1 00:00:00,240 --> 00:00:05,000 Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes. 2 00:00:05,040 --> 00:00:07,400 Speaker 1: The economy is in the process of rebounding. Will the 3 00:00:07,480 --> 00:00:10,479 Speaker 1: utter reserve have its own digital currency? The financial stories 4 00:00:10,520 --> 00:00:12,879 Speaker 1: that cheap hard work. Many people think the yields are 5 00:00:12,880 --> 00:00:15,080 Speaker 1: just going to keep marching up. We have more spending 6 00:00:15,120 --> 00:00:17,160 Speaker 1: coming out of Congress. One of the big questions I 7 00:00:17,200 --> 00:00:19,880 Speaker 1: think on investor's minds inflation through the eyes of the 8 00:00:19,880 --> 00:00:23,560 Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary 9 00:00:23,640 --> 00:00:27,240 Speaker 1: Bryan Wynhand a backup America Will CEO of Charlie Sharp. 10 00:00:27,360 --> 00:00:31,520 Speaker 1: Bloomberg wool Street Week with David Weston from Bloomberg Radio 11 00:00:31,760 --> 00:00:35,440 Speaker 1: taking stock halfway into the year. Most of us would 12 00:00:35,520 --> 00:00:38,080 Speaker 1: hope for a second half as strong as the first. 13 00:00:38,560 --> 00:00:41,560 Speaker 1: But is that what we have in store? This is 14 00:00:41,600 --> 00:00:45,000 Speaker 1: Bloomberg Wall Street Week. I'm David Weston this week. It 15 00:00:45,120 --> 00:00:48,160 Speaker 1: really wasn't about the week. It was about the year, 16 00:00:48,400 --> 00:00:50,880 Speaker 1: or at least the first half of the year. A 17 00:00:50,960 --> 00:00:54,960 Speaker 1: first half that saw the SMP five fiftcent and Treasury 18 00:00:55,040 --> 00:00:58,520 Speaker 1: yields up around fifty, although still in the very modest 19 00:00:58,560 --> 00:01:02,200 Speaker 1: one point five range, while the reflation trade drove oil 20 00:01:02,320 --> 00:01:05,560 Speaker 1: up from forty nine dollars a barrel to seventy five 21 00:01:05,680 --> 00:01:08,800 Speaker 1: dollars of barrel. So if that's what the first half 22 00:01:08,840 --> 00:01:11,280 Speaker 1: of the year meant for investors, what does this second 23 00:01:11,319 --> 00:01:14,479 Speaker 1: half have in store? With GDP expected to grow over 24 00:01:14,600 --> 00:01:17,800 Speaker 1: six percent this year, while inflation looks likely to come 25 00:01:17,840 --> 00:01:21,200 Speaker 1: in well above the two percent target of the Federal Reserve. 26 00:01:22,160 --> 00:01:24,040 Speaker 1: To help us look ahead to that second half of 27 00:01:24,040 --> 00:01:26,640 Speaker 1: the year, we welcome now Glenn Hubbard, dean emeritus at 28 00:01:26,640 --> 00:01:29,119 Speaker 1: the Columbia Business School and former Chairman of the Council 29 00:01:29,160 --> 00:01:32,480 Speaker 1: of Economic Advisors under President George W. Bush, and Sarah Bloomer, 30 00:01:32,480 --> 00:01:35,640 Speaker 1: asking of Duke University. She earlier serves as Deputy treasure 31 00:01:35,640 --> 00:01:38,160 Speaker 1: Secretary as well as Governor of the Federal Reserve Board. 32 00:01:38,200 --> 00:01:39,600 Speaker 1: So welcome to both of you. Great to have you 33 00:01:39,640 --> 00:01:41,440 Speaker 1: on Wall Street week. Sarah, let me start with you, 34 00:01:41,520 --> 00:01:43,760 Speaker 1: if I may. We got the jobs numbers out. They 35 00:01:43,800 --> 00:01:46,119 Speaker 1: were better than expected and earn fifty thou new jobs. 36 00:01:46,160 --> 00:01:48,680 Speaker 1: At the same time unemployment rate ticked up. Does it 37 00:01:48,720 --> 00:01:50,440 Speaker 1: tell us much about where the economy is going in 38 00:01:50,480 --> 00:01:53,640 Speaker 1: the second half of this year? Probably not, David. While 39 00:01:53,720 --> 00:01:57,320 Speaker 1: it was a good number, it wasn't a blockbuster number, 40 00:01:57,360 --> 00:02:01,920 Speaker 1: and we're still seeing real and usual behavior UM by 41 00:02:02,160 --> 00:02:05,480 Speaker 1: workers right now and decisions regarding whether or not to 42 00:02:05,640 --> 00:02:09,680 Speaker 1: go back to work. UM. These decisions at some point 43 00:02:09,800 --> 00:02:13,120 Speaker 1: were thought to be related to the fact that there 44 00:02:13,280 --> 00:02:17,919 Speaker 1: was this three d dollars supplemental unemployment insurance piece that 45 00:02:18,240 --> 00:02:22,239 Speaker 1: was tacked onto benefits. Uh. It turns out that that 46 00:02:22,760 --> 00:02:26,880 Speaker 1: rationale is probably not what's going on. People are thinking 47 00:02:26,960 --> 00:02:30,520 Speaker 1: about other things. They're thinking about their health, they're thinking 48 00:02:30,600 --> 00:02:35,320 Speaker 1: about the vaccination rates, they're thinking about childcare. So the 49 00:02:35,480 --> 00:02:38,240 Speaker 1: decisions which you know, and of course they're thinking about 50 00:02:38,360 --> 00:02:41,000 Speaker 1: wages and benefits to the jobs that they're going back to. 51 00:02:41,440 --> 00:02:44,079 Speaker 1: But the decision making, I think is a little bit 52 00:02:44,280 --> 00:02:49,480 Speaker 1: more complex than UM than economists might have thought about before. 53 00:02:49,960 --> 00:02:53,679 Speaker 1: So the number by itself, I would say, is you know, 54 00:02:53,720 --> 00:02:57,280 Speaker 1: it's a good solid number. Uh. Clearly there's more room 55 00:02:57,400 --> 00:03:00,720 Speaker 1: to be to to go. The nun members of people 56 00:03:00,800 --> 00:03:03,800 Speaker 1: back in the workforce are not what you would expect 57 00:03:03,919 --> 00:03:06,600 Speaker 1: them to be. There need to be many more coming 58 00:03:06,680 --> 00:03:10,160 Speaker 1: in uh, and they're not there yet. So I would say, UM, 59 00:03:10,360 --> 00:03:13,400 Speaker 1: more progress and you know, let's not let's not get 60 00:03:13,480 --> 00:03:16,440 Speaker 1: fixated on this number. A loan So so Glenn. Sarah says, 61 00:03:16,480 --> 00:03:19,639 Speaker 1: it's complex. Such a nice word. It's complex. We spent 62 00:03:19,680 --> 00:03:21,760 Speaker 1: a lot of time talking about the jobs numbers every month, 63 00:03:22,160 --> 00:03:24,000 Speaker 1: and in part is because what we think it will 64 00:03:24,080 --> 00:03:26,160 Speaker 1: mean for the FED and what they'll do at this point. 65 00:03:26,160 --> 00:03:27,760 Speaker 1: If you're in the FED, how do you interpret numbers 66 00:03:27,800 --> 00:03:29,640 Speaker 1: like this? I mean, if you look at price, stability, employment, 67 00:03:29,800 --> 00:03:31,840 Speaker 1: what do you make it. It's a great question. I 68 00:03:31,960 --> 00:03:34,359 Speaker 1: agree with Sarah. I think we learned something, but not 69 00:03:34,520 --> 00:03:37,320 Speaker 1: a lot from the report. It was good. We have 70 00:03:37,960 --> 00:03:41,360 Speaker 1: a hundred fifty jobs. Wages were rising three point six 71 00:03:41,440 --> 00:03:44,480 Speaker 1: percent year over year, but we have more job openings 72 00:03:44,880 --> 00:03:48,080 Speaker 1: in the country than we have unemployed people. For the FED, 73 00:03:48,160 --> 00:03:51,240 Speaker 1: I think it means the following kind of arithmetic. We're 74 00:03:51,280 --> 00:03:55,360 Speaker 1: down six point seven million jobs from the pre pandemic period. 