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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with

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Speaker 1: David Gura. Daily we bring you insight from the best

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Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance

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Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course

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Speaker 1: on the Bloomberg Right Now, David Gura and Tom Keene

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Speaker 1: in New York with Jonathan Gollub of Credit Sueeze and

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Speaker 1: on this Monday at sn in the morning, maybe this

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Speaker 1: is the equity interview of the week. John, You're not

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Speaker 1: only optimistic, but you're double digit optimistic. So few agree

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Speaker 1: with you. What do they get wrong? I think that

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Speaker 1: there's this belief that if you're optimistic on stocks, you

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Speaker 1: have to think that the economy is going to, you know,

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Speaker 1: have this tremendous momentum behind it. And our view is

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Speaker 1: that we are in a good economy, but that valuations

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Speaker 1: will drift higher because the risks right now, especially around

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Speaker 1: the potential for recession, are really much lower than average,

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Speaker 1: and that lack of risk is what will push the

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Speaker 1: stock market higher. What's your counsel of how worried or

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Speaker 1: cognizant we should be of recession risks at this point,

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Speaker 1: What are you looking at and what would you advise

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Speaker 1: clients to to do at this point when it comes

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Speaker 1: to fear of or or worry about a recession. So

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Speaker 1: we put together this credit Swiss recessionary dashboard and we

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Speaker 1: look at things like is the yield curve flatter inverted? Um?

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Speaker 1: Absolutely not? Do you have our jobs being created? Yes?

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Speaker 1: Do you have is inflation um under control? Yes? Are

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Speaker 1: you seeing UM construction activity improving as opposed to contracting? Yes?

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Speaker 1: Are you seeing credit write downs um? Corporations are able

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Speaker 1: to meet their dead obligations? Yes? Um. If you look

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Speaker 1: at each of these seven criteria, were are about as

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Speaker 1: solid as we've ever been. What role is the Fed

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Speaker 1: playing in all of this? Is you look at that dashboard?

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Speaker 1: How much are you paying attention to what the central

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Speaker 1: banks are doing? And what does the j Powell nomination

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Speaker 1: mean for markets going forward? Well, so that that's that's

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Speaker 1: two questions first, the first, right, the first first come

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Speaker 1: on at a time. Monday's folks, we don't do this.

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Speaker 1: Let's start with how co you are with the Fed?

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Speaker 1: Is well? All right? Um? All right, So since us

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Speaker 1: I'll answer in the other direction. But we know but so,

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Speaker 1: but Powell really is a continue The market is perceiving

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Speaker 1: it as a continuation of yelling type um governance, and

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Speaker 1: so I think that that alone probably means that that

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Speaker 1: it's not surprising that it got very very little reaction.

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Speaker 1: But the there's this consensus view that the FED ultimately

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Speaker 1: is propping the market up by all of this money printing,

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Speaker 1: and then if they stop printing, bad things are going

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Speaker 1: to happen, and I just agree with that wholeheartedly. I

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Speaker 1: think that the market is doing well because the economy

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Speaker 1: is doing well. I think the Fed is doing is

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Speaker 1: actually responding to the economy um as opposed to the

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Speaker 1: other way around. And therefore, um if they remove some accommodation,

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Speaker 1: I think the market is gonna be perfectly fine. But

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Speaker 1: I will tell you that's not the consensus view. The

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Speaker 1: consensus view is, oh my god, they're gonna remove liquidity.

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Speaker 1: Bad things are gonna happen, and I just think that

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Speaker 1: that's off base. It's been almost a year since since

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Speaker 1: election night. You were around the building on election night

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Speaker 1: as we did the coverage of the results coming in.

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Speaker 1: What have we learned about the markets in that year since?

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Speaker 1: ALASKI about the prospects for tax form and all that

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Speaker 1: in just a sec But but in terms of enthusiasm

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Speaker 1: for policy this administration, what have we learned in these

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Speaker 1: interviewing three six, five days. Um, well, a bunch of things.

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Speaker 1: I mean, the one that that's perhaps the most interesting

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Speaker 1: is there was this belief that, and once we kind

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Speaker 1: of shook off the surprise of the election, was that

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Speaker 1: Trump was going to have this huge impact via tax changes,

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Speaker 1: and the market has really taken the opposite side of that.

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Speaker 1: That trade in the last six months, and more specifically,

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Speaker 1: those companies that would benefit the most from tax changes

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Speaker 1: have actually underperformed since, um, you know, since his inauguration,

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Speaker 1: and I think that that's been a big surprise for many.

