the big issue this year is they've really got 0:04:23.640 --> 0:04:28.400 to get Spirit Aerosystems bought and integrated into Boeing. I 0:04:28.400 --> 0:04:31.840 think that's well underway. I'm hearing good news from people 0:04:32.120 --> 0:04:35.400 I know in the industry about quality coming out of Spirit. 0:04:35.800 --> 0:04:37.760 They've got to get rid of that shadow factory. 0:04:37.760 --> 0:04:41.719 These airplanes already built sitting on the tarmac that they're maintaining. 0:04:42.640 --> 0:04:44.600 You know, that's just a huge dragon expenses. 0:04:44.600 --> 0:04:47.279 They got to get them delivered out to customers, sold 0:04:47.279 --> 0:04:50.160 off to new customers. And it's all about in the 0:04:50.200 --> 0:04:53.840 back half of the year building more airplanes in the factory. 0:04:53.839 --> 0:04:56.640 We've been watching it in the first quarter of the year. 0:04:56.640 --> 0:04:59.640 I think they're getting about twenty twenty five through the 0:04:59.680 --> 0:05:03.160 factory month. They got to keep building on that cadence. 0:05:03.200 --> 0:05:06.559 That's going to generate the cash and the profitability they need. 0:05:06.839 --> 0:05:10.120 And oh, by the way, they added twenty six billion 0:05:10.200 --> 0:05:14.520 dollars to inventory since I think twenty eighteen we have 0:05:14.600 --> 0:05:18.479 it and supported some five hundred equivalent to five. 0:05:18.320 --> 0:05:19.880 Hundred and seven thirty sevens. 0:05:20.240 --> 0:05:23.599 As they start building from the inventory on hand, their 0:05:23.680 --> 0:05:27.080 cash generation is going to be super charged. They could 0:05:27.080 --> 0:05:29.880 have a really nice back half of twenty twenty five. 0:05:30.480 --> 0:05:32.760 George Ferguson, thanks so much for joining us. Always appreciate 0:05:32.800 --> 0:05:35.120 getting a couple of minutes of your time. George Ferguson, 0:05:35.160 --> 0:05:38.960 Senior Aerospace, Defense and Airlines Centers to Bloomberg Intelligence covers 0:05:39.000 --> 0:05:41.559 all the aerospace companies and all the airlines. He sees 0:05:41.560 --> 0:05:44.760 it from the entire three hundred and sixty degree picture 0:05:44.760 --> 0:05:46.760 the whole global aerospace business. 0:05:48.480 --> 0:05:52.160 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:05:52.240 --> 0:05:55.720 weekdays at ten am Eastern on Applecarclay, and Android Auto 0:05:55.760 --> 0:05:58.800 with the Bloomberg Business app. Listen on demand wherever you 0:05:58.839 --> 0:06:01.840 get your podcasts world Watch US live on YouTube. 0:06:02.520 --> 0:06:06.400 Bank of America reported today, City Bank reported today. I 0:06:06.480 --> 0:06:08.560 worked for both of those services back in the day, 0:06:08.720 --> 0:06:10.800 Merrill Lynch, which is now part of Bank of America 0:06:10.920 --> 0:06:13.960 and Solomonbros. Which is not part of City, So I 0:06:14.000 --> 0:06:17.200 always pay attention to these two names both trading up 0:06:17.240 --> 0:06:18.840 here today. So that's a good news. Let's get Alison 0:06:18.880 --> 0:06:21.440 Williams in here. She'll tell us the details here. She's 0:06:21.480 --> 0:06:24.360 a senior alist. She covers all the banks for Bloomberg Intelligence. 0:06:24.400 --> 0:06:27.200 She's been working super hardless last four or five days 0:06:27.200 --> 0:06:30.559 as all these big banks put out their numbers. Also, 0:06:30.600 --> 0:06:32.200 what she like when I think of BFA and I 0:06:32.200 --> 0:06:34.520 think of City, I think is the corporate investment banks 0:06:34.600 --> 0:06:39.039 making loans for big global corporations and that kind of stuff, 0:06:39.080 --> 0:06:41.760 as well as going down to the local branch level. 