75 00:03:55,800 --> 00:03:58,240 Speaker 1: The FED believes that about two and a half million 76 00:03:58,720 --> 00:04:01,640 Speaker 1: Americans may have retired, hired, or we're thinking about retiring 77 00:04:01,680 --> 00:04:04,200 Speaker 1: as part of that. So that means that the present 78 00:04:04,320 --> 00:04:10,040 Speaker 1: pace of job creation in the Spring of two will 79 00:04:10,080 --> 00:04:13,320 Speaker 1: be approaching full employment. And so the question for the 80 00:04:13,440 --> 00:04:16,120 Speaker 1: FED is how do you think about that? Is that 81 00:04:16,440 --> 00:04:20,360 Speaker 1: does that mean tapering early is a good idea? How 82 00:04:20,440 --> 00:04:22,800 Speaker 1: much of this is just the change in the reopening 83 00:04:22,920 --> 00:04:26,520 Speaker 1: patterns in the economy, UH, the unemployment benefits and so on. 84 00:04:26,839 --> 00:04:28,760 Speaker 1: I think it's a tough time for the FED, but 85 00:04:29,200 --> 00:04:32,200 Speaker 1: I would prefer they spend a little more time thinking 86 00:04:32,200 --> 00:04:34,359 Speaker 1: about what next spring could look like and what they 87 00:04:34,440 --> 00:04:37,240 Speaker 1: may do to prepare well, Sarah, next spring, we have 88 00:04:37,320 --> 00:04:39,200 Speaker 1: to we concerned about maybe a full employment. There are 89 00:04:39,200 --> 00:04:41,599 Speaker 1: other things as well. We also had the case housing 90 00:04:41,640 --> 00:04:43,520 Speaker 1: price numbers come out this week, and there they want 91 00:04:43,520 --> 00:04:45,680 Speaker 1: to the most in thirty years. There are people talking 92 00:04:45,680 --> 00:04:48,400 Speaker 1: about a bubble, certainly in fout bubble, a real boom 93 00:04:48,440 --> 00:04:50,360 Speaker 1: in house prices. Does that that has to be worried 94 00:04:50,360 --> 00:04:53,000 Speaker 1: about things like that? Oh, yes, the FED has to 95 00:04:53,080 --> 00:04:57,520 Speaker 1: look at that. UM and the concerns about a housing 96 00:04:57,600 --> 00:05:00,720 Speaker 1: bubble I think grew a little bit more with the 97 00:05:00,839 --> 00:05:03,560 Speaker 1: numbers that came out. You'll you'll also be hearing some 98 00:05:04,040 --> 00:05:08,640 Speaker 1: um UH Federal Open Market Committee members talking about housing 99 00:05:09,040 --> 00:05:15,000 Speaker 1: specifically because of course, the the stability, the financial stability 100 00:05:15,120 --> 00:05:21,280 Speaker 1: consequences of UM of housing prices is really quite you know, 101 00:05:21,440 --> 00:05:24,760 Speaker 1: can be quite concerning. So UM. The FED of course 102 00:05:24,839 --> 00:05:28,680 Speaker 1: has regulatory tools that it can engage in that it 103 00:05:28,760 --> 00:05:32,840 Speaker 1: can use that it can deploy um in order to uh, 104 00:05:33,080 --> 00:05:35,040 Speaker 1: you know, to kind of take away some of this 105 00:05:35,360 --> 00:05:39,320 Speaker 1: you know, froth in housing markets. Um. You know, the 106 00:05:39,440 --> 00:05:43,479 Speaker 1: FEDS sometimes talks about, wow, should we use monetary policy 107 00:05:43,560 --> 00:05:46,040 Speaker 1: as you know, the sort of the whole big, you know, 108 00:05:46,200 --> 00:05:49,000 Speaker 1: set of tools on the monetary policy side. We have 109 00:05:49,200 --> 00:05:50,960 Speaker 1: to you know, to take the oxygen out. But they 110 00:05:51,000 --> 00:05:52,760 Speaker 1: are looking at this. You can be sure of it. 111 00:05:52,960 --> 00:05:55,560 Speaker 1: And so Glan, you're economist, you're not a market s guy. 112 00:05:55,680 --> 00:05:57,160 Speaker 1: At the same time, it's interesting going to be the 113 00:05:57,240 --> 00:05:59,840 Speaker 1: market's reaction this week. I mean, we're starting the second 114 00:06:00,000 --> 00:06:02,080 Speaker 1: of the year and they basically it's a melt up. 115 00:06:02,160 --> 00:06:04,760 Speaker 1: It's a general move up. We're still at record or 116 00:06:04,800 --> 00:06:08,680 Speaker 1: close to records. It's gradually moving up, not dramatically. Is 117 00:06:08,760 --> 00:06:11,479 Speaker 1: this we think because they think the FED will actually 118 00:06:11,600 --> 00:06:15,840 Speaker 1: taper and tighten monetary policy appropriately to avoid inflation because 119 00:06:15,880 --> 00:06:17,920 Speaker 1: they think they won't. I'm not sure whether they're they're 120 00:06:17,920 --> 00:06:20,000 Speaker 1: happier that doesn't do anything that they think they're going 121 00:06:20,040 --> 00:06:23,080 Speaker 1: to jump in. I think it depends on the market participant, David, 122 00:06:23,120 --> 00:06:25,320 Speaker 1: But I think you're hitting on exactly the right issue, 123 00:06:25,360 --> 00:06:28,120 Speaker 1: you know, to Sarah's point, An obvious thing that FED 124 00:06:28,200 --> 00:06:31,000 Speaker 1: could do is stop buying nbs every month. You know 125 00:06:31,120 --> 00:06:33,920 Speaker 1: that that's an obvious thing to do before you get 126 00:06:34,000 --> 00:06:38,719 Speaker 1: to regulatory and and margin and lending changes. Sarah bloom 127 00:06:38,720 --> 00:06:40,880 Speaker 1: were asking and Glenn Hubbard will be staying with us 128 00:06:41,040 --> 00:06:43,479 Speaker 1: as we turn our attention to the all important question 129 00:06:43,520 --> 00:06:46,279 Speaker 1: of financial stability and whether there are still some holes 130 00:06:46,320 --> 00:06:48,560 Speaker 1: in the system, even after all the reforms made a 131 00:06:48,600 --> 00:06:50,960 Speaker 1: little over a decade ago. Now that's gonna up next 132 00:06:51,000 --> 00:06:59,480 Speaker 1: down Wall Street Week on Bloomberg. This is Bloomberg Wall 133 00:06:59,560 --> 00:07:03,760 Speaker 1: Street Week with David Weston from Bloomberg Radio. Let us 134 00:07:03,880 --> 00:07:07,600 Speaker 1: not forget one fundamental issue which lies at the heart 135 00:07:07,720 --> 00:07:12,320 Speaker 1: of our problems over a period of years, persistent in 136 00:07:12,440 --> 00:07:17,600 Speaker 1: growing global imbalances fuel the dramatic increasing capital flows, low 137 00:07:17,680 --> 00:07:22,200 Speaker 1: interest rates, excessive risk taking in the global search for return. 