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Speaker 1: So it was the market either saying one of two things.

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Speaker 1: Either I don't think that these are ever going to

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Speaker 1: get implemented into law, or in year nine of a

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Speaker 1: recovery cycle with an economy that's in pretty stable footing,

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Speaker 1: maybe we don't need or want a big late cycle

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Speaker 1: stimulus plan that would create inflationary pressure. So we can

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Speaker 1: argue why the market's not celebrating this potential for for

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Speaker 1: tax reform. But that's what the markets saying I'm gonna

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Speaker 1: ask you what what companies stand to benefit the most

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Speaker 1: should it get three. You've done a great list of

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Speaker 1: of all the companies you're finally have who have some

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Speaker 1: upside here broadly speaking, what types of companies here would

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Speaker 1: benefit most from from tax Again, I think that we

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Speaker 1: have to split this into two things. If you said

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Speaker 1: that we're going to get tax reform, but we weren't

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Speaker 1: going to get any inflationary pressure the economy, and the

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Speaker 1: FED wasn't going to respond to this stimulus by tightening

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Speaker 1: policy more than expected, then it would be companies that

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Speaker 1: are more domestically oriented that can't avoid taxes offshore. And

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Speaker 1: these could be you know, retailers would be a good example.

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Speaker 1: Those should be the biggest wins, and the biggest losers

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Speaker 1: are industrial companies that do a lot of business offshore

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Speaker 1: that have very low tax effective tax rates. Um. But

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Speaker 1: I think that the second issue is the more important

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Speaker 1: one is do you get some other feedback loop? And

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Speaker 1: that's what investors very often miss its and things don't

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Speaker 1: move in a straight law and investment land. UM. So

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Speaker 1: if this is stimulus, does that overheat the economy? Does

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Speaker 1: the force of FED? And and that's the part that

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Speaker 1: people may miss headline crossing the Bloomberg. Here we're talking

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Speaker 1: about the President of the New York Fed, Buil Dudley,

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Speaker 1: announcing his retirement mid two eighteen that according to the

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Speaker 1: New York Offensive, confirming what had been reported over the

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Speaker 1: course of the weekend. As we mentioned, Tom sitting down

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Speaker 1: with the President New York Fed a little bit later,

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Speaker 1: a little lunch for four people. Let's let me explain

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Speaker 1: to our global audience, it is always appropriate when the

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Speaker 1: New York Fed president speaks to the Economic Club of

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Speaker 1: New York, John, what's the question I get to ask

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Speaker 1: him questions? Being a good gentleman from the Economist magazine,

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Speaker 1: what's the question you would ask? They're very retiring, Bill Dudley,

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Speaker 1: one of the perhaps more anything else. And this is

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Speaker 1: the guy who, remember it's not that he runs the Fed,

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Speaker 1: but he's the one who's in touch with the way

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Speaker 1: the markets are going to respond to Fed policy. UM,

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Speaker 1: I'd want to get a better understanding of what it

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Speaker 1: means if and when the Fed continues to move forward

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Speaker 1: with balance sheet liquidation and and how do they how

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Speaker 1: do they equate a little bit of tightening from the

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Speaker 1: FED funds rate with with balanty liquidation. How do they

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Speaker 1: weigh these against each other? How should the market perceive it?

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Speaker 1: I'll give Bloomberg Radio a first look at this. One

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Speaker 1: of my questions will be under crisis, how does a

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Speaker 1: non PhD listen to the fancy pants PhDs the FED

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Speaker 1: like the gentleman from Berkeley. I think with a four

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Speaker 1: standard deviation move in, John gollubs world down down, down

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Speaker 1: seventent You picked the gloom, John, How does a non

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Speaker 1: economist chairman and chairman Powell listen to people like Bill Dudley?

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Speaker 1: I think Bill's got real knowledge on it. It's it's

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Speaker 1: a it's a it's a great Is that okay question? No? No,

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Speaker 1: it's it's it's it's a it's a great question. And

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Speaker 1: I think if you look at the uh, you know,

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Speaker 1: the leadership of FED by academics, I think that there's um,

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Speaker 1: you know, in hindsight, I'm sure that there's a lot

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Speaker 1: of skepticism over the you know. One is how they've

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Speaker 1: did help with the crisis, which I think they've gotten

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Speaker 1: tremendously good marks on. And then what does the world

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Speaker 1: look like after that when the world has returned to

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Speaker 1: normal as a separate question. Here's an email coming in,

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Speaker 1: David Girl, Neil Sauce on the shortlist, like place Bill Dudley.