0:06:41.800 --> 0:06:43.039 What are they telling us today? 0:06:43.600 --> 0:06:45.600 So on the capital. 0:06:45.320 --> 0:06:48.040 Markets side of things, so your your friends, the traders 0:06:48.040 --> 0:06:51.800 and bankers, you know, really good quarter for trading across 0:06:51.800 --> 0:06:55.440 the board. We've had sort of everyone come in equities 0:06:55.480 --> 0:06:58.599 trading better. You know, City did a little bit better, 0:06:58.640 --> 0:07:01.960 and Fick and banking, so that was a key positive. 0:07:02.040 --> 0:07:06.640 But generally we're seeing strength and trading that's helped by 0:07:06.680 --> 0:07:10.320 volatility and fees stalling, so which we know kind of 0:07:10.360 --> 0:07:15.280 as a pause. So that's broadly across the banks. The 0:07:15.320 --> 0:07:17.840 other thing is, you know Q one was good, but 0:07:18.000 --> 0:07:20.520 of course we have not seen the impact of the 0:07:20.600 --> 0:07:24.240 last couple of weeks, but banks are preparing for that 0:07:24.320 --> 0:07:28.280 in perhaps different ways. Bank of America kept their interest 0:07:28.320 --> 0:07:31.440 income guidance stable. But the positive thing there is that 0:07:31.480 --> 0:07:33.680 they are factoring in the four interest rate cuts that 0:07:33.680 --> 0:07:36.360 they're factoring in what we've seen in April, So I 0:07:36.400 --> 0:07:40.880 think that is generally helpful to the shares. You're seeing 0:07:40.920 --> 0:07:44.400 them respond today. Also on the credit provision, you know, 0:07:44.480 --> 0:07:48.480 Bank of America always provides these extra slides. As you 0:07:48.560 --> 0:07:54.200 talked about, there's all different types of businesses. There's concerns 0:07:54.200 --> 0:07:57.080 certainly on the consumer business tends to be higher loss 0:07:57.120 --> 0:07:59.600 in Bank of America showing a slide the shift in 0:07:59.640 --> 0:08:02.640 their portfolio over the long term, but also making the 0:08:02.680 --> 0:08:06.280 point that look, they're reserved at about a six percent 0:08:07.200 --> 0:08:09.880 unemployment rate. That's similar to what we heard from City. 0:08:10.240 --> 0:08:12.160 I'm sorry, that's similar to what we heard from JP 0:08:12.240 --> 0:08:14.080 Morgan and Wells. We're going to hear more from City 0:08:14.080 --> 0:08:18.440 on there call in a bit, but their losses tend 0:08:18.520 --> 0:08:22.000 to be lower. This, you know, responsible growth is something 0:08:22.080 --> 0:08:27.280 that moynihan has championed, championed. Some have been critical when 0:08:27.280 --> 0:08:29.560 things are better, are you taking enough risk? But in 0:08:29.600 --> 0:08:32.880 a period like today, when we're worrying about risk, I 0:08:32.880 --> 0:08:33.560 think that gives the. 0:08:33.640 --> 0:08:36.839 Cushion Allison so up today we're seeing shares up today. 0:08:36.840 --> 0:08:39.040 But if you look here today, we've got Bank of 0:08:39.040 --> 0:08:43.240 America down fourteen percent, City Group down eight percent, Broader 0:08:43.280 --> 0:08:46.439 Financials down about you know, one and a half percent. 0:08:46.880 --> 0:08:49.360 But that being said, what do you think has really 0:08:49.400 --> 0:08:51.760 been the drag for them as of late? Because I mean, 0:08:51.800 --> 0:08:54.680 this sounds like pretty decent news, but you know, on 0:08:54.720 --> 0:08:56.760 a broader scale, that's not necessarily the case. 0:08:57.160 --> 0:09:00.000 So I think that what we saw was a big 0:09:00.120 --> 0:09:03.319 rally in these shares after the election. People were very 0:09:03.360 --> 0:09:08.360 excited about less regulation under the new administration, and we 0:09:08.480 --> 0:09:11.480 saw evidence of that this quarter in terms of buybacks. 