WEBVTT - The Upcoming Fiscal Cliffs For Consumers: Deutsche Bank's Slok 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.240 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.400 we bring you interviews from CEO, market pros and Bloomberg experts, 0:00:10.440 --> 0:00:13.600 along with essential market moving news. Find the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple Podcasts or wherever you listen to podcasts, 0:00:17.000 --> 0:00:22.040 and on Bloomberg dot com. Well. As the economic impacts 0:00:22.079 --> 0:00:25.760 from the coronavirus began to be felt early in the pandemic, 0:00:26.040 --> 0:00:29.240 the federal Reverse steps Federal Reserve stepped up and did 0:00:29.320 --> 0:00:32.640 its part aggressively injecting liquidit into the marketplace. We even 0:00:32.640 --> 0:00:36.720 had Congress with a three trillion dollar fiscal stimulus plan, 0:00:37.080 --> 0:00:39.960 all designed to get cash in the hands of consumers 0:00:39.960 --> 0:00:42.720 and small to midsized businesses. A lot of that stimulus 0:00:42.840 --> 0:00:46.839 is going to be running out relatively soon. The question is, 0:00:47.280 --> 0:00:49.680 does Congress need to come through with another round of 0:00:49.680 --> 0:00:52.959 fiscal stimulus UH to continue to keep this economy from 0:00:52.960 --> 0:00:56.280 going over a. Cliff Torsence Slock, chief economist at Tortche 0:00:56.320 --> 0:00:58.920 Bank Securities, joins us. Torsen, I kind of want to 0:00:58.920 --> 0:01:02.200 put that question to you here. How critical is it 0:01:02.240 --> 0:01:06.119 for Congress to come through with another round of fiscal stimulus. 0:01:07.280 --> 0:01:10.240 It is very important in the sense that the Congressional 0:01:10.240 --> 0:01:13.319 Budget Office at the moment forecast that the unemployer rate 0:01:13.360 --> 0:01:15.800 by the end of this year will be more than 0:01:15.840 --> 0:01:19.600 ten percent. So that means that remember they're INFLOM rate 0:01:19.600 --> 0:01:21.800 today is thirteen point three and if we still have 0:01:21.959 --> 0:01:23.520 an on a power rate by the end of this 0:01:23.600 --> 0:01:26.959 year that is anywhere around ten percent its points, that 0:01:27.040 --> 0:01:29.400 means that a lot of people will still not be 0:01:29.440 --> 0:01:31.600 back in jobs and therefore will not have incomes, and 0:01:31.640 --> 0:01:34.640 therefore we will need to have more income support, similar 0:01:34.680 --> 0:01:37.560 to the income support that we saw through the most 0:01:37.600 --> 0:01:42.000 importantly higher unemployment benefits through the last evel months. Now, 0:01:42.000 --> 0:01:45.119 those benefits normally last twenty six weeks, but workers who 0:01:45.120 --> 0:01:47.640 lost their job back in March will have exhausted all 0:01:47.680 --> 0:01:51.000 of their unemployment benefits by September. At Horston, do you 0:01:51.040 --> 0:01:54.960 think that Congress finds a way around those rules and 0:01:55.000 --> 0:01:59.480 if not, how do these people manage? Well? So, I'm 0:01:59.520 --> 0:02:01.520 reading on my Bloomberg screen at the moment that there's 0:02:01.520 --> 0:02:03.880 a lot of talk about more fiscal support coming, but 0:02:04.800 --> 0:02:07.760 through your question here, it is all about the exact design. 0:02:08.120 --> 0:02:10.320 Will the new fiscal support that comes will that the 0:02:10.400 --> 0:02:14.240 infrastructure that will not directly help households. And if anything 0:02:14.320 --> 0:02:16.440 infrastructure takes a long time, they are not that maybe 0:02:16.520 --> 0:02:20.200 shovel ready projects normally when you do infrastructure investment spending. 0:02:20.280 --> 0:02:22.560 So the short answer to your question is that it 0:02:22.600 --> 0:02:25.520 all depends on what the exact nature of the package 0:02:25.560 --> 0:02:28.000 will be. There's also been talking about a paywroll tax cut. 0:02:28.840 --> 0:02:31.000 There's also been some discussion about that. Do we need 0:02:31.080 --> 0:02:35.160 more supports of small businesses? How can households otherwise be supported. 