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Speaker 1: You're supposed to say, John, Yes, Dr Sauce would be

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Speaker 1: a wonderful So we we we we love Niel Sauce.

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Speaker 1: Neil Sauce Folks is vice chairman of research for all

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Speaker 1: of Credits, is extremely qualified. Looking at the release here,

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Speaker 1: Bill Dudley's dream is expected to end in January of

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Speaker 1: two thousand nineteen, So Bill, that would be leaving here

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Speaker 1: a bit early mid two thousand and eighteen, he's saying.

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Speaker 1: And a note here in the release from the New

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Speaker 1: York Fed uh search will will begin shortly and they

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Speaker 1: expect that search to conclude by mid two thousand and eighteen,

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Speaker 1: depending on finding the best candidate. UM, so look for

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Speaker 1: more clear on that. I have a moment of silence

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Speaker 1: for Terry Longer and the Macy's CEO, and also ahead

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Speaker 1: of the Economic Club of New York who's on the committee,

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Speaker 1: and I believe he'll be on the committee at the

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Speaker 1: New York Fed. You didn't know this was happening, you know, honestly,

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Speaker 1: I mean if I if I knew, I wouldn't tell you.

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Speaker 1: But the answers. No, I had absolutely no clue in all,

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Speaker 1: but I'll tell you guys like Terry London are going

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Speaker 1: to be absolutely inundated with names um to take this

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Speaker 1: extremely important a position and might point out a position

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Speaker 1: under crisis. Bill Dudley, Uh, wonderful guy will retire mid

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Speaker 1: two thousand eighteen from the Fed, and again he will speak.

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Speaker 1: Matt Bessler and our team will have full coverage of

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Speaker 1: that speech from the Economic Club of New York, and

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Speaker 1: my questions to President Dudley have shifted from the minutia

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Speaker 1: to the bigger and broader. Coming up, Francia Kwan London

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Speaker 1: an exceptionally timely conversation with the Secretary of Commerce Wilbur

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Speaker 1: Ross in the News as we can, David, what Cyprus

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Speaker 1: and Russia is that sort of members of the Putin

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Speaker 1: family as well? He denying all of that being improperly.

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Speaker 1: So we'll see what he has to say to Francin

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Speaker 1: here in just a few minutes. Maybe Mr Ross can

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Speaker 1: buy the New York Giants and put him out of

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Speaker 1: their misery as well. Coming up, Wilbert Ross, stay with

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Speaker 1: us worldwide. This is Bloomberg. He has been on the

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Speaker 1: show too many times as an industrialist, as a financier

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Speaker 1: out of Yale University. Wilburt Ross selected by the President

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Speaker 1: to be Secretary of Commerce, best known over the last

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Speaker 1: number of months for Ross Navarro, which was a white paper.

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Speaker 1: He actually showed it to me at one point at

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Speaker 1: an Economic Club of New York meeting, and uh, that

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Speaker 1: was controversial to say the least. Now more controversy with

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Speaker 1: Secretary Ross over the weekend his relationships with Russia, Russia

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Speaker 1: and Cyprus. From London. Here is Francine Laqui with the Secretary.

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Speaker 1: We need to talk about tax but I also need

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Speaker 1: to ask you about the Paradise papers. So he's certainly

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Speaker 1: in the papers quite a lot. Today. You've retained investments

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Speaker 1: in a shipping firm that has business ties to the

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Speaker 1: son in law of the Russian president but also an

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Speaker 1: oligarch under sanction with hindsights. Should you have divested this stake? Well,

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Speaker 1: first of all, let me correct what you just said.

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Speaker 1: We have no business ties to those Russian individuals who

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Speaker 1: are under sanction. Prior to my joining the board of Navigator,

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Speaker 1: they entered into some charter arrangements with Cyborg, which is

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Speaker 1: a big Russian hydrocarbon company. I had nothing to do

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Speaker 1: with the negotiations, never met the people under sanction. Cyborg

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Speaker 1: never has been under sanction, So there's nothing whatsoever wrong

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Speaker 1: with Navigator having a deal with them. Second, as to

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Speaker 1: the disclosure, much has been made that it wasn't disclosed.