0:09:11.840 --> 0:09:14.360 Buy backs were bigger than expected for everybody except for 0:09:14.400 --> 0:09:19.200 Morgan Stanley, a huge announcement by Goldman Sachs and so 0:09:19.840 --> 0:09:23.400 capital return. Being able to return more capital is one 0:09:23.440 --> 0:09:26.319 of the positive benefits that is coming through and that, 0:09:26.600 --> 0:09:30.199 you know, So we had the big rally on less regulation. 0:09:31.400 --> 0:09:33.920 M and A being helped by less regulation was part 0:09:33.960 --> 0:09:36.440 of that. We did get the buybacks. M and A 0:09:36.600 --> 0:09:38.800 is not coming through because there's so much uncertainty in 0:09:38.840 --> 0:09:41.280 the environment. That goes to some of the comments we 0:09:41.320 --> 0:09:44.120 heard earlier just in terms of you know, pipeline are 0:09:44.120 --> 0:09:47.280 they broken or bent. So I do think it does 0:09:47.320 --> 0:09:50.760 depend like if we can get things, you know, changing course, 0:09:50.800 --> 0:09:53.240 if we get some level of certainty, that can improve. 0:09:53.360 --> 0:09:56.680 But if there is more volatility, perhaps not. 0:09:56.920 --> 0:10:00.959 And it really comes down to the economy. So if 0:10:01.000 --> 0:10:03.319 there is a weaker economy, if there is a recession, 0:10:04.120 --> 0:10:05.319 not good for financials. 0:10:05.840 --> 0:10:08.920 So City Group in particular, Jane Freezer, she's about a 0:10:08.960 --> 0:10:11.680 little over halfway through this five year plan for a 0:10:11.720 --> 0:10:12.760 turnaround for the bank. 0:10:13.000 --> 0:10:13.640 How's that going? 0:10:13.679 --> 0:10:15.600 Are people liking what she's doing? 0:10:15.960 --> 0:10:16.760 I think people are. 0:10:16.920 --> 0:10:20.240 She's making progress, So we saw some of that this quarter. 0:10:20.440 --> 0:10:24.040 It's certainly a very long term story, and a lot 0:10:24.080 --> 0:10:27.040 of that has to do with, you know, to some extent, 0:10:27.080 --> 0:10:29.760 when you're fixing things that the regulators want you to fix, 0:10:30.760 --> 0:10:33.240 that can take some time and it's not fully within 0:10:33.280 --> 0:10:33.880 your control. 0:10:34.000 --> 0:10:36.600 I mean, it's within your control to deliver on things. 0:10:36.320 --> 0:10:41.000 But it's it's a negotiation and you have to you know, 0:10:41.080 --> 0:10:44.000 sort of meet those standards as we've seen it Wills Barger. 0:10:44.080 --> 0:10:46.480 That can take a seriously long time. But I do 0:10:46.559 --> 0:10:48.960 think for City Group it's the best thing that could 0:10:48.960 --> 0:10:52.520 have happened to them, because really, you know, the City 0:10:52.520 --> 0:10:56.280 Group is the house that Sandy built and has all 0:10:56.320 --> 0:10:59.559 these different businesses, and I think finally taking the steps 0:10:59.600 --> 0:11:03.920 to nationalize and integrate things and improve the risk management 0:11:03.960 --> 0:11:07.240 systems are good thing in the long term, even though 0:11:07.240 --> 0:11:08.240 there's some pay in your term. 0:11:08.960 --> 0:11:11.720 Brian Moynhan of BIAVE on the conference call this morning, 0:11:11.800 --> 0:11:15.440 did he acknowledge the uncertainty and the decline and consumer 0:11:15.520 --> 0:11:18.680 sentiment just in the last several weeks, in corporate sentiment 0:11:18.679 --> 0:11:20.720 as well. We've seen polling on that. You look at 0:11:20.760 --> 0:11:23.320 the University of Michigan data, people concerned about things. Did 0:11:23.360 --> 0:11:26.840 he acknowledge that and maybe think about how they might 0:11:26.840 --> 0:11:27.640 impact their business? 