138 00:07:23,600 --> 00:07:27,880 Speaker 1: These excesses cannot be attributed to any single nation. That, 139 00:07:28,120 --> 00:07:30,440 Speaker 1: of course, with Treasury Secretary Hank Paulson speaking at a 140 00:07:30,480 --> 00:07:32,840 Speaker 1: news conference during the Great Financial Crisis all the way 141 00:07:32,840 --> 00:07:34,920 Speaker 1: back in two thousand and eight, we're a very different 142 00:07:34,920 --> 00:07:37,800 Speaker 1: world today, but it's striking that we have once again 143 00:07:38,000 --> 00:07:40,920 Speaker 1: enormous capital flows, low interest rates. What some say, is 144 00:07:40,960 --> 00:07:44,000 Speaker 1: excessive risk taking and a global search for return. The 145 00:07:44,160 --> 00:07:47,600 Speaker 1: Brookings Institution assembled a task force to look at financial stability, 146 00:07:47,640 --> 00:07:50,200 Speaker 1: and it issues its report this week. We are fortunate 147 00:07:50,280 --> 00:07:52,920 Speaker 1: to have with us the co chair of that task force. 148 00:07:52,960 --> 00:07:55,680 Speaker 1: He's Glenn Hubbard of the Columbia Business School, together with 149 00:07:55,760 --> 00:07:58,320 Speaker 1: Sarah Bloom Raskin, who's looked at these issues both as 150 00:07:58,320 --> 00:08:01,280 Speaker 1: a Federal Reserve governor and as a definite Treasury secretary. So, 151 00:08:01,360 --> 00:08:04,040 Speaker 1: first of all, congratulations on the report you got it at. 152 00:08:04,320 --> 00:08:06,800 Speaker 1: Tell us what's different, what's the same? What you found 153 00:08:06,840 --> 00:08:08,840 Speaker 1: from your report. Well, it's funny seeing that clip of 154 00:08:08,960 --> 00:08:11,360 Speaker 1: Hank because it really could have been done. It could 155 00:08:11,400 --> 00:08:13,640 Speaker 1: have been done today. I think what happened in the 156 00:08:13,680 --> 00:08:16,720 Speaker 1: global financial crisis is we focused on banks and we 157 00:08:16,760 --> 00:08:19,480 Speaker 1: actually did a pretty reasonable job in dealing with banks. 158 00:08:19,800 --> 00:08:22,040 Speaker 1: And the way I think about it is, if you're 159 00:08:22,040 --> 00:08:25,160 Speaker 1: thinking about fire, putting out a fire or fire prevention. 160 00:08:25,880 --> 00:08:28,440 Speaker 1: One tool is just to put out fires after they're raging. 161 00:08:28,520 --> 00:08:31,200 Speaker 1: That's the way regulators typically do it. That's what Hank 162 00:08:31,320 --> 00:08:34,160 Speaker 1: was talking about. But another is to prevent the build 163 00:08:34,240 --> 00:08:37,000 Speaker 1: up of combustible materials in the first place. If I'm 164 00:08:37,040 --> 00:08:40,719 Speaker 1: not torturing it. That's like policy, and then another is 165 00:08:40,800 --> 00:08:43,520 Speaker 1: to smell smoke, and that's process. And what we tried 166 00:08:43,600 --> 00:08:45,240 Speaker 1: to do and the report was say, what are the 167 00:08:45,400 --> 00:08:49,520 Speaker 1: key externalities the spillovers, if you will, from one sector 168 00:08:49,600 --> 00:08:52,240 Speaker 1: to the other in the economy. What kind of policies 169 00:08:52,320 --> 00:08:55,800 Speaker 1: need to change in non bank finance? And what is 170 00:08:55,920 --> 00:08:59,360 Speaker 1: causing the regulatory process to miss things? Why did the 171 00:08:59,440 --> 00:09:03,120 Speaker 1: treasury market breakdown last March? What could we have done 172 00:09:03,160 --> 00:09:06,880 Speaker 1: to make that better? We talked about housing earlier. What 173 00:09:07,000 --> 00:09:09,559 Speaker 1: could we be doing there is f suck working. Those 174 00:09:09,600 --> 00:09:11,599 Speaker 1: are the kind of questions we were doing on a 175 00:09:11,720 --> 00:09:14,440 Speaker 1: quote clear day, uh, to see if we can make 176 00:09:14,480 --> 00:09:16,120 Speaker 1: it better. So, Sarah, one of the things that strikes 177 00:09:16,160 --> 00:09:17,959 Speaker 1: me about this is I don't know the policy. I 178 00:09:18,000 --> 00:09:20,800 Speaker 1: don't know the regulation the way you and Glenn know it. 179 00:09:20,920 --> 00:09:22,840 Speaker 1: At the same time, I've heard for some time now 180 00:09:22,920 --> 00:09:25,440 Speaker 1: about issues with non bank issues, not the banks, as 181 00:09:25,440 --> 00:09:27,319 Speaker 1: Glen says, they're regular at this point, They've got a 182 00:09:27,360 --> 00:09:30,959 Speaker 1: lot of reserves and also short term funding issues. I've 183 00:09:31,000 --> 00:09:33,040 Speaker 1: heard about this quite a bit, and yet he keeps 184 00:09:33,080 --> 00:09:35,599 Speaker 1: coming up, including his glenses just a little over a 185 00:09:35,720 --> 00:09:39,600 Speaker 1: year ago. Now, why don't we fix it right. So, um, 186 00:09:39,720 --> 00:09:41,520 Speaker 1: you know, one of the virtues of the work that 187 00:09:41,679 --> 00:09:46,880 Speaker 1: Glenn and his group did is to highlight once again, uh, 188 00:09:47,080 --> 00:09:50,400 Speaker 1: some of the issues that are going on really outside 189 00:09:50,640 --> 00:09:55,079 Speaker 1: the contours of banking. As we understand banking now, the 190 00:09:56,040 --> 00:10:00,400 Speaker 1: rules and structures around the banking system or much more 191 00:10:00,480 --> 00:10:03,440 Speaker 1: developed than they are in the than in the non 192 00:10:03,520 --> 00:10:06,040 Speaker 1: bank space. And as Glenn points out, you know, you 193 00:10:06,120 --> 00:10:08,959 Speaker 1: can take all kinds of actions within the contours of 194 00:10:09,040 --> 00:10:12,719 Speaker 1: the banking world and there will be effects outside. And 195 00:10:12,920 --> 00:10:16,280 Speaker 1: it is those outside effects that this report and this 196 00:10:16,640 --> 00:10:20,160 Speaker 1: group are once again highlighting. And the question is why 197 00:10:20,200 --> 00:10:23,400 Speaker 1: are they once again highlighting this and why are these 198 00:10:23,440 --> 00:10:27,160 Speaker 1: issues not addressed fully earlier? And uh you know so 199 00:10:27,400 --> 00:10:31,360 Speaker 1: so after the financial crisis, Um, there was indeed quite 200 00:10:31,400 --> 00:10:34,920 Speaker 1: a bit of attention put on the financial sector, but 201 00:10:35,080 --> 00:10:37,920 Speaker 1: mostly the regulated part of the financial sector, what are 202 00:10:37,960 --> 00:10:42,400 Speaker 1: called wholesale funding markets, the so called plumbing behind a 203 00:10:42,559 --> 00:10:46,640 Speaker 1: lot of the non banking activity that uh you know 204 00:10:46,760 --> 00:10:50,600 Speaker 1: that that that Glenn and this report discussed, those issues 205 00:10:50,760 --> 00:10:55,640 Speaker 1: are far less along in being addressed, and yet they 206 00:10:55,720 --> 00:10:58,800 Speaker 1: have to be because they are the source of important 207 00:10:59,040 --> 00:11:04,160 Speaker 1: parts of important components of financial stability and really to 208 00:11:04,400 --> 00:11:09,520 Speaker 1: go much further without addressing these underlying risks is actually 209 00:11:10,120 --> 00:11:12,520 Speaker 1: quite perilous. And one of the things that I that 210 00:11:12,640 --> 00:11:15,800 Speaker 1: I think is important in this discussion is that we 211 00:11:16,040 --> 00:11:18,719 Speaker 1: have to understand that there that these are, that this 212 00:11:18,840 --> 00:11:21,400 Speaker 1: is the pipe right. You've got to keep your pipes 213 00:11:21,480 --> 00:11:23,880 Speaker 1: clean and cannot clog them up. And when you clog 214 00:11:24,080 --> 00:11:28,000 Speaker 1: them up, you actually create all kinds of problems. So, yeah, 215 00:11:28,200 --> 00:11:30,640 Speaker 1: the good news here, Glenn is for those of who 216 00:11:30,679 --> 00:11:32,920 Speaker 1: haven't got a chance to look forward, you have a roadmap. 