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Speaker 1: It was in three places on my form to seventy eight,

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Speaker 1: which is public document at place ten point one four

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Speaker 1: point one point three, ten point one, five point one

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Speaker 1: point three and two four point one point four point too,

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Speaker 1: as well as on the Office of Government Ethics website

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Speaker 1: public website the symbol is o g E dot CoV okay.

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Speaker 1: Couldn't be more clear. But with hindsight, Again, there are

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Speaker 1: allegations about ethics, about you know, creating a conflict of interest.

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Speaker 1: Do you think you should have divested this? Well, there

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Speaker 1: is no conflict of interest. We don't regulate shipping and

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Speaker 1: that's why the o g E let me retain shipping interests.

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Speaker 1: Would you welcome an investigation into this? Investigate what? But

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Speaker 1: is there not an ethical question that needs to be

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Speaker 1: raised that you've done no nothing illegal, right, and that's

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Speaker 1: very clear, very good, nothing even improper at all. Um,

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Speaker 1: The o g E came to an independent decision. Plus,

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Speaker 1: before I meet with any corporate party, the O g

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Speaker 1: E clears a that I can meet and be the

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Speaker 1: accent to which I can participate in conversations. I have

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Speaker 1: never sought a waiver from any of those strictures. You're

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Speaker 1: keeping the steak? I didn't say that. That's a different question.

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Speaker 1: You're saying, was there anything improper? There's nothing improper, either

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Speaker 1: in the way we've handled net meetings or in the

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Speaker 1: investment itself. Will you keep the steak? Probably not have

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Speaker 1: been actually selling it anyway, but um that isn't because

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Speaker 1: of this it Talk to me a little bit about

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Speaker 1: your upcoming trip to China. What is the president's stands

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Speaker 1: on dealing with China when it comes to terroriffs and steel. Well,

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Speaker 1: we are hoping for some specific deliverables. We're un leading

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Speaker 1: a trade mission of some twenty nine US companies over there,

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Speaker 1: and we hope to come away it's some very tangible

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Speaker 1: and hopefully large UH deals for them. What are you

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Speaker 1: doing in London? Are you talking trade in post Braxit London?

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Speaker 1: Is several several different things. UM as spoke to the

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Speaker 1: Trilateral Commission UH, speaking to the b C, I, UM

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Speaker 1: doing all kinds of things, as well as meeting with

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Speaker 1: various government officials, and I went to the Balfour Centennial dinner. Okay, Secretary,

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Speaker 1: if there is a Brexit that actually really rips out

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Speaker 1: the UK out of the EU, how quickly can the

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Speaker 1: US have a trade agreement with the UK. We should

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Speaker 1: go pretty fast, because well, we can't negotiate right now,

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Speaker 1: that's forbidden under EC rules. We do have a working

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Speaker 1: group that meda in July in Washington is meeting next

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Speaker 1: week here in London. So they're kind of scoping things

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Speaker 1: out and going as far as they can without violating

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Speaker 1: the EU regulation to make preparation. Will you also talk

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Speaker 1: with the opposition Labor Party in case there's a change

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Speaker 1: of people in charge. I think we'll be talking with

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Speaker 1: whoever is the government. Mr russ One very last question

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Speaker 1: when you look about trade, we're expecting the status of

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Speaker 1: the investigation into imports of steel and aluminium. When will

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Speaker 1: we get that well, as the President has indicated, that

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Speaker 1: will be some time after the tax legislation is dealt with,

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Speaker 1: So that should be when you respect tax the rappid

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Speaker 1: hopefully pretty soon before Christmas. We would likely think it

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Speaker 1: would be a wonderful Christmas present for the American business

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Speaker 1: and consumer to get a tax reduction. So we hope

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Speaker 1: so Secretary Ross in London with our fancy and a qualm.

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Speaker 1: You might note the first interview David Dunne from ours

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Speaker 1: that right in London. I believe that was done by

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Speaker 1: Mansion House. There's done by Wardour Street or whatever. I

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Speaker 1: can't remember now. Mental block Christopher Wren's churches right there.

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Speaker 1: St Stephen's as well. Speaking of St. Michael's. Here Michael

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Speaker 1: McKinnon to talk to us about Lord Dudley leaving the

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Speaker 1: New York Fed. I want to go, Mike, just because

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Speaker 1: the time to How is a New York Fed president selected?

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Speaker 1: The answers, it's a lot like the other banks. But

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Speaker 1: boy is it a different process? Well, it's it's different

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Speaker 1: than the Federal Reserve Board. We should make that clear.

