Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with
Speaker 1: David Gura. Daily we bring you insight from the best
Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance
Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course
Speaker 1: on the Bloomberg Right Now, David Gura and Tom Keene
Speaker 1: in New York with Jonathan Gollub of Credit Sueeze and
Speaker 1: on this Monday at sn in the morning, maybe this
Speaker 1: is the equity interview of the week. John, You're not
Speaker 1: only optimistic, but you're double digit optimistic. So few agree
Speaker 1: with you. What do they get wrong? I think that
Speaker 1: there's this belief that if you're optimistic on stocks, you
Speaker 1: have to think that the economy is going to, you know,
Speaker 1: have this tremendous momentum behind it. And our view is
Speaker 1: that we are in a good economy, but that valuations
Speaker 1: will drift higher because the risks right now, especially around
Speaker 1: the potential for recession, are really much lower than average,
Speaker 1: and that lack of risk is what will push the
Speaker 1: stock market higher. What's your counsel of how worried or
Speaker 1: cognizant we should be of recession risks at this point,
Speaker 1: What are you looking at and what would you advise
Speaker 1: clients to to do at this point when it comes
Speaker 1: to fear of or or worry about a recession. So
Speaker 1: we put together this credit Swiss recessionary dashboard and we
Speaker 1: look at things like is the yield curve flatter inverted? Um?
Speaker 1: Absolutely not? Do you have our jobs being created? Yes?
Speaker 1: Do you have is inflation um under control? Yes? Are
Speaker 1: you seeing UM construction activity improving as opposed to contracting? Yes?
Speaker 1: Are you seeing credit write downs um? Corporations are able
Speaker 1: to meet their dead obligations? Yes? Um. If you look
Speaker 1: at each of these seven criteria, were are about as
Speaker 1: solid as we've ever been. What role is the Fed
Speaker 1: playing in all of this? Is you look at that dashboard?
Speaker 1: How much are you paying attention to what the central
Speaker 1: banks are doing? And what does the j Powell nomination
Speaker 1: mean for markets going forward? Well, so that that's that's
Speaker 1: two questions first, the first, right, the first first come
Speaker 1: on at a time. Monday's folks, we don't do this.
Speaker 1: Let's start with how co you are with the Fed?
Speaker 1: Is well? All right? Um? All right, So since us
Speaker 1: I'll answer in the other direction. But we know but so,
Speaker 1: but Powell really is a continue The market is perceiving
Speaker 1: it as a continuation of yelling type um governance, and
Speaker 1: so I think that that alone probably means that that
Speaker 1: it's not surprising that it got very very little reaction.
Speaker 1: But the there's this consensus view that the FED ultimately
Speaker 1: is propping the market up by all of this money printing,
Speaker 1: and then if they stop printing, bad things are going
Speaker 1: to happen, and I just agree with that wholeheartedly. I
Speaker 1: think that the market is doing well because the economy
Speaker 1: is doing well. I think the Fed is doing is
Speaker 1: actually responding to the economy um as opposed to the
Speaker 1: other way around. And therefore, um if they remove some accommodation,
Speaker 1: I think the market is gonna be perfectly fine. But
Speaker 1: I will tell you that's not the consensus view. The
Speaker 1: consensus view is, oh my god, they're gonna remove liquidity.
Speaker 1: Bad things are gonna happen, and I just think that
Speaker 1: that's off base. It's been almost a year since since
Speaker 1: election night. You were around the building on election night
Speaker 1: as we did the coverage of the results coming in.
Speaker 1: What have we learned about the markets in that year since?
Speaker 1: ALASKI about the prospects for tax form and all that
Speaker 1: in just a sec But but in terms of enthusiasm
Speaker 1: for policy this administration, what have we learned in these
Speaker 1: interviewing three six, five days. Um, well, a bunch of things.
Speaker 1: I mean, the one that that's perhaps the most interesting
Speaker 1: is there was this belief that, and once we kind
Speaker 1: of shook off the surprise of the election, was that
Speaker 1: Trump was going to have this huge impact via tax changes,
Speaker 1: and the market has really taken the opposite side of that.