0:11:28.080 --> 0:11:30.199 You know, he did talk about sort of the pivot 0:11:30.480 --> 0:11:34.000 since a quarter end. He talked about that, especially with 0:11:34.040 --> 0:11:36.960 regard to the reserve build. So again, I think that's 0:11:37.000 --> 0:11:38.400 one of the things that we're seeing a little bit 0:11:38.480 --> 0:11:41.079 different at banks JP Morgan taking. 0:11:40.880 --> 0:11:42.959 A big preserve. Of course, they had a game. 0:11:42.800 --> 0:11:46.320 That helped to fund that whiles doing very little, but 0:11:46.320 --> 0:11:50.280 they were already pretty well conserved. And Bank of America saying, look, 0:11:50.320 --> 0:11:52.560 we do our reserve at the end of March. But 0:11:52.600 --> 0:11:55.400 then there are different factors. We can use judgmental factors 0:11:55.640 --> 0:11:59.400 and different factors to sort of shore up that reserve. 0:11:59.080 --> 0:11:59.680 A little bit. 0:12:00.320 --> 0:12:03.240 And so even though the headline numbers don't look like, 0:12:03.760 --> 0:12:06.760 you know, they're taking big reserves, their credit is good, 0:12:06.960 --> 0:12:09.040 the charge offs are good, and so the fact that 0:12:09.720 --> 0:12:12.280 you know, even just kind of keeping those reserves stable, 0:12:13.920 --> 0:12:16.760 you know, when your credit is improving, shows a level 0:12:16.800 --> 0:12:17.880 of conservatism. 0:12:18.400 --> 0:12:21.000 So big being earnings kicked off on Friday, we're sitting 0:12:21.000 --> 0:12:23.040 here Tuesday. You've gotten so many names that you're kind 0:12:23.080 --> 0:12:25.520 of parsing through right now. But of course, to your point, 0:12:25.520 --> 0:12:28.280 this is a really uncertain period. So what is a 0:12:28.320 --> 0:12:30.599 general expectation. Do we expect that investors are going to 0:12:30.640 --> 0:12:33.800 punish companies harshly if they were to miss or does 0:12:33.840 --> 0:12:35.720 it seem like people are kind of just going along 0:12:35.760 --> 0:12:37.800 with the flow and seeing what's going to happen given 0:12:37.880 --> 0:12:39.920 the you know, tumultuous time period. 0:12:40.000 --> 0:12:42.360 I think it's you know, for for investors, like so 0:12:42.440 --> 0:12:45.520 many other stocks out there, right there's a level of uncertainty. 0:12:46.080 --> 0:12:48.640 And I do think that as you said that, so 0:12:48.679 --> 0:12:51.040 the stocks have come right down, they're factoring in a 0:12:51.120 --> 0:12:54.480 level of risk, but investors have to feel more comfortable 0:12:54.480 --> 0:12:56.680 that they have a handle on those risks or clarity, 0:12:58.240 --> 0:13:01.079 so that that could stop people from from getting involved. 0:13:01.559 --> 0:13:03.800 But in terms of you know. 0:13:03.720 --> 0:13:06.640 It depends on what happens for prere do things get 0:13:06.679 --> 0:13:10.239 worse at the risk of recession rise. You could see 0:13:10.400 --> 0:13:13.520 bigger provisions in the second quarter, and so investors were 0:13:13.559 --> 0:13:17.199 wondering what we see banks being conservative, and I think 0:13:17.240 --> 0:13:19.480 what we saw was back to really saying like, look, 0:13:19.480 --> 0:13:21.320 we're going to wait and see. Okay, you know, as 0:13:21.360 --> 0:13:24.680 of March things are good. We recognize that things are getting. 0:13:24.440 --> 0:13:26.560 A little weaker, but we're going to wait and see. 0:13:26.880 --> 0:13:29.840 Allison, thank you so much, as always appreciated. Alison Williams, 0:13:29.840 --> 0:13:32.800 Senior Alice covering all the global banks for Bloomberg Intelligence, 0:13:33.320 --> 0:13:34.640 City Bank of America. 