217 00:11:33,160 --> 00:11:35,280 Speaker 1: I mean, you lay out a series of issues and 218 00:11:35,520 --> 00:11:38,200 Speaker 1: including a series of recommendation. Will what come be done 219 00:11:38,240 --> 00:11:40,520 Speaker 1: about it? Give us an example or two of things 220 00:11:40,600 --> 00:11:42,760 Speaker 1: that should be done. And by the way, who would 221 00:11:42,800 --> 00:11:45,000 Speaker 1: do them? Because I'm not sure about who the regulatory 222 00:11:45,080 --> 00:11:47,120 Speaker 1: is authority? Who would do it? Sure, Let's let's start 223 00:11:47,160 --> 00:11:49,800 Speaker 1: with the treasury market, because that was a real life 224 00:11:49,840 --> 00:11:53,079 Speaker 1: stress test that we all failed in March. There's no 225 00:11:53,200 --> 00:11:56,079 Speaker 1: market more fundamental to finance in the United States and 226 00:11:56,160 --> 00:11:58,640 Speaker 1: around the world. The Fed had to buy one and 227 00:11:58,679 --> 00:12:01,520 Speaker 1: a half trillion dollars and treasuries more than it brought, 228 00:12:01,600 --> 00:12:04,440 Speaker 1: uring the entire financial crisis in a short period of time. 229 00:12:04,800 --> 00:12:07,360 Speaker 1: What had happened was the size of the treasury market 230 00:12:07,440 --> 00:12:11,719 Speaker 1: had grown enormously from government debt issuance, but the capacity 231 00:12:11,800 --> 00:12:16,319 Speaker 1: of private dealers to intermediate hadn't kept pace. Part of 232 00:12:16,360 --> 00:12:18,719 Speaker 1: that was regulation, part of it other things in the 233 00:12:18,840 --> 00:12:24,719 Speaker 1: economy that was foreseeable. We could make steps to make 234 00:12:24,840 --> 00:12:29,040 Speaker 1: those dealers more able, modifying regulation a bit having to 235 00:12:29,120 --> 00:12:32,520 Speaker 1: do with liquidity ratios. We could also create a standing 236 00:12:32,640 --> 00:12:36,079 Speaker 1: FED facility where it's really clear you don't have to 237 00:12:36,240 --> 00:12:40,960 Speaker 1: dump treasuries. Another issue is money market funds and open 238 00:12:41,080 --> 00:12:43,800 Speaker 1: and bond funds that had grown very large, to the 239 00:12:43,840 --> 00:12:46,280 Speaker 1: extent in a crisis those funds try to dump their 240 00:12:46,360 --> 00:12:49,679 Speaker 1: treasuries first. We may need to think about that. A 241 00:12:49,800 --> 00:12:52,240 Speaker 1: lot of the financial sector in the non bank world 242 00:12:52,360 --> 00:12:56,160 Speaker 1: was creating liquidity or the illusion of liquidity. The question 243 00:12:56,280 --> 00:12:58,959 Speaker 1: is is that liquidity really there to do this regulation 244 00:13:00,040 --> 00:13:02,800 Speaker 1: lation or is there existing regulatory authority to accomplish some 245 00:13:02,840 --> 00:13:05,400 Speaker 1: of that. It depends some of the things we recommend, 246 00:13:05,559 --> 00:13:11,079 Speaker 1: particularly about process existing regulatory authority can do. Secretary Yelling 247 00:13:11,160 --> 00:13:13,400 Speaker 1: and her capacity is the chair of f Sock can 248 00:13:13,440 --> 00:13:15,920 Speaker 1: make some of those changes. But some things we recommend, 249 00:13:16,000 --> 00:13:19,880 Speaker 1: like giving each agency a financial stability mandate that you'd 250 00:13:19,920 --> 00:13:21,920 Speaker 1: have to go to Congress to do some of the 251 00:13:22,000 --> 00:13:24,000 Speaker 1: housing things we talk about, you'd have to go to 252 00:13:24,080 --> 00:13:26,559 Speaker 1: Congress to do so. Sarah, you've spent a fair amount 253 00:13:26,559 --> 00:13:29,000 Speaker 1: of time in Washington, both the executive Branch and at 254 00:13:29,000 --> 00:13:33,000 Speaker 1: the FED. If it's this straightforward and it is this important, 255 00:13:33,040 --> 00:13:35,880 Speaker 1: why doesn't it get done? I think part of the 256 00:13:35,920 --> 00:13:38,640 Speaker 1: reason it doesn't get done is because a lot of 257 00:13:38,760 --> 00:13:42,440 Speaker 1: things in Washington are are not done with a precautionary approach. 258 00:13:42,640 --> 00:13:46,640 Speaker 1: They're done after the crisis has hit. And um, you know, 259 00:13:46,800 --> 00:13:52,040 Speaker 1: examples of of lawmaking I think are filled with this 260 00:13:52,320 --> 00:13:55,160 Speaker 1: idea that you know, we kind of wait till disaster 261 00:13:55,320 --> 00:13:58,200 Speaker 1: strikes and then we come in and clean up. Um. 262 00:13:58,640 --> 00:14:01,040 Speaker 1: That actually is an appro that turns out to be 263 00:14:01,200 --> 00:14:05,160 Speaker 1: quite costly. Um. It turns out to be an approach that, um, 264 00:14:05,440 --> 00:14:09,520 Speaker 1: you know, I think is quite suboptimal. Um. One of 265 00:14:09,600 --> 00:14:14,880 Speaker 1: the very interesting times of risks facing financial stability right now, 266 00:14:14,960 --> 00:14:18,800 Speaker 1: of course, is the risks posed by by weather and climate. 267 00:14:19,080 --> 00:14:21,040 Speaker 1: I really want to thank Sarah Bloom. We're asking of 268 00:14:21,160 --> 00:14:23,600 Speaker 1: Duke and Glenn Hubbard the Columbia Business School for its 269 00:14:23,640 --> 00:14:27,800 Speaker 1: terrific discussion about financial stability coming up. The deal's market 270 00:14:27,920 --> 00:14:30,880 Speaker 1: is red hot, but is it's still being held back 271 00:14:31,040 --> 00:14:34,360 Speaker 1: by uncertainty about where the Biden administration is headed on 272 00:14:34,480 --> 00:14:37,280 Speaker 1: things like taxes and at a trust review. We talked 273 00:14:37,320 --> 00:14:41,160 Speaker 1: with former lawmaker and current dealmaker Eric Canter of Molus 274 00:14:41,200 --> 00:14:44,800 Speaker 1: and Company. That's next on Wall Street Week on Bloomberg. 