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Speaker 1: the autoparts maker for seven dollars a share, and futures

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Speaker 1: are pairing their earlier losses following a second weekly game

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Speaker 1: for the SNP five index. This is after China's central

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Speaker 1: Bank stepped up efforts to cushion the country's economic slowdown.

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Speaker 1: SNP e Many Future is now down one and a

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Speaker 1: half points down, Emuni futures down fifteen, naz Documny futures

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Speaker 1: down nine, DAX in Germany down one per cent, ten,

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Speaker 1: Your Treasury up three thirty seconds. The YELP one point

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Speaker 1: seven five percent Nimex corn oil up six tents per

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Speaker 1: cent or twenty one cents. Thirty barrel comics gold is

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Speaker 1: up nine or ten dollars eighty cents a twelve thirty

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Speaker 1: one thirty announced the euro a dollar eight eight six,

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Speaker 1: the N one thirteen point oh nine. That's a Bloomberg

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Speaker 1: business flash, Tom and Mike, thank you. Karen. We're talking

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Speaker 1: with Phil Swegel, Senior Fellow and professor at the University

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Speaker 1: of Maryland School of Public Policy. Formerly Assistant Secretary for

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Speaker 1: Economic Policy at the Treasury Department. He helped write the

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Speaker 1: original Tarpe legislation that bailed out the banks. Now he's

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Speaker 1: looking at what happens next and arguing that Dodd Frank

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Speaker 1: had better work, or we could be in a lot

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Speaker 1: of trouble. Uh, the next crisis you suggest is out there.

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Speaker 1: It will happen. But the thing is, we never know

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Speaker 1: exactly how it's going to happen. So how do we

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Speaker 1: know that Dodd Frank addresses the right things? Right? I mean,

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Speaker 1: that's that's the problem. If we knew, of course, people

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Speaker 1: would address it. I was just thinking doing the n

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Speaker 1: G I T commercials that that's you know, the kinds

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Speaker 1: of things they're talking about are super important. We do

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Speaker 1: have a cyber related crisis. Uh you know something from China? Uh,

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Speaker 1: like you know who knows. Um, there's a lot of

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Speaker 1: important steps that have been taken that the banks are

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Speaker 1: are in much better position now than they were before

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Speaker 1: the crisis, much more capital um, They're much more resilient,

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Speaker 1: and that's important. Um. The FED is imposing a new

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Speaker 1: requirement on them for essentially convertible capital, the so called

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Speaker 1: t LAC uh loss absorbing capital um. And you know,

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Speaker 1: but ultimately we still are going to have a crisis

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Speaker 1: at some point. It'll be a big one. And that's

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Speaker 1: where the new tools and dot frank that the title

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Speaker 1: to the resolution Authority, that's where they come in. And

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Speaker 1: that's why I focus so much on that in my paper. Still,

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Speaker 1: good morning and congratulations on time in your paper, I'm

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Speaker 1: sure you knew that Neil cash Carry was coming down

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Speaker 1: the pike. I did not know that the paper has

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Speaker 1: written before I knew anything about Neil, but obviously we

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Speaker 1: were Letnil and I worked together in the crisis. And

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Speaker 1: if anyone who's there, you know, uh as in thinking

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Speaker 1: about these issues, are you going to go to minne

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Speaker 1: apples to his sire. Oh, you know, I certainly would

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Speaker 1: if if he wants to include me. I'm not you know,

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Speaker 1: I'm not going to the first one I saw. He's uh,

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Speaker 1: you know, he's launching with Professor Maddy from Stanford and

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Speaker 1: Simon Johnson from what is your that's wonderful. What is

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Speaker 1: your distinction between Johnson of thirteen bankers? Uh? Not? Is

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Speaker 1: is I guess most hated professor coast to coast among bankers?

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Speaker 1: What is the Swagel distinction between those two first class academics.