0:02:35.240 --> 0:02:38.200 We need to change it from paying people for being 0:02:38.280 --> 0:02:41.640 unemployed to instead paying people for taking a job. So 0:02:41.760 --> 0:02:45.160 this debate is ongoing. It has been said and talked 0:02:45.160 --> 0:02:48.280 about that we will hear in July and after recess 0:02:48.480 --> 0:02:50.800 have more discussions in Congress about it. But this is 0:02:50.800 --> 0:02:53.679 extremely important for investors because if there is not more 0:02:53.680 --> 0:02:55.840 fiscal support coming, and if we do end up in 0:02:55.880 --> 0:02:58.880 a deadlock situation where we don't get another fiscal boost, 0:02:58.960 --> 0:03:01.840 then we could run into some serious issues in particularly 0:03:01.880 --> 0:03:04.720 solving the issues for the household sector towards and how 0:03:04.760 --> 0:03:07.920 about at the aid for the state and local municipalities. 0:03:07.960 --> 0:03:10.960 We've heard many governors led by new York Governor Andrew 0:03:11.000 --> 0:03:16.720 Cuomo UH state that they really need UH fiscal stimulus 0:03:16.760 --> 0:03:19.280 for the states to balance their budgets. Meant most states 0:03:19.320 --> 0:03:22.200 have a balanced budget amendment, and that we're seeing UH 0:03:22.520 --> 0:03:27.440 forecasts of some multi multi multibillion dollar deficits for a 0:03:27.480 --> 0:03:30.680 lot of states. That's right, poll and that's why this 0:03:30.720 --> 0:03:34.520 has also been a bullet point that there has been 0:03:34.560 --> 0:03:36.920 talking about that this is something that's needed. So a 0:03:37.080 --> 0:03:39.880 very macroeconomic way of of looking at this whole question 0:03:40.000 --> 0:03:42.240 is that if you're unemployer rate is still ten percented 0:03:42.320 --> 0:03:45.880 December and going into next year, that just sets in 0:03:45.920 --> 0:03:49.640 motion a lot of different things that will require therefore 0:03:49.680 --> 0:03:55.040 more support local governments, household sector balance sheets, corporate sector balancies, 0:03:55.040 --> 0:03:58.280 on the particular small business sector palance. So that sends 0:03:58.320 --> 0:04:02.840 this next year, we become absolutely critical the conversations around 0:04:03.240 --> 0:04:06.120 what will the nature and the design be of any 0:04:06.160 --> 0:04:08.640 the future fiscal support and will there any future of 0:04:08.640 --> 0:04:11.680 physical support, Will any support be coming along? That becomes 0:04:11.760 --> 0:04:14.040 very important for markets because if not, let's say that 0:04:14.080 --> 0:04:16.440 we don't get more supported to the household sector and 0:04:16.480 --> 0:04:18.200 if you're on a point rate does end up being 0:04:18.200 --> 0:04:20.480 ten percent by the end of the years. Again, Congressional 0:04:20.520 --> 0:04:23.080 Budget Office is podcasting. That means that more people begin 0:04:23.120 --> 0:04:25.200 to fall behind on their payments, on their car loans, 0:04:25.400 --> 0:04:28.000 on their credit cards, on the mortgages. You will also 0:04:28.040 --> 0:04:30.800 see people fall behind on c NBAS payments and across 0:04:30.839 --> 0:04:34.640 the board. Those, of course, increases in delinquenty rates will 0:04:34.680 --> 0:04:37.960 begin to have consequence for credit, infrastructure, finance, and a 0:04:38.040 --> 0:04:40.839 lot of things across the board. In fting come in particular, 0:04:41.520 --> 0:04:44.520 if you believe that the Fed will not let this happen, 0:04:44.560 --> 0:04:47.440 and that Congress will also not let this happen, particularly 0:04:47.440 --> 0:04:49.719 in an election year, then you have to start believing 0:04:49.720 --> 0:04:53.560 in M M T right towards them. Is there a problem? 