275 00:14:49,880 --> 00:14:53,800 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 276 00:14:54,000 --> 00:14:57,920 Speaker 1: Bloomberg Radio. Taxes are on the global agenda. This week, 277 00:14:58,120 --> 00:15:01,320 Speaker 1: one and thirty countries endorsed a global tax minimum of 278 00:15:02,720 --> 00:15:05,600 Speaker 1: setting the stage for g twenty finance ministers to sign 279 00:15:05,680 --> 00:15:08,960 Speaker 1: off on an agreement in principle next week. Here's Treasury 280 00:15:09,000 --> 00:15:14,480 Speaker 1: Secretary Janet Yellen. Seven has taken significant steps this weekend 281 00:15:15,000 --> 00:15:19,920 Speaker 1: to end the existing harmful dynamic, making commitments today that 282 00:15:20,160 --> 00:15:26,240 Speaker 1: provide tremendous momentum towards achieving a robust global minimum tax 283 00:15:26,720 --> 00:15:30,200 Speaker 1: at a rate of at least in the United States. 284 00:15:30,280 --> 00:15:33,280 Speaker 1: President Biden has made tax policy one of the centerpieces 285 00:15:33,360 --> 00:15:37,840 Speaker 1: of his administration's agenda. Where President Trump cut taxes, President 286 00:15:37,880 --> 00:15:41,560 Speaker 1: Biden wants to raise them on the wealthiest corporation and individuals, 287 00:15:41,960 --> 00:15:45,080 Speaker 1: all to help pay for his economic programs. I think 288 00:15:45,120 --> 00:15:48,400 Speaker 1: the President's basic point is that why shouldn't capital be 289 00:15:48,520 --> 00:15:52,040 Speaker 1: tax as much as work as tax? And um, I'd 290 00:15:52,080 --> 00:15:54,360 Speaker 1: love to have someone tell me why it shouldn't be that, 291 00:15:54,520 --> 00:15:58,040 Speaker 1: Steve Rattner of will It Advisers. It's not just about 292 00:15:58,160 --> 00:16:01,680 Speaker 1: raising tax rates, and Biden also plans to do away 293 00:16:01,760 --> 00:16:05,040 Speaker 1: with some tax breaks that benefit Wall Street. The private 294 00:16:05,080 --> 00:16:08,000 Speaker 1: equity industry is hoping to hold onto some version of 295 00:16:08,120 --> 00:16:11,400 Speaker 1: its carried interest tax break, as President Biden wants to 296 00:16:11,520 --> 00:16:14,360 Speaker 1: raise the tax on what private equity managers earn from 297 00:16:14,400 --> 00:16:17,880 Speaker 1: the rate in effect now to something as high as 298 00:16:18,000 --> 00:16:22,000 Speaker 1: thirty nine point six percent. The tech sector is also 299 00:16:22,200 --> 00:16:25,600 Speaker 1: on the receiving end of President Biden's tax plans. Silicon 300 00:16:25,720 --> 00:16:28,480 Speaker 1: Valley's biggest stars could get hit by a change in 301 00:16:28,560 --> 00:16:32,560 Speaker 1: capital gains tax rates and the potential retroactive application of 302 00:16:32,640 --> 00:16:35,160 Speaker 1: the new rules. I don't think it's going to reduce 303 00:16:35,440 --> 00:16:38,040 Speaker 1: the amount of venture capital next year, or the amount 304 00:16:38,080 --> 00:16:42,440 Speaker 1: of venture capital investing or anyone else. That's graaycrafts Alan Patrokoff. 305 00:16:42,720 --> 00:16:45,520 Speaker 1: The Biden administration is also taking an aggressive approach to 306 00:16:45,560 --> 00:16:49,480 Speaker 1: and a trust. Newly appointed FTC chair Lena Khan, plans 307 00:16:49,560 --> 00:16:53,480 Speaker 1: to take on big tech claiming they abuse their market power, 308 00:16:53,800 --> 00:16:56,360 Speaker 1: and Amazon is worried enough that it's calling for CON's 309 00:16:56,480 --> 00:17:00,520 Speaker 1: recusal from actions involving it because of her prior criticism 310 00:17:00,760 --> 00:17:03,680 Speaker 1: of the e commerce giant. Here's Wall Street Week special 311 00:17:03,720 --> 00:17:07,879 Speaker 1: contributor Larry Summers in the idea that big is bad 312 00:17:08,240 --> 00:17:12,080 Speaker 1: per se, or the idea that big should be broken 313 00:17:12,240 --> 00:17:16,119 Speaker 1: up just so that smaller companies have a better chance 314 00:17:16,840 --> 00:17:21,119 Speaker 1: to compete even when they are less efficient. That is 315 00:17:21,240 --> 00:17:25,800 Speaker 1: the way to American failure. Even the prospect of big 316 00:17:25,960 --> 00:17:29,560 Speaker 1: changes in taxation or an intrust regulation can have a 317 00:17:29,640 --> 00:17:32,200 Speaker 1: real effect on when and if big deals get done. 318 00:17:32,520 --> 00:17:34,840 Speaker 1: So who better to ask about this than somebody who 319 00:17:34,880 --> 00:17:37,200 Speaker 1: went from being one of the most senior lawmakers in 320 00:17:37,359 --> 00:17:40,280 Speaker 1: Washington to being one of our most senior dealmakers on 321 00:17:40,359 --> 00:17:43,840 Speaker 1: Wall Street. Eric Canter served as representative from the Commonwealth 322 00:17:43,840 --> 00:17:46,800 Speaker 1: of Virginia, rising the level of majority Leader of the House, 323 00:17:47,160 --> 00:17:50,080 Speaker 1: and now he is a vice chairman of Mollison Company. 324 00:17:50,160 --> 00:17:52,600 Speaker 1: So Eric, welcome back to Bloomberg. Good to have you here. 325 00:17:52,880 --> 00:17:54,680 Speaker 1: Give us a sense as you actually are talking to 326 00:17:54,720 --> 00:17:58,080 Speaker 1: people about doing deals. Are people holding off at this 327 00:17:58,240 --> 00:18:01,680 Speaker 1: point because of un certainty about where the Bode administration 328 00:18:01,720 --> 00:18:04,280 Speaker 1: is going with both taxation and antitrust. I would say, 329 00:18:04,320 --> 00:18:05,760 Speaker 1: you know, we have to sort of take a step 330 00:18:05,840 --> 00:18:08,960 Speaker 1: back and realize that we are continuing to see just 331 00:18:09,080 --> 00:18:13,080 Speaker 1: tremendous momentum in US M and A. And this comes 332 00:18:13,160 --> 00:18:16,320 Speaker 1: off of record breaking quarters for Q one and certainly 333 00:18:16,440 --> 00:18:20,399 Speaker 1: key four last year. Uh And with that, you know, 334 00:18:20,520 --> 00:18:23,840 Speaker 1: tremendous amount of tail winds in general, obviously with the 335 00:18:23,920 --> 00:18:27,640 Speaker 1: government intervention because of the pandemic, the pent up demand 336 00:18:27,880 --> 00:18:31,879 Speaker 1: and the excitement around the reopening the vaccine rollouts. Um. 337 00:18:31,960 --> 00:18:35,760 Speaker 1: You know, you couple that together with the access to capital, 338 00:18:35,800 --> 00:18:38,159 Speaker 1: the low cost of capital, and mix it in with 339 00:18:38,240 --> 00:18:41,320 Speaker 1: the valuations that sellers can realize routing at right now. 340 00:18:41,600 --> 00:18:44,879 Speaker 1: There is a strong appetite to transact, no question about it, 341 00:18:45,320 --> 00:18:49,520 Speaker 1: and the the ability to transact a cross sectors, across 342 00:18:49,600 --> 00:18:52,840 Speaker 1: regions is certainly pronounced. When it comes to taxation and 343 00:18:52,920 --> 00:18:55,280 Speaker 1: possible changes of taxation, again, we don't know what those 344 00:18:55,320 --> 00:18:58,440 Speaker 1: would be, but we've seen various proposals made. Is it 345 00:18:58,480 --> 00:19:00,679 Speaker 1: causing to people to move things up to