0:13:34.720 --> 0:13:40.280 Today, you're listening to the Bloomberg Intelligence podcast. Catch us 0:13:40.360 --> 0:13:43.400 live weekdays at ten am Eastern on Apple, Cocklay and 0:13:43.400 --> 0:13:46.680 Android Auto with the Bloomberg Business app. Listen on demand 0:13:46.720 --> 0:13:50.280 wherever you get your podcasts, or watch us live on YouTube. 0:13:50.880 --> 0:13:52.640 One of the big stories that's getting a ton of 0:13:52.720 --> 0:13:56.200 readership on the Bloomberg terminal is Harvard has hit with 0:13:56.280 --> 0:14:01.120 financial retribution after rebuffing Trump. So Harvard University President Alan 0:14:01.160 --> 0:14:05.439 Garber rejected the Trump administration's demands to combat anti Semitism, 0:14:05.679 --> 0:14:09.600 saving concerns over academic freedom and government interference and higher education. 0:14:09.679 --> 0:14:11.680 Let's break this story down with Janet Lawren. She's a 0:14:11.720 --> 0:14:15.000 higher education financial reporter for Bloomberg News. She joins here 0:14:15.000 --> 0:14:19.000 in our Bloomberg in Active Brokers studio. Janet, Harvard seems 0:14:19.000 --> 0:14:24.320 to be one of the few institutions or entities openly 0:14:24.360 --> 0:14:28.320 defining presidential peer what's the view from Harvard's perspective. 0:14:29.040 --> 0:14:32.440 Well, it's true, Harvard is the richest university in America. 0:14:32.520 --> 0:14:35.680 They have a fifty three billion dollar endowment. No one 0:14:35.760 --> 0:14:40.760 comes close. Seventy percent of that money is restricted, so 0:14:40.880 --> 0:14:44.600 it doesn't appear as massive as it seems. But in theory, 0:14:45.720 --> 0:14:48.000 you know, they could afford to try to spend some 0:14:48.080 --> 0:14:51.400 of that endowment. Last year, the endowment contributed two point 0:14:51.440 --> 0:14:54.680 four billion dollars to Harvard's budget of about six point 0:14:54.720 --> 0:14:59.240 five billion. But you know, the federal government has, you know, 0:15:00.080 --> 0:15:01.960 get a lot of money from the federal government, and 0:15:02.080 --> 0:15:05.280 I guess the question is are they willing to risk it? 0:15:05.480 --> 0:15:08.720 And you saw President Trump on True Social just a 0:15:08.720 --> 0:15:11.680 few minutes ago saying, well, he's perhaps going after their 0:15:11.720 --> 0:15:14.360 tax exempt status, so's it's unclear. 0:15:14.440 --> 0:15:14.640 Wow. 0:15:15.000 --> 0:15:17.400 I mean, I just actually had some experience over the 0:15:17.440 --> 0:15:20.240 weekend on this at a place of higher education about 0:15:20.240 --> 0:15:23.560 the finances there and for top research universities. And this 0:15:23.600 --> 0:15:26.600 is a private public relationship that really started after World 0:15:26.640 --> 0:15:28.920 War Two, which is when the America said we need 0:15:28.960 --> 0:15:32.760 to be the leader in key key industries, technology, healthcare, 0:15:32.840 --> 0:15:35.480 so on and so forth. We think the best way 0:15:35.480 --> 0:15:37.760 to do that. This is the US government after World 0:15:37.760 --> 0:15:40.520 War two is a public private kind of relationship. And 0:15:40.600 --> 0:15:44.400 right now the relationship is about two thirds federal funded, 0:15:44.440 --> 0:15:48.800 one third private funding, including the universities themselves. That's big 0:15:48.880 --> 0:15:50.680 money for a lot of these universities. 0:15:51.040 --> 0:15:53.800 It is big money. And you know we've written that 0:15:54.320 --> 0:15:58.280 many times. And you know the federal government also gives 0:15:58.320 --> 0:16:03.160 students millions of dollars to attend universities in the form 0:16:03.200 --> 0:16:06.000 of federal student loans and pel grants and other grants. 