0:04:53.600 --> 0:04:56.280 So that's true, and this is why. Of course, one 0:04:56.320 --> 0:04:59.920 option here is that the Treasury just issues a lot 0:05:00.080 --> 0:05:02.800 more treasuries and then the Reserve just buys them, which 0:05:02.839 --> 0:05:06.440 is essentially what's happening today. The issue is that even 0:05:06.600 --> 0:05:10.840 from an MMT angled, the Treasury still needs to issue 0:05:10.920 --> 0:05:14.560 treasuries and then comes to some agreement meaning Congress and 0:05:14.839 --> 0:05:16.960 the White House, in terms of how the money should 0:05:16.960 --> 0:05:19.480 be spent. And what we're debating is really this issue 0:05:19.480 --> 0:05:21.719 of how should the money be spent we're not really 0:05:21.760 --> 0:05:24.440 debating whether the money is available. This, of course is 0:05:24.480 --> 0:05:27.000 a very important debate in many other countries, but in 0:05:27.000 --> 0:05:28.800 the US it's almost assumed that, of course we have 0:05:28.839 --> 0:05:32.159 another trillion or two trillion for this, and if it 0:05:32.240 --> 0:05:33.560 is the case that they're going to spend it, then 0:05:33.600 --> 0:05:37.159 for markets it does become very important for individual stocks, 0:05:37.200 --> 0:05:40.280 for individual things in credit and pick income exactly which 0:05:40.279 --> 0:05:44.280 balances will get support and which will not. Interesting Torsencelock, 0:05:44.360 --> 0:05:46.880 thank you so much for joining US. Torsence Luck chief 0:05:46.920 --> 0:05:50.080 ECONRAS for Torture bank Securities. Vanni. I think it's really 0:05:50.160 --> 0:05:53.479 interesting here as we uh see some news of just 0:05:53.600 --> 0:05:56.599 you know, more cases flaring up at some really really 0:05:56.680 --> 0:06:00.919 key economic markets California, you know, Florida, exis. What the 0:06:00.960 --> 0:06:03.640 impact will be on the overall US economy be very 0:06:03.680 --> 0:06:05.960 interesting to see how this plays out over the next 0:06:06.120 --> 0:06:10.200 several weeks and months. Well, plenty of you headlines on 0:06:10.240 --> 0:06:13.799 the coronavirus in the heart Land and in some other 0:06:14.320 --> 0:06:18.080 states like Arizona and Texas. This morning, arizonavirus cases jumping 0:06:18.080 --> 0:06:21.440 five point four percent over the seven days. The previous 0:06:21.440 --> 0:06:24.240 seven day average was about half of that. Let's bring 0:06:24.240 --> 0:06:26.000 in someone who knows a lot about this now. Lawrence 0:06:26.040 --> 0:06:31.000 Sour is John's Hopkins University Assistant Professor of Emergency Medicine. So, 0:06:31.040 --> 0:06:34.880 Professor Sour, how concerned should we be with certain counties 0:06:34.880 --> 0:06:37.840 in Texas saying that they're overwhelmed at this point? And 0:06:37.920 --> 0:06:40.120 I think we have every right to be concerned. UM, 0:06:40.160 --> 0:06:42.640 And I think that's reflected in the governor rolling back 0:06:42.720 --> 0:06:45.880 some of those reopening measures. I mean, you know, there 0:06:46.000 --> 0:06:49.760 is some talk of these increased testing numbers just being 0:06:50.080 --> 0:06:53.240 um an artifact of the increased availability of test but 0:06:53.279 --> 0:06:57.080 we're still hearing plenty of reports that people can't get tests, 0:06:57.080 --> 0:06:58.919 that tests are still a challenge, and we're still seeing 0:06:58.920 --> 0:07:02.000 a really high positive the rate as the hospitals start 0:07:02.080 --> 0:07:04.600 to surge, and you know, you see things like Texas 0:07:04.720 --> 0:07:08.360 children taking adult patients to manage some of that surge. UM. 0:07:08.400 --> 0:07:10.360 I think we know it's real that that we're seeing 0:07:10.360 --> 0:07:13.840 a massive increase in cases and it's very worrying. So 0:07:14.000 --> 0:07:18.320 Dr Sour from the medical community perspective, are we in 0:07:18.360 --> 0:07:21.200 any better shape to deal with this surge than we 0:07:21.240 --> 0:07:23.120 were maybe just a few months ago when New York 0:07:23.120 --> 0:07:26.400 and New Jersey and the Northeast was hit. I think 0:07:26.440 --> 0:07:28.760 we have a few more tools in our tool kit. UM. 0:07:28.760 --> 0:07:32.680 We have some therapeutics that are looking very promising, So 0:07:33.000 --> 0:07:35.240 once the patient is in the hospital, we have some 0:07:35.920 --> 0:07:39.200 UM improved ability to manage those patients. We know a 0:07:39.200 --> 0:07:41.560 lot more about the virus and how it how it 0:07:42.040 --> 0:07:44.880 sort of interacts in the body, and how it impacts 0:07:44.880 --> 0:07:49.080 the patient. That being said, these therapeutics and this medical 0:07:49.120 --> 0:07:52.200 management doesn't keep patients out of the hospital, so we 0:07:52.240 --> 0:07:55.440 have to go back to those UM tried in true measures. 