Speaker 1: That trade in the last six months, and more specifically,
Speaker 1: those companies that would benefit the most from tax changes
Speaker 1: have actually underperformed since, um, you know, since his inauguration,
Speaker 1: and I think that that's been a big surprise for many.
Speaker 1: So it was the market either saying one of two things.
Speaker 1: Either I don't think that these are ever going to
Speaker 1: get implemented into law, or in year nine of a
Speaker 1: recovery cycle with an economy that's in pretty stable footing,
Speaker 1: maybe we don't need or want a big late cycle
Speaker 1: stimulus plan that would create inflationary pressure. So we can
Speaker 1: argue why the market's not celebrating this potential for for
Speaker 1: tax reform. But that's what the markets saying I'm gonna
Speaker 1: ask you what what companies stand to benefit the most
Speaker 1: should it get three. You've done a great list of
Speaker 1: of all the companies you're finally have who have some
Speaker 1: upside here broadly speaking, what types of companies here would
Speaker 1: benefit most from from tax Again, I think that we
Speaker 1: have to split this into two things. If you said
Speaker 1: that we're going to get tax reform, but we weren't
Speaker 1: going to get any inflationary pressure the economy, and the
Speaker 1: FED wasn't going to respond to this stimulus by tightening
Speaker 1: policy more than expected, then it would be companies that
Speaker 1: are more domestically oriented that can't avoid taxes offshore. And
Speaker 1: these could be you know, retailers would be a good example.
Speaker 1: Those should be the biggest wins, and the biggest losers
Speaker 1: are industrial companies that do a lot of business offshore
Speaker 1: that have very low tax effective tax rates. Um. But
Speaker 1: I think that the second issue is the more important
Speaker 1: one is do you get some other feedback loop? And
Speaker 1: that's what investors very often miss its and things don't
Speaker 1: move in a straight law and investment land. UM. So
Speaker 1: if this is stimulus, does that overheat the economy? Does
Speaker 1: the force of FED? And and that's the part that
Speaker 1: people may miss headline crossing the Bloomberg. Here we're talking
Speaker 1: about the President of the New York Fed, Buil Dudley,
Speaker 1: announcing his retirement mid two eighteen that according to the
Speaker 1: New York Offensive, confirming what had been reported over the
Speaker 1: course of the weekend. As we mentioned, Tom sitting down
Speaker 1: with the President New York Fed a little bit later,
Speaker 1: a little lunch for four people. Let's let me explain
Speaker 1: to our global audience, it is always appropriate when the
Speaker 1: New York Fed president speaks to the Economic Club of
Speaker 1: New York, John, what's the question I get to ask
Speaker 1: him questions? Being a good gentleman from the Economist magazine,
Speaker 1: what's the question you would ask? They're very retiring, Bill Dudley,
Speaker 1: one of the perhaps more anything else. And this is
Speaker 1: the guy who, remember it's not that he runs the Fed,
Speaker 1: but he's the one who's in touch with the way
Speaker 1: the markets are going to respond to Fed policy. UM,
Speaker 1: I'd want to get a better understanding of what it
Speaker 1: means if and when the Fed continues to move forward
Speaker 1: with balance sheet liquidation and and how do they how
Speaker 1: do they equate a little bit of tightening from the
Speaker 1: FED funds rate with with balanty liquidation. How do they
Speaker 1: weigh these against each other? How should the market perceive it?
Speaker 1: I'll give Bloomberg Radio a first look at this. One
Speaker 1: of my questions will be under crisis, how does a
Speaker 1: non PhD listen to the fancy pants PhDs the FED
Speaker 1: like the gentleman from Berkeley. I think with a four
Speaker 1: standard deviation move in, John gollubs world down down, down
Speaker 1: seventent You picked the gloom, John, How does a non
Speaker 1: economist chairman and chairman Powell listen to people like Bill Dudley?