do them 346 00:19:00,680 --> 00:19:02,920 Speaker 1: more quickly? We saw Steve Schwartzman last week over and 347 00:19:02,960 --> 00:19:05,440 Speaker 1: cut Are saying that he thinks actually there's an avalanche 348 00:19:05,480 --> 00:19:07,480 Speaker 1: of opportunities because people want to get ahead of the 349 00:19:07,560 --> 00:19:10,760 Speaker 1: tax men, as it were, in case there are tax rises. Well, 350 00:19:10,800 --> 00:19:14,040 Speaker 1: I mean, as you know, the sort of narrative of 351 00:19:14,119 --> 00:19:18,080 Speaker 1: this administration and the majorities UH in the House and 352 00:19:18,200 --> 00:19:21,680 Speaker 1: the democratic control of the Senate, um the narrative is 353 00:19:22,240 --> 00:19:25,000 Speaker 1: increased taxes on the private sector, and so there's a 354 00:19:25,080 --> 00:19:28,080 Speaker 1: lot of concern about where that will end up. As 355 00:19:28,119 --> 00:19:31,720 Speaker 1: you suggest, there is uncertainty about what what really the 356 00:19:31,800 --> 00:19:35,080 Speaker 1: traffic will bear here in Washington, about how how much 357 00:19:35,200 --> 00:19:38,280 Speaker 1: increase uh we'll see in tax rates. But yes, for 358 00:19:38,359 --> 00:19:42,080 Speaker 1: the most part, I think people who are transacting in 359 00:19:42,240 --> 00:19:46,840 Speaker 1: the markets today are anticipating a likelihood of a tax increase, 360 00:19:46,880 --> 00:19:50,359 Speaker 1: whether it be a corporate rate increase, whether it be 361 00:19:50,480 --> 00:19:54,440 Speaker 1: a cap gains rate increase, or on the individual side, 362 00:19:54,520 --> 00:19:58,520 Speaker 1: for the smaller businesses who may still operate as past umanities, 363 00:19:58,800 --> 00:20:01,200 Speaker 1: which as you know there are lot of those in America, 364 00:20:01,760 --> 00:20:04,959 Speaker 1: UM that anticipation that perhaps we may see a return 365 00:20:05,080 --> 00:20:09,000 Speaker 1: to the pre seventeen days before the Trump tax cuts 366 00:20:09,520 --> 00:20:12,120 Speaker 1: um UM in the individual right as well. So all 367 00:20:12,200 --> 00:20:15,760 Speaker 1: that together I think does create again some incentive for 368 00:20:15,840 --> 00:20:18,480 Speaker 1: people to want to transact to get their deals closed 369 00:20:18,560 --> 00:20:22,920 Speaker 1: this year. Um in in thought that perhaps there would 370 00:20:22,920 --> 00:20:26,480 Speaker 1: be an effective date of January one, two and any 371 00:20:26,520 --> 00:20:28,760 Speaker 1: increased acts, right, Eric, thank you so very much. That's 372 00:20:28,880 --> 00:20:32,000 Speaker 1: Eric Canter. He's vice chairman of Mollison Company. Coming up, 373 00:20:32,080 --> 00:20:34,240 Speaker 1: we wrap up the week with special contributor to Larry 374 00:20:34,320 --> 00:20:38,119 Speaker 1: Summers of Harvard. This is Wall Street Week on Bloomberg. 375 00:20:43,400 --> 00:20:47,280 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 376 00:20:47,480 --> 00:20:50,720 Speaker 1: Bloomberg Radio. We now turned to our special trader Larry 377 00:20:50,760 --> 00:20:53,280 Speaker 1: Summers to wrap up the overall week force. So, Larry, 378 00:20:53,400 --> 00:20:54,840 Speaker 1: at the very end of the week on Friday, we 379 00:20:54,920 --> 00:20:56,600 Speaker 1: got the jobs. There was a little bit better in 380 00:20:56,680 --> 00:20:58,600 Speaker 1: some respects than what was expected. What do you make 381 00:20:58,640 --> 00:21:01,280 Speaker 1: of them? I only give her a story. The employment 382 00:21:01,400 --> 00:21:05,040 Speaker 1: number was better than I better than people expected. The 383 00:21:05,119 --> 00:21:08,720 Speaker 1: unemployment number was worse than people expected. I think what 384 00:21:08,880 --> 00:21:12,520 Speaker 1: stood out for me was that labor force participation did 385 00:21:12,640 --> 00:21:18,480 Speaker 1: not increase. And with twenty five states phasing out unemployment 386 00:21:18,800 --> 00:21:24,080 Speaker 1: unemployment insurance, with everything that was happening, this long awaited 387 00:21:24,280 --> 00:21:28,440 Speaker 1: return of those out of the labor force is materializing 388 00:21:28,560 --> 00:21:32,040 Speaker 1: more slowly than I think many people expected. And that's 389 00:21:32,040 --> 00:21:36,560 Speaker 1: a little bit ominous for the future of UH wage inflation. 390 00:21:37,280 --> 00:21:40,480 Speaker 1: The headline figure three tenths of a percent growth in 391 00:21:40,640 --> 00:21:44,840 Speaker 1: wage inflation doesn't seem so bad. But given that the 392 00:21:44,920 --> 00:21:48,880 Speaker 1: workers who were coming back or disproportionately low wage workers 393 00:21:49,359 --> 00:21:52,200 Speaker 1: and that holds the number down, I think that's a 394 00:21:52,240 --> 00:21:56,560 Speaker 1: bit more concerned for inflation. So that wasn't the big 395 00:21:56,600 --> 00:21:58,639 Speaker 1: events some people thought it might be. Talking about the 396 00:21:58,680 --> 00:22:01,160 Speaker 1: CBO report, thin comprecial Budge Office came out the report. 397 00:22:01,320 --> 00:22:03,879 Speaker 1: They talked about something a three trillion dollar deficit we're 398 00:22:03,880 --> 00:22:05,320 Speaker 1: gonna be running, although it comes down to all the 399 00:22:05,359 --> 00:22:07,600 Speaker 1: ways down to one point two trillion dollars in the 400 00:22:07,680 --> 00:22:09,400 Speaker 1: out years. What do you make of the CBO Report 401 00:22:09,440 --> 00:22:12,840 Speaker 1: of the Economy? Look, I think it's saying something that 402 00:22:13,119 --> 00:22:18,080 Speaker 1: is the conventional wisdom that might be right, but I 403 00:22:18,160 --> 00:22:21,399 Speaker 1: don't think we can count on it being right. You know, 404 00:22:21,520 --> 00:22:25,280 Speaker 1: that CBO report assumes no passage of the Biden Plan, 405 00:22:26,000 --> 00:22:30,879 Speaker 1: it assumes no extensions of range of tax cuts, it 406 00:22:31,000 --> 00:22:35,880 Speaker 1: includes not much in the way of emergencies, so it's 407 00:22:35,920 --> 00:22:39,439 Speaker 1: probably a substantial underestimate of where the deficit is going 408 00:22:39,520 --> 00:22:44,840 Speaker 1: to turn out to be, and it's saying that we're 409 00:22:44,880 --> 00:22:49,040 Speaker 1: going to be a country basically for a decade where 410 00:22:49,240 --> 00:22:53,159 Speaker 1: the real interest rates going to be negative, where the 411 00:22:53,200 --> 00:22:56,640 Speaker 1: budget deficits going to be close to five percent of GDP, 412 00:22:57,600 --> 00:23:00,080 Speaker 1: and where the debt ratio is gonna be a of 413 00:23:00,160 --> 00:23:06,760 Speaker 1: a and that that's all gonna be sustainable. It might 414 00:23:06,920 --> 00:23:10,040 Speaker 1: turn out to be right. But for it to turn 415 00:23:10,119 --> 00:23:13,639 Speaker 1: out to be right, it's gonna require that there be 416 00:23:13,800 --> 00:23:19,720 Speaker 1: a very substantial excess of saving over investment, or it's 417 00:23:19,720 --> 00:23:25,960 Speaker 1: gonna require that we be borrowing very substantially of from abroad. 