0:07:55.480 --> 0:07:58.360 You know that physical distancing, staying home if you don't 0:07:58.360 --> 0:08:02.200 need to go out, do sing, you know, the flow 0:08:02.240 --> 0:08:05.600 of people out in public, and reducing large gatherings, and 0:08:05.600 --> 0:08:08.840 then continuing to use that face covering whenever you are 0:08:08.960 --> 0:08:11.120 whenever you do have to be out. So I think 0:08:11.120 --> 0:08:15.120 we have made some improvements. UM. That being said, simply 0:08:15.280 --> 0:08:17.480 throwing the switch and reopening is going to put us 0:08:17.560 --> 0:08:20.400 very close to back where we started again. Yeah, I mean, 0:08:20.440 --> 0:08:22.800 what would happen if everyone just stayed in place for 0:08:22.800 --> 0:08:25.120 two weeks and we know that the COVID cases in 0:08:25.120 --> 0:08:27.160 New York, just that that headline coming in now there 0:08:27.280 --> 0:08:30.360 was which was in line with the previous seven day 0:08:30.400 --> 0:08:33.960 average and that's because New Yorkers just went home and 0:08:33.960 --> 0:08:36.480 stayed there for the most part. If everybody in the 0:08:36.520 --> 0:08:39.120 country literally spent two weeks at home, would this virus 0:08:39.200 --> 0:08:41.560 be gone. I don't think you'd be gone. I think, 0:08:41.600 --> 0:08:43.640 you know, you still have your essential workers. You still 0:08:43.640 --> 0:08:46.200 have people coming and going from healthcare and having healthcare 0:08:46.320 --> 0:08:48.880 needs and other you know, day to day needs. But 0:08:48.960 --> 0:08:51.680 we would see a reduction in in cases, just like 0:08:51.720 --> 0:08:54.160 we did the last time we implemented these more sort 0:08:54.200 --> 0:08:58.000 of strict measures. Um, we are working really hard on 0:08:58.559 --> 0:09:00.959 development of a vaccine and if element of improvement of 0:09:01.000 --> 0:09:04.000 therapeutics that can be given in the outpatient space. So 0:09:04.080 --> 0:09:06.400 we have a lot of options that are going to 0:09:06.440 --> 0:09:08.800 be coming on board in the next year or so here. 0:09:08.880 --> 0:09:11.880 But but until we get to that time, we still 0:09:11.920 --> 0:09:17.600 are going to have to limit that that out outside interaction. So, Professor, 0:09:17.679 --> 0:09:20.400 So the as we think about some of the you know, 0:09:20.440 --> 0:09:22.920 the it's things that I think a lot of people 0:09:22.960 --> 0:09:24.959 would like to do in terms of behavior, i e. 0:09:25.679 --> 0:09:29.680 Safe distancing, wearing a mask, you know, limiting exposure in 0:09:29.920 --> 0:09:34.439 large groups. I mean, that really is the primary way today. 0:09:34.559 --> 0:09:36.800 We don't have therapeutics, we don't have a vaccine that 0:09:36.960 --> 0:09:40.400 is really the best way to kind of bend the 0:09:40.480 --> 0:09:43.360 curve here in these new states, is it not? Yeah, 0:09:43.360 --> 0:09:46.520 it is. And you know, I think that in public 0:09:46.520 --> 0:09:48.600 health we've always said that as we start to reopen, 0:09:48.640 --> 0:09:50.760 we have to be willing to to pull back on 0:09:50.800 --> 0:09:54.120 some of those measures if we see surges in cases. So, 0:09:54.679 --> 0:09:57.000 you know, there's a sort of hierarchy where it's like 0:09:57.520 --> 0:09:59.520 staying home is the best if you have to go out, 0:09:59.559 --> 0:10:02.800 avoiding large crowds is you know, better than being in 0:10:02.880 --> 0:10:04.720 large crowds. If you have to be in a crowd, 0:10:04.760 --> 0:10:07.680 being outside is better than being inside. So we have 0:10:07.920 --> 0:10:11.440 this sort of basic understanding of where the lowest risk 0:10:11.559 --> 0:10:13.760 is and how that risk starts to creep back in, 0:10:14.160 --> 0:10:15.640 and the best we can do to stay on the 0:10:15.679 --> 0:10:18.559 lower end of those of that risk stratification all the better. 