Speaker 1: I think Bill's got real knowledge on it. It's it's
Speaker 1: a it's a it's a great Is that okay question? No? No,
Speaker 1: it's it's it's it's a it's a great question. And
Speaker 1: I think if you look at the uh, you know,
Speaker 1: the leadership of FED by academics, I think that there's um,
Speaker 1: you know, in hindsight, I'm sure that there's a lot
Speaker 1: of skepticism over the you know. One is how they've
Speaker 1: did help with the crisis, which I think they've gotten
Speaker 1: tremendously good marks on. And then what does the world
Speaker 1: look like after that when the world has returned to
Speaker 1: normal as a separate question. Here's an email coming in,
Speaker 1: David Girl, Neil Sauce on the shortlist, like place Bill Dudley.
Speaker 1: You're supposed to say, John, Yes, Dr Sauce would be
Speaker 1: a wonderful So we we we we love Niel Sauce.
Speaker 1: Neil Sauce Folks is vice chairman of research for all
Speaker 1: of Credits, is extremely qualified. Looking at the release here,
Speaker 1: Bill Dudley's dream is expected to end in January of
Speaker 1: two thousand nineteen, So Bill, that would be leaving here
Speaker 1: a bit early mid two thousand and eighteen, he's saying.
Speaker 1: And a note here in the release from the New
Speaker 1: York Fed uh search will will begin shortly and they
Speaker 1: expect that search to conclude by mid two thousand and eighteen,
Speaker 1: depending on finding the best candidate. UM, so look for
Speaker 1: more clear on that. I have a moment of silence
Speaker 1: for Terry Longer and the Macy's CEO, and also ahead
Speaker 1: of the Economic Club of New York who's on the committee,
Speaker 1: and I believe he'll be on the committee at the
Speaker 1: New York Fed. You didn't know this was happening, you know, honestly,
Speaker 1: I mean if I if I knew, I wouldn't tell you.
Speaker 1: But the answers. No, I had absolutely no clue in all,
Speaker 1: but I'll tell you guys like Terry London are going
Speaker 1: to be absolutely inundated with names um to take this
Speaker 1: extremely important a position and might point out a position
Speaker 1: under crisis. Bill Dudley, Uh, wonderful guy will retire mid
Speaker 1: two thousand eighteen from the Fed, and again he will speak.
Speaker 1: Matt Bessler and our team will have full coverage of
Speaker 1: that speech from the Economic Club of New York, and
Speaker 1: my questions to President Dudley have shifted from the minutia
Speaker 1: to the bigger and broader. Coming up, Francia Kwan London
Speaker 1: an exceptionally timely conversation with the Secretary of Commerce Wilbur
Speaker 1: Ross in the News as we can, David, what Cyprus
Speaker 1: and Russia is that sort of members of the Putin
Speaker 1: family as well? He denying all of that being improperly.
Speaker 1: So we'll see what he has to say to Francin
Speaker 1: here in just a few minutes. Maybe Mr Ross can
Speaker 1: buy the New York Giants and put him out of
Speaker 1: their misery as well. Coming up, Wilbert Ross, stay with
Speaker 1: us worldwide. This is Bloomberg. He has been on the
Speaker 1: show too many times as an industrialist, as a financier
Speaker 1: out of Yale University. Wilburt Ross selected by the President
Speaker 1: to be Secretary of Commerce, best known over the last
Speaker 1: number of months for Ross Navarro, which was a white paper.
Speaker 1: He actually showed it to me at one point at
Speaker 1: an Economic Club of New York meeting, and uh, that
Speaker 1: was controversial to say the least. Now more controversy with
Speaker 1: Secretary Ross over the weekend his relationships with Russia, Russia
Speaker 1: and Cyprus. From London. Here is Francine Laqui with the Secretary.
Speaker 1: We need to talk about tax but I also need
Speaker 1: to ask you about the Paradise papers. So he's certainly
Speaker 1: in the papers quite a lot. Today. You've retained investments
Speaker 1: in a shipping firm that has business ties to the
Speaker 1: son in law of the Russian president but also an
Speaker 1: oligarch under sanction with hindsights. Should you have divested this stake? Well,
Speaker 1: first of all, let me correct what you just said.
Speaker 1: We have no business ties to those Russian individuals who
Speaker 1: are under sanction. Prior to my joining the board of Navigator,
Speaker 1: they entered into some charter arrangements with Cyborg, which is
Speaker 1: a big Russian hydrocarbon company. I had nothing to do
Speaker 1: with the negotiations, never met the people under sanction. Cyborg
Speaker 1: never has been under sanction, So there's nothing whatsoever wrong
Speaker 1: with Navigator having a deal with them. Second, as to
Speaker 1: the disclosure, much has been made that it wasn't disclosed.