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Speaker 1: Members of the Federal Reserve Board. There's three openings now

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Speaker 1: if Jane leaves before nominated by the President, confirmed by

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Speaker 1: the Senate. Individual federal reserve banks have boards of directors,

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Speaker 1: and those boards of directors whose the person to be president.

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Speaker 1: The Fed Board in Washington has vitail power, never exercised

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Speaker 1: it on a nominee, but they do have to get

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Speaker 1: approved by the FED. The President of the United States

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Speaker 1: does not, he has no role. The other thing is

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Speaker 1: there are three classes of directors of each Each FED

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Speaker 1: bank has nine directors three classes. One class is bankers

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Speaker 1: at the New York FED, it's James Gorman from Morgan Stanley,

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Speaker 1: Paul Mellow of salve A Banks, Jerry Lipkin of Valley

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Speaker 1: National Bank. None of those can take part. Only the

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Speaker 1: other directors, the Class B directors who are finance, and

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Speaker 1: Class C directors who are in theory is supposed to

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Speaker 1: represent the public. Emily Rafferty of the Metropolitan Museum of Art,

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Speaker 1: she's she's a Class C director. Sarah Harowitz is the

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Speaker 1: chairman of the FEDS Board of Director New York FEDS

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Speaker 1: Board of Director. She's the executive director of the Freelancers Union.

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Speaker 1: She's leading the search along with Glenn Hutchins, who is

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Speaker 1: the co founder of Silver Lake Partners. In the news

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Speaker 1: for the reasons this is this is like a free

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Speaker 1: for all. Let's be blunt you. The history of this

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Speaker 1: over the last thirty years is everybody piles on for there. Well,

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Speaker 1: it's very interesting. The New York Fed obviously the most

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Speaker 1: important of the FED banks, and so they tend to

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Speaker 1: hire really big names. It's been a mixture of internal

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Speaker 1: candidates over the years and external candidates. Two of the

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Speaker 1: the New York feds most prominent presidents, Jerry Corrigan and

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Speaker 1: Paul Volker, were president of the Minneapolis FED when they

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Speaker 1: were selected, and so some people are looking at Neil

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Speaker 1: cash Gary and wondering what he's doing the next couple

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Speaker 1: of years. Another name that's been floated is Robert Kaplan,

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Speaker 1: who of course originally worked in the markets at Goldman Sachs,

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Speaker 1: then was at Harvard for a long time and as

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Speaker 1: now president of the Dallas FED. You've got Simon Potter,

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Speaker 1: who is head of the Open Markets Committee for the

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Speaker 1: New York Fed, and that was the job Bill Dudley

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Speaker 1: had before he became president. Brian Sack, a former head

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Speaker 1: of the Open Markets Group, is also on the list.

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Speaker 1: So um, some big names out there that are he

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Speaker 1: is he is on the talking Points list. We don't

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Speaker 1: have an official copy of Sarah Horowitz's list. Are you

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Speaker 1: on the list? Always? Run? I was trying to sell

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Speaker 1: Neil Sauce the last hour the voice Chairman. It'll be fun.

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Speaker 1: This is a real uh Exerciory Jeffrey Lacker's successor. Yet

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Speaker 1: has that been that yet? We're still waiting for a

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Speaker 1: Richmond fair enough, Michael McKee, thank you so much. Are

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Speaker 1: you going to go to this swarm? I'm gonna watch

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Speaker 1: you and you can have half of Thomas Rose. I need,

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Speaker 1: I need help with my question for Michael McKee. It

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Speaker 1: is tax reformed time. It is a time where lots

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Speaker 1: of blowviate. And if you actually have analysis the Tax

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Speaker 1: Policy Center of the Urban Institute and Brookings Institute, UH

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Speaker 1: lead for years William Gale and Gene Stirley, I should

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Speaker 1: mention as well. And in the trenches of our tax reform,

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Speaker 1: tax cut, whatever it is, is Howard Blackman. That's a

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Speaker 1: name that you will begin to know over the coming

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Speaker 1: weeks and months. And we're honored that the senior fellow

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Speaker 1: at the Tax Policy Center joins us now, Howard, congratulations

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Speaker 1: on the issue coming front and center for you. What

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Speaker 1: is your single observation of where we are right now

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Speaker 1: on this tax reform bill. Well, as Donald Trump might

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Speaker 1: have said, nobody knew tax reform would be this hard. Uh.