0:10:20.920 --> 0:10:24.439 What's the solution that everybody is hoping for? So obviously 0:10:24.440 --> 0:10:26.680 waiting on antibody tests to be better, obviously waiting on 0:10:26.720 --> 0:10:29.040 testing in general to be better. We're hoping for vaccines. 0:10:29.080 --> 0:10:31.280 We're still not sure if you know, the the initial 0:10:31.320 --> 0:10:34.960 vaccines will be good. Is there any any hope at 0:10:34.960 --> 0:10:37.720 all that this virus just mutates itself out of existence. 0:10:38.559 --> 0:10:40.840 I think you can always hope that UM, we are 0:10:40.960 --> 0:10:42.679 seeing data that says that there's not a lot of 0:10:42.760 --> 0:10:46.520 mutation in this virus UM. A lot of people, UM 0:10:46.600 --> 0:10:49.960 with much more virology expertise than me, are working very 0:10:50.000 --> 0:10:52.920 hard on that. But I think for now, you know, 0:10:53.000 --> 0:10:57.880 our targets are vaccine and UM outpatient therapeutics, those things 0:10:57.880 --> 0:10:59.920 that are low cost things that can be delivered out 0:11:00.000 --> 0:11:03.240 side of the hospital to reduce the severity of illness UM. 0:11:03.280 --> 0:11:06.720 That's where our targets are. Lauren Sour, thanks so much 0:11:06.800 --> 0:11:10.000 for joining us. We really appreciate your thoughts. Always were 0:11:10.040 --> 0:11:14.240 such benefits, beneficiaries of having a good smart people at 0:11:14.280 --> 0:11:17.520 Johns Hopkins available to us. Lauren Sour is the Assistant 0:11:17.559 --> 0:11:21.720 Professor of Emergency medic Medicine at Johns Hopkins UH School 0:11:21.720 --> 0:11:24.440 of Medicine. Also will note that the Bloomberg School of 0:11:24.440 --> 0:11:27.640 Public Health is supported by Michael Bloomberg, founder Bloomberg LP 0:11:27.760 --> 0:11:31.000 and Bloomberg and that philanthropies as well. So, Vonnie, I 0:11:31.000 --> 0:11:33.040 think the story here, it sounds to me is we're 0:11:33.040 --> 0:11:35.480 listening to UH Professor Sour. It's it's kind of the 0:11:35.520 --> 0:11:38.480 story we've heard now for months. Uh, we know what 0:11:38.640 --> 0:11:40.600 to do. We know what bends the curve here in 0:11:40.720 --> 0:11:44.960 terms of uh uh you know, behavior, it's just having 0:11:45.200 --> 0:11:47.880 that conviction to get it done. And uh, the folks 0:11:47.920 --> 0:11:51.599 in New York and the metro area certainly showed that conviction. 0:11:51.679 --> 0:11:54.000 Now it's time for some other folks in other parts 0:11:54.000 --> 0:11:55.880 of the country to do the same. Yeah, what I mean, 0:11:55.960 --> 0:11:59.200 you'll end up doing it by force, if not by persuasion, 0:11:59.240 --> 0:12:01.280 it seems like in the end, so may as well 0:12:01.360 --> 0:12:05.079 started doing it early and uh, you know, maybe avoid 0:12:05.160 --> 0:12:07.560 the worst of it. It's just such a difficult position 0:12:07.600 --> 0:12:09.000 to be in. And the worst part of a pole 0:12:09.120 --> 0:12:11.400 is that if you're you know, particularly affective, you could 0:12:11.480 --> 0:12:13.280 end up living with very long term effects. And we 0:12:13.320 --> 0:12:16.760 know that, so you know that's just terrifying. Yeah, absolutely, 0:12:16.840 --> 0:12:19.600 so we will certainly follow up with that throughout the day. 0:12:23.120 --> 0:12:25.800 Let's concentrate on one of those sectors, now, the banks. 0:12:25.880 --> 0:12:28.000 The cap W Bank index down five and a half percent. 0:12:28.120 --> 0:12:30.640 Right now, Let's bring in Alison Williams, senior banks asset 0:12:30.679 --> 0:12:34.600 managers and payment analysts for Bloomberg Intelligence. So we had 0:12:34.640 --> 0:12:36.600 the bank stress test. We also had a little bit 0:12:36.600 --> 0:12:39.880 of relaxation of some of the Volcal rule provisions. Alison 0:12:40.200 --> 0:12:43.120 Banks though not doing well today, is this because their 0:12:43.120 --> 0:12:47.240 dividends are being kept so the dividend cap. I don't 0:12:47.240 --> 0:12:49.640 think it should be a surprise. In fact, I think, 0:12:50.040 --> 0:12:53.400 you know, for the most part, the takeaways should be 0:12:53.440 --> 0:12:56.079 in line with what people expected. The ongoing scrutiny of 0:12:56.120 --> 0:13:00.280 the banks. Um. You know there's there's a three