Speaker 1: It was in three places on my form to seventy eight,
Speaker 1: which is public document at place ten point one four
Speaker 1: point one point three, ten point one, five point one
Speaker 1: point three and two four point one point four point too,
Speaker 1: as well as on the Office of Government Ethics website
Speaker 1: public website the symbol is o g E dot CoV okay.
Speaker 1: Couldn't be more clear. But with hindsight, Again, there are
Speaker 1: allegations about ethics, about you know, creating a conflict of interest.
Speaker 1: Do you think you should have divested this? Well, there
Speaker 1: is no conflict of interest. We don't regulate shipping and
Speaker 1: that's why the o g E let me retain shipping interests.
Speaker 1: Would you welcome an investigation into this? Investigate what? But
Speaker 1: is there not an ethical question that needs to be
Speaker 1: raised that you've done no nothing illegal, right, and that's
Speaker 1: very clear, very good, nothing even improper at all. Um,
Speaker 1: The o g E came to an independent decision. Plus,
Speaker 1: before I meet with any corporate party, the O g
Speaker 1: E clears a that I can meet and be the
Speaker 1: accent to which I can participate in conversations. I have
Speaker 1: never sought a waiver from any of those strictures. You're
Speaker 1: keeping the steak? I didn't say that. That's a different question.
Speaker 1: You're saying, was there anything improper? There's nothing improper, either
Speaker 1: in the way we've handled net meetings or in the
Speaker 1: investment itself. Will you keep the steak? Probably not have
Speaker 1: been actually selling it anyway, but um that isn't because
Speaker 1: of this it Talk to me a little bit about
Speaker 1: your upcoming trip to China. What is the president's stands
Speaker 1: on dealing with China when it comes to terroriffs and steel. Well,
Speaker 1: we are hoping for some specific deliverables. We're un leading
Speaker 1: a trade mission of some twenty nine US companies over there,
Speaker 1: and we hope to come away it's some very tangible
Speaker 1: and hopefully large UH deals for them. What are you
Speaker 1: doing in London? Are you talking trade in post Braxit London?
Speaker 1: Is several several different things. UM as spoke to the
Speaker 1: Trilateral Commission UH, speaking to the b C, I, UM
Speaker 1: doing all kinds of things, as well as meeting with
Speaker 1: various government officials, and I went to the Balfour Centennial dinner. Okay, Secretary,
Speaker 1: if there is a Brexit that actually really rips out
Speaker 1: the UK out of the EU, how quickly can the
Speaker 1: US have a trade agreement with the UK. We should
Speaker 1: go pretty fast, because well, we can't negotiate right now,
Speaker 1: that's forbidden under EC rules. We do have a working
Speaker 1: group that meda in July in Washington is meeting next
Speaker 1: week here in London. So they're kind of scoping things
Speaker 1: out and going as far as they can without violating
Speaker 1: the EU regulation to make preparation. Will you also talk
Speaker 1: with the opposition Labor Party in case there's a change
Speaker 1: of people in charge. I think we'll be talking with
Speaker 1: whoever is the government. Mr russ One very last question
Speaker 1: when you look about trade, we're expecting the status of
Speaker 1: the investigation into imports of steel and aluminium. When will
Speaker 1: we get that well, as the President has indicated, that
Speaker 1: will be some time after the tax legislation is dealt with,
Speaker 1: So that should be when you respect tax the rappid
Speaker 1: hopefully pretty soon before Christmas. We would likely think it
Speaker 1: would be a wonderful Christmas present for the American business
Speaker 1: and consumer to get a tax reduction. So we hope
Speaker 1: so Secretary Ross in London with our fancy and a qualm.
Speaker 1: You might note the first interview David Dunne from ours
Speaker 1: that right in London. I believe that was done by
Speaker 1: Mansion House. There's done by Wardour Street or whatever. I
Speaker 1: can't remember now. Mental block Christopher Wren's churches right there.