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Speaker 1: I'm sure they're they're excellent academics. Um. You know, Simon

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Speaker 1: is a little bit hard to know what he's actually

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Speaker 1: calling for. Um. Mardi is a very clear message more capital,

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Speaker 1: and the problem is that is tough to figure out

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Speaker 1: how much more capital? And right, she has a whole

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Speaker 1: book that doesn't you know, busy doesn't take that on

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Speaker 1: and in fact, she actually criticizes the people who try

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Speaker 1: to do that hard work. So to me, that's that's

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Speaker 1: why my or what Neil is doing is that he's saying, look,

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Speaker 1: this is an important question, and he wants to do

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Speaker 1: the work right. He's got the whole staff out there

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Speaker 1: in Minneapolis, excellent staff, and they're going to do it,

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Speaker 1: and it's ultimately his cost benefit analysis, and he wants

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Speaker 1: to actually do the work and not you know, not

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Speaker 1: talking to something. If he used to break up the bank,

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Speaker 1: so he does it by fourth of July, that's a joke, folks.

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Speaker 1: But if he used to break up the banks, what's

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Speaker 1: he do? Was it like John D. Rockefeller and I

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Speaker 1: did tarboll and the breaking up of Standard Oil? I mean,

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Speaker 1: help me here, you know that's right? I mean, look,

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Speaker 1: a lot of people, when you know IBM and A

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Speaker 1: T and T we're having this happen to them, had

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Speaker 1: dire predictions and that has worked out pretty well. Um. Look,

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Speaker 1: he's got a menu of things in his his launch speech.

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Speaker 1: Um breaking them up as one possibility. But as you're

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Speaker 1: kind of hinting at, if we had three really big,

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Speaker 1: really big banks instead of one enormous JP Morgan Chase,

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Speaker 1: would that thing be? Would that those three energies be safer?

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Speaker 1: It's not. Yeah, it's not at all clear the Fed.

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Speaker 1: Um are they doing enough right now that Neil needs

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Speaker 1: to supplement what they're doing? Um? You know, Dant rule

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Speaker 1: seems to have been fairly firm on all of this. Um.

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Speaker 1: You know, the FED has done a lot of good things.

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Speaker 1: The you know, more capital uh is by far the

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Speaker 1: most important thing, and that's what you know, an auto

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Speaker 1: Madi from Stanford, that's really been her her call. On

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Speaker 1: the other hand, the FED is is oddly responsive on

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Speaker 1: regulatory issues to political pressures. And I look at that

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Speaker 1: and you know, at least two ways right. One is

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Speaker 1: on the liquidity rule, essentially making sure banks have have

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Speaker 1: adequate high high quality liquidity, where the FED is allowing

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Speaker 1: municipal bonds to act as high quality liquidity, which you

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Speaker 1: know is those things are going to be liquid until

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Speaker 1: the next crisis and then they're then they're not um

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Speaker 1: and I said, also essentially viscerated the risk retention pro

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Speaker 1: visions and Dodd Frank the sort of skin in the

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Speaker 1: game that you know, originators to keep exposure to the

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Speaker 1: you know, to the risk they're they're bundling into securities.

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Speaker 1: So the said has done a lot of good but

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Speaker 1: on regulatory policy, including Dan Tarullo, they're oddly responsive to

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Speaker 1: political pressure. Do you think that they have weakened the

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Speaker 1: Dodd Frank regulations in a way that could be dangerous?

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Speaker 1: You know, in some ways the risk retention, and that

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Speaker 1: there's two I just pointed out risk retention and liquidity

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Speaker 1: for sure. You know, others I think they've improved what

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Speaker 1: Dog Frank has in there, for example, the vocal rule,

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Speaker 1: which is basically a solution and in search of a problem.

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Speaker 1: The said implemented that in a way that I think

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Speaker 1: is the least damaging to the economy, but by turning

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Speaker 1: it into a way to improve risk management. Um. So

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Speaker 1: that's you know that that's to the sets credit. So

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Speaker 1: it's it's a mix and and there is good in

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Speaker 1: Dodd Frank and you know not many Republicans are willing

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Speaker 1: to say that. Uh, and you know that's the challenge

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Speaker 1: is to maximize a good within this How do you

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Speaker 1: respond to bank our types? And of course Mr Rattner

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Speaker 1: with this a week ago. So in defense of our

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Speaker 1: international expansion of banks, Phil, do we risk losing our

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Speaker 1: international excellence and transactional banking. That's absolutely it's a danger,

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Speaker 1: and that that I would put on the benefits side

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Speaker 1: of the ledger of large banks. And that to me

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Speaker 1: that you know, this is a it's not it's not

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Speaker 1: like a math problem like arithmetic, but it's an analysis

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Speaker 1: problem and trying to do the cost benefit analysis, and

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Speaker 1: that's what you highlighted. We have global banks that are excellent,

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Speaker 1: and we have a big trader plus in financial services,

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Speaker 1: suggesting that we have uh, you know this, this excellence

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Speaker 1: and we don't want to lose the good unless it's

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Speaker 1: outweighed by the bad. Is it necessary to have banks

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Speaker 1: as big as we have them? Now? You know that?