quarter 0:13:00.360 --> 0:13:03.480 cap on dividends, there's a buyback pause. I think most 0:13:03.600 --> 0:13:07.640 investors expected that without a mandate by regulators. Uh, there's 0:13:07.640 --> 0:13:11.800 another metric where they're going to look at dividends as 0:13:11.840 --> 0:13:15.920 a as a ratio to the prior year earnings. UM. 0:13:16.000 --> 0:13:18.560 I think the one bank in my coverage universe that 0:13:18.720 --> 0:13:22.280 that screens poorly on that as well as Fargo, and we, 0:13:22.400 --> 0:13:25.920 along with most expect expected a dividend cut. We might 0:13:25.960 --> 0:13:28.720 get to cut there sooner than expected. We could get 0:13:28.760 --> 0:13:32.080 that as soon as Monday versus later. Uh. The other 0:13:32.160 --> 0:13:35.800 bank within my universe that's a focus is Goldman Sachs Uh. 0:13:35.880 --> 0:13:38.840 So Wells Fargo screens well on excess capital, but their 0:13:38.880 --> 0:13:41.880 income is a problem. Goldman, it's the opposite. So their 0:13:41.920 --> 0:13:46.480 capital Uh, the capital ratio that we're expecting now based 0:13:46.480 --> 0:13:49.320 on the stress test, results might be a little bit 0:13:49.400 --> 0:13:54.959 higher than previously anticipated. We won't know exactly until Monday, UM, 0:13:55.000 --> 0:13:58.080 but they have, uh, the income cushion they have, they 0:13:58.120 --> 0:14:00.800 have some flexibility around that to sort of proof what 0:14:00.880 --> 0:14:03.160 their capital ratio is going to be by the time 0:14:03.160 --> 0:14:05.800 this rule is implemented. So they should be fine. For 0:14:05.880 --> 0:14:10.199 the broader bank takeaway, the banks are all going to 0:14:10.280 --> 0:14:13.960 have to basically resubmit their plans. The results came out 0:14:14.040 --> 0:14:17.960 much more negative under a COVID overlay, which was significantly 0:14:18.000 --> 0:14:21.880 more stressful than UM you know, the basic test that's 0:14:21.960 --> 0:14:26.160 governing capital requirements at the moment. And so the negative 0:14:26.200 --> 0:14:29.440 for investors is that there will be ongoing uncertainty related 0:14:29.440 --> 0:14:31.200 to dividends, So not just some of the banks that 0:14:31.240 --> 0:14:34.480 I talked about, UM, but across all banks. But I 0:14:34.560 --> 0:14:37.000 don't think that should be a surprise to people. Were 0:14:37.000 --> 0:14:39.800 in an uncertain environment, UM, and so it shouldn't be 0:14:39.840 --> 0:14:41.800 surprising that the regulators are going to try to keep 0:14:41.800 --> 0:14:45.560 their options open. Alison, was a little bit of surprise 0:14:45.720 --> 0:14:48.400 to me in the sense that, you know, I had 0:14:48.440 --> 0:14:51.040 heard from a lot of folks. You know that the 0:14:51.120 --> 0:14:54.800 banks relative to two thousand and eight going to that crisis, 0:14:54.960 --> 0:14:58.480 were in much much better financial shape, much better balance sheets, 0:14:58.560 --> 0:15:01.160 much better on the reserve or front. Is this just 0:15:01.280 --> 0:15:03.920 the federal reserve acting out of it? You know, the 0:15:04.040 --> 0:15:08.960 term is abundance of caution here for the near term. 0:15:09.000 --> 0:15:11.800 I think you're right on all those points. While so, 0:15:12.400 --> 0:15:15.880 you know, we are in an unprecedented downturn, and when 0:15:15.920 --> 0:15:18.800 we look at some of the COVID overlays in some 0:15:18.960 --> 0:15:23.120 of the U and W shaped scenarios, we have losses 0:15:23.280 --> 0:15:26.640 that are you know, perhaps thirty to six higher than 0:15:26.680 --> 0:15:30.680 those used in the stress test. That's basically setting a 0:15:30.800 --> 0:15:34.400 requirements for banks. And now keep in mind that to 0:15:34.440 --> 0:15:38.040 your point that the banks have very healthy levels to capital. 