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Speaker 1: This is a real challenge. It's particularly a real challenge

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Speaker 1: for Republicans to do this on a partisan basis, because

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Speaker 1: to pay for many of the tax cuts that they favor,

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Speaker 1: I need to get rid of tax preferences already in

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Speaker 1: the law, and it's really hard to do that when

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Speaker 1: you don't have political cover of a bipartisan bill. Let

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Speaker 1: me ask you just about what we know about the

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Speaker 1: ramifications of this piece of legislation. Of course, the Tax

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Speaker 1: Policy Center was in the cross Harris when Kevin Hassett

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Speaker 1: made a trip there to speak to you in the

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Speaker 1: Tax Foundation as well, and he was critical of the

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Speaker 1: fact that y'all did some analysis early on that he

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Speaker 1: thought was was premature. We see this bill being rushed

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Speaker 1: through committee. Uh. The chair of the House Ways and

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Speaker 1: Means Committee says he wants to have it done by

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Speaker 1: of November. Is it Is it your sense that we're

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Speaker 1: gonna maybe have that happened without having a full sense

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Speaker 1: of what this bill means. I think that's true. In

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Speaker 1: the House. The House is on a fast track. They

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Speaker 1: have the votes, and I suspect it will move pretty quickly.

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Speaker 1: The Senate, I think is going to be a different story.

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Speaker 1: I think the Senate is going to take quite a

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Speaker 1: while to work its way through this bill, and I

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Speaker 1: think there will be some opportunity to chew over many

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Speaker 1: of the details. One of the things that that we're

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Speaker 1: all learning just in the last few days is that

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Speaker 1: there there are provisions building enormously complicated. You know, while

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Speaker 1: the while the supporters of the bill talked about simplification,

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Speaker 1: and there is some simplification here, there's things in here.

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Speaker 1: They're very, very complex, and people even four or five

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Speaker 1: days after the bill was first introducer just trying to

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Speaker 1: figure out what they mean. You have members of this

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Speaker 1: administration guaranteeing that there will be no tax increases to

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Speaker 1: cuts for for the middle classes. You've seen it is that?

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Speaker 1: Is that possible from from what you've read. The problem

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Speaker 1: with this bill is is that the changes that they

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Speaker 1: make are going to be very idiosyncratic. Whether you pay

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Speaker 1: more tax or less tax, particularly from the middle income,

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Speaker 1: is going to depend a lot on a lot of

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Speaker 1: specific circumstances. Where do you live, what's the makeup of

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Speaker 1: your family, how many people who have how do you

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Speaker 1: make your living? Uh So, I think what we're going

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Speaker 1: to find and we hope to have an analysis of

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Speaker 1: this for the next few days. I think what we're

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Speaker 1: going to find is that for some middle income people

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Speaker 1: it will be a small tax cut, for some build

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Speaker 1: income people it will be a small tax increase, and

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Speaker 1: for some very high income people it will be a

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Speaker 1: very big tax cut. Howard Gluckman was Tax Policy Center.

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Speaker 1: To me, the the elephant in the room here, Howard,

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Speaker 1: is the one point five trillion number. Bill gil writing

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Speaker 1: on this this weekend. Do you believe in that number?

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Speaker 1: Are you out at the two trillion dollar level like others?

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Speaker 1: So I think that this proposal is likely to cost

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Speaker 1: more than the one point five trade. And now the

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Speaker 1: problem is they have built themselves this box. They have to,

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Speaker 1: at the end of the day pass a bill that

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Speaker 1: that increases the deficit or it loses no more than

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Speaker 1: one point five How do they do that? What's the

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Speaker 1: elephant in the room that goes out the big fat door.

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Speaker 1: So this is a so this is a lower the

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Speaker 1: bridge or raise the river story. They can either do

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Speaker 1: it by h finding more tax preferences to get rid of,

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Speaker 1: which is I think pretty unlikely, or the other way

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Speaker 1: they do it is they make the tax cuts less generous.