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Speaker 1: To me, that's the hardest question, because you can say,

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Speaker 1: you know, look are some activities where you want a

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Speaker 1: global bank with global reach. You know, you're you know,

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Speaker 1: some multinational corporation arranging financial facilities around the world. On

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Speaker 1: the other hand, Neil in his first speech, there's Q

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Speaker 1: and A where he basically said, look, you know, multinational

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Speaker 1: corporations have thousands of suppliers, and why, you know, why

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Speaker 1: can they buy nutting bolts from ten different companies but

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Speaker 1: not obtain funding from ten different banks? And that's a

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Speaker 1: you know, that's a legitimate question. Just just great. What

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Speaker 1: else did you learn in your paper? One of the things,

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Speaker 1: folks that's great about Phil Schwegel. As he works at

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Speaker 1: his papers, he grinds them out. How many times did

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Speaker 1: you rewrite the paper? I'm guessing ten times? Yeah, I

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Speaker 1: think that's right. It was reginally a presentation at the

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Speaker 1: Chicago FEDS Banking Conference, and then I had the chance

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Speaker 1: to go back and you know, write it up properly.

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Speaker 1: What the rewrite? What you learning the rewrite? You didn't

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Speaker 1: know when you started the paper, you know, I honest,

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Speaker 1: I have been in a defender of large banks against

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Speaker 1: some of the attacks, and I have a paper, actually,

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Speaker 1: I have a piece in Bloom Review from saying we

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Speaker 1: don't want to make big banks too small to succeed.

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Speaker 1: And I still think that's the case. And that's that's

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Speaker 1: the benefits side. You know, as I did the paper,

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Speaker 1: thinking about the next crisis, that's when I started to think,

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Speaker 1: you know, the title to regime. It kind of sounds

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Speaker 1: good on paper, but let me think about actually using it,

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Speaker 1: you know, go back into policy making, uh, you know, world,

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Speaker 1: and think about using it. And and that's where I became,

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Speaker 1: you know, some somewhat more um, you know, more worried.

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Speaker 1: Thanks today, formerly at the Treasury Department, now you oversee

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Speaker 1: a v School of Public policy in affiliated with the

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Speaker 1: Milk And Institution. Yes, the paper came out through the

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Speaker 1: Milk And Institute, and you know, a lot of people

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Speaker 1: looking at the banking system these days and what could

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Speaker 1: and should be done. What we're trying to do, folks,

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Speaker 1: is give you a lack of hysteria. Mike and I

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Speaker 1: will make and fully tried to do that tomorrow. What

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Speaker 1: do they call the elections tomorrow? Super? Super? No? Well,

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Speaker 1: I don't know. You know there's a political debate on that.

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Speaker 1: Boy was it front and center over the weekend. We

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Speaker 1: will be in Washington tomorrow and support of FM Washington

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Speaker 1: and Baltimore. Thrilled to come down there to see Mgan

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Speaker 1: Murphy and al Hunt the team in Washington. Uh, they

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Speaker 1: will be distributed across the nation. We decided to go

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Speaker 1: to the nation's capital in conversation with Jason Furman, Chairman

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Speaker 1: of the President's Council of Economic Advisors, and then an

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Speaker 1: important conversation with Alan Greenspan, our first conversation with the

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Speaker 1: chairman since the advent of what I'm gonna call global

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Speaker 1: negative interest Rich really looking forward to that and maybe Mike,

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Speaker 1: we can also talk to the chairman about productivity in

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Speaker 1: that mystery. Lots to talk about with your Greenspan. Yes,

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Speaker 1: we could get an up to on spring training Washington style.

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Speaker 1: Good morning, Washington FM, all of you nationwide Series ex

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Speaker 1: Emp Channel one nineteen. This is Bloomberg's surveillance. We have

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Speaker 1: another hour for you.