0:15:38.440 --> 0:15:41.080 You know, I talked about Goldman, but the bar is 0:15:41.160 --> 0:15:44.840 so much higher um than where it was before, and 0:15:44.880 --> 0:15:49.040 they're basically close to meeting that. The other consideration is 0:15:49.080 --> 0:15:52.200 just the fact that the banks have been, you know, 0:15:52.360 --> 0:15:55.400 the solution this crisis. Right, So the previous crisis they 0:15:55.440 --> 0:15:59.120 were the problem. Now they're the solution, and I think 0:15:59.200 --> 0:16:01.720 that regular raiders want to make sure that they can 0:16:01.760 --> 0:16:05.480 continue to be the solution. So unlike the last crisis, 0:16:05.480 --> 0:16:07.960 where the question was do these banks have enough capital. 0:16:08.560 --> 0:16:11.240 You know that the focus right now of you know, 0:16:11.280 --> 0:16:15.800 current regulators and former regulators is that, you know, we 0:16:15.840 --> 0:16:17.720 want to make sure that that capital is there and 0:16:17.760 --> 0:16:21.200 being used to support the economy. And I think some 0:16:21.280 --> 0:16:24.640 of the thinking is UM by some of these formula 0:16:25.400 --> 0:16:28.520 regulators is just to err on the side of caution. UM. 0:16:28.520 --> 0:16:32.120 But keep in mind, dividends are a small percentage. Wells 0:16:32.160 --> 0:16:34.120 Fargo is a company that had sort of a hired 0:16:34.400 --> 0:16:36.360 payout ratio, and I think that's why they're more at 0:16:36.440 --> 0:16:40.000 risk UM. But for the most part, all the capital 0:16:40.080 --> 0:16:43.280 return that we've seen in several years, about seventy of 0:16:43.280 --> 0:16:45.920 that has been from buy backs, and we don't buy 0:16:46.000 --> 0:16:49.640 backs are paused. The banks stop those and I wouldn't 0:16:49.640 --> 0:16:52.880 expect those to return this year. Alison william thank you 0:16:52.960 --> 0:16:55.800 so much for that. We always appreciate your perspective. One 0:16:55.800 --> 0:16:58.920 of the top banks analysts on the Wall Street, not 0:16:58.960 --> 0:17:01.360 just to Bloomberg Intelligence but before that at Morgan Stanley 0:17:01.400 --> 0:17:03.560 Investment Manager, and she's been covering these banks for a 0:17:03.560 --> 0:17:07.760 long time. Always appreciate her perspective. Alison Williams, Senior Analyst, 0:17:07.840 --> 0:17:13.560 Global Investment, Banks and Asset Management for Bloomberg Intelligence, and 0:17:13.720 --> 0:17:15.960 it is Texas that we go to now for a 0:17:16.000 --> 0:17:19.840 Bloomberg opinion piece called COVID nineteen gives Texas a reality check, 0:17:19.880 --> 0:17:23.879 gets written by our own Timothy O'Brien, senior columnist for 0:17:23.920 --> 0:17:27.320 Bloomberg Opinion, and of course a huge career before that. 0:17:27.320 --> 0:17:30.440 This is just what he's doing right now, tim your 0:17:30.480 --> 0:17:33.560 column is fantastic. You talk to us about the Texas 0:17:33.560 --> 0:17:35.959 Medical Center, which I'll get to expand upon in a moment. 0:17:36.000 --> 0:17:39.480 But first of all, is there a dereliction of duty 0:17:39.480 --> 0:17:41.639 on the part of Governor Greg Abbott right now? Is 0:17:41.720 --> 0:17:45.240 this his fault? Is that the humors of Texas residents, 0:17:45.520 --> 0:17:48.200 that places in Texas are being overwhelmed. I mean, when 0:17:48.240 --> 0:17:51.280 you take us through the timeline you start in March nineteenth, 0:17:51.320 --> 0:17:53.760 when New York was already shut down, Texas only had 0:17:53.760 --> 0:17:58.600 three hundred six cases, then right, you know what it's 0:17:58.640 --> 0:18:01.119 I think, Vonnie, it would be share and too easy 0:18:01.160 --> 0:18:05.080 to put, you know, the fallout from a pandemic like 0:18:05.160 --> 0:18:09.160 this on the shoulders any one person. But certainly at 0:18:09.160 --> 0:18:13.600 a minimum, Greg Abbot bears a lot of blame at 0:18:13.640 --> 0:18:18.280 this point. Frankly, Uh, I think he's had a scattered 0:18:18.280 --> 0:18:22.959 approach through the Governor's house in Texas to taking practical 0:18:23.080 --> 0:18:27.040 measures that would have helped ensure the safeties of safety 0:18:27.040 --> 0:18:30.720 of most Texans. We don't know, obviously at this point. 