418 00:23:26,840 --> 00:23:30,720 Speaker 1: In many ways, it's a bet on ironic for me 419 00:23:30,840 --> 00:23:35,320 Speaker 1: to say this. It's a bet on secular stagnation. After all, 420 00:23:35,400 --> 00:23:38,880 Speaker 1: the whole idea about secular stagnation was that even when 421 00:23:38,960 --> 00:23:42,800 Speaker 1: interest rates came down, savings were going to be substantially 422 00:23:42,880 --> 00:23:47,560 Speaker 1: an excessive investment. And if you think that you're not 423 00:23:47,720 --> 00:23:51,679 Speaker 1: going to have an overheating economy with negative real interest 424 00:23:51,840 --> 00:23:57,639 Speaker 1: rates and with those pretty large budget deficits, uh, that's 425 00:23:57,680 --> 00:24:01,960 Speaker 1: a that's a bet that there's gonna be some fundamental 426 00:24:02,080 --> 00:24:05,879 Speaker 1: weakness on a part of the consumer or the investor, 427 00:24:06,760 --> 00:24:12,280 Speaker 1: or some very heavy borrowing uh from abroad. So I'm 428 00:24:12,400 --> 00:24:20,160 Speaker 1: surprised to see that as the mainline normal uh, normal case, 429 00:24:20,440 --> 00:24:23,240 Speaker 1: and I kind of think something's gonna have to give, 430 00:24:23,720 --> 00:24:25,800 Speaker 1: So so lear gonna just pick up on one thing 431 00:24:25,920 --> 00:24:28,280 Speaker 1: that you just said, their negative real rates going out 432 00:24:28,359 --> 00:24:30,920 Speaker 1: into the future, and definitely doesn't that have to be 433 00:24:31,000 --> 00:24:32,760 Speaker 1: wrong or if it's right, doesn't that tell us that 434 00:24:32,840 --> 00:24:35,200 Speaker 1: something has gone terribly wrong with the economy that can't 435 00:24:35,240 --> 00:24:40,760 Speaker 1: be healthy. Well, I think what it's telling you is 436 00:24:41,320 --> 00:24:45,080 Speaker 1: that there's a lot of desire, a lot of uncertainty 437 00:24:45,200 --> 00:24:48,720 Speaker 1: people are gonna live, uh a long time, that you've 438 00:24:48,720 --> 00:24:54,399 Speaker 1: got very substantial desires to save and limited desires for 439 00:24:54,680 --> 00:25:00,440 Speaker 1: resources for investment. I think it is substantially concerned and David, 440 00:25:00,480 --> 00:25:03,920 Speaker 1: if it turns out to be right, but remember that 441 00:25:04,240 --> 00:25:06,920 Speaker 1: some of it is being driven by what's basically a 442 00:25:07,040 --> 00:25:10,639 Speaker 1: very positive thing, which is the capital goods are getting cheaper. 443 00:25:11,480 --> 00:25:16,760 Speaker 1: My six phone can do more computation than a million 444 00:25:16,800 --> 00:25:22,160 Speaker 1: dollars supercomputer could in the n That's progress, that's something 445 00:25:22,240 --> 00:25:26,200 Speaker 1: that's good. But it does have this consequence that we 446 00:25:26,359 --> 00:25:31,240 Speaker 1: have this excess of saving, and that's something we have 447 00:25:31,440 --> 00:25:35,520 Speaker 1: to manage. Now. This forecast is assuming that that excess 448 00:25:35,600 --> 00:25:39,840 Speaker 1: of saving is really big, because we got room for 449 00:25:39,960 --> 00:25:44,600 Speaker 1: all these deficits without all this debt, without pushing up 450 00:25:45,240 --> 00:25:49,879 Speaker 1: UH interest rates. If that's right, then we're doing the 451 00:25:50,040 --> 00:25:52,720 Speaker 1: right thing and it will all work out. That was 452 00:25:52,880 --> 00:25:57,040 Speaker 1: the secular stagnation view. It's just this is kind of 453 00:25:57,119 --> 00:26:00,920 Speaker 1: secular stagnation on steroids. Give and how low the real 454 00:26:01,040 --> 00:26:04,080 Speaker 1: interest rates are going to be in the forecast, and 455 00:26:04,160 --> 00:26:06,480 Speaker 1: how big the deficits are going to be? Okay, learn 456 00:26:06,600 --> 00:26:08,159 Speaker 1: Let's wrap it up, as we always do with a 457 00:26:08,280 --> 00:26:11,480 Speaker 1: wrapping round of summer says, let's start first with somebody 458 00:26:11,560 --> 00:26:15,800 Speaker 1: you knew. Donald Rumsfelt served twice as Secretary of Defense, 459 00:26:16,440 --> 00:26:19,320 Speaker 1: and I think although he was controversial sometimes some people 460 00:26:19,400 --> 00:26:21,680 Speaker 1: might even suggest you sometimes have been in controversial. I 461 00:26:21,720 --> 00:26:24,600 Speaker 1: think everybody agrees he was very intelligent, and he also 462 00:26:24,760 --> 00:26:26,920 Speaker 1: was devoted to his country. What did you know of 463 00:26:27,119 --> 00:26:32,639 Speaker 1: Donald Rumsfeld? He was always um a good friend to me. 464 00:26:33,440 --> 00:26:36,920 Speaker 1: We didn't know each other well obviously on questions like 465 00:26:37,080 --> 00:26:41,480 Speaker 1: the Iraq War. We had some major disagreements. But I 466 00:26:41,640 --> 00:26:47,320 Speaker 1: learned from him his observations about unknown unknowns or I 467 00:26:47,400 --> 00:26:50,360 Speaker 1: think something anybody in a leadership position has to pay 468 00:26:50,400 --> 00:26:53,840 Speaker 1: a lot of attention to, and UH one of the 469 00:26:53,960 --> 00:26:58,040 Speaker 1: shrewdest bits of management advice I've ever received was his 470 00:26:58,320 --> 00:27:03,040 Speaker 1: famous statement they as higher aise and these higher sees, 471 00:27:03,800 --> 00:27:06,600 Speaker 1: and I think every manager in America should keep that 472 00:27:07,119 --> 00:27:12,680 Speaker 1: in mind as they make hiring decisions for organizations for 473 00:27:12,800 --> 00:27:16,320 Speaker 1: which they have responsibility. That really is terribly good advice. 474 00:27:16,359 --> 00:27:20,000 Speaker 1: I agree with that. Second subject, here is Facebook, Facebook 475 00:27:20,320 --> 00:27:24,040 Speaker 1: of one, in its motion to dismiss against the FTC 476 00:27:24,400 --> 00:27:26,320 Speaker 1: had to pull back the case they may file again. 