0:16:06.640 --> 0:16:11.240 So colleges are quite dependent on the federal government, and 0:16:12.240 --> 0:16:16.600 they're exercising their their views and saying, look, we give 0:16:16.640 --> 0:16:18.600 you a lot of money, and if you don't make changes, 0:16:18.680 --> 0:16:21.200 we have the right to take that away. If they say, 0:16:21.200 --> 0:16:23.920 if you don't follow the law and in talking about 0:16:23.960 --> 0:16:27.320 you know, their their issue in some ways, DEI, if 0:16:28.800 --> 0:16:31.840 if you don't follow the law of their saying discrimination, 0:16:32.440 --> 0:16:34.240 we can we can yank your moneyway. 0:16:34.920 --> 0:16:37.800 So what the sources that you're speaking to, Janet, is 0:16:37.840 --> 0:16:42.280 the expectation that Harvard will remain resolute in this this 0:16:42.480 --> 0:16:44.360 you know where they are right now? Or do people 0:16:44.400 --> 0:16:47.760 think that they're gonna essentially cave. I mean, I saw 0:16:47.800 --> 0:16:50.520 you wrote a story earlier last month about the Columbia 0:16:50.560 --> 0:16:53.320 president stepping down, and I remember that they had initially 0:16:53.320 --> 0:16:55.400 been kind of trying to stand their ground as well. 0:16:55.680 --> 0:16:57.880 So what are you hearing from sources about what people 0:16:57.880 --> 0:16:58.920 are thinking Harvard might do? 0:16:59.080 --> 0:16:59.800 Well, I don't think it. 0:16:59.760 --> 0:17:02.840 Really matters what people think. It matters how they're going 0:17:02.920 --> 0:17:06.879 to get through this because they are dependent on the 0:17:06.920 --> 0:17:08.800 government for a lot of money. Now, if you look 0:17:08.840 --> 0:17:12.000 at Columbia, Columbia is poor compared to Harvard. They only 0:17:12.080 --> 0:17:17.160 have fifteen billion dollars. So it's you know, it's it's 0:17:17.240 --> 0:17:20.560 uncertain what happens next. I mean, the ball is in 0:17:20.640 --> 0:17:24.639 Harvard's court. Are they going to litigate? That could take 0:17:24.720 --> 0:17:28.480 quite a long time. What happens if labs are closing 0:17:28.920 --> 0:17:32.000 or there. You know, from past experience, we're going to 0:17:32.040 --> 0:17:35.480 get stop work orders. You know, we've sort of seen 0:17:35.520 --> 0:17:38.160 this already with a couple of schools getting stop work 0:17:38.280 --> 0:17:40.440 orders and getting money frozen. 0:17:41.119 --> 0:17:44.360 I mean, what are some of the alumni? Is there 0:17:44.359 --> 0:17:47.320 a is there a consistent reaction from the alumni, either 0:17:47.359 --> 0:17:50.200 in support of Harvard or maybe not supporting them. 0:17:50.480 --> 0:17:53.560 Well, you know, I think I think some alumni have 0:17:53.640 --> 0:17:57.920 posted on various social media's people are happy that somebody 0:17:57.960 --> 0:18:00.560 has stood up to Trump. But you have to remember 0:18:00.600 --> 0:18:04.600 the federal government has a lot of power. Yes, and 0:18:04.640 --> 0:18:07.480 perhaps fifty three billion dollars seems like a lot of money, 0:18:07.520 --> 0:18:09.760 But I mean, how much does it? How much money 0:18:09.760 --> 0:18:11.680 does the federal government go through in one day? 0:18:11.920 --> 0:18:13.920 So what our next steps here? I mean, I see 0:18:13.920 --> 0:18:18.359 that the Harvard has officially rejected the administration's demands here, So. 0:18:19.359 --> 0:18:21.040 We're in unchartered territory. 