Speaker 1: St Stephen's as well. Speaking of St. Michael's. Here Michael
Speaker 1: McKinnon to talk to us about Lord Dudley leaving the
Speaker 1: New York Fed. I want to go, Mike, just because
Speaker 1: the time to How is a New York Fed president selected?
Speaker 1: The answers, it's a lot like the other banks. But
Speaker 1: boy is it a different process? Well, it's it's different
Speaker 1: than the Federal Reserve Board. We should make that clear.
Speaker 1: Members of the Federal Reserve Board. There's three openings now
Speaker 1: if Jane leaves before nominated by the President, confirmed by
Speaker 1: the Senate. Individual federal reserve banks have boards of directors,
Speaker 1: and those boards of directors whose the person to be president.
Speaker 1: The Fed Board in Washington has vitail power, never exercised
Speaker 1: it on a nominee, but they do have to get
Speaker 1: approved by the FED. The President of the United States
Speaker 1: does not, he has no role. The other thing is
Speaker 1: there are three classes of directors of each Each FED
Speaker 1: bank has nine directors three classes. One class is bankers
Speaker 1: at the New York FED, it's James Gorman from Morgan Stanley,
Speaker 1: Paul Mellow of salve A Banks, Jerry Lipkin of Valley
Speaker 1: National Bank. None of those can take part. Only the
Speaker 1: other directors, the Class B directors who are finance, and
Speaker 1: Class C directors who are in theory is supposed to
Speaker 1: represent the public. Emily Rafferty of the Metropolitan Museum of Art,
Speaker 1: she's she's a Class C director. Sarah Harowitz is the
Speaker 1: chairman of the FEDS Board of Director New York FEDS
Speaker 1: Board of Director. She's the executive director of the Freelancers Union.
Speaker 1: She's leading the search along with Glenn Hutchins, who is
Speaker 1: the co founder of Silver Lake Partners. In the news
Speaker 1: for the reasons this is this is like a free
Speaker 1: for all. Let's be blunt you. The history of this
Speaker 1: over the last thirty years is everybody piles on for there. Well,
Speaker 1: it's very interesting. The New York Fed obviously the most
Speaker 1: important of the FED banks, and so they tend to
Speaker 1: hire really big names. It's been a mixture of internal
Speaker 1: candidates over the years and external candidates. Two of the
Speaker 1: the New York feds most prominent presidents, Jerry Corrigan and
Speaker 1: Paul Volker, were president of the Minneapolis FED when they
Speaker 1: were selected, and so some people are looking at Neil
Speaker 1: cash Gary and wondering what he's doing the next couple
Speaker 1: of years. Another name that's been floated is Robert Kaplan,
Speaker 1: who of course originally worked in the markets at Goldman Sachs,
Speaker 1: then was at Harvard for a long time and as
Speaker 1: now president of the Dallas FED. You've got Simon Potter,
Speaker 1: who is head of the Open Markets Committee for the
Speaker 1: New York Fed, and that was the job Bill Dudley
Speaker 1: had before he became president. Brian Sack, a former head
Speaker 1: of the Open Markets Group, is also on the list.
Speaker 1: So um, some big names out there that are he
Speaker 1: is he is on the talking Points list. We don't
Speaker 1: have an official copy of Sarah Horowitz's list. Are you
Speaker 1: on the list? Always? Run? I was trying to sell
Speaker 1: Neil Sauce the last hour the voice Chairman. It'll be fun.
Speaker 1: This is a real uh Exerciory Jeffrey Lacker's successor. Yet
Speaker 1: has that been that yet? We're still waiting for a
Speaker 1: Richmond fair enough, Michael McKee, thank you so much. Are
Speaker 1: you going to go to this swarm? I'm gonna watch
Speaker 1: you and you can have half of Thomas Rose. I need,
Speaker 1: I need help with my question for Michael McKee. It
Speaker 1: is tax reformed time. It is a time where lots
Speaker 1: of blowviate. And if you actually have analysis the Tax
Speaker 1: Policy Center of the Urban Institute and Brookings Institute, UH
Speaker 1: lead for years William Gale and Gene Stirley, I should
Speaker 1: mention as well. And in the trenches of our tax reform,
Speaker 1: tax cut, whatever it is, is Howard Blackman. That's a
Speaker 1: name that you will begin to know over the coming
Speaker 1: weeks and months. And we're honored that the senior fellow
Speaker 1: at the Tax Policy Center joins us now, Howard, congratulations
Speaker 1: on the issue coming front and center for you. What
Speaker 1: is your single observation of where we are right now
Speaker 1: on this tax reform bill. Well, as Donald Trump might
Speaker 1: have said, nobody knew tax reform would be this hard. Uh.