477 00:27:26,560 --> 00:27:29,800 Speaker 1: How significant was this development? I think it said something 478 00:27:30,000 --> 00:27:34,680 Speaker 1: very important for the antitrust debate, whatever you think, and 479 00:27:34,800 --> 00:27:38,199 Speaker 1: the people who are very worried and others who are 480 00:27:38,280 --> 00:27:43,880 Speaker 1: less alarmed about the big tech companies. If one wanted 481 00:27:43,960 --> 00:27:48,920 Speaker 1: to mount a major UH attack on what they're doing, 482 00:27:49,640 --> 00:27:54,760 Speaker 1: we probably need not just more aggressive enforcers, but changes 483 00:27:54,840 --> 00:27:59,520 Speaker 1: in the anti trust's law. And that's a basic reality 484 00:28:00,200 --> 00:28:05,560 Speaker 1: that everybody needs to consider. Whatever their opinion on what's 485 00:28:05,760 --> 00:28:10,960 Speaker 1: desirable is. It's something that investors to say handicap the 486 00:28:11,040 --> 00:28:16,639 Speaker 1: antitrust possibilities UH need to recognize as well. And finally, 487 00:28:16,760 --> 00:28:20,240 Speaker 1: third subject, housing prices. They came out this week and 488 00:28:20,280 --> 00:28:22,280 Speaker 1: the case Shiller was up the most it's been up 489 00:28:22,320 --> 00:28:25,399 Speaker 1: in thirty years. We've got something of a housing boom 490 00:28:25,480 --> 00:28:27,600 Speaker 1: boom with not a buzzle bubble. What do you make 491 00:28:27,640 --> 00:28:31,240 Speaker 1: of that? I think this is scary. I think rising 492 00:28:31,320 --> 00:28:35,119 Speaker 1: house prices in most people's common sense of the word, 493 00:28:36,040 --> 00:28:41,760 Speaker 1: represent inflation whatever exactly is showing up in some price index. 494 00:28:42,880 --> 00:28:47,000 Speaker 1: My guess is that the increases we've seen are going 495 00:28:47,040 --> 00:28:49,640 Speaker 1: to find their way into the price in disease over 496 00:28:49,720 --> 00:28:53,760 Speaker 1: the next year. Even if we don't see further increases, 497 00:28:54,600 --> 00:28:57,400 Speaker 1: my guesses we are going to see further increases in 498 00:28:57,520 --> 00:29:03,160 Speaker 1: house prices, given can tinuing shortages and my guests and 499 00:29:03,280 --> 00:29:06,680 Speaker 1: my judgment is that if that doesn't get reflected in 500 00:29:06,760 --> 00:29:11,320 Speaker 1: the indussease, it tells you something about the indusseries, not 501 00:29:11,480 --> 00:29:15,440 Speaker 1: about the economy, and that this is surely a major 502 00:29:15,600 --> 00:29:22,040 Speaker 1: indicator of substantial inflation psychology and needs to be taken very, 503 00:29:22,240 --> 00:29:28,400 Speaker 1: very seriously. I cannot understand why the Federal Reserve, in 504 00:29:28,480 --> 00:29:33,280 Speaker 1: the face of this, continues to be every month a 505 00:29:33,480 --> 00:29:38,320 Speaker 1: major buyer of mortgage backed securities. That is the ultimate 506 00:29:38,600 --> 00:29:43,040 Speaker 1: in procyclical behavior. Okay, Larry, thank you so much. That's 507 00:29:43,080 --> 00:29:45,600 Speaker 1: our special contributor to Wall Street Week. He's Larry Summers 508 00:29:45,920 --> 00:29:49,520 Speaker 1: of Harvard. Finally one more thought working nine to five. 509 00:29:50,040 --> 00:29:53,160 Speaker 1: But from where now? That we can finally go back 510 00:29:53,200 --> 00:29:56,200 Speaker 1: to Manhattan dinner parties again. There's always one subject that 511 00:29:56,280 --> 00:30:00,160 Speaker 1: inevitably comes up, and no, I don't mean Donald Trump. No, 512 00:30:00,440 --> 00:30:02,959 Speaker 1: it's the question of getting people back into the office. 513 00:30:03,440 --> 00:30:05,680 Speaker 1: Sixteen months ago, most of us didn't have a choice. 514 00:30:06,040 --> 00:30:08,720 Speaker 1: We had to stay home no matter what. But now 515 00:30:08,960 --> 00:30:11,720 Speaker 1: it's no longer a must do. It's turning into a 516 00:30:11,880 --> 00:30:16,000 Speaker 1: can do or even want to do. And surprise, surprise, 517 00:30:16,320 --> 00:30:18,520 Speaker 1: some of us find that what we once found a 518 00:30:18,640 --> 00:30:23,640 Speaker 1: pain is now more of a perk. But not everyone agrees. Employees, 519 00:30:23,680 --> 00:30:28,320 Speaker 1: when they're surveyed, are split almost evenly among always sometimes 520 00:30:28,440 --> 00:30:30,840 Speaker 1: and never on when they want to work from home, 521 00:30:31,320 --> 00:30:34,480 Speaker 1: and bosses are divided as well. Some of the big banks, 522 00:30:34,520 --> 00:30:37,480 Speaker 1: for example, don't see any reason why employees shouldn't get 523 00:30:37,560 --> 00:30:41,040 Speaker 1: back into the office, especially when they seem perfectly capable 524 00:30:41,080 --> 00:30:45,400 Speaker 1: of doing other things in large social settings, and even 525 00:30:45,480 --> 00:30:47,960 Speaker 1: some big tech companies like Apples say you need to 526 00:30:48,000 --> 00:30:50,400 Speaker 1: get back into the office, that working from home just 527 00:30:50,560 --> 00:30:53,400 Speaker 1: doesn't do the trick. And then there's the other end 528 00:30:53,440 --> 00:30:56,920 Speaker 1: of the spectrum, where companies are actively competing for employees, 529 00:30:56,960 --> 00:30:58,600 Speaker 1: telling them that they never have to come back in 530 00:30:58,640 --> 00:31:01,760 Speaker 1: the office. Again, even characterizing remote work as a sort 531 00:31:01,800 --> 00:31:04,920 Speaker 1: of signing bonus according to the Wall Street Journal. But 532 00:31:05,000 --> 00:31:08,240 Speaker 1: in the middle is the so called hybrid companies like 533 00:31:08,400 --> 00:31:11,000 Speaker 1: UBS that this week announced it would let two thirds 534 00:31:11,040 --> 00:31:14,400 Speaker 1: of employees mixed working from home and from the office, 535 00:31:14,920 --> 00:31:18,280 Speaker 1: and City CEO Jane Fraser this week acknowledged that there's 536 00:31:18,320 --> 00:31:21,880 Speaker 1: something of a fight going on over where employers end 537 00:31:22,000 --> 00:31:25,080 Speaker 1: up along this spectrum. The future of work at City 538 00:31:25,160 --> 00:31:27,800 Speaker 1: will will see nearly all of us back in the office. 539 00:31:28,160 --> 00:31:30,600 Speaker 1: But there's a big butt with that, and that's with 540 00:31:30,920 --> 00:31:35,160 Speaker 1: increased flexibility. We're looking at a much more flexible approach 541 00:31:35,280 --> 00:31:38,760 Speaker 1: going forward. Um and uh, I think it will be 542 00:31:39,160 --> 00:31:41,880 Speaker 1: a competitive advantage for us, But we really don't need 543 00:31:41,920 --> 00:31:45,080 Speaker 1: any survey to tell us two things. First, pretty much, 544 00:31:45,240 --> 00:31:48,000 Speaker 1: no one, I mean no one given the option, really 545 00:31:48,040 --> 00:31:51,000 Speaker 1: wants to be in the office on a Friday. And second, 546 00:31:51,400 --> 00:31:54,520 Speaker 1: you know for sure that all those small businesses around 547 00:31:54,600 --> 00:31:57,960 Speaker 1: our office buildings, the coffee vendors and small restaurants and 548 00:31:58,080 --> 00:32:01,120 Speaker 1: sandwich shop, they need us all to get back to 549 00:32:01,200 --> 00:32:05,360 Speaker 1: work in the office. That does it. For this episode 550 00:32:05,360 --> 00:32:08,360 Speaker 1: of Wall Street Week, I'm David Weston. This is Bloomberg. 551 00:32:08,720 --> 00:32:13,080 Speaker 1: See you next week m