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Speaker 1: Many people believe, and I'm among them, that the corporate

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Speaker 1: tax rate in this bill is not going to survive

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Speaker 1: that by the time they're done, that corporate rate is

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Speaker 1: going to be somewhere. I want to ask you just

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Speaker 1: a logistical question here. I think there'll be a lot

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Speaker 1: of people listening who don't have Washington experience, haven't lived there,

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Speaker 1: and wonder how all of this can come together is

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Speaker 1: as quickly as it can to go from nine pages

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Speaker 1: to many hundreds of pages to to hammer out some

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Speaker 1: of the complicated things that that you're talking about. In particular,

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Speaker 1: how's all of this being done? So this is you

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Speaker 1: often hear this phrase in Washington Regular Order, and this

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Speaker 1: was this was the idea that a bill would be introduced,

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Speaker 1: there would be months of hearings in the committee, the

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Speaker 1: committee would spend time drafting the legislation. That's not what

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Speaker 1: we're doing this time. What's what's happening this time is

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Speaker 1: is written. This bill was written in the back room

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Speaker 1: by a handful of people. They are now shopping it

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Speaker 1: to rank and file Republicans in the House, trying to

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Speaker 1: get them on board. Um, there will be a markup

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Speaker 1: in the Ways of Meats Committee, but it's going to

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Speaker 1: be basically performed. It'll be a show, but most of

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Speaker 1: the decisions have been made. It'll be jammed through the House.

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Speaker 1: Uh and the Senate process is going to be a

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Speaker 1: little different. I think there'll be much more input from

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Speaker 1: rank and file Republicans at least in the Senate bill

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Speaker 1: and and and depending on what Chairman a Hatch of

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Speaker 1: the Senate Finance Committee does, there may even be some press.

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Speaker 1: This is the first conversation. We're thrilled. I'm bringing you

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Speaker 1: a hard electman of the Text Policy Center. He and

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Speaker 1: his colleagues just to true of a work. I'll send

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Speaker 1: out uh their internet site, uh tay to their website.

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Speaker 1: It's just I can't say enough about there were Coward

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Speaker 1: Gluckman Text Policy Center. Some big news out of Friod

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Speaker 1: in Saudi Arabia this weekend. The new Crown Prince Mohammed

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Speaker 1: been someone overseeing a anti corruption campaign, a consolidation of power.

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Speaker 1: Some might say, we saw many members of the kingdom arrested,

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Speaker 1: uh imprisoned at the Ritz Carlton in Riod for for

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Speaker 1: an in definite period of time. Getting a list of

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Speaker 1: who they are, Let's get some more perspective on this.

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Speaker 1: For there's certainly some economic and market impact from it

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Speaker 1: from Mohammed Ali Akyah, who is with the Rafiq Career

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Speaker 1: Center on the Middle East at the Atlantic Council. He

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00:25:48,800 --> 00:25:51,800
Speaker 1: joins us now by phone. What's just, broadly speaking, the

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Speaker 1: import of all of this I mentioned this is a

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00:25:54,200 --> 00:25:56,840
Speaker 1: consolidation of power on the one hand, uh an anti

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00:25:56,880 --> 00:25:59,560
Speaker 1: corruption campaign on the other. Can they can they go together?

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00:25:59,680 --> 00:26:03,200
Speaker 1: Is it or the other? Um? That's a good question, Tom.

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Speaker 1: I think what you mentioned about generational change in economics

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00:26:06,400 --> 00:26:09,399
Speaker 1: is very important here. What's happening in a mix of everything.

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Speaker 1: You can't remove politics from the equation when you're looking

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Speaker 1: at the country that is undergoing an unprecedented transformation. Every

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Speaker 1: rule is changing in Saudi Arabia right now. But what's

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Speaker 1: most important is considering the economic complications of this anti

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00:26:22,200 --> 00:26:27,040
Speaker 1: corruption crackdown that's happening. You know, corruption has caused Saudi

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Speaker 1: Arabia many billions of dollars on an annual basis. We're

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Speaker 1: talking about top level government contracts, private sectual contracts, we're

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Speaker 1: talking about arms deals. It's a huge dollar amount that

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Speaker 1: takes a toll on the Saudi economy. And this is

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Speaker 1: why there's an economic compartment to brack down on it

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Speaker 1: and there's economic benefit that's derived from this. We have

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Speaker 1: Mohammed a romance of Saudi Arabia going back to warrants

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Speaker 1: of Arabia and all the other stereotypes are wrong. What

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Speaker 1: will shift here in rule of law? Well, the laws

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Speaker 1: have always existed against corruption and Sagirabia anti corruption commissions

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00:27:08,800 --> 00:27:12,040
Speaker 1: have been introduced time and time again from the seventies

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Speaker 1: throughout the eighties and the nineties. But the difference that

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Speaker 1: is happening today is that these laws, these pre existing

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Speaker 1: laws are being used against the top dogs, the big

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Speaker 1: wigs in the country, and that's the main criticism against