Speaker 1: This is a real challenge. It's particularly a real challenge
Speaker 1: for Republicans to do this on a partisan basis, because
Speaker 1: to pay for many of the tax cuts that they favor,
Speaker 1: I need to get rid of tax preferences already in
Speaker 1: the law, and it's really hard to do that when
Speaker 1: you don't have political cover of a bipartisan bill. Let
Speaker 1: me ask you just about what we know about the
Speaker 1: ramifications of this piece of legislation. Of course, the Tax
Speaker 1: Policy Center was in the cross Harris when Kevin Hassett
Speaker 1: made a trip there to speak to you in the
Speaker 1: Tax Foundation as well, and he was critical of the
Speaker 1: fact that y'all did some analysis early on that he
Speaker 1: thought was was premature. We see this bill being rushed
Speaker 1: through committee. Uh. The chair of the House Ways and
Speaker 1: Means Committee says he wants to have it done by
Speaker 1: of November. Is it Is it your sense that we're
Speaker 1: gonna maybe have that happened without having a full sense
Speaker 1: of what this bill means. I think that's true. In
Speaker 1: the House. The House is on a fast track. They
Speaker 1: have the votes, and I suspect it will move pretty quickly.
Speaker 1: The Senate, I think is going to be a different story.
Speaker 1: I think the Senate is going to take quite a
Speaker 1: while to work its way through this bill, and I
Speaker 1: think there will be some opportunity to chew over many
Speaker 1: of the details. One of the things that that we're
Speaker 1: all learning just in the last few days is that
Speaker 1: there there are provisions building enormously complicated. You know, while
Speaker 1: the while the supporters of the bill talked about simplification,
Speaker 1: and there is some simplification here, there's things in here.
Speaker 1: They're very, very complex, and people even four or five
Speaker 1: days after the bill was first introducer just trying to
Speaker 1: figure out what they mean. You have members of this
Speaker 1: administration guaranteeing that there will be no tax increases to
Speaker 1: cuts for for the middle classes. You've seen it is that?
Speaker 1: Is that possible from from what you've read. The problem
Speaker 1: with this bill is is that the changes that they
Speaker 1: make are going to be very idiosyncratic. Whether you pay
Speaker 1: more tax or less tax, particularly from the middle income,
Speaker 1: is going to depend a lot on a lot of
Speaker 1: specific circumstances. Where do you live, what's the makeup of
Speaker 1: your family, how many people who have how do you
Speaker 1: make your living? Uh So, I think what we're going
Speaker 1: to find and we hope to have an analysis of
Speaker 1: this for the next few days. I think what we're
Speaker 1: going to find is that for some middle income people
Speaker 1: it will be a small tax cut, for some build
Speaker 1: income people it will be a small tax increase, and
Speaker 1: for some very high income people it will be a
Speaker 1: very big tax cut. Howard Gluckman was Tax Policy Center.
Speaker 1: To me, the the elephant in the room here, Howard,
Speaker 1: is the one point five trillion number. Bill gil writing
Speaker 1: on this this weekend. Do you believe in that number?
Speaker 1: Are you out at the two trillion dollar level like others?
Speaker 1: So I think that this proposal is likely to cost
Speaker 1: more than the one point five trade. And now the
Speaker 1: problem is they have built themselves this box. They have to,
Speaker 1: at the end of the day pass a bill that
Speaker 1: that increases the deficit or it loses no more than
Speaker 1: one point five How do they do that? What's the
Speaker 1: elephant in the room that goes out the big fat door.