0:18:30.840 --> 0:18:34.760 There are no silver bullet approaches to battling back against 0:18:34.760 --> 0:18:37.800 COVID nineteen until we have a vaccine. But there are 0:18:37.840 --> 0:18:41.520 practical measures that people can take, that states can take, 0:18:41.520 --> 0:18:43.720 and that the federal government can take that have been 0:18:43.800 --> 0:18:47.960 really spottily applied. And they're the basic things, UH washing 0:18:48.000 --> 0:18:52.560 your hands, maintaining social distance, UH, contact tracing, and of 0:18:52.600 --> 0:18:56.680 course mask wearing and and I think masks have been 0:18:57.080 --> 0:19:00.439 a useful UM symbol in Texas for some of the 0:19:00.520 --> 0:19:04.400 problems there, because you had mayors across the state asking 0:19:04.400 --> 0:19:09.080 Greg Abbott to impose uh A law requiring that that 0:19:09.200 --> 0:19:11.600 masks be worn, and he wouldn't do it. He gave 0:19:11.680 --> 0:19:13.680 guidance that people should do it, but he left it 0:19:13.760 --> 0:19:16.760 up to Texans themselves to decide whether or not they 0:19:16.760 --> 0:19:20.399 should wear masks, and that ended up being spottily applied. 0:19:21.240 --> 0:19:25.720 The same thing has happened around business openings UM. Early 0:19:25.800 --> 0:19:29.040 on Abbott put it in order to lockdown businesses across 0:19:29.080 --> 0:19:33.600 the state, but within about I think uh, five weeks 0:19:33.680 --> 0:19:37.960 or so of of the pandemic bursting into view, he 0:19:38.040 --> 0:19:42.240 began easing that those lockdowns some people said to prematurely, 0:19:42.320 --> 0:19:45.480 and now he's backtracking. Alright, So Timmy talked about the 0:19:45.760 --> 0:19:51.600 spotty applications on a statewide basis for precaution measures and 0:19:51.680 --> 0:19:54.080 responses to the pandemic. That kind of brings me back 0:19:54.160 --> 0:19:57.400 to something. I still don't have a clear picture of 0:19:57.640 --> 0:20:00.400 what there does not appear to be any FED rule 0:20:01.400 --> 0:20:05.520 efforts to combat the pandemic in terms of laying out 0:20:05.560 --> 0:20:08.720 some regulations and how this should work at a federal level, 0:20:09.080 --> 0:20:12.119 should there be have their historically been in these types 0:20:12.119 --> 0:20:16.920 of situations as a Trump administration kind of not fulfilled 0:20:16.960 --> 0:20:20.600 its duty. Oh I, I don't think the Trump administration 0:20:20.640 --> 0:20:22.600 has fulfilled its duty at all here, Paul, and I 0:20:22.640 --> 0:20:27.160 think that's where I think first and foremost criticism has 0:20:27.200 --> 0:20:31.000 to reside. All of the governors across the country, regardless 0:20:31.000 --> 0:20:34.160 of party, have had to send for themselves essentially during 0:20:34.160 --> 0:20:37.280 this crisis because the federal government has not stepped in 0:20:37.320 --> 0:20:41.679 and done important things like playing coordinating roles around the 0:20:41.760 --> 0:20:46.359 supply of PPE and testing equipment to the various states. 0:20:46.400 --> 0:20:48.760 The states have been left to compete against one another 0:20:49.119 --> 0:20:52.000 and come up with their own policies because the federal 0:20:52.000 --> 0:20:57.280 government isn't playing a very necessary uh coordinating role, which 0:20:57.440 --> 0:21:02.320 is always done during disasters are even localized, like for example, 0:21:02.840 --> 0:21:06.160 Hurricane um. You see FEMA and the federal government play 0:21:06.400 --> 0:21:10.440 a role intervening and coordinating the rescue. The Trump administration 0:21:10.560 --> 0:21:14.439 is totally um given up its responsibility for playing a 0:21:14.440 --> 0:21:17.760 meaningful role in the crisis. And again that's not an 0:21:17.760 --> 0:21:21.440 ideological or partisan observation, It's just an observation of the facts. 0:21:22.119 --> 0:21:24.960 So yes, I agree with you. I think I think 0:21:24.960 --> 0:21:27.280 it first has to start with where is the federal 0:21:27.320 --> 0:21:31.560 government um even in that vacuum. Some states have been 0:21:31.600 --> 0:21:34.080 more proactive than others in terms of taking this on, 0:21:34.560 --> 0:21:37.920 and there are some useful comparisons now among the various 0:21:37.960 --> 0:21:41.760 governors about approaches that have worked in Heaven. Yeah, I 0:21:41.800 --> 0:21:45.320 mean the Trump administration could also have gone the regulation road, 0:21:45.400 --> 0:21:49.120