0:18:21.200 --> 0:18:23.800 Okay, if you asked me to predict any of this, 0:18:24.160 --> 0:18:26.199 I know it's hard to know. 0:18:26.720 --> 0:18:29.160 I see in your story you say that former Harvard 0:18:29.200 --> 0:18:33.120 president Larry Summers says that the statement drew support from him. 0:18:33.240 --> 0:18:35.879 He said that he hoped other universities would adopt a 0:18:35.920 --> 0:18:40.280 similar stance to defend academic freedom. Is he alone in 0:18:40.320 --> 0:18:43.280 that or are you hearing other people on the same side. 0:18:43.359 --> 0:18:49.040 I think there is an interest in having entities try 0:18:49.040 --> 0:18:51.160 to stand up to Trump. We saw this with some 0:18:51.280 --> 0:18:56.000 law firms. But in some ways, the federal government holds 0:18:56.040 --> 0:18:56.840 all the cards. 0:18:57.720 --> 0:19:01.240 What are other universities doing? Have we heard from anybody else? 0:19:01.359 --> 0:19:05.000 Has anybody been in a target like Harvard Princeton has? 0:19:05.280 --> 0:19:09.720 Princeton's president has been outspoken. But keep in mind Princeton, 0:19:10.160 --> 0:19:12.800 while they've produced many Nobel Prize winners, they do not 0:19:12.880 --> 0:19:16.320 operate a medical school. Most of the grants are NIH 0:19:16.440 --> 0:19:20.840 funding grants to medical schools, grants for scientific research. 0:19:21.320 --> 0:19:22.159 You know, there's only a. 0:19:23.760 --> 0:19:26.800 Handful of schools that are receiving the kind of money 0:19:26.840 --> 0:19:31.879 that Princeton. Stanford MIT also does not operate a medical school, 0:19:31.880 --> 0:19:36.920 but there had also received cuts in Department of Energy, 0:19:37.040 --> 0:19:41.119 in Department of Defense. So remember, you know, NIH is 0:19:41.280 --> 0:19:44.560 one federal agency. It's the biggest, but there's a lot 0:19:44.560 --> 0:19:48.240 of them out there. I believe Cornell had frozen funding 0:19:48.320 --> 0:19:49.359 from Agriculture. 0:19:49.840 --> 0:19:52.240 Interesting. I mean, and again, these are grants from the 0:19:52.320 --> 0:19:56.960 US government in most cases to fund research and development. Correct, right, 0:19:56.960 --> 0:19:58.960 they're not these aren't we're giving you money just to 0:19:59.000 --> 0:20:02.120 give you money. They're they're investing in research, their buying research. 0:20:02.240 --> 0:20:03.040 That is correct. 0:20:03.160 --> 0:20:06.919 And earlier in the conversation you mentioned DEI, how has 0:20:06.960 --> 0:20:09.679 Harvard been really viewing the pushback from the government on that? 0:20:09.720 --> 0:20:13.080 How have they been responding? In about thirty seconds or less. 0:20:13.119 --> 0:20:16.119 Well, we did a big story earlier this year about 0:20:16.119 --> 0:20:19.800 the decline in black freshman first year law students at 0:20:19.800 --> 0:20:23.320 Harvard Law School, and you know they they have to 0:20:23.359 --> 0:20:24.040 follow the law. 0:20:24.680 --> 0:20:27.240 All right, Very good, Janet Lauren, thank you so much 0:20:27.400 --> 0:20:29.639 for joining us. Sir Jena Laurren. She's a higher education 0:20:29.720 --> 0:20:35.280 finance reporter again talking about Harvard and its discussions and 0:20:35.320 --> 0:20:38.240 I guess differences with the US with the Trump administration 0:20:39.040 --> 0:20:42.320 and the financial risk associated with that. So I'll have 0:20:42.320 --> 0:20:43.400 to see how that plays out. 0:20:44.000 --> 0:20:48.679 This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 0:20:48.880 --> 0:20:52.359 and anywhere else you get your podcasts. Listen live each 0:20:52.359 --> 0:20:56.160 weekday ten am to noon Eastern on Bloomberg dot Com, 0:20:56.240 --> 0:20:59.800