Speaker 1: So this is a so this is a lower the
Speaker 1: bridge or raise the river story. They can either do
Speaker 1: it by h finding more tax preferences to get rid of,
Speaker 1: which is I think pretty unlikely, or the other way
Speaker 1: they do it is they make the tax cuts less generous.
Speaker 1: Many people believe, and I'm among them, that the corporate
Speaker 1: tax rate in this bill is not going to survive
Speaker 1: that by the time they're done, that corporate rate is
Speaker 1: going to be somewhere. I want to ask you just
Speaker 1: a logistical question here. I think there'll be a lot
Speaker 1: of people listening who don't have Washington experience, haven't lived there,
Speaker 1: and wonder how all of this can come together is
Speaker 1: as quickly as it can to go from nine pages
Speaker 1: to many hundreds of pages to to hammer out some
Speaker 1: of the complicated things that that you're talking about. In particular,
Speaker 1: how's all of this being done? So this is you
Speaker 1: often hear this phrase in Washington Regular Order, and this
Speaker 1: was this was the idea that a bill would be introduced,
Speaker 1: there would be months of hearings in the committee, the
Speaker 1: committee would spend time drafting the legislation. That's not what
Speaker 1: we're doing this time. What's what's happening this time is
Speaker 1: is written. This bill was written in the back room
Speaker 1: by a handful of people. They are now shopping it
Speaker 1: to rank and file Republicans in the House, trying to
Speaker 1: get them on board. Um, there will be a markup
Speaker 1: in the Ways of Meats Committee, but it's going to
Speaker 1: be basically performed. It'll be a show, but most of
Speaker 1: the decisions have been made. It'll be jammed through the House.
Speaker 1: Uh and the Senate process is going to be a
Speaker 1: little different. I think there'll be much more input from
Speaker 1: rank and file Republicans at least in the Senate bill
Speaker 1: and and and depending on what Chairman a Hatch of
Speaker 1: the Senate Finance Committee does, there may even be some press.
Speaker 1: This is the first conversation. We're thrilled. I'm bringing you
Speaker 1: a hard electman of the Text Policy Center. He and
Speaker 1: his colleagues just to true of a work. I'll send
Speaker 1: out uh their internet site, uh tay to their website.
Speaker 1: It's just I can't say enough about there were Coward
Speaker 1: Gluckman Text Policy Center. Some big news out of Friod
Speaker 1: in Saudi Arabia this weekend. The new Crown Prince Mohammed
Speaker 1: been someone overseeing a anti corruption campaign, a consolidation of power.
Speaker 1: Some might say, we saw many members of the kingdom arrested,
Speaker 1: uh imprisoned at the Ritz Carlton in Riod for for
Speaker 1: an in definite period of time. Getting a list of
Speaker 1: who they are, Let's get some more perspective on this.
Speaker 1: For there's certainly some economic and market impact from it
Speaker 1: from Mohammed Ali Akyah, who is with the Rafiq Career
Speaker 1: Center on the Middle East at the Atlantic Council. He
Speaker 1: joins us now by phone. What's just, broadly speaking, the
Speaker 1: import of all of this I mentioned this is a
Speaker 1: consolidation of power on the one hand, uh an anti
Speaker 1: corruption campaign on the other. Can they can they go together?
Speaker 1: Is it or the other? Um? That's a good question, Tom.
Speaker 1: I think what you mentioned about generational change in economics
Speaker 1: is very important here. What's happening in a mix of everything.