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Speaker 1: previous anti corruption drives. It seems to me that what

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Speaker 1: the message is, the message that the Crown Prince and

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00:27:30,600 --> 00:27:32,600
Speaker 1: the new government is trying to send is that this

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00:27:32,680 --> 00:27:34,720
Speaker 1: won't be tolerated. There will be no half measures to

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Speaker 1: fight corruption, and they want to stave office criticism that

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00:27:39,720 --> 00:27:44,720
Speaker 1: well connected uh top level princes and and and the

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00:27:45,000 --> 00:27:48,080
Speaker 1: politicians are exempted from these laws. You know what, when

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Speaker 1: I heard that the princes and ministries have been imprisoned

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Speaker 1: at the Ritz Carlent Hotel and real I thought immediately

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Speaker 1: of the event that was held there. Just a couple

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Speaker 1: of weeks ago the Future Investment Initiative, several thousand investors

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Speaker 1: and business people from Aroun in the world came to

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Speaker 1: reod at the invitation there of the of the Saudi government.

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Speaker 1: What's the message being sent here to investors is it?

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Speaker 1: Is it once counterinto if you have here this anti

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Speaker 1: corruption campaign. But there must be a folks who are

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00:28:12,880 --> 00:28:16,040
Speaker 1: worried about the continuation of power and sort of stability

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Speaker 1: of the country in light of all of this, Well,

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Speaker 1: this is a complex issue. I mean, one of the

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Speaker 1: biggest obstacles to foreign investment and business within Saudi Arabia

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Speaker 1: in the past has been precisely this issue of corruption.

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Speaker 1: People don't know who to deal with, they don't know

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Speaker 1: how the system of patronage in terms of corruption works,

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Speaker 1: and and uh for for a very long time, this

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Speaker 1: has been the main obstacle today. That's that bandit is

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Speaker 1: being a torn off in Saudi Arabia. Will that create

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Speaker 1: a sense of uncertain peo perhaps, But at the end

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Speaker 1: of the day, the bottom line is that the message

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Speaker 1: being sent is that corruption won't be tolerated and that

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00:28:52,480 --> 00:28:54,680
Speaker 1: sounds spelling is the name of the game going forward.

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Speaker 1: One final question and I don't say it is a joke.

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Speaker 1: Is Saudi Arabia's event? Is the corruption so great that

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Speaker 1: they don't have the wealth that we presume? I don't

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Speaker 1: think Saturday it was solvent, so it was still indeed

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Speaker 1: has a large foreign reserves and and enormous financial capabilities.

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Speaker 1: But it doesn't take away from the fact that the

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Speaker 1: corruption h cost Saudi Arabia a huge amount on an

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Speaker 1: annual basis. I mean the Deputy Grand Prince in Division

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00:29:26,560 --> 00:29:30,400
Speaker 1: twenty plan set out to resue subsidies, set out to

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Speaker 1: roll back uh certain parts of of salaries in the

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Speaker 1: private sector. If you look at the dollar amount that

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Speaker 1: these policies gave the government, they would pay it in

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Speaker 1: comparison towards cracking down seriously on corruption, I would save

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Speaker 1: the government in a donor amount. Great pleasure to speak

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Speaker 1: with you, Thank you very much for the time. If

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Speaker 1: we get long perspective on what happened over the weekend

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Speaker 1: in Saudi Rabbi in reod that that was Muhammad Aliyakia,

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00:29:58,160 --> 00:30:00,240
Speaker 1: who with the Atlantic Council joining us there by phone

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00:30:00,280 --> 00:30:02,640
Speaker 1: from Washington, d C. And as I said, Tom, something

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Speaker 1: that will bear watching. There's so much happening here with

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Speaker 1: the present, trip to Asia, tax perform and all of that,

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Speaker 1: but certainly in terms of geopolitical events, this seemed pretty seismic.

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Speaker 1: Absolutely thanks for listening to the Bloomberg Surveillance podcast. Subscribe

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00:30:24,360 --> 00:30:29,240
Speaker 1: and listen to interviews on Apple Podcasts, SoundCloud, or whichever

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00:30:29,400 --> 00:30:33,080
Speaker 1: podcast platform you prefer. I'm on Twitter at Tom Keene,

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00:30:33,240 --> 00:30:37,520
Speaker 1: David Gura is at David Gura. Before the podcast, you

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Speaker 1: can always catch us worldwide. I'm Bloomberg Radio