Speaker 1: You can't remove politics from the equation when you're looking
Speaker 1: at the country that is undergoing an unprecedented transformation. Every
Speaker 1: rule is changing in Saudi Arabia right now. But what's
Speaker 1: most important is considering the economic complications of this anti
Speaker 1: corruption crackdown that's happening. You know, corruption has caused Saudi
Speaker 1: Arabia many billions of dollars on an annual basis. We're
Speaker 1: talking about top level government contracts, private sectual contracts, we're
Speaker 1: talking about arms deals. It's a huge dollar amount that
Speaker 1: takes a toll on the Saudi economy. And this is
Speaker 1: why there's an economic compartment to brack down on it
Speaker 1: and there's economic benefit that's derived from this. We have
Speaker 1: Mohammed a romance of Saudi Arabia going back to warrants
Speaker 1: of Arabia and all the other stereotypes are wrong. What
Speaker 1: will shift here in rule of law? Well, the laws
Speaker 1: have always existed against corruption and Sagirabia anti corruption commissions
Speaker 1: have been introduced time and time again from the seventies
Speaker 1: throughout the eighties and the nineties. But the difference that
Speaker 1: is happening today is that these laws, these pre existing
Speaker 1: laws are being used against the top dogs, the big
Speaker 1: wigs in the country, and that's the main criticism against
Speaker 1: previous anti corruption drives. It seems to me that what
Speaker 1: the message is, the message that the Crown Prince and
Speaker 1: the new government is trying to send is that this
Speaker 1: won't be tolerated. There will be no half measures to
Speaker 1: fight corruption, and they want to stave office criticism that
Speaker 1: well connected uh top level princes and and and the
Speaker 1: politicians are exempted from these laws. You know what, when
Speaker 1: I heard that the princes and ministries have been imprisoned
Speaker 1: at the Ritz Carlent Hotel and real I thought immediately
Speaker 1: of the event that was held there. Just a couple
Speaker 1: of weeks ago the Future Investment Initiative, several thousand investors
Speaker 1: and business people from Aroun in the world came to
Speaker 1: reod at the invitation there of the of the Saudi government.
Speaker 1: What's the message being sent here to investors is it?
Speaker 1: Is it once counterinto if you have here this anti
Speaker 1: corruption campaign. But there must be a folks who are
Speaker 1: worried about the continuation of power and sort of stability
Speaker 1: of the country in light of all of this, Well,
Speaker 1: this is a complex issue. I mean, one of the
Speaker 1: biggest obstacles to foreign investment and business within Saudi Arabia
Speaker 1: in the past has been precisely this issue of corruption.
Speaker 1: People don't know who to deal with, they don't know
Speaker 1: how the system of patronage in terms of corruption works,
Speaker 1: and and uh for for a very long time, this
Speaker 1: has been the main obstacle today. That's that bandit is
Speaker 1: being a torn off in Saudi Arabia. Will that create
Speaker 1: a sense of uncertain peo perhaps, But at the end
Speaker 1: of the day, the bottom line is that the message
Speaker 1: being sent is that corruption won't be tolerated and that
Speaker 1: sounds spelling is the name of the game going forward.
Speaker 1: One final question and I don't say it is a joke.
Speaker 1: Is Saudi Arabia's event? Is the corruption so great that
Speaker 1: they don't have the wealth that we presume? I don't
Speaker 1: think Saturday it was solvent, so it was still indeed
Speaker 1: has a large foreign reserves and and enormous financial capabilities.
Speaker 1: But it doesn't take away from the fact that the
Speaker 1: corruption h cost Saudi Arabia a huge amount on an
Speaker 1: annual basis. I mean the Deputy Grand Prince in Division
Speaker 1: twenty plan set out to resue subsidies, set out to
Speaker 1: roll back uh certain parts of of salaries in the
Speaker 1: private sector. If you look at the dollar amount that
Speaker 1: these policies gave the government, they would pay it in
Speaker 1: comparison towards cracking down seriously on corruption, I would save
Speaker 1: the government in a donor amount. Great pleasure to speak
Speaker 1: with you, Thank you very much for the time. If
Speaker 1: we get long perspective on what happened over the weekend
Speaker 1: in Saudi Rabbi in reod that that was Muhammad Aliyakia,
Speaker 1: who with the Atlantic Council joining us there by phone
Speaker 1: from Washington, d C. And as I said, Tom, something
Speaker 1: that will bear watching. There's so much happening here with
Speaker 1: the present, trip to Asia, tax perform and all of that,
Speaker 1: but certainly in terms of geopolitical events, this seemed pretty seismic.
Speaker 1: Absolutely thanks for listening to the Bloomberg Surveillance podcast. Subscribe
Speaker 1: and listen to interviews on Apple Podcasts, SoundCloud, or whichever
Speaker 1: podcast platform you prefer. I'm on Twitter at Tom Keene,
Speaker 1: David Gura is at David Gura. Before the podcast, you
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio