1 00:00:00,880 --> 00:00:04,320 Speaker 1: You're listening to the Bloomberg Sound on podcast. Catch us 2 00:00:04,400 --> 00:00:07,560 Speaker 1: live weekdays at one Eastern on Bloomberg dot com, the 3 00:00:07,640 --> 00:00:10,760 Speaker 1: iHeartRadio app and the Bloomberg Business app, or listening on 4 00:00:10,800 --> 00:00:12,800 Speaker 1: demand wherever you get your podcasts. 5 00:00:13,960 --> 00:00:17,159 Speaker 2: Happy Friday to you, Madison Mills, thanks for joining me 6 00:00:17,200 --> 00:00:18,080 Speaker 2: from New York today. 7 00:00:18,160 --> 00:00:20,279 Speaker 3: Thank you so much for having me, Kayley. I'm so 8 00:00:20,320 --> 00:00:21,880 Speaker 3: excited to be here and to get to do this 9 00:00:22,320 --> 00:00:24,680 Speaker 3: by City show with you as we wrap up our 10 00:00:24,680 --> 00:00:26,200 Speaker 3: week here. A lot of good stuff to get to. 11 00:00:26,760 --> 00:00:29,000 Speaker 2: Yeah, absolutely, And I think the fact that we're both 12 00:00:29,080 --> 00:00:31,680 Speaker 2: from Washington and New York today really speaks to the 13 00:00:31,760 --> 00:00:35,000 Speaker 2: fact that everything we're talking about here in DC at 14 00:00:35,000 --> 00:00:38,400 Speaker 2: the moment, the debt sealing, the economy, ties back to 15 00:00:38,479 --> 00:00:40,760 Speaker 2: Wall Street and to what markets are looking at right. 16 00:00:40,800 --> 00:00:43,440 Speaker 2: So it's really great that we have both angles covered 17 00:00:43,440 --> 00:00:46,040 Speaker 2: today because it's not just any Friday. It is also 18 00:00:46,240 --> 00:00:49,000 Speaker 2: Synco Demyo, but more importantly, perhaps it is also a 19 00:00:49,200 --> 00:00:53,040 Speaker 2: jobs Friday. And man, Maddie, the jobs market is still 20 00:00:53,120 --> 00:00:56,360 Speaker 2: really hot. Two hundred and fifty three thousand on non 21 00:00:56,400 --> 00:00:57,120 Speaker 2: farm payrolls. 22 00:00:57,240 --> 00:00:58,880 Speaker 3: Yeah, it's always a good day when I get to 23 00:00:58,880 --> 00:01:01,240 Speaker 3: hear Mike mckeeth say, oops, we did it again on 24 00:01:01,280 --> 00:01:03,520 Speaker 3: the air when he said that we're at that thirteenth 25 00:01:03,640 --> 00:01:07,319 Speaker 3: month with jobs numbers coming in higher. And you know, Kelly, 26 00:01:07,400 --> 00:01:09,120 Speaker 3: you and I talk about it a little differently. We 27 00:01:09,160 --> 00:01:11,680 Speaker 3: know that those net revisions were down for March in February, 28 00:01:11,760 --> 00:01:14,959 Speaker 3: but that's not going to stop the Biden administration from 29 00:01:14,959 --> 00:01:17,160 Speaker 3: being really excited about this report today. 30 00:01:17,360 --> 00:01:19,840 Speaker 2: Oh yeah, the President earlier in a cabinet meeting was 31 00:01:20,080 --> 00:01:22,200 Speaker 2: taking a bit of a victory lap on this one. 32 00:01:22,240 --> 00:01:24,240 Speaker 2: Here's what he had to say this morning. 33 00:01:24,920 --> 00:01:28,440 Speaker 4: We got some good news from the jobs report. We 34 00:01:28,480 --> 00:01:32,119 Speaker 4: had at two hundred and fifty thousand jobs last month. 35 00:01:32,800 --> 00:01:36,279 Speaker 4: That's on top of the twelve million jobs we've already 36 00:01:36,319 --> 00:01:38,440 Speaker 4: had it just since we came in office a little 37 00:01:38,440 --> 00:01:42,480 Speaker 4: over two years ago. Unemployment rate is at three point 38 00:01:42,720 --> 00:01:46,880 Speaker 4: four percent, which is the lowest in fifty years. 39 00:01:47,280 --> 00:01:50,120 Speaker 2: So good news for the president. But we have to 40 00:01:50,200 --> 00:01:52,760 Speaker 2: keep in mind, Maty that for the Federal Reserve, I'm 41 00:01:52,760 --> 00:01:54,560 Speaker 2: not so sure that they still want to be seeing 42 00:01:55,360 --> 00:01:57,320 Speaker 2: this kind of jobs report. The idea that the labor 43 00:01:57,360 --> 00:02:00,160 Speaker 2: market is still really tight, unemployment is just not going 44 00:02:00,000 --> 00:02:02,680 Speaker 2: going up. In fact, the unemployment rate went down to 45 00:02:02,680 --> 00:02:05,760 Speaker 2: three point four percent, as we just heard the President say, 46 00:02:05,800 --> 00:02:08,040 Speaker 2: and they're trying to fight inflation, and in theory that 47 00:02:08,080 --> 00:02:09,600 Speaker 2: means that the labor market is going to have to 48 00:02:09,600 --> 00:02:10,280 Speaker 2: give a little bit. 49 00:02:10,560 --> 00:02:12,760 Speaker 3: Yeah, it's one of those classic good news is bad 50 00:02:12,800 --> 00:02:16,080 Speaker 3: news scenarios that we talk about. And even in looking 51 00:02:16,120 --> 00:02:18,640 Speaker 3: at where the jobs are up, it's across the board, right, 52 00:02:18,720 --> 00:02:22,400 Speaker 3: professional and business jobs up, healthcare up, leisure at one 53 00:02:22,400 --> 00:02:24,799 Speaker 3: point over the past thirteen months, we've seen at least 54 00:02:25,240 --> 00:02:28,680 Speaker 3: the kind of growth happening specifically in the leisure space, 55 00:02:28,760 --> 00:02:32,720 Speaker 3: but the overall job market seems unstoppable. So that's, you know, 56 00:02:32,800 --> 00:02:35,600 Speaker 3: great news for those that are worried about that pending 57 00:02:35,639 --> 00:02:38,520 Speaker 3: recession that we keep anticipating, But as you mentioned, Kaylee, 58 00:02:38,760 --> 00:02:39,919 Speaker 3: not good news for the Fed. 59 00:02:40,720 --> 00:02:43,240 Speaker 2: Yeah. And we also heard from the President, I should say, 60 00:02:43,280 --> 00:02:44,760 Speaker 2: on that inflation story. 61 00:02:44,800 --> 00:02:48,520 Speaker 4: Hears him on that inflation is now down forty percent 62 00:02:48,880 --> 00:02:51,440 Speaker 4: since last summer. It's come down the last nine months 63 00:02:51,480 --> 00:02:53,880 Speaker 4: in a row. We obviously have more work to do, 64 00:02:53,960 --> 00:02:55,680 Speaker 4: but we're trending in the right direction. 65 00:02:56,639 --> 00:02:59,200 Speaker 2: So on the subject of more work to do, how 66 00:02:59,280 --> 00:03:00,960 Speaker 2: much of that is going to be in a deterioration 67 00:03:01,080 --> 00:03:03,840 Speaker 2: in the labor market. Let's add another voice from the 68 00:03:03,840 --> 00:03:05,640 Speaker 2: White House now. I'm so pleased to say that joining 69 00:03:05,720 --> 00:03:08,520 Speaker 2: us is bar Ramamurti. He is the Deputy Director of 70 00:03:08,560 --> 00:03:13,000 Speaker 2: the National Economic Council and Advisor for Strategic Economic Communications. 71 00:03:13,240 --> 00:03:15,200 Speaker 2: Great to have you back on the show, mister Ramamurty. 72 00:03:16,240 --> 00:03:17,200 Speaker 5: Thanks for having me. 73 00:03:17,560 --> 00:03:20,120 Speaker 2: So as Mattie and I were just discussing, this was 74 00:03:20,160 --> 00:03:23,840 Speaker 2: an incredibly strong jobs are for it. Obviously, the jobs 75 00:03:23,840 --> 00:03:27,000 Speaker 2: growth we continue to see, something the President has continued 76 00:03:27,000 --> 00:03:30,320 Speaker 2: to tout, and yet we do still have an inflation problem. 77 00:03:30,480 --> 00:03:32,080 Speaker 2: Is it the belief of the White House that we 78 00:03:32,160 --> 00:03:34,680 Speaker 2: need to start to see some slack in the labor 79 00:03:34,680 --> 00:03:37,520 Speaker 2: market to ease the price pressures Americans are feeling, or 80 00:03:37,560 --> 00:03:39,160 Speaker 2: do we get to have both at the same time. 81 00:03:40,960 --> 00:03:43,240 Speaker 5: At the short answer is no, and I think the 82 00:03:43,280 --> 00:03:46,040 Speaker 5: best evidence of that is that over the last nine 83 00:03:46,040 --> 00:03:49,680 Speaker 5: months we've seen inflation come down significantly, as the President 84 00:03:49,720 --> 00:03:52,520 Speaker 5: pointed out, and at the same time, we have added 85 00:03:53,280 --> 00:03:56,040 Speaker 5: millions or jobs, and the unemployment rate has actually dropped, 86 00:03:56,040 --> 00:03:59,000 Speaker 5: as the President said, to three point four percent, which 87 00:03:59,040 --> 00:04:02,200 Speaker 5: is the lowest it's been to nineteen sixty nine. Side note, 88 00:04:02,200 --> 00:04:04,360 Speaker 5: I would also add that the Black unemployment rate dropped 89 00:04:04,360 --> 00:04:06,440 Speaker 5: a four point seven percent, which is the first time 90 00:04:06,480 --> 00:04:08,280 Speaker 5: in the history of this country that it's been below 91 00:04:08,320 --> 00:04:11,960 Speaker 5: five percent. So we think that we can continue to 92 00:04:12,240 --> 00:04:15,760 Speaker 5: walk that line where the labor market remained strong, where 93 00:04:15,800 --> 00:04:19,320 Speaker 5: wages continue to rise at a reasonable pace, but inflation 94 00:04:19,400 --> 00:04:20,840 Speaker 5: continues to trend in the right direction. 95 00:04:21,279 --> 00:04:24,440 Speaker 3: And you mentioned the lowest unemployment rate across the board 96 00:04:24,480 --> 00:04:27,159 Speaker 3: and specifically for Black Americans. And I know that you've 97 00:04:27,160 --> 00:04:31,559 Speaker 3: talked about crediting the American Rescue Plan force being part 98 00:04:31,640 --> 00:04:35,600 Speaker 3: of those great numbers there, But on the Republican side, 99 00:04:35,640 --> 00:04:39,039 Speaker 3: they've credited the American Rescue Plan for being responsible for 100 00:04:39,120 --> 00:04:42,599 Speaker 3: the record inflation that the FED is fighting. Talk me 101 00:04:42,640 --> 00:04:46,400 Speaker 3: through your thinking on those two conflicting pieces of both 102 00:04:46,440 --> 00:04:47,799 Speaker 3: good and bad news there. 103 00:04:49,560 --> 00:04:52,080 Speaker 5: Well, I would say that the American Rescue Plans certainly 104 00:04:52,120 --> 00:04:56,120 Speaker 5: helped stabilize household balance sheets when the President came into office. 105 00:04:56,160 --> 00:04:58,760 Speaker 5: And I think with the consumer driven economy like we 106 00:04:58,800 --> 00:05:01,480 Speaker 5: have in the United States, making sure that people have 107 00:05:01,920 --> 00:05:04,440 Speaker 5: financial security, have money in their pockets, and are able 108 00:05:04,480 --> 00:05:07,560 Speaker 5: to get out there and spend is important to keeping 109 00:05:07,839 --> 00:05:09,840 Speaker 5: our economy going. And it's a big part of the 110 00:05:09,880 --> 00:05:14,920 Speaker 5: reason we've had an extraordinarily strong recovery on the inflation side. Look, 111 00:05:14,960 --> 00:05:18,039 Speaker 5: inflation is a global problem. There isn't the country in 112 00:05:18,040 --> 00:05:20,720 Speaker 5: the world that hasn't been dealing with, in many cases, 113 00:05:20,800 --> 00:05:24,120 Speaker 5: historically high inflation, even those countries, by the way, that 114 00:05:24,200 --> 00:05:28,239 Speaker 5: didn't pursue robust fiscal stimulus. A lot of the problems 115 00:05:28,240 --> 00:05:30,240 Speaker 5: that we had were on the supply side, whether it 116 00:05:30,320 --> 00:05:34,600 Speaker 5: was supply chain issues, and then compounded by Russia's invasion 117 00:05:34,600 --> 00:05:38,760 Speaker 5: of Ukraine, which disrupted global energy markets and global commodity markets. 118 00:05:39,480 --> 00:05:42,920 Speaker 5: I think overall, the American rescue plan, with the support 119 00:05:42,960 --> 00:05:46,400 Speaker 5: that are provided directly to middle class and lower income families, 120 00:05:47,040 --> 00:05:49,839 Speaker 5: put us in a very strong position to weather the 121 00:05:49,880 --> 00:05:53,400 Speaker 5: global inflation problems that we've had and the global supply 122 00:05:53,480 --> 00:05:56,200 Speaker 5: chain issues that we've had, and it's allowed us, the 123 00:05:56,279 --> 00:05:58,360 Speaker 5: United States, to come out of this period of time 124 00:05:58,800 --> 00:06:00,919 Speaker 5: with an economy and much longer shape than many of 125 00:06:00,920 --> 00:06:02,039 Speaker 5: our competitors. 126 00:06:03,000 --> 00:06:05,800 Speaker 2: But kind of on the subject of this inflation problem still, 127 00:06:05,800 --> 00:06:08,160 Speaker 2: obviously that is a fight that the FED has been 128 00:06:08,160 --> 00:06:11,040 Speaker 2: fighting for some time now, and quite aggressively. I mean, 129 00:06:11,040 --> 00:06:13,000 Speaker 2: the labor market has held up despite the FED has 130 00:06:13,040 --> 00:06:15,680 Speaker 2: high rates to five percent. We're at the highest since 131 00:06:15,839 --> 00:06:19,400 Speaker 2: two thousand and seven. Should the FED be stopping now 132 00:06:19,440 --> 00:06:21,719 Speaker 2: considering that there is still more work to do? And 133 00:06:21,720 --> 00:06:23,680 Speaker 2: that is something that the President has admitted. 134 00:06:25,600 --> 00:06:28,919 Speaker 5: Well, look, we're not going to comment on any FED decisions. 135 00:06:29,000 --> 00:06:31,800 Speaker 5: We've have been respectful of the Fed's independence since the 136 00:06:31,839 --> 00:06:34,039 Speaker 5: President came into office, and we're going to continue to 137 00:06:34,040 --> 00:06:37,440 Speaker 5: do that. What I will say is that for the 138 00:06:37,480 --> 00:06:40,320 Speaker 5: past several months, we've seen interest rates go up, we've 139 00:06:40,320 --> 00:06:43,360 Speaker 5: seen inflation come down, and we've seen unemployment go down 140 00:06:43,400 --> 00:06:46,840 Speaker 5: and jobs go up. And so, while of course things 141 00:06:46,839 --> 00:06:49,520 Speaker 5: can change going forward, we continue to think the economy 142 00:06:49,560 --> 00:06:52,360 Speaker 5: is in a really strong position. And by the way, 143 00:06:52,440 --> 00:06:55,240 Speaker 5: a lot of the investments that were put in place 144 00:06:55,880 --> 00:06:58,160 Speaker 5: in the first two years of the president's term, whether 145 00:06:58,200 --> 00:07:01,400 Speaker 5: it's the infrastructure bill that he passed into law, whether 146 00:07:01,440 --> 00:07:05,320 Speaker 5: it was the Inflation Reduction Act and the clean energy 147 00:07:05,320 --> 00:07:08,600 Speaker 5: credits that that has a lot of that investment is 148 00:07:09,200 --> 00:07:11,600 Speaker 5: just starting to hit the economy and starting to percolate 149 00:07:11,640 --> 00:07:15,160 Speaker 5: through the economy, and so that should provide some tailwinds 150 00:07:15,200 --> 00:07:16,080 Speaker 5: going forward as well. 151 00:07:17,040 --> 00:07:19,960 Speaker 3: The other big issue and headwind for the economy right 152 00:07:20,000 --> 00:07:22,520 Speaker 3: now that our listeners are really worried about, of course, 153 00:07:22,640 --> 00:07:25,840 Speaker 3: is that debt ceiling question. We are at four weeks under, 154 00:07:25,880 --> 00:07:28,720 Speaker 3: four weeks now to the X date, and President Biden, 155 00:07:28,760 --> 00:07:31,760 Speaker 3: as you know, only inviting Congression or leaders to discuss 156 00:07:31,840 --> 00:07:34,880 Speaker 3: this this Tuesday here. The criticism being that it's a 157 00:07:34,880 --> 00:07:37,680 Speaker 3: little too little, too late. So what is your message 158 00:07:37,760 --> 00:07:41,400 Speaker 3: to the business community that's more stressed about the debt 159 00:07:41,400 --> 00:07:44,080 Speaker 3: ceiling debate than the potential recession question. 160 00:07:46,280 --> 00:07:49,480 Speaker 5: We've been saying for months now that it's Congress's responsibility 161 00:07:49,520 --> 00:07:51,960 Speaker 5: to take the threat of default off the table, and 162 00:07:52,000 --> 00:07:53,960 Speaker 5: they could have passed at any point over the past 163 00:07:54,000 --> 00:07:58,080 Speaker 5: several weeks a very simple bill that suspended or increased 164 00:07:58,080 --> 00:08:01,960 Speaker 5: the debt ceiling default off the table and with it 165 00:08:02,000 --> 00:08:05,040 Speaker 5: all the uncertainty that that's creating in financial markets and 166 00:08:05,080 --> 00:08:08,240 Speaker 5: for our economy. The President has been really clear that 167 00:08:08,280 --> 00:08:10,400 Speaker 5: he is happy to have a conversation with all the 168 00:08:10,440 --> 00:08:14,280 Speaker 5: professional leaders, including Speaker McCarthy, about well but tax policy 169 00:08:14,280 --> 00:08:16,640 Speaker 5: and spending policy. But what we're not going to do, 170 00:08:16,920 --> 00:08:19,600 Speaker 5: because we're not a deadbeat nations, have a discussion about 171 00:08:19,600 --> 00:08:21,000 Speaker 5: whether we're going to default on our debt or not. 172 00:08:21,960 --> 00:08:23,920 Speaker 2: With all due respect, mister rama murty, you say that 173 00:08:24,000 --> 00:08:26,960 Speaker 2: the President has been clear Speaker McCarthy has been clear 174 00:08:27,040 --> 00:08:29,200 Speaker 2: as well, he does not want to do a clean 175 00:08:30,000 --> 00:08:32,520 Speaker 2: lift to the dead ceiling. He would like to negotiate. 176 00:08:32,640 --> 00:08:35,120 Speaker 2: They want to see deficit reduction in spending cuts on 177 00:08:35,200 --> 00:08:37,719 Speaker 2: the table. So at what point would you encourage the 178 00:08:37,800 --> 00:08:43,160 Speaker 2: President to negotiate to actually consider some of what the 179 00:08:43,280 --> 00:08:45,679 Speaker 2: other side of the aisle is proposing here so that 180 00:08:45,840 --> 00:08:49,439 Speaker 2: we avoid a default inflicting massive damage to the US economy. 181 00:08:51,080 --> 00:08:55,199 Speaker 5: Look, there is a standard process by which Congress and 182 00:08:55,280 --> 00:08:57,560 Speaker 5: the President discuss how we should spend money and how 183 00:08:57,559 --> 00:09:00,400 Speaker 5: we should tax, and it's called the Budget and Appropriations process. 184 00:09:00,840 --> 00:09:03,280 Speaker 5: It happens on basically a yearly basis. It just happened 185 00:09:03,360 --> 00:09:06,280 Speaker 5: last year where the President sat down with Republican and 186 00:09:06,400 --> 00:09:10,120 Speaker 5: Democratic leaders and had a negotiation and nobody got exactly 187 00:09:10,160 --> 00:09:12,320 Speaker 5: what they wanted, but nobody was threatening to blow up the. 188 00:09:13,559 --> 00:09:16,959 Speaker 2: That's not the moment that we're in now. So why 189 00:09:17,040 --> 00:09:20,160 Speaker 2: wouldn't the White House need to adjust for this moment 190 00:09:20,240 --> 00:09:22,760 Speaker 2: in time? Could the risk actually be greater that this 191 00:09:22,920 --> 00:09:26,000 Speaker 2: time is different, that Republicans are actually willing to get 192 00:09:26,040 --> 00:09:28,120 Speaker 2: close to the edge of the cliff or perhaps go 193 00:09:28,280 --> 00:09:28,559 Speaker 2: over it. 194 00:09:29,760 --> 00:09:32,600 Speaker 5: Well, Look, there's a really important principle at stake here, 195 00:09:32,640 --> 00:09:34,640 Speaker 5: which is why the President has been clear on this. 196 00:09:35,679 --> 00:09:40,720 Speaker 5: If we agree to negotiations with the threat of default 197 00:09:40,800 --> 00:09:44,240 Speaker 5: hanging over us, and if Republicans are permitted to use 198 00:09:44,280 --> 00:09:47,160 Speaker 5: the possibility of a global economic crisis to ram through 199 00:09:48,720 --> 00:09:51,959 Speaker 5: spending cuts and other changes that would be harmful to 200 00:09:52,040 --> 00:09:55,160 Speaker 5: the economy, we'll be right back in this position over 201 00:09:55,200 --> 00:09:57,200 Speaker 5: and over again. Remember this is what they're proposing as 202 00:09:57,240 --> 00:09:59,319 Speaker 5: a one year extension of the debt limit. We really 203 00:09:59,360 --> 00:10:01,240 Speaker 5: want to be in a p edition or a year 204 00:10:01,320 --> 00:10:04,680 Speaker 5: after year. We put the threat of a global economic 205 00:10:04,720 --> 00:10:07,560 Speaker 5: crisis on the table, and one party with a narrow 206 00:10:07,600 --> 00:10:10,480 Speaker 5: majority in one House of Congress is allowed to use 207 00:10:10,559 --> 00:10:14,679 Speaker 5: that leverage to impose the most extreme version of their 208 00:10:14,800 --> 00:10:18,360 Speaker 5: fiscal policy in the United States. The President believes that 209 00:10:18,440 --> 00:10:21,200 Speaker 5: that's not the appropriate way to manage the world's leading economy. 210 00:10:21,880 --> 00:10:24,360 Speaker 5: He's standing up for that principle. And at the same time, 211 00:10:24,760 --> 00:10:27,280 Speaker 5: I don't think anybody accused Joe Biden of not being 212 00:10:27,320 --> 00:10:29,439 Speaker 5: willing to sit down and talk with Democrats and Republicans, 213 00:10:29,480 --> 00:10:31,880 Speaker 5: and something he did repeatedly over the first two years 214 00:10:32,120 --> 00:10:34,840 Speaker 5: when he got more bipartisan legislation done than anybody would 215 00:10:34,880 --> 00:10:35,559 Speaker 5: have thought possible. 216 00:10:36,040 --> 00:10:38,800 Speaker 3: I know that you don't want to negotiate this on 217 00:10:38,880 --> 00:10:41,520 Speaker 3: air with us, but one could say that the outcomes 218 00:10:41,559 --> 00:10:46,480 Speaker 3: here are either Biden bending, McCarthy bending, or an economic disaster. 219 00:10:47,240 --> 00:10:48,959 Speaker 3: Which of those are you anticipating. 220 00:10:50,720 --> 00:10:52,599 Speaker 5: Well, you're right, I'm not going to negotiate on it, 221 00:10:52,880 --> 00:10:56,000 Speaker 5: and I'm less interested in the political dynamics around this. 222 00:10:56,280 --> 00:10:58,199 Speaker 5: And really I want to emphasize the point that I 223 00:10:58,360 --> 00:11:02,400 Speaker 5: just made, which is, we are the world's leading economy, 224 00:11:02,960 --> 00:11:05,959 Speaker 5: and we're the only country other than one that has 225 00:11:06,080 --> 00:11:10,000 Speaker 5: this sort of debt ceiling that looms over the economy 226 00:11:10,160 --> 00:11:13,320 Speaker 5: from time to time, and it's not an appropriate way 227 00:11:13,480 --> 00:11:17,800 Speaker 5: to conduct economic policy to allow one party, which has 228 00:11:17,840 --> 00:11:21,040 Speaker 5: a narrow majority in one House of Congress, to use 229 00:11:21,120 --> 00:11:24,400 Speaker 5: that as a bargaining tool, the threat of global economic 230 00:11:24,760 --> 00:11:29,400 Speaker 5: crisis as a bargaining tool to get through brutally unpopular 231 00:11:29,679 --> 00:11:33,240 Speaker 5: and brutally harmful cuts to the economy. Remember, Moody's did 232 00:11:33,280 --> 00:11:36,840 Speaker 5: an analysis of the Republican bill that passed the House, 233 00:11:37,480 --> 00:11:41,600 Speaker 5: and Moody's found that it would push us meaningfully closer 234 00:11:41,640 --> 00:11:44,360 Speaker 5: to a recession. It cost US eight hundred thousand jobs 235 00:11:44,400 --> 00:11:46,920 Speaker 5: over the next year, So really those are the options 236 00:11:46,960 --> 00:11:48,600 Speaker 5: that the Republicans have put in front of us, either 237 00:11:48,640 --> 00:11:51,600 Speaker 5: a global economic crisis because of a default, or push 238 00:11:51,640 --> 00:11:53,600 Speaker 5: the country closer to a recession and cost US eight 239 00:11:53,679 --> 00:11:56,240 Speaker 5: hundred thousand jobs. I hope that folks will realize why 240 00:11:56,480 --> 00:11:58,800 Speaker 5: that's not a negotiation. We're interested in entering. 241 00:12:00,080 --> 00:12:02,840 Speaker 2: To shift gears just a little bit here, because, of course, 242 00:12:02,920 --> 00:12:05,199 Speaker 2: the other thing that has been looming large in the 243 00:12:05,280 --> 00:12:08,680 Speaker 2: economic conversation has been the health of regional banks. After 244 00:12:08,720 --> 00:12:11,280 Speaker 2: we've seen multiple failures this year, the most recent, of course, 245 00:12:11,320 --> 00:12:15,720 Speaker 2: being First Republic this week on Monday. We had seen 246 00:12:15,840 --> 00:12:18,000 Speaker 2: some concern in the market, for sure about the health 247 00:12:18,040 --> 00:12:21,000 Speaker 2: of pac West, Western Alliance some of these other banking 248 00:12:21,040 --> 00:12:25,400 Speaker 2: stocks getting absolutely crushed. Now we're seeing a massive rebound today. 249 00:12:25,760 --> 00:12:28,840 Speaker 2: Does the administration feel that any further steps are necessary 250 00:12:29,200 --> 00:12:31,600 Speaker 2: to stabilize the system, and what would those steps be. 251 00:12:33,679 --> 00:12:36,400 Speaker 5: If you look at the data, I think the overall 252 00:12:36,480 --> 00:12:41,240 Speaker 5: banking system is strong and in resilient shape. Obviously, back 253 00:12:41,280 --> 00:12:44,400 Speaker 5: with Silicon Valley Bank, there was a concern about a 254 00:12:44,520 --> 00:12:48,280 Speaker 5: run on deposits. We're not seeing much indication at all 255 00:12:48,520 --> 00:12:51,480 Speaker 5: of some sort of run on deposits now or strong 256 00:12:51,559 --> 00:12:54,960 Speaker 5: deposit outflow, and so I think people should feel confident 257 00:12:55,080 --> 00:12:57,440 Speaker 5: that if they have deposits in the bank, they're going 258 00:12:57,520 --> 00:13:00,920 Speaker 5: to be there if they need them. And separately are regulators, 259 00:13:00,960 --> 00:13:05,319 Speaker 5: the FDI, SE the FED. They have tools available to 260 00:13:05,480 --> 00:13:08,200 Speaker 5: them that they've used in the past that may they 261 00:13:08,280 --> 00:13:10,679 Speaker 5: would be willing to use again in the future that 262 00:13:10,760 --> 00:13:16,040 Speaker 5: can help intervene with individual banks that may need that intervention. 263 00:13:16,240 --> 00:13:18,920 Speaker 5: But if you take a step back, you look at 264 00:13:18,960 --> 00:13:22,079 Speaker 5: the capitalization of the financial system, you look at the 265 00:13:22,120 --> 00:13:25,120 Speaker 5: overall health of both the larger banks and the smaller 266 00:13:25,160 --> 00:13:27,800 Speaker 5: community banks, and I think the banking system the United 267 00:13:27,840 --> 00:13:30,559 Speaker 5: States overall is actually in very strong and resilted shape. 268 00:13:31,360 --> 00:13:34,120 Speaker 2: Well, certainly from a market perspective, looking a little bit 269 00:13:34,120 --> 00:13:37,000 Speaker 2: stronger today. Thank you so much for your time. That's 270 00:13:37,040 --> 00:13:39,760 Speaker 2: Barbara Ramamurti. He is the Deputy Director of the National 271 00:13:39,840 --> 00:13:44,720 Speaker 2: Economic Council and Advisor for Strategic Economic Communications. We really 272 00:13:44,720 --> 00:13:46,760 Speaker 2: appreciate your time, thanks for joining us, and Maddie, I 273 00:13:46,800 --> 00:13:49,360 Speaker 2: guess it just now is a matter of counting down 274 00:13:49,400 --> 00:13:51,480 Speaker 2: over the next couple of days until we get to Tuesday, 275 00:13:51,559 --> 00:13:54,040 Speaker 2: May ninth, we really see what kind of progress can 276 00:13:54,120 --> 00:13:56,240 Speaker 2: be made on this debt sealing discussion. 277 00:13:56,640 --> 00:13:58,440 Speaker 3: Yeah, and I just think about the fact that there 278 00:13:58,440 --> 00:14:01,199 Speaker 3: are only what seven days in May where there's that 279 00:14:01,360 --> 00:14:05,559 Speaker 3: overlap between Congress and the White House, So time's ticking. 280 00:14:06,040 --> 00:14:09,080 Speaker 2: Time is ticking. Arguably that clock is just ticking louder 281 00:14:09,360 --> 00:14:12,960 Speaker 2: and faster as time goes on and we approach June first, which, 282 00:14:13,000 --> 00:14:16,320 Speaker 2: as Treasury Secretary Janet Yellen has suggested earlier this week, 283 00:14:16,640 --> 00:14:19,440 Speaker 2: it could be as early as then that the US 284 00:14:19,600 --> 00:14:22,680 Speaker 2: cannot pay its bills, a story we will continue to 285 00:14:22,880 --> 00:14:25,520 Speaker 2: stay on top of. Madison Mills in New York, Kayley 286 00:14:25,600 --> 00:14:27,600 Speaker 2: Lines in Washington. Sound On continues. 287 00:14:29,000 --> 00:14:32,320 Speaker 1: You're listening to the Bloomberg Sound On podcast. Catch the 288 00:14:32,400 --> 00:14:36,240 Speaker 1: program live weekdays at one Eastern on Bloomberg Radio, the 289 00:14:36,360 --> 00:14:39,600 Speaker 1: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 290 00:14:39,800 --> 00:14:42,640 Speaker 1: You can also listen live on Amazon Alexa from our 291 00:14:42,680 --> 00:14:47,160 Speaker 1: flagship New York station, Just say Alexa play Bloomberg eleven thirty. 292 00:14:48,440 --> 00:14:51,480 Speaker 2: Welcome back to the fastest show in politics. Joe Matthew 293 00:14:51,520 --> 00:14:54,320 Speaker 2: has taken this Friday off. I'm Kayle Lines in Washington 294 00:14:54,360 --> 00:14:58,200 Speaker 2: together today with Madison Mills in New York as both 295 00:14:58,280 --> 00:15:01,480 Speaker 2: Wall Street and Washington and continue to have our eyes 296 00:15:01,560 --> 00:15:03,800 Speaker 2: on the clock, the clock that is sticking louder and 297 00:15:03,920 --> 00:15:07,600 Speaker 2: faster toward the X date with every passing day. And yet, Maddie, 298 00:15:07,640 --> 00:15:10,080 Speaker 2: as we get closer to this meeting next week between 299 00:15:10,200 --> 00:15:13,640 Speaker 2: President Biden and congressional leaders that's taking place on Tuesday, 300 00:15:14,120 --> 00:15:16,520 Speaker 2: it seems like both sides are just digging in their 301 00:15:16,600 --> 00:15:20,400 Speaker 2: heels even further, not giving any sign of budging heading 302 00:15:20,440 --> 00:15:21,120 Speaker 2: into these talks. 303 00:15:21,240 --> 00:15:24,680 Speaker 3: Yeah, and I just keep thinking about Congress going home 304 00:15:24,760 --> 00:15:27,480 Speaker 3: for the weekend and whether or not folks are you know, 305 00:15:28,280 --> 00:15:30,800 Speaker 3: plugging away on phone calls this weekend working on this, 306 00:15:31,000 --> 00:15:34,560 Speaker 3: and also thinking about President Biden US not necessarily hearing 307 00:15:34,640 --> 00:15:36,600 Speaker 3: a ton from him this week. I feel like you 308 00:15:37,320 --> 00:15:39,320 Speaker 3: had the most recent eyes on him, Kayley, at the 309 00:15:39,320 --> 00:15:41,680 Speaker 3: White House correspondence dinner. But other than that, I feel 310 00:15:41,720 --> 00:15:43,760 Speaker 3: like we haven't heard much from him this week on this. 311 00:15:43,920 --> 00:15:46,360 Speaker 2: Yeah, although he did speak in a cabinet meeting earlier 312 00:15:46,440 --> 00:15:48,040 Speaker 2: and after taking a bit of a victory lap on 313 00:15:48,120 --> 00:15:51,440 Speaker 2: the jobs report, did address this whole debate over the 314 00:15:51,480 --> 00:15:52,800 Speaker 2: debt ceiling. Listen to what he said. 315 00:15:54,240 --> 00:15:58,080 Speaker 4: The toure totally unrelated when you pay the debt or not, 316 00:15:58,720 --> 00:16:01,200 Speaker 4: doesn't have a damn thing to do. What your budget is, 317 00:16:01,800 --> 00:16:04,640 Speaker 4: What your budget is, where you're going to spend money, 318 00:16:04,680 --> 00:16:05,800 Speaker 4: How are you going to raise the money? 319 00:16:06,160 --> 00:16:07,080 Speaker 1: Wait, what are you going to cut? 320 00:16:07,160 --> 00:16:10,560 Speaker 4: What are you going to that's the two separate issues too, 321 00:16:11,480 --> 00:16:13,800 Speaker 4: And let's get us straight. We're trying to hold the 322 00:16:13,920 --> 00:16:17,920 Speaker 4: dead hostage to us to agree to some Jerconian cuts, 323 00:16:18,200 --> 00:16:21,560 Speaker 4: magnificently difficult and damaging cuts. 324 00:16:22,400 --> 00:16:24,680 Speaker 2: So, repeating the line we have heard consistently from the 325 00:16:24,720 --> 00:16:27,880 Speaker 2: White House, they'll negotiate on the budget, which they view 326 00:16:27,920 --> 00:16:30,920 Speaker 2: as an entirely separate conversation than the debt ceiling one. 327 00:16:31,000 --> 00:16:33,840 Speaker 2: Let's bring in Steve Dennis. Now, he is Bloomberg congressional 328 00:16:34,000 --> 00:16:36,400 Speaker 2: reporter who will help us give us the perspective from 329 00:16:36,440 --> 00:16:38,800 Speaker 2: the congressional side. So, Steve, great to see you here 330 00:16:38,880 --> 00:16:41,760 Speaker 2: in the DC studio. As we get closer to this meeting, 331 00:16:41,840 --> 00:16:43,680 Speaker 2: do we have any real sense of whether or not 332 00:16:43,800 --> 00:16:47,200 Speaker 2: it feels like progress can be made when Biden's digging 333 00:16:47,240 --> 00:16:50,280 Speaker 2: in his heels and congressional leaders feel like they are too. 334 00:16:51,000 --> 00:16:54,160 Speaker 6: Yeah, so far it seems so far. This seems like 335 00:16:54,280 --> 00:16:58,680 Speaker 6: the most intractable beginning to a debt limit negotiation that 336 00:16:58,800 --> 00:17:02,840 Speaker 6: I can remember. And you know, there's no easy, obvious 337 00:17:02,960 --> 00:17:06,040 Speaker 6: way out when one side is saying I must have 338 00:17:06,280 --> 00:17:10,440 Speaker 6: concession to take back to my conference in that speaker McCarthy, 339 00:17:11,119 --> 00:17:13,000 Speaker 6: and the White House is saying, we're going to give 340 00:17:13,000 --> 00:17:16,159 Speaker 6: you nothing. But there is you know, a lot of 341 00:17:16,480 --> 00:17:18,520 Speaker 6: things that they need to talk about anyways. They do 342 00:17:18,680 --> 00:17:21,240 Speaker 6: need to have a budget deal. They need to set 343 00:17:21,400 --> 00:17:26,000 Speaker 6: caps for the appropriations bills later this year. They need 344 00:17:26,040 --> 00:17:29,639 Speaker 6: to negotiate a defense level, a domestic level. They need 345 00:17:29,760 --> 00:17:32,680 Speaker 6: to negotiate on the border. There are a lot of 346 00:17:32,760 --> 00:17:35,840 Speaker 6: things for them to talk about. And the kind of 347 00:17:35,920 --> 00:17:38,879 Speaker 6: the question I have coming out of that meeting is 348 00:17:38,960 --> 00:17:42,760 Speaker 6: whether they make any progress on these other things that 349 00:17:42,960 --> 00:17:46,840 Speaker 6: the Republicans could go back to their conference and say, hey, 350 00:17:46,960 --> 00:17:49,399 Speaker 6: we're we're going to get something here. It's not going 351 00:17:49,480 --> 00:17:54,720 Speaker 6: to be you know, getting coming home empty handed where 352 00:17:54,920 --> 00:17:57,440 Speaker 6: the White House can claim, well, I didn't negotiate on 353 00:17:57,720 --> 00:18:00,639 Speaker 6: the dead limit, but I am negotiating on these things. 354 00:18:00,720 --> 00:18:04,440 Speaker 6: Can they thread that needle? And there's just only you know, 355 00:18:04,880 --> 00:18:06,280 Speaker 6: they're only going to be in town. 356 00:18:06,200 --> 00:18:09,119 Speaker 2: Like a week together, yeah, like seven days in May, right, 357 00:18:09,840 --> 00:18:10,800 Speaker 2: I mean, I think that there is. 358 00:18:10,800 --> 00:18:14,000 Speaker 6: A chance that you know, the Biden could cancel his 359 00:18:14,080 --> 00:18:17,479 Speaker 6: trip to Japan. The House and the Senate could cancel 360 00:18:17,600 --> 00:18:19,440 Speaker 6: some of their recesses around. 361 00:18:19,200 --> 00:18:21,880 Speaker 2: Memorial Day, call a fewel nighters, right. 362 00:18:22,160 --> 00:18:26,080 Speaker 6: So what usually happens in these kind of situations is 363 00:18:26,160 --> 00:18:28,520 Speaker 6: when markets start reacting, and they already are in the 364 00:18:28,640 --> 00:18:33,280 Speaker 6: short term bond market, that that puts amps up the pressure. 365 00:18:33,760 --> 00:18:35,960 Speaker 6: And the problem, of course for the economy is when 366 00:18:35,960 --> 00:18:39,000 Speaker 6: you get close like we did in twenty eleven, the 367 00:18:39,160 --> 00:18:43,000 Speaker 6: S and P five hundred fell quite a bit, consumer 368 00:18:43,080 --> 00:18:44,199 Speaker 6: confidence got crushed and. 369 00:18:44,200 --> 00:18:46,320 Speaker 2: All the rest, and we got downgraded there. 370 00:18:46,440 --> 00:18:49,000 Speaker 6: Yeah, so I mean, and there's already warnings from the 371 00:18:49,080 --> 00:18:52,440 Speaker 6: credit rating agencies that they are watching and not liking 372 00:18:52,480 --> 00:18:52,960 Speaker 6: what they're seeing. 373 00:18:53,000 --> 00:18:55,840 Speaker 3: So that's part of the PTSD here that's sort of 374 00:18:55,960 --> 00:19:00,200 Speaker 3: impacting Biden's, like you say, digging in his heels, not 375 00:19:00,320 --> 00:19:03,879 Speaker 3: wanting to negotiate. Is what happened in twenty eleven here, Steven, 376 00:19:03,920 --> 00:19:06,800 Speaker 3: do you see any big differences happening this time, specifically 377 00:19:06,800 --> 00:19:09,760 Speaker 3: in regards to maybe executive action on the debt limit? 378 00:19:10,720 --> 00:19:15,880 Speaker 6: Yeah, I do think that the potential for executive action, 379 00:19:16,080 --> 00:19:18,680 Speaker 6: whether it be minting the coin or premium bonds or 380 00:19:18,840 --> 00:19:22,960 Speaker 6: zero coupon bonds, or declaring the fourteenth Amendment, which says 381 00:19:23,000 --> 00:19:26,040 Speaker 6: you can't question the debt, makes the dead limit unconstitutional. 382 00:19:26,720 --> 00:19:29,840 Speaker 6: You know, any and or all of those become more 383 00:19:30,000 --> 00:19:33,320 Speaker 6: and more sort of front of mind as we get 384 00:19:33,400 --> 00:19:36,879 Speaker 6: closer to the cliff diving moment, whether that's actually June first. 385 00:19:37,040 --> 00:19:38,960 Speaker 6: You know, some of the Republican senators I've talked to 386 00:19:39,040 --> 00:19:41,720 Speaker 6: this week are kind of questioning whether it might really 387 00:19:41,880 --> 00:19:42,720 Speaker 6: be more like July. 388 00:19:44,000 --> 00:19:44,359 Speaker 7: And so. 389 00:19:46,280 --> 00:19:48,800 Speaker 6: That, you know, you wonder is the White House, which 390 00:19:48,840 --> 00:19:51,760 Speaker 6: has not said they absolutely won't do those things that 391 00:19:51,880 --> 00:19:54,480 Speaker 6: you know, they're not looking at it right now, but 392 00:19:56,400 --> 00:19:59,119 Speaker 6: you kind of wonder are they holding that sort of 393 00:19:59,200 --> 00:20:02,480 Speaker 6: in their back as sort of like a magic pineapple 394 00:20:02,600 --> 00:20:09,120 Speaker 6: to save the day. And you know, I mean, there 395 00:20:09,600 --> 00:20:13,240 Speaker 6: does just seem to be a really intractable thing going 396 00:20:13,440 --> 00:20:17,360 Speaker 6: from you know, there's two sides learned different lessons from 397 00:20:17,400 --> 00:20:21,840 Speaker 6: twenty eleven. Yeah, the Democrats saw that that deal, which 398 00:20:21,880 --> 00:20:25,560 Speaker 6: had a ten year spending cuts over two trillion dollars, 399 00:20:26,280 --> 00:20:29,359 Speaker 6: really put Barack Obama's domestic agenda in a straight jacket 400 00:20:29,440 --> 00:20:33,440 Speaker 6: for the final six years of his presidency. Democrats think 401 00:20:33,520 --> 00:20:36,560 Speaker 6: that was a disaster. Yeah, Republicans think, hey, that was 402 00:20:36,600 --> 00:20:41,120 Speaker 6: pretty good. We constrained spending for six years or first. 403 00:20:41,200 --> 00:20:43,680 Speaker 2: It depends on what kind of glasses you put on. 404 00:20:43,840 --> 00:20:45,399 Speaker 2: Right to look back at that, Steve, we got to 405 00:20:45,440 --> 00:20:47,119 Speaker 2: leave it there, but thank you so much for joining us. 406 00:20:47,160 --> 00:20:49,600 Speaker 2: Terrific reporting, and I look forward to your continued reporting 407 00:20:49,680 --> 00:20:52,040 Speaker 2: on this, especially as we get to next Tuesday. That's 408 00:20:52,040 --> 00:20:54,800 Speaker 2: Steve Dennis Bloomberg, Congressional reporter. We have to get to 409 00:20:54,920 --> 00:20:58,240 Speaker 2: our political panel now. Bloomberg Politics contributor, Jeanie Shanzino and 410 00:20:58,320 --> 00:21:02,639 Speaker 2: Doug high of Republican Strategist, former RNC communications director are 411 00:21:02,760 --> 00:21:06,320 Speaker 2: joining us now. Genie, especially given the events of this morning, 412 00:21:06,400 --> 00:21:09,560 Speaker 2: a really strong jobs report that President Biden now has 413 00:21:09,880 --> 00:21:12,119 Speaker 2: at his back, does that just give him maybe a 414 00:21:12,160 --> 00:21:15,119 Speaker 2: little extra swagger and a little bit more of a 415 00:21:15,240 --> 00:21:17,560 Speaker 2: firm I am giving a talking to. I am not 416 00:21:18,200 --> 00:21:20,440 Speaker 2: talking when he goes into this on Tuesday. 417 00:21:20,920 --> 00:21:25,119 Speaker 8: Yeah, it sounded he sounded very positive, as did Barat 418 00:21:25,200 --> 00:21:27,919 Speaker 8: in your interview, that they are on the right path here. 419 00:21:28,040 --> 00:21:30,600 Speaker 8: And you know what is absolutely startling is, you know, 420 00:21:30,680 --> 00:21:34,000 Speaker 8: I've worked in organizations and crises. You don't leave Thursday 421 00:21:34,040 --> 00:21:37,000 Speaker 8: at three thirty and come back, you know, four days later. 422 00:21:37,119 --> 00:21:39,600 Speaker 8: And this is what our Congress is doing the president 423 00:21:39,680 --> 00:21:42,359 Speaker 8: calling meetings a week out, so everybody else is on 424 00:21:42,480 --> 00:21:44,600 Speaker 8: pins and needles. But it's a bit surreal to watch. 425 00:21:44,920 --> 00:21:47,200 Speaker 8: They don't seem to feel a sense of urgency in 426 00:21:47,280 --> 00:21:49,359 Speaker 8: the White House or Congress if you look at this 427 00:21:49,400 --> 00:21:53,320 Speaker 8: schedule they're keeping, which is absolutely maddening for the American public. 428 00:21:53,400 --> 00:21:55,760 Speaker 8: And that's something I think the White House does need 429 00:21:55,840 --> 00:21:57,760 Speaker 8: to speak to as well as Congressional leadership. 430 00:21:58,240 --> 00:22:00,600 Speaker 3: Well, I think that's a great question. That's what I've 431 00:22:00,640 --> 00:22:03,480 Speaker 3: been wondering is why isn't the Biden administration speaking out 432 00:22:03,480 --> 00:22:05,920 Speaker 3: about the work he's doing, even if it's in the 433 00:22:06,000 --> 00:22:09,720 Speaker 3: Oval Office on the phones to work on the debt 434 00:22:09,800 --> 00:22:12,600 Speaker 3: ceiling question? Doug, what's your take on why we haven't 435 00:22:12,640 --> 00:22:13,399 Speaker 3: heard more on that? 436 00:22:15,000 --> 00:22:16,919 Speaker 9: Well, we don't hear a whole lot from Joe Biden. 437 00:22:17,000 --> 00:22:19,879 Speaker 9: By and large, we hear a lot less from him 438 00:22:19,960 --> 00:22:22,639 Speaker 9: than we've heard from previous presidents. I know he's doing 439 00:22:22,680 --> 00:22:25,920 Speaker 9: an interview with Stephanie Rule Tonight's out of the norm 440 00:22:26,040 --> 00:22:31,800 Speaker 9: from him, But clearly Biden's hardwired DNA is one of 441 00:22:31,960 --> 00:22:35,680 Speaker 9: negotiation and compromise. It's been his whole career, from working 442 00:22:35,760 --> 00:22:38,840 Speaker 9: with strom Thurman and Jesse Helms to working with my 443 00:22:38,960 --> 00:22:40,800 Speaker 9: old boss Eric Canner on something. 444 00:22:40,680 --> 00:22:41,800 Speaker 1: Called the debt ceiling. 445 00:22:42,960 --> 00:22:45,720 Speaker 9: And so as we've gotten into certainly our politics are 446 00:22:45,840 --> 00:22:49,040 Speaker 9: very different today than they were eleven years ago. It 447 00:22:49,160 --> 00:22:52,399 Speaker 9: becomes a question of what is tenable here. And what 448 00:22:52,520 --> 00:22:55,359 Speaker 9: we see is the results in advance look to be muddled. 449 00:22:55,480 --> 00:22:59,880 Speaker 9: Polling shows that, you know, a very slim plurality. Certain 450 00:23:00,080 --> 00:23:03,959 Speaker 9: certainly not a majority would blame congressional Republicans over Biden. 451 00:23:04,040 --> 00:23:07,000 Speaker 9: When you look at say, ABC Washington Post polling which 452 00:23:07,040 --> 00:23:09,040 Speaker 9: says this is going to be bad for everybody if 453 00:23:09,040 --> 00:23:11,120 Speaker 9: they're not able to reach some kind of a deal. 454 00:23:12,200 --> 00:23:15,520 Speaker 2: Well, you say, Doug, you know the talking of negotiation 455 00:23:15,720 --> 00:23:19,560 Speaker 2: and compromise and slim margins in Congress. McCarthy is also 456 00:23:19,680 --> 00:23:22,120 Speaker 2: working with a very slim margin in this House. And yes, 457 00:23:22,240 --> 00:23:23,959 Speaker 2: he passed this bill, that doesn't mean he had an 458 00:23:23,960 --> 00:23:26,720 Speaker 2: easy time of it. So even if Biden were to 459 00:23:26,800 --> 00:23:30,320 Speaker 2: start negotiating, isn't McCarthy going to have to give some 460 00:23:30,520 --> 00:23:33,879 Speaker 2: of that up? Just thinking logically, and then ultimately what 461 00:23:33,960 --> 00:23:36,639 Speaker 2: will his caucus think about that? What are they realistically 462 00:23:36,680 --> 00:23:37,359 Speaker 2: willing to lose? 463 00:23:38,240 --> 00:23:40,760 Speaker 9: Yeah, it's interesting. I thought Kevin deserved a lot more 464 00:23:40,840 --> 00:23:43,280 Speaker 9: credit than he got for getting that bill through. If 465 00:23:43,320 --> 00:23:46,920 Speaker 9: we go back to the Friday night when Kevin becomes speaker, 466 00:23:47,040 --> 00:23:50,080 Speaker 9: the narrative in Washington is that he's a speaker name 467 00:23:50,160 --> 00:23:52,560 Speaker 9: only and won't be able to do anything. So he 468 00:23:52,680 --> 00:23:55,040 Speaker 9: got this done and it was hard work, but the 469 00:23:55,200 --> 00:23:58,720 Speaker 9: real hard work is what now begins. And for some 470 00:23:58,960 --> 00:24:02,040 Speaker 9: members in his conference, anything more than what is in 471 00:24:02,160 --> 00:24:05,920 Speaker 9: this bill or anything less is unacceptable. But that's not 472 00:24:06,040 --> 00:24:09,159 Speaker 9: the majority necessarily of his conference, and he's able to 473 00:24:09,280 --> 00:24:12,280 Speaker 9: reach a deal where he gets a majority of Republicans 474 00:24:12,720 --> 00:24:16,760 Speaker 9: and brings Democrats. That's how Washington should work. Even when 475 00:24:16,920 --> 00:24:19,760 Speaker 9: Washington kicks the can and kicks the can and continues 476 00:24:19,840 --> 00:24:22,520 Speaker 9: to do so, which could happen here, but he does 477 00:24:22,640 --> 00:24:26,359 Speaker 9: have that very real possibility that some elements of his 478 00:24:26,840 --> 00:24:31,080 Speaker 9: conference could make a motion to vacate the chair, ultimately 479 00:24:31,160 --> 00:24:34,160 Speaker 9: meaning his speakership, and that's a political problem that he's 480 00:24:34,240 --> 00:24:36,879 Speaker 9: not going to be able to absorb. Potentially. 481 00:24:38,240 --> 00:24:41,920 Speaker 2: Yeah, that's a really good point. How tenuous is McCarthy's 482 00:24:41,960 --> 00:24:44,840 Speaker 2: position here, Doug, Doug High, of course, thank you, and 483 00:24:45,000 --> 00:24:47,200 Speaker 2: let's stick with you here. We're going to take a 484 00:24:47,280 --> 00:24:48,959 Speaker 2: quick break. But Doug and Jeanie are going to come 485 00:24:48,960 --> 00:24:51,680 Speaker 2: back with us. That's our Bloomberg Politics contributor, Jeanie Schanzino 486 00:24:51,840 --> 00:24:53,120 Speaker 2: and then of course Doug High. 487 00:24:53,960 --> 00:24:57,399 Speaker 1: You're listening to the Bloomberg Sound On podcast. Catch us 488 00:24:57,520 --> 00:25:01,720 Speaker 1: live weekdays at one Eastern on Bloomberg, the iHeartRadio app 489 00:25:01,760 --> 00:25:04,639 Speaker 1: and the Bloomberg Business app, or listen on demand wherever 490 00:25:04,760 --> 00:25:05,880 Speaker 1: you get your podcasts. 491 00:25:06,520 --> 00:25:09,399 Speaker 2: Welcome back to Bloomberg Sound On. Joe Matthew taking the 492 00:25:09,480 --> 00:25:12,160 Speaker 2: day off. I am Kayley Lines in Washington, joined today 493 00:25:12,200 --> 00:25:15,600 Speaker 2: by Madison Mills in New York and Maddie. We have 494 00:25:15,680 --> 00:25:18,359 Speaker 2: to talk about what is happening in New York right now, 495 00:25:18,440 --> 00:25:21,160 Speaker 2: what has become a very big news story up there, 496 00:25:21,880 --> 00:25:23,480 Speaker 2: the death of Jordan Neely. 497 00:25:24,200 --> 00:25:27,760 Speaker 3: Yeah, Kaylle. Neely was a thirty year old unsheltered man. 498 00:25:27,840 --> 00:25:30,639 Speaker 3: We understand that he suffered from mental illness and was 499 00:25:30,760 --> 00:25:33,960 Speaker 3: killed in the subway. That was after a fellow passenger, 500 00:25:34,040 --> 00:25:37,119 Speaker 3: a twenty four year old, put Neely into a chokehold 501 00:25:37,160 --> 00:25:40,200 Speaker 3: and this was all caught on video. That twenty four 502 00:25:40,280 --> 00:25:43,440 Speaker 3: year old was taken into custody, question and then released. 503 00:25:43,840 --> 00:25:46,360 Speaker 3: No charges have been filed, but the case is still 504 00:25:46,440 --> 00:25:50,000 Speaker 3: under investigation. And has ignited protests throughout the city. 505 00:25:57,359 --> 00:25:59,840 Speaker 2: And we should note that as these protests are happening, 506 00:26:00,080 --> 00:26:02,480 Speaker 2: politicians from the state of New York are weighing in 507 00:26:02,560 --> 00:26:06,840 Speaker 2: on this, including Democratic Congresswoman Alexandria Cassio Cortez, who wrote 508 00:26:06,880 --> 00:26:09,760 Speaker 2: on Twitter on Wednesday that Jordan Neely was murdered, but 509 00:26:09,840 --> 00:26:12,159 Speaker 2: because Jordan was houseless and crying for food in a 510 00:26:12,240 --> 00:26:14,640 Speaker 2: time when the city is raising rents and stripping services 511 00:26:14,720 --> 00:26:18,400 Speaker 2: to militarize itself. While many in power demonize the poor, 512 00:26:18,600 --> 00:26:21,719 Speaker 2: the murderer gets protected with passive headlines and no charges. 513 00:26:22,320 --> 00:26:25,639 Speaker 2: It's disgusting. And she is butting heads pretty directly with 514 00:26:25,720 --> 00:26:28,919 Speaker 2: New York City Mayor Eric Adams over this issue. Here 515 00:26:29,040 --> 00:26:30,480 Speaker 2: is him speaking earlier this week. 516 00:26:30,800 --> 00:26:33,680 Speaker 10: There are many layers through this. Let them, let the 517 00:26:33,800 --> 00:26:39,240 Speaker 10: process follow his course, and so get engaged with comparisons 518 00:26:39,359 --> 00:26:41,040 Speaker 10: and where we are, where we are, where we are. 519 00:26:41,440 --> 00:26:42,879 Speaker 10: I'm not going to do that. I'm gonna let the 520 00:26:42,880 --> 00:26:46,960 Speaker 10: investigation run his course. And those who believe that I 521 00:26:47,000 --> 00:26:49,840 Speaker 10: should do something differently, I respect that. But I have 522 00:26:49,920 --> 00:26:51,680 Speaker 10: to make the right decision for the City of New York. 523 00:26:51,880 --> 00:26:54,240 Speaker 2: So that's at the city level. But we've also had 524 00:26:54,320 --> 00:26:56,119 Speaker 2: some way in at the state level as well. New 525 00:26:56,200 --> 00:26:59,800 Speaker 2: York Governor Kathy Hochel said this earlier this week. 526 00:27:00,480 --> 00:27:02,879 Speaker 11: No, that was deeply disturbing, and that causes a lot 527 00:27:02,960 --> 00:27:05,600 Speaker 11: of fear in people. And actually, the Mayor and I 528 00:27:05,680 --> 00:27:08,360 Speaker 11: are working so hard to restore that sense of safety. 529 00:27:08,680 --> 00:27:11,320 Speaker 11: We have the cameras on the subways, we have more 530 00:27:11,400 --> 00:27:14,760 Speaker 11: police officers, we're assisting with overtime. We've been doing so much, 531 00:27:15,200 --> 00:27:18,560 Speaker 11: and the numbers have been improving. The number of crimes 532 00:27:18,600 --> 00:27:22,000 Speaker 11: on subways has been declining, and I don't want people 533 00:27:22,080 --> 00:27:24,600 Speaker 11: to feel anxious again when something like that comes the lighted. 534 00:27:24,880 --> 00:27:25,840 Speaker 11: It is deeply disturbing. 535 00:27:26,920 --> 00:27:29,600 Speaker 2: So this will speaks to the wider issue of crime 536 00:27:29,640 --> 00:27:33,040 Speaker 2: in America cities and the difficult politics around it. So 537 00:27:33,160 --> 00:27:36,159 Speaker 2: let's bring back our panel for their thoughts. Bloomberg Politics 538 00:27:36,200 --> 00:27:39,840 Speaker 2: contributor Genie Schanzano and Doug High, the Republican strategist former 539 00:27:39,960 --> 00:27:43,960 Speaker 2: RNC communications director. Genie, First, to you, since I know 540 00:27:44,040 --> 00:27:46,240 Speaker 2: you are quite familiar with New York in particular, but 541 00:27:46,359 --> 00:27:49,400 Speaker 2: this isn't a problem unique to New York. Crime has 542 00:27:49,520 --> 00:27:53,359 Speaker 2: become an increasingly large part of the political narrative. How 543 00:27:53,480 --> 00:27:56,639 Speaker 2: difficult it is is it for these leaders, democratic leaders 544 00:27:56,680 --> 00:27:59,800 Speaker 2: in many cases in large cities to navigate. 545 00:28:00,080 --> 00:28:02,600 Speaker 8: It is incredibly difficult. And you know, as we look 546 00:28:02,680 --> 00:28:06,280 Speaker 8: at the US House of Representatives, who arguably the reason 547 00:28:06,400 --> 00:28:10,320 Speaker 8: Republicans control it today is because Democrats in my home 548 00:28:10,400 --> 00:28:12,640 Speaker 8: state of New York did not do a good job 549 00:28:12,720 --> 00:28:15,800 Speaker 8: of addressing crime in the last election, and that cost 550 00:28:15,920 --> 00:28:19,800 Speaker 8: Democrats a number of seats, and that allowed Republicans to 551 00:28:19,920 --> 00:28:23,119 Speaker 8: take over. And it was all on the issue of crime. 552 00:28:23,240 --> 00:28:25,359 Speaker 8: That's the reason Mayor Eric Adams, who you were just 553 00:28:25,440 --> 00:28:28,359 Speaker 8: talking about, was elected in New York City. And now, 554 00:28:28,440 --> 00:28:31,600 Speaker 8: of course, this horrible incident on the f train involving 555 00:28:31,880 --> 00:28:35,520 Speaker 8: a former Michael Jackson impersonator, and it has just created 556 00:28:35,560 --> 00:28:39,320 Speaker 8: a firestorm in New York City, Questions of racial politics, 557 00:28:39,480 --> 00:28:42,280 Speaker 8: questions of the failure of the mental health system in 558 00:28:42,360 --> 00:28:46,240 Speaker 8: our city, homelessness, and everything else, with everybody weighing in 559 00:28:46,640 --> 00:28:50,560 Speaker 8: and still no charges levied against this young veteran, a 560 00:28:50,640 --> 00:28:53,360 Speaker 8: former marine we understand who is being named in some 561 00:28:53,520 --> 00:28:56,640 Speaker 8: press accounts and not others. We understand a former marine 562 00:28:56,720 --> 00:28:58,960 Speaker 8: who put him in this choke hold. So it has 563 00:28:59,080 --> 00:29:01,480 Speaker 8: really created a firestorm here in New York and. 564 00:29:01,560 --> 00:29:04,440 Speaker 3: It's obviously not happening in a vacuum. Genie. We're just 565 00:29:04,520 --> 00:29:07,400 Speaker 3: three months out from the death of Tyree Nichols, the 566 00:29:07,480 --> 00:29:10,000 Speaker 3: man who died after being beaten by police officers, and 567 00:29:10,080 --> 00:29:13,360 Speaker 3: we know that President Biden invited his parents to the 568 00:29:13,520 --> 00:29:16,800 Speaker 3: State of the Union. He talked specifically about wanting to 569 00:29:16,880 --> 00:29:20,200 Speaker 3: free our neighborhoods from violence in his address and reiterated 570 00:29:20,280 --> 00:29:23,840 Speaker 3: his executive order on banning chokeholds. Doug, come on in here. 571 00:29:24,080 --> 00:29:30,000 Speaker 3: How does this broader question play into Biden's messaging when 572 00:29:30,040 --> 00:29:32,120 Speaker 3: it comes to the campaign for twenty. 573 00:29:31,960 --> 00:29:35,680 Speaker 9: Twenty four, Well, it certainly complicates it. And you know 574 00:29:36,760 --> 00:29:39,360 Speaker 9: the sound that you just played. Somebody said, I don't 575 00:29:39,400 --> 00:29:41,680 Speaker 9: know if that was the mayor who said I'm going 576 00:29:41,760 --> 00:29:45,600 Speaker 9: to let the investigation run its course. That is, of 577 00:29:45,840 --> 00:29:48,000 Speaker 9: course the right thing to say. And I say that 578 00:29:48,120 --> 00:29:52,600 Speaker 9: because so often we have passions that are inflamed because 579 00:29:52,640 --> 00:29:55,840 Speaker 9: we've seen parts of videos or even whole videos. But 580 00:29:56,200 --> 00:29:59,520 Speaker 9: if we don't know exactly what happened and why, we 581 00:29:59,600 --> 00:30:01,880 Speaker 9: have a to judgment. And I say this because I 582 00:30:02,000 --> 00:30:04,760 Speaker 9: know people who were sued because of that video that 583 00:30:04,840 --> 00:30:08,000 Speaker 9: we all saw parts of in front of the Lincoln 584 00:30:08,080 --> 00:30:13,360 Speaker 9: memorial with a Native American older gentleman and some high 585 00:30:13,360 --> 00:30:16,960 Speaker 9: school students and people felt compelled to condemn it immediately, 586 00:30:17,320 --> 00:30:19,120 Speaker 9: but they hadn't seen the full video and they got 587 00:30:19,200 --> 00:30:22,640 Speaker 9: sued for it. On the issue largely of crime, though 588 00:30:23,080 --> 00:30:26,920 Speaker 9: it's not an issue that just plays out in one 589 00:30:27,040 --> 00:30:30,680 Speaker 9: or two localities. These become very national issues, as this 590 00:30:30,840 --> 00:30:34,920 Speaker 9: will in New York. So many voters know that very 591 00:30:35,120 --> 00:30:39,160 Speaker 9: large stores and businesses are closing in San Francisco, they 592 00:30:39,240 --> 00:30:42,160 Speaker 9: know that Portland's a mess, and then they hear about 593 00:30:42,440 --> 00:30:47,040 Speaker 9: what's happening in their local communities too. They're upset, they're scared, 594 00:30:47,560 --> 00:30:50,240 Speaker 9: and you know, as Jennie pointed out, this had real 595 00:30:50,400 --> 00:30:54,520 Speaker 9: electoral consequences in New York. And I'd wager if it 596 00:30:54,560 --> 00:30:58,080 Speaker 9: weren't for the Dobbs decision and some extreme rhetoric from 597 00:30:58,240 --> 00:31:02,200 Speaker 9: various Republican candidates throughout the country, crime would have been 598 00:31:02,280 --> 00:31:04,760 Speaker 9: much more of a national issue in the last elections 599 00:31:04,800 --> 00:31:05,120 Speaker 9: as well. 600 00:31:05,600 --> 00:31:07,560 Speaker 2: So what about in the elections that are ahead of us? 601 00:31:07,640 --> 00:31:10,080 Speaker 2: How do you see this influencing twenty twenty four, Doug, 602 00:31:10,160 --> 00:31:12,760 Speaker 2: Where do you think this issue in particular ranks on 603 00:31:12,840 --> 00:31:14,240 Speaker 2: the list of voter priorities? 604 00:31:15,240 --> 00:31:19,680 Speaker 9: I think it's one that potentially rises. Every time we 605 00:31:19,880 --> 00:31:22,720 Speaker 9: see stats and every time we see stories. You know 606 00:31:22,800 --> 00:31:26,680 Speaker 9: that the numbers are scary and the individual stories are scary, 607 00:31:27,160 --> 00:31:31,400 Speaker 9: and it's incumbent on both Republicans and Democrats to find 608 00:31:31,480 --> 00:31:34,800 Speaker 9: a way to talk about crime that doesn't turn off 609 00:31:34,840 --> 00:31:39,160 Speaker 9: broad swaths of voters, and that starts with funding for police. Yes, 610 00:31:39,640 --> 00:31:43,240 Speaker 9: we do have police that go overboard, sometimes groups of police, 611 00:31:43,960 --> 00:31:47,640 Speaker 9: as we've all seen. But when you're talking about defunding police, 612 00:31:47,680 --> 00:31:52,720 Speaker 9: whether you're a Democrat in dealing in specific situations in 613 00:31:52,840 --> 00:31:56,760 Speaker 9: your cities and police brutality, or your Republican who's saying 614 00:31:56,800 --> 00:32:01,040 Speaker 9: it because of Donald Trump and investigations into you, turn 615 00:32:01,160 --> 00:32:04,760 Speaker 9: off a lot of voters, and it's messaging that your 616 00:32:04,880 --> 00:32:07,920 Speaker 9: party then has a tough time turning away from because 617 00:32:07,960 --> 00:32:11,080 Speaker 9: our extremes often define this in partisan politics. 618 00:32:11,760 --> 00:32:13,880 Speaker 2: All Right, Unfortunately we have to leave it there, but 619 00:32:14,040 --> 00:32:16,880 Speaker 2: thank you so much as always for joining us. Fantastic 620 00:32:17,400 --> 00:32:20,440 Speaker 2: political panel. That was Doug High, a Republican strategist, the 621 00:32:20,480 --> 00:32:24,960 Speaker 2: former r NC communications director, and of course Bloomberg Politics contributor, 622 00:32:25,080 --> 00:32:27,600 Speaker 2: Jeanie shan Zeno and Maddie, I know you have a 623 00:32:27,680 --> 00:32:31,479 Speaker 2: real feel on what is happening in New York right now. 624 00:32:31,560 --> 00:32:33,400 Speaker 2: But as both of them pointed out, this is not 625 00:32:33,480 --> 00:32:36,400 Speaker 2: a New York specific issue. We are seeing these kinds 626 00:32:36,400 --> 00:32:38,800 Speaker 2: of conversations happening all over the country. 627 00:32:38,640 --> 00:32:40,959 Speaker 3: All over the country, and in all different facets. Right 628 00:32:41,040 --> 00:32:44,440 Speaker 3: We see it with gun violence, mass shootings, the immigration 629 00:32:44,600 --> 00:32:46,520 Speaker 3: problem at the border. It's going to be a huge 630 00:32:46,560 --> 00:32:48,600 Speaker 3: issue heading into twenty twenty. 631 00:32:48,400 --> 00:32:51,720 Speaker 2: Four, indeed, and it's something we will continue to cover. 632 00:32:52,080 --> 00:32:54,600 Speaker 2: We have much more coming up. You're listening to Bloomberg 633 00:32:54,880 --> 00:32:55,280 Speaker 2: Sound On. 634 00:32:56,520 --> 00:32:59,840 Speaker 1: If you're listening to the Bloomberg Sound On podcast, catch 635 00:32:59,880 --> 00:33:03,680 Speaker 1: the program live weekdays at one Eastern on Bloomberg Radio, 636 00:33:03,880 --> 00:33:06,600 Speaker 1: the tune in app, Bloomberg dot Com, and the Bloomberg 637 00:33:06,680 --> 00:33:09,920 Speaker 1: Business App. You can also listen live on Amazon Alexa 638 00:33:10,040 --> 00:33:13,400 Speaker 1: from our flagship New York station, Just say Alexa play 639 00:33:13,520 --> 00:33:14,720 Speaker 1: Bloomberg eleven. 640 00:33:14,520 --> 00:33:18,000 Speaker 2: Thirty Maddie, I gotta say as Charlie talks about the 641 00:33:18,040 --> 00:33:20,719 Speaker 2: rebound we are seeing in bank stocks today, this Friday, 642 00:33:20,760 --> 00:33:23,080 Speaker 2: to me feels very different than last Friday did, when 643 00:33:23,080 --> 00:33:24,760 Speaker 2: I was watching what was happening with the shares of 644 00:33:24,800 --> 00:33:27,520 Speaker 2: First Republic and just waiting with bated breath for the 645 00:33:27,560 --> 00:33:30,680 Speaker 2: headline to cross about the FDIC taking receivership of the bank. 646 00:33:30,720 --> 00:33:34,200 Speaker 2: Obviously we didn't actually get that until very early Monday morning. 647 00:33:34,280 --> 00:33:36,640 Speaker 2: But all week we've been questioning whether or not we 648 00:33:36,720 --> 00:33:39,720 Speaker 2: were going to see another working weekend for banking regulators 649 00:33:39,800 --> 00:33:44,680 Speaker 2: and financial regulation reporters like myself. But maybe it seems 650 00:33:44,720 --> 00:33:46,440 Speaker 2: like we're not. We're not going to have a repeat 651 00:33:46,480 --> 00:33:47,400 Speaker 2: of that this time around. 652 00:33:48,000 --> 00:33:50,520 Speaker 3: Yeah, and it's so interesting to see the continued selloff 653 00:33:50,560 --> 00:33:53,040 Speaker 3: in these regionals. But our Hermann Chan, who is the 654 00:33:53,120 --> 00:33:55,400 Speaker 3: expert on this we're gonna speak with and a little bit, 655 00:33:55,520 --> 00:33:58,800 Speaker 3: has continued to reiterate all week the regionals are on 656 00:33:59,080 --> 00:34:03,040 Speaker 3: stable footing fundamentally, so that's not stopping the selloff. What 657 00:34:03,200 --> 00:34:05,840 Speaker 3: is the argument then, for why they're vulnerable and what 658 00:34:05,960 --> 00:34:08,920 Speaker 3: needs to be done on the regulatory level, as you said. 659 00:34:08,840 --> 00:34:11,960 Speaker 2: Kelly, Yeah, well, and on that point, obviously, a lot 660 00:34:12,000 --> 00:34:14,360 Speaker 2: of the concern around these regional banks has been about 661 00:34:14,440 --> 00:34:17,560 Speaker 2: deposit flight, the idea that depositors will flee these smaller 662 00:34:17,600 --> 00:34:21,000 Speaker 2: institutions for higher yielding products or banks that are too 663 00:34:21,080 --> 00:34:23,960 Speaker 2: big to fail, And for that reason, it has been 664 00:34:24,040 --> 00:34:27,840 Speaker 2: floated that maybe deposit insurance that the FDIC offers that 665 00:34:28,000 --> 00:34:31,240 Speaker 2: cap should be higher. This is something that Democratic Senator 666 00:34:31,280 --> 00:34:34,040 Speaker 2: Elizabeth Warren of Massachusetts was talking about when I spoke 667 00:34:34,080 --> 00:34:35,720 Speaker 2: with her in the Senate Hall yesterday. 668 00:34:36,239 --> 00:34:40,760 Speaker 12: We need to change the limit on deposit insurance. Small 669 00:34:40,840 --> 00:34:44,360 Speaker 12: businesses need to know for sure that the money that 670 00:34:44,840 --> 00:34:50,480 Speaker 12: they're using for payroll and mortgage payments and utilities will 671 00:34:50,560 --> 00:34:51,799 Speaker 12: be fully insured. 672 00:34:52,200 --> 00:34:54,160 Speaker 2: And yes, that was a baby crying we heard in 673 00:34:54,239 --> 00:34:58,120 Speaker 2: the background. There was one of the those One of 674 00:34:58,120 --> 00:35:01,480 Speaker 2: the people testifying before the Senate Banking Committee and yesterday's 675 00:35:01,520 --> 00:35:04,439 Speaker 2: hearing was a mother and her eighteen month old son 676 00:35:04,640 --> 00:35:07,040 Speaker 2: was there. It was very cute to see him wandering around. 677 00:35:07,239 --> 00:35:10,160 Speaker 2: But back to the idea of deposit insurance reform. I 678 00:35:10,280 --> 00:35:14,160 Speaker 2: asked Representative Byron Donald's of Florida, he's a Republican, about 679 00:35:14,160 --> 00:35:16,560 Speaker 2: that same issue on Balance of Power last night. His 680 00:35:16,680 --> 00:35:18,400 Speaker 2: answer was a little bit different. 681 00:35:19,719 --> 00:35:25,239 Speaker 7: I don't support modifications to FDIC insurance. The issue we 682 00:35:25,400 --> 00:35:28,480 Speaker 7: have here is that some of the regional banks were 683 00:35:28,640 --> 00:35:32,640 Speaker 7: long treasuries because they didn't really understand or realize that 684 00:35:32,760 --> 00:35:35,160 Speaker 7: what was going to happen with interest rate moves because 685 00:35:35,200 --> 00:35:37,520 Speaker 7: of Joe Biden's reckless economic policy. 686 00:35:38,920 --> 00:35:41,280 Speaker 2: All right, So let's add another voice to this, Maddie. 687 00:35:41,400 --> 00:35:44,640 Speaker 2: Joining us now is Senator Pat Toomey is a former 688 00:35:44,719 --> 00:35:48,600 Speaker 2: Republican senator from Pennsylvania and the ranking member of the 689 00:35:48,719 --> 00:35:51,920 Speaker 2: Senate Banking Committee, so you know he has thoughts on this. Senator, 690 00:35:52,000 --> 00:35:55,080 Speaker 2: Thank you so very much for joining us. What is 691 00:35:55,160 --> 00:35:58,080 Speaker 2: your degree of confidence? Thank you for being here. What 692 00:35:58,280 --> 00:36:01,279 Speaker 2: is your degree of confidence about the stability in the 693 00:36:01,360 --> 00:36:05,120 Speaker 2: banking system? Is there something further that Congress and financial 694 00:36:05,160 --> 00:36:07,600 Speaker 2: regulators need to do here? What action is needed? 695 00:36:09,320 --> 00:36:14,120 Speaker 13: So I think this whole episode has put a bright 696 00:36:14,680 --> 00:36:19,160 Speaker 13: spotlight on a significant problem. And what I'm alluding to 697 00:36:19,840 --> 00:36:26,439 Speaker 13: is the intrinsic instability of fraction reserve banking. And we've 698 00:36:26,560 --> 00:36:29,920 Speaker 13: made that so, you know, just to be specific, what 699 00:36:30,000 --> 00:36:34,080 Speaker 13: I'm saying is the idea that you take demand deposits, 700 00:36:34,080 --> 00:36:36,600 Speaker 13: which can be withdrawn at any time for any reason 701 00:36:36,719 --> 00:36:39,480 Speaker 13: or no reason at all, and you put aside just 702 00:36:39,560 --> 00:36:43,000 Speaker 13: a small fraction of those for those who come in 703 00:36:43,200 --> 00:36:45,839 Speaker 13: to withdraw it, and you lend long term, whether it's 704 00:36:45,880 --> 00:36:49,240 Speaker 13: buying government bonds or making corporate loans or other assets. 705 00:36:50,000 --> 00:36:55,600 Speaker 13: That duration mismatch is fundamental, forensic, inherent part of banking 706 00:36:55,760 --> 00:36:59,000 Speaker 13: and it always has been, and it relies entirely on 707 00:36:59,120 --> 00:37:03,080 Speaker 13: the premise that the deposits aren't going anywhere anytime soon. Well, 708 00:37:03,280 --> 00:37:07,440 Speaker 13: I think that fundamental question is being challenged here. We 709 00:37:07,600 --> 00:37:13,520 Speaker 13: have seen how quickly deposit flight can occur. Technology can 710 00:37:13,600 --> 00:37:16,279 Speaker 13: make it instant. I mean, they're forty billion dollars left 711 00:37:16,480 --> 00:37:21,040 Speaker 13: SVB Bank in four hours. There's never never been anything 712 00:37:21,239 --> 00:37:25,560 Speaker 13: like this before. So look, it doesn't matter for banks 713 00:37:25,840 --> 00:37:29,520 Speaker 13: that for whom the vast majority of their deposits are guaranteed. Anyway, 714 00:37:29,520 --> 00:37:32,239 Speaker 13: there's no incentive for people to move their deposits, or 715 00:37:32,239 --> 00:37:34,919 Speaker 13: at least not aside from price, which is another matter. 716 00:37:35,920 --> 00:37:41,279 Speaker 13: And there's no real incentive of that sort for people 717 00:37:41,360 --> 00:37:44,600 Speaker 13: whose deposits are with giant banks because DoD Frank and 718 00:37:44,600 --> 00:37:48,040 Speaker 13: Theissippi designation makes them clearly too big to fail. The 719 00:37:48,480 --> 00:37:51,520 Speaker 13: question is those banks, which we kind of euphemistically call 720 00:37:51,600 --> 00:37:53,920 Speaker 13: regional banks, in fact what we mean our banks that 721 00:37:54,000 --> 00:37:59,440 Speaker 13: are disproportionately dependent on uninsured deposits. I think the premise 722 00:37:59,520 --> 00:38:03,440 Speaker 13: that those posits are never going anywhere is highly dubious, 723 00:38:03,719 --> 00:38:06,000 Speaker 13: and so I'm not at all convinced that this is over. 724 00:38:06,520 --> 00:38:11,040 Speaker 3: Then do you support modifications to FDIC insurance. 725 00:38:11,080 --> 00:38:15,239 Speaker 13: Given your view on that, so right, So the question 726 00:38:15,320 --> 00:38:17,759 Speaker 13: is what do we do about it. I can think 727 00:38:17,800 --> 00:38:19,800 Speaker 13: of a couple of ways we could deal with this. 728 00:38:20,560 --> 00:38:24,840 Speaker 13: One would be to increase deposit insurance, but we shouldn't 729 00:38:24,840 --> 00:38:28,000 Speaker 13: assume that that has to be the FDIC. I don't 730 00:38:28,200 --> 00:38:31,680 Speaker 13: like the idea of expanding the government's guarantee. That will 731 00:38:31,800 --> 00:38:35,680 Speaker 13: lead to incremental socialism of the banking system because people 732 00:38:35,719 --> 00:38:38,560 Speaker 13: are going to say, well, if the taxpayer's taking all 733 00:38:38,600 --> 00:38:41,000 Speaker 13: the risk, shouldn't the taxpayer get some of the reward. 734 00:38:41,239 --> 00:38:44,920 Speaker 13: It'll also lead to a new wave of very prescriptive regulation, 735 00:38:45,160 --> 00:38:48,080 Speaker 13: which will hold back growth. So I actually think that's 736 00:38:49,160 --> 00:38:52,200 Speaker 13: likely outcome, but it's not a great outcome. A better outcome, 737 00:38:52,280 --> 00:38:55,120 Speaker 13: by far, in my view, would be to have private insurance. 738 00:38:56,040 --> 00:38:59,200 Speaker 13: I'll have triple A insurance companies or other very high 739 00:38:59,280 --> 00:39:04,000 Speaker 13: quality that Usians systematically offer deposit guarantees for a price, 740 00:39:04,480 --> 00:39:06,480 Speaker 13: and the well managed banks would get it for a 741 00:39:06,600 --> 00:39:09,319 Speaker 13: low price, and the less well managed banks would pay 742 00:39:09,320 --> 00:39:14,160 Speaker 13: a higher price, and you'd have a third party evaluating 743 00:39:14,480 --> 00:39:16,680 Speaker 13: the credit worthiness of these banks. I think that's a 744 00:39:16,719 --> 00:39:17,360 Speaker 13: better outcome. 745 00:39:18,160 --> 00:39:21,680 Speaker 2: Just continuing on this question of regulation, as I was saying. 746 00:39:21,719 --> 00:39:24,440 Speaker 2: I spoke with Congressman Byron Donald's who we heard from 747 00:39:24,480 --> 00:39:27,040 Speaker 2: earlier last night. He wants to hear from Mary Daily 748 00:39:27,080 --> 00:39:29,640 Speaker 2: in the San Francisco FED. We've heard a lot of 749 00:39:29,760 --> 00:39:32,960 Speaker 2: that in Congress as well. There's been a lot of 750 00:39:33,000 --> 00:39:37,480 Speaker 2: finger pointing at the supervisors at bank management. Is the 751 00:39:37,560 --> 00:39:39,200 Speaker 2: finger being pointed in the right direction? 752 00:39:40,680 --> 00:39:43,080 Speaker 13: Well, so, first of all, I think the finger has 753 00:39:43,120 --> 00:39:45,520 Speaker 13: to be pointed at the FED. Let's be clear, none 754 00:39:45,560 --> 00:39:49,560 Speaker 13: of this happens without the Fed's complicity. And by that, 755 00:39:49,680 --> 00:39:53,440 Speaker 13: I'm referring to the massive surge in the money supply 756 00:39:53,960 --> 00:39:56,880 Speaker 13: that ended up in the form of deposits on a 757 00:39:56,920 --> 00:39:59,600 Speaker 13: lot of these in part right in a lot of places, 758 00:40:00,120 --> 00:40:03,839 Speaker 13: one of which was massive surgeon deposits. Then, in an 759 00:40:04,160 --> 00:40:08,480 Speaker 13: zero interest rate environment, these banks inevitably were seeking to 760 00:40:08,640 --> 00:40:11,120 Speaker 13: move out the risk curve. In the case of these 761 00:40:11,200 --> 00:40:13,080 Speaker 13: banks that have failed, it wasn't so much the credit 762 00:40:13,200 --> 00:40:16,000 Speaker 13: risk curve as a maturity and duration risk curve. And 763 00:40:16,160 --> 00:40:19,439 Speaker 13: then when the FED very blatantly discovered that they're way 764 00:40:19,520 --> 00:40:22,360 Speaker 13: behind the curve, they jacked up interest rates very quickly 765 00:40:22,480 --> 00:40:26,279 Speaker 13: and very dramatically, and cretered the bond portfolios that they 766 00:40:26,360 --> 00:40:30,239 Speaker 13: were responsible for creating in the first place. So that's 767 00:40:30,440 --> 00:40:32,520 Speaker 13: exhibit A in terms of where to point the finger. 768 00:40:32,880 --> 00:40:36,200 Speaker 13: But you know, look, supervisors, in my experience, in my judgment, 769 00:40:36,760 --> 00:40:41,759 Speaker 13: almost always miss the next problem because they're fixated on 770 00:40:41,840 --> 00:40:45,240 Speaker 13: the last problem or some other problem. This was lying 771 00:40:45,400 --> 00:40:48,680 Speaker 13: in plane view. Everybody knew what the balance sheet looked 772 00:40:48,760 --> 00:40:51,520 Speaker 13: like on these banks. Everybody knew that interest rates were 773 00:40:51,600 --> 00:40:55,200 Speaker 13: higher and bond prices were lower, So there was the 774 00:40:55,640 --> 00:40:59,280 Speaker 13: supervisors have no excuse. But this plays out again and again, 775 00:40:59,600 --> 00:41:01,920 Speaker 13: which is part of the reason why I prefer we 776 00:41:02,080 --> 00:41:04,920 Speaker 13: have private sector players who tend to be better at 777 00:41:05,040 --> 00:41:10,759 Speaker 13: anticipating these kinds of problems than government regulators. But we'll 778 00:41:10,800 --> 00:41:11,799 Speaker 13: see how this turns out. 779 00:41:12,160 --> 00:41:15,160 Speaker 3: Yeah, I want to transition to the question on all 780 00:41:15,200 --> 00:41:18,240 Speaker 3: of our minds, which is the big debt ceiling elephant 781 00:41:18,280 --> 00:41:20,799 Speaker 3: in the room. And I know that you went through 782 00:41:20,840 --> 00:41:24,239 Speaker 3: this back in twenty eleven when the Federal Reserve had 783 00:41:24,520 --> 00:41:28,120 Speaker 3: contingency plans. At the time, J. Powell, who as we 784 00:41:28,239 --> 00:41:30,480 Speaker 3: know now fedchair, went around warning about the risks of 785 00:41:30,560 --> 00:41:34,719 Speaker 3: debt default and saying alternatives like prioritizing payments were not helpful. 786 00:41:35,680 --> 00:41:39,200 Speaker 3: Do you think that he undercut Republicans back then, even 787 00:41:39,239 --> 00:41:41,600 Speaker 3: though his interventionism sort of put him on the radar 788 00:41:42,000 --> 00:41:43,440 Speaker 3: and paved his way to where he is now. 789 00:41:44,600 --> 00:41:47,680 Speaker 13: You know, I don't I'd have to go back and 790 00:41:47,760 --> 00:41:50,840 Speaker 13: reacquaire myself with the things that he actually said that 791 00:41:51,000 --> 00:41:52,120 Speaker 13: was over a decade ago. 792 00:41:53,520 --> 00:41:54,360 Speaker 14: But I will tell you this. 793 00:41:56,280 --> 00:42:00,680 Speaker 13: I'm sure you're aware every major budget that has been 794 00:42:00,760 --> 00:42:03,600 Speaker 13: done over the last forty years has been done in 795 00:42:03,640 --> 00:42:06,520 Speaker 13: the context of a debt ceiling increase. When you have 796 00:42:06,680 --> 00:42:10,760 Speaker 13: divided government, there is always a fight over the debt ceiling, 797 00:42:11,280 --> 00:42:14,400 Speaker 13: and it always gets resolved, and if there's going to 798 00:42:14,480 --> 00:42:18,520 Speaker 13: be any kind of budget agreement, it happens in that context. 799 00:42:18,960 --> 00:42:22,279 Speaker 13: This is absolutely the right moment to have this. And 800 00:42:22,440 --> 00:42:25,560 Speaker 13: by the way, I strongly push back on the notion 801 00:42:25,719 --> 00:42:28,600 Speaker 13: that there's any meaningful chance of a default on our debt. 802 00:42:29,120 --> 00:42:33,040 Speaker 13: Ongoing tax revenue is eight times roughly eight times this 803 00:42:33,200 --> 00:42:38,279 Speaker 13: year's debt service requirement. Why would Janet Yellen ever make 804 00:42:38,360 --> 00:42:40,839 Speaker 13: the decision to not make an interest payment when she's 805 00:42:40,880 --> 00:42:43,239 Speaker 13: got eight times the cash flow to do it. It 806 00:42:43,280 --> 00:42:48,600 Speaker 13: would be beyond beyond imprudent and incompetent. It wouldn't happen. Now, 807 00:42:48,800 --> 00:42:51,560 Speaker 13: that's not to say that what would happen is desirable. 808 00:42:51,640 --> 00:42:54,040 Speaker 13: What will happen is vendors won't get paid on time 809 00:42:54,600 --> 00:42:56,880 Speaker 13: and at some point some big checks that should be 810 00:42:56,960 --> 00:42:59,759 Speaker 13: going out won't. That's not at all optimal, but it's 811 00:42:59,840 --> 00:43:03,880 Speaker 13: very different from It's much closer to a partial government 812 00:43:03,920 --> 00:43:07,040 Speaker 13: shutdown than it is to a default on our debt. 813 00:43:07,440 --> 00:43:10,080 Speaker 3: Yeah, so it sounds like, well, I'm sorry, senator, but 814 00:43:10,160 --> 00:43:12,759 Speaker 3: it does sound like you're pretty confident. But I wonder then, 815 00:43:12,960 --> 00:43:14,759 Speaker 3: and just to go back to twenty eleven, the FED 816 00:43:14,920 --> 00:43:18,520 Speaker 3: had contingency plans, right, So is that something that you 817 00:43:18,560 --> 00:43:21,160 Speaker 3: would push for now just as a hedge if things 818 00:43:21,200 --> 00:43:22,800 Speaker 3: don't work out as you predict. 819 00:43:23,600 --> 00:43:27,239 Speaker 13: Well, I think it's actually the Treasury's responsibility, and I 820 00:43:27,360 --> 00:43:30,920 Speaker 13: would be I know they have these contingents. Let me 821 00:43:30,960 --> 00:43:32,719 Speaker 13: just put it that way. I know they have They 822 00:43:32,840 --> 00:43:37,040 Speaker 13: have these contingency plans in place. They've known about this 823 00:43:37,160 --> 00:43:39,799 Speaker 13: for a long time. They probably had it pretty fully 824 00:43:39,880 --> 00:43:43,160 Speaker 13: in place back in twenty eleven, and we're twelve years later, 825 00:43:43,480 --> 00:43:46,719 Speaker 13: and how many death doing increases along the way. So 826 00:43:47,000 --> 00:43:49,919 Speaker 13: they have that plan in place, and you can argue about, well, 827 00:43:49,960 --> 00:43:52,240 Speaker 13: will it work perfectly or will there be some hitches. 828 00:43:52,320 --> 00:43:55,239 Speaker 13: Since it's never been required before, it's possible that there 829 00:43:55,280 --> 00:43:57,719 Speaker 13: could be some hiccups along the way, But we're not 830 00:43:57,800 --> 00:44:00,879 Speaker 13: going to default on our debt. And I do think 831 00:44:01,160 --> 00:44:04,040 Speaker 13: in the end, because the House was able to pass 832 00:44:04,280 --> 00:44:07,879 Speaker 13: a bill that raises the debt ceiling, it's very hard 833 00:44:07,960 --> 00:44:11,320 Speaker 13: for President Biden not to engage and have a negotiation 834 00:44:11,480 --> 00:44:14,600 Speaker 13: that will result in probably both sides being a have 835 00:44:14,719 --> 00:44:17,640 Speaker 13: to claim a victory, but it'll be a debt ceiling 836 00:44:17,760 --> 00:44:22,520 Speaker 13: increase and some modest movement in the direction of reducing spending. 837 00:44:22,880 --> 00:44:25,600 Speaker 2: Senator, as you say, Speaker McCarthy was able to pass 838 00:44:25,600 --> 00:44:27,160 Speaker 2: a bill on the House floor. He got the two 839 00:44:27,239 --> 00:44:29,319 Speaker 2: hundred and seventeen votes he needed, But that doesn't mean 840 00:44:29,640 --> 00:44:32,000 Speaker 2: the job was easy for him. It took a lot 841 00:44:32,080 --> 00:44:34,760 Speaker 2: of giving to get all the members of his party 842 00:44:35,320 --> 00:44:37,080 Speaker 2: in line, and we know how hard it was for 843 00:44:37,200 --> 00:44:40,240 Speaker 2: him to get just the speakership in the first place, 844 00:44:40,280 --> 00:44:43,759 Speaker 2: which just kind of speaks to the disjointedness of the 845 00:44:43,840 --> 00:44:46,799 Speaker 2: Republican Party at the moment. Do you think that there 846 00:44:46,880 --> 00:44:50,560 Speaker 2: are members of the Republican Party, specifically in the House, 847 00:44:51,000 --> 00:44:53,560 Speaker 2: that would actually be willing to see this country default. 848 00:44:55,200 --> 00:44:57,080 Speaker 13: Oh, I've very much doubt it, and if so, they're 849 00:44:57,280 --> 00:45:01,560 Speaker 13: very very small minority. Nobody wants that to happen. And 850 00:45:01,920 --> 00:45:04,200 Speaker 13: I give Kevin McCarthy a lot of credit. I didn't 851 00:45:04,239 --> 00:45:06,680 Speaker 13: think he would get the votes to pass something. There 852 00:45:06,719 --> 00:45:09,920 Speaker 13: were a lot of Republican House members who have over 853 00:45:10,000 --> 00:45:13,320 Speaker 13: their careers many times voted against the debt ceiling increase 854 00:45:13,640 --> 00:45:18,439 Speaker 13: and never voted for one. Yet two weeks ago, whenever 855 00:45:18,520 --> 00:45:21,200 Speaker 13: it was, they voted in favor of raising the debt ceiling. 856 00:45:21,520 --> 00:45:24,360 Speaker 13: And if you actually look at the substance of their proposals, 857 00:45:24,760 --> 00:45:27,640 Speaker 13: they were quite quite modest and sensible. They wanted to 858 00:45:27,719 --> 00:45:30,719 Speaker 13: take discretionary spending all the way back to where it 859 00:45:30,920 --> 00:45:35,719 Speaker 13: was and then let it grow, but only at one 860 00:45:35,800 --> 00:45:39,120 Speaker 13: percent rather than the projected rates of growth. They wanted 861 00:45:39,120 --> 00:45:43,800 Speaker 13: to have some limited work requirements on able bodied adults 862 00:45:43,880 --> 00:45:47,200 Speaker 13: without dependants who are receiving welfare payments of various kinds. 863 00:45:47,400 --> 00:45:49,080 Speaker 13: They want to claw back a little bit of the 864 00:45:49,560 --> 00:45:52,840 Speaker 13: wildly excess amount of money that the federal government pumped 865 00:45:52,880 --> 00:45:55,399 Speaker 13: into the state and local governments, and some of which 866 00:45:55,640 --> 00:45:59,880 Speaker 13: hasn't even been spent yet. Most Americans who listen to that, well, 867 00:46:00,200 --> 00:46:03,040 Speaker 13: that doesn't sound so crazy, So this is why I 868 00:46:03,120 --> 00:46:06,840 Speaker 13: think it was really impressive that he was able to 869 00:46:06,920 --> 00:46:09,720 Speaker 13: get those guys held together, the fact that they voted 870 00:46:09,800 --> 00:46:13,360 Speaker 13: for this. Look, the end compromise is going to include 871 00:46:13,440 --> 00:46:16,279 Speaker 13: a lot of Democrat votes, So probably there'll be a 872 00:46:16,360 --> 00:46:18,360 Speaker 13: number of Republicans will say, well, I don't want to 873 00:46:18,440 --> 00:46:19,480 Speaker 13: vote for this conference. 874 00:46:19,480 --> 00:46:21,680 Speaker 2: They're going to they're going to lose sense of things 875 00:46:21,719 --> 00:46:22,200 Speaker 2: they wanted. 876 00:46:23,239 --> 00:46:25,600 Speaker 13: Right, That's right, and that's how this is inevitably going 877 00:46:25,640 --> 00:46:30,480 Speaker 13: to end. But I think Kevin McCarthy has strengthened his 878 00:46:30,600 --> 00:46:34,520 Speaker 13: position within the Republican Conference. He has strengthened the Republican 879 00:46:35,560 --> 00:46:39,040 Speaker 13: debate over the merits of a death cealing increase, and 880 00:46:39,320 --> 00:46:41,719 Speaker 13: he's increased the chances that he gets through all of this, 881 00:46:42,920 --> 00:46:44,440 Speaker 13: you know, with his speakership intact. 882 00:46:45,200 --> 00:46:47,360 Speaker 2: And of course he's getting ready to sit down with 883 00:46:47,480 --> 00:46:50,960 Speaker 2: President Biden, as he's been asking for some time. On Tuesday. 884 00:46:51,040 --> 00:46:52,719 Speaker 2: We have to leave it there, but Senator please come 885 00:46:52,760 --> 00:46:54,799 Speaker 2: back and join us soon. That is Pat Tuomy, former 886 00:46:54,840 --> 00:46:58,080 Speaker 2: Republican Senator from Pennsylvania and of course former ranking member 887 00:46:58,320 --> 00:47:01,759 Speaker 2: of the Senate Banking Committee. The conversations continue, sound on 888 00:47:02,160 --> 00:47:02,640 Speaker 2: keeps going. 889 00:47:03,680 --> 00:47:07,120 Speaker 1: You're listening to the Bloomberg Sound On podcast. Catch us 890 00:47:07,200 --> 00:47:10,320 Speaker 1: live weekdays at one Eastern on Bloomberg dot com, the 891 00:47:10,440 --> 00:47:13,520 Speaker 1: iHeartRadio app, and the Bloomberg Business App, or listen on 892 00:47:13,600 --> 00:47:15,600 Speaker 1: demand wherever you get your podcasts. 893 00:47:16,880 --> 00:47:19,959 Speaker 2: This is indeed the fastest show in politics. Bloomberg Sound 894 00:47:20,040 --> 00:47:22,680 Speaker 2: On Joe Matthews taken this Friday off. I'm Kaylee Lines 895 00:47:22,680 --> 00:47:26,560 Speaker 2: in Washington, joined today by Madison Mills in New York 896 00:47:26,680 --> 00:47:29,799 Speaker 2: and Maddie. It feels like literally my entire life since 897 00:47:29,840 --> 00:47:33,480 Speaker 2: I moved to Washington has been consumed by banking drama 898 00:47:33,520 --> 00:47:37,120 Speaker 2: and all of the regulatory conversations that have followed. It feels, though, 899 00:47:37,160 --> 00:47:39,680 Speaker 2: like the mood music is a little bit different today. 900 00:47:39,680 --> 00:47:41,279 Speaker 2: As we were just hearing from Charlie, we have a 901 00:47:41,480 --> 00:47:45,000 Speaker 2: massive rebound taking place in some of these regional banking shares, 902 00:47:45,320 --> 00:47:48,200 Speaker 2: and I would notice well that some of the officials 903 00:47:48,239 --> 00:47:51,239 Speaker 2: from the White House also are sounding more positive on 904 00:47:51,520 --> 00:47:55,760 Speaker 2: the banking system. Here's Heather Bouchet speaking on Bloomberg TV earlier. 905 00:47:55,880 --> 00:47:58,200 Speaker 14: There's been stresses in the banking sector, and you know, 906 00:47:58,680 --> 00:48:01,560 Speaker 14: through bold and decisive action that the administration has taken 907 00:48:01,600 --> 00:48:04,439 Speaker 14: and the FDIC, you know, we've been able to see 908 00:48:04,520 --> 00:48:07,560 Speaker 14: stability come back into that system, and we've seen deposit 909 00:48:07,680 --> 00:48:11,080 Speaker 14: flows again stabilized, So I think they are indications that 910 00:48:11,280 --> 00:48:13,880 Speaker 14: we are in a better place. 911 00:48:14,120 --> 00:48:17,200 Speaker 2: Certainly She of course, Maddie is a member of the 912 00:48:17,320 --> 00:48:19,440 Speaker 2: US Council of Economic Advisors. 913 00:48:19,520 --> 00:48:21,320 Speaker 3: And Killy, like you were mentioning and I was just 914 00:48:21,400 --> 00:48:23,640 Speaker 3: talking about this with our next guest here. But this 915 00:48:23,719 --> 00:48:25,800 Speaker 3: has been going on for almost two months now, and 916 00:48:25,880 --> 00:48:29,320 Speaker 3: those months have been NonStop for our Hermann cham Bloomberg 917 00:48:29,360 --> 00:48:32,680 Speaker 3: Intelligence Senior Regional Banks analyst. Herman, great to speak with 918 00:48:32,760 --> 00:48:36,400 Speaker 3: you here in our interactive broker's studio. We've been talking 919 00:48:36,440 --> 00:48:39,200 Speaker 3: basically every day, You and I and everyone here at Bloomberg. 920 00:48:40,200 --> 00:48:43,680 Speaker 3: Talk to me about what's new today, specifically with Western Alliance, 921 00:48:43,840 --> 00:48:47,920 Speaker 3: Zion's and Comerica upgraded to overweight by JP Morgan. What 922 00:48:48,160 --> 00:48:50,600 Speaker 3: is new today that led to this change. 923 00:48:50,960 --> 00:48:53,640 Speaker 15: Look, if you talk about all these banks and the 924 00:48:53,680 --> 00:48:57,800 Speaker 15: banking system in general, not much has changed since earnings 925 00:48:58,160 --> 00:49:01,759 Speaker 15: that were reported a couple of weeks back. It showed 926 00:49:01,800 --> 00:49:05,920 Speaker 15: stability in deposits, and deposits held up better than feared, 927 00:49:07,080 --> 00:49:10,279 Speaker 15: and there's no real shoe to drop on their credit 928 00:49:10,360 --> 00:49:13,400 Speaker 15: quality front, even though there's headline risk with office commercial 929 00:49:13,400 --> 00:49:19,640 Speaker 15: real estates that's been fluttering abouts. But really the visceral 930 00:49:19,719 --> 00:49:21,799 Speaker 15: reaction from the markets over the past couple of days 931 00:49:21,840 --> 00:49:25,880 Speaker 15: has outside of today, has just been driven by negative sentiments. 932 00:49:26,040 --> 00:49:30,200 Speaker 15: And the upgrade from JP Morgan was really good to 933 00:49:30,239 --> 00:49:36,520 Speaker 15: see because it brought some clarity and some better common 934 00:49:36,600 --> 00:49:40,000 Speaker 15: sense with what's going on fundamentally within the regional bank space. 935 00:49:40,440 --> 00:49:42,640 Speaker 2: Yeah, it's a really good point on sentiment because it 936 00:49:42,719 --> 00:49:45,120 Speaker 2: feels almost as if the pattern has been with all 937 00:49:45,160 --> 00:49:48,560 Speaker 2: these failures, something happens to spook the markets, then the 938 00:49:48,640 --> 00:49:51,040 Speaker 2: shares start selling off dramatically, and then that just kind 939 00:49:51,080 --> 00:49:53,920 Speaker 2: of feeds into the wider confidence crisis. And it felt 940 00:49:54,600 --> 00:49:56,360 Speaker 2: for most of this week that that was what was 941 00:49:56,440 --> 00:49:59,239 Speaker 2: happening with pack West and Western Alliance, that perhaps, you know, 942 00:49:59,320 --> 00:50:02,560 Speaker 2: market calamit could lead to real calamity in Herman. I 943 00:50:02,640 --> 00:50:05,040 Speaker 2: say this, you know, knocking on wood with my fingers crossed. 944 00:50:05,040 --> 00:50:07,120 Speaker 2: But does this mean that the FDIC can take the 945 00:50:07,200 --> 00:50:09,319 Speaker 2: weekend off? We're not likely to see more failures at 946 00:50:09,320 --> 00:50:09,640 Speaker 2: this point. 947 00:50:09,840 --> 00:50:12,520 Speaker 15: I think for this weekend we can breathe a sigh 948 00:50:12,520 --> 00:50:16,320 Speaker 15: of relief and not stay tuned on Sunday at starting 949 00:50:16,360 --> 00:50:19,040 Speaker 15: at six o'clock PM to see if there's any sort 950 00:50:19,080 --> 00:50:22,480 Speaker 15: of announcement, and I fingers crossed on that front as well. 951 00:50:23,560 --> 00:50:27,200 Speaker 15: But really it does seem like at least the banks 952 00:50:27,239 --> 00:50:31,879 Speaker 15: in question from yesterday pack West and Western Alliance, they're 953 00:50:31,920 --> 00:50:35,200 Speaker 15: talking about stable deposit balances through the second quarter this far, 954 00:50:35,320 --> 00:50:40,720 Speaker 15: and Western Alliance in particular was reiterating deposit inflow guidance 955 00:50:40,760 --> 00:50:44,239 Speaker 15: of two billion dollars. So it just seems like everything's 956 00:50:44,360 --> 00:50:49,800 Speaker 15: just been driven more by market participants pressing against the shorts. 957 00:50:50,400 --> 00:50:53,000 Speaker 2: So on the point of deposits being stable, I wonder 958 00:50:53,080 --> 00:50:55,879 Speaker 2: if the policy response around that really matters at this point. 959 00:50:55,960 --> 00:50:59,359 Speaker 2: The FDIC, of course, gave an overview earlier this week 960 00:50:59,480 --> 00:51:02,279 Speaker 2: talking about different kinds of reform that could happen to 961 00:51:02,360 --> 00:51:06,080 Speaker 2: the Deposit Insurance Fund, including unlimited coverage or targeted coverage 962 00:51:06,120 --> 00:51:09,160 Speaker 2: that raises the cap for businesses. What a tweak to 963 00:51:10,640 --> 00:51:13,239 Speaker 2: FDIC insurance matter at this point. If this is no 964 00:51:13,360 --> 00:51:16,560 Speaker 2: longer really a deposit flight issue, it's not the. 965 00:51:16,960 --> 00:51:21,160 Speaker 15: Posit flight issue, but I think any change would be 966 00:51:21,520 --> 00:51:25,239 Speaker 15: at least a sign of confidence that the regulators are 967 00:51:25,320 --> 00:51:28,880 Speaker 15: taking this a bit seriously and think there needs to 968 00:51:28,960 --> 00:51:29,399 Speaker 15: be action. 969 00:51:29,640 --> 00:51:30,400 Speaker 2: So action. 970 00:51:31,800 --> 00:51:34,719 Speaker 15: Speaks louder than words, and if there's a sort of 971 00:51:34,800 --> 00:51:38,320 Speaker 15: blanket guarantee or a short term guarantee, I think that 972 00:51:38,400 --> 00:51:42,080 Speaker 15: would do wonders in terms of boosting the market confidence 973 00:51:42,120 --> 00:51:43,240 Speaker 15: across the regional banks. 974 00:51:43,760 --> 00:51:47,080 Speaker 3: So what does the regulatory cost burden then look like 975 00:51:47,239 --> 00:51:49,880 Speaker 3: for these regional banks if we get movement from Washington. 976 00:51:50,239 --> 00:51:53,160 Speaker 15: Yeah, I think you're just going to see higher FDSC 977 00:51:53,239 --> 00:51:57,800 Speaker 15: assessment fees, which the banks all pay out collectively each quarter. 978 00:51:58,719 --> 00:52:03,160 Speaker 15: And the insurance fund is already dipping, right because it 979 00:52:03,280 --> 00:52:05,760 Speaker 15: was at about one hundred and twenty eight billion dollars 980 00:52:05,800 --> 00:52:09,000 Speaker 15: at the end of the year, and you've got a 981 00:52:09,080 --> 00:52:12,239 Speaker 15: twenty billion dollar loss from SVB, thirteen billion from First 982 00:52:12,280 --> 00:52:14,520 Speaker 15: Republic in two and a half from signature, So that 983 00:52:14,680 --> 00:52:17,440 Speaker 15: needs to be built up, which the assessment fees, a 984 00:52:17,520 --> 00:52:20,719 Speaker 15: special assessment fee is coming down the pike, and you'd 985 00:52:20,880 --> 00:52:24,279 Speaker 15: expect if we get a more blanket type guarantee that 986 00:52:24,600 --> 00:52:28,640 Speaker 15: would just increase the assessment fees collectively across the banks. 987 00:52:29,040 --> 00:52:30,880 Speaker 2: Well, and of course, Herman, we had a great bloomberg 988 00:52:30,920 --> 00:52:34,919 Speaker 2: scoop from our colleague Katanga Johnson yesterday about those assessment fees. 989 00:52:34,920 --> 00:52:39,280 Speaker 2: Apparently the FDIC is looking at proposing only really applying 990 00:52:39,320 --> 00:52:41,920 Speaker 2: those to the bigger banks and making any institution with 991 00:52:42,000 --> 00:52:45,520 Speaker 2: less than ten billion dollars in assets exempt from paying 992 00:52:45,600 --> 00:52:48,000 Speaker 2: those fees. But as you say, there are other kind 993 00:52:48,000 --> 00:52:50,680 Speaker 2: of regulatory costs at play here. We all read Michael Bars, 994 00:52:51,000 --> 00:52:53,799 Speaker 2: the Vice Chair of Supervision at the FEDS report from 995 00:52:53,960 --> 00:52:56,439 Speaker 2: earlier about a week ago, I believe now, in which 996 00:52:56,440 --> 00:52:59,920 Speaker 2: she was talking about, you know, tighter liquidity and capital requirements. 997 00:53:00,360 --> 00:53:03,040 Speaker 2: Does that mean that further consolidation is still going to 998 00:53:03,120 --> 00:53:05,239 Speaker 2: have to come among the regional banks, And if so, 999 00:53:05,360 --> 00:53:06,840 Speaker 2: who would be the buyers and who would be the 1000 00:53:06,920 --> 00:53:07,920 Speaker 2: bot Yeah. 1001 00:53:07,840 --> 00:53:13,120 Speaker 15: That's a good question up. Yeah, the expected tightening of 1002 00:53:14,040 --> 00:53:17,120 Speaker 15: regulations across the regional banks is something that we're expecting. 1003 00:53:18,600 --> 00:53:23,360 Speaker 15: You mentioned liquidity requirements, the liquidy coverage ratio will come 1004 00:53:23,440 --> 00:53:28,759 Speaker 15: back for the regional banks. The unrealized losses and securities 1005 00:53:29,120 --> 00:53:31,760 Speaker 15: will be part of the capital calculations for the regionals 1006 00:53:31,800 --> 00:53:33,920 Speaker 15: as well. So there's going to be a litany of 1007 00:53:34,239 --> 00:53:39,840 Speaker 15: tweaks and it will reduce the profitability of the regional banks. 1008 00:53:40,040 --> 00:53:44,000 Speaker 15: And one way to counteract that is consolidation to increase 1009 00:53:44,040 --> 00:53:46,920 Speaker 15: your scales. So ideally, in a perfect world, I think 1010 00:53:46,960 --> 00:53:49,200 Speaker 15: the regional banks would love to do M and A. 1011 00:53:49,400 --> 00:53:53,040 Speaker 15: But as you've seen what earlier this week yesterday with 1012 00:53:53,320 --> 00:53:56,600 Speaker 15: TD and First Arison, that that deal broke because they 1013 00:53:56,640 --> 00:54:00,880 Speaker 15: couldn't get regulatory approval. So the the regulators need to 1014 00:54:01,000 --> 00:54:04,080 Speaker 15: signal to the industry that they're open and willing for 1015 00:54:04,520 --> 00:54:07,239 Speaker 15: this in order for banks to do M and A 1016 00:54:08,040 --> 00:54:09,120 Speaker 15: on a large scale. 1017 00:54:09,520 --> 00:54:11,080 Speaker 3: So I'm not going to ask you who the next 1018 00:54:11,840 --> 00:54:13,520 Speaker 3: bank to fail is, because I know you're tired of 1019 00:54:13,600 --> 00:54:16,719 Speaker 3: answering that, but I will ask you, and especially off 1020 00:54:16,760 --> 00:54:18,120 Speaker 3: of what you were just saying about M and A, 1021 00:54:18,680 --> 00:54:21,359 Speaker 3: what is the business of regional banking going to look 1022 00:54:21,480 --> 00:54:22,840 Speaker 3: like in five years? 1023 00:54:23,120 --> 00:54:23,239 Speaker 7: Right? 1024 00:54:23,800 --> 00:54:27,400 Speaker 15: Yeah, it's going to be a smaller subset the banks 1025 00:54:27,440 --> 00:54:30,640 Speaker 15: that we think. Just circling back to that prior question 1026 00:54:30,680 --> 00:54:33,840 Speaker 15: about who are the buyers, you can look at the 1027 00:54:33,920 --> 00:54:37,279 Speaker 15: banks that have bid that bid on First Republic that 1028 00:54:37,600 --> 00:54:41,480 Speaker 15: didn't get that acquisition, and the news came out that 1029 00:54:41,680 --> 00:54:45,560 Speaker 15: it was P and C, it was fifth Third, So 1030 00:54:45,880 --> 00:54:47,759 Speaker 15: these are sort of the banks that we think will 1031 00:54:47,800 --> 00:54:52,320 Speaker 15: be consolidators over time. But really the lessons learned across 1032 00:54:52,960 --> 00:54:56,000 Speaker 15: this whole episode, starting with SVB, was you need to 1033 00:54:56,480 --> 00:54:59,000 Speaker 15: manage your balance sheet much more conservatively. You have to 1034 00:54:59,120 --> 00:55:02,840 Speaker 15: have a diverse deposit base and not just focused on 1035 00:55:03,000 --> 00:55:07,920 Speaker 15: one sort of vertical like SBB did. And that just 1036 00:55:08,040 --> 00:55:13,280 Speaker 15: means like lower net interest margins because you're not adding 1037 00:55:13,320 --> 00:55:16,919 Speaker 15: securities that are longer dated to create interest rate risk. 1038 00:55:17,560 --> 00:55:20,080 Speaker 2: All right, Herman, I got a selfish question for you 1039 00:55:20,200 --> 00:55:21,759 Speaker 2: here to wrap things up, because I'm going to be 1040 00:55:21,800 --> 00:55:23,959 Speaker 2: on Capital at Hill a lot in the coming weeks 1041 00:55:23,960 --> 00:55:26,880 Speaker 2: because the House Financial Services Committee, the Banking Committee, other 1042 00:55:26,920 --> 00:55:29,440 Speaker 2: committees as well are all holding hearings into bank failures 1043 00:55:29,520 --> 00:55:33,240 Speaker 2: and regulatory matters. If you had one question for lawmakers 1044 00:55:33,280 --> 00:55:35,400 Speaker 2: surrounding this way right now, that would help you understand 1045 00:55:35,440 --> 00:55:37,200 Speaker 2: kind of what the fundamental picture of these banks is 1046 00:55:37,200 --> 00:55:38,960 Speaker 2: going to look like. What should I be asking? 1047 00:55:39,280 --> 00:55:42,760 Speaker 15: Yeah, we should be asking, really what's going on because 1048 00:55:43,640 --> 00:55:46,320 Speaker 15: some of these tweaks the regulations don't really address the 1049 00:55:46,400 --> 00:55:51,000 Speaker 15: fundamental issues. Right, So the fundamental issues are the flightiness 1050 00:55:51,040 --> 00:55:55,920 Speaker 15: of deposits. How do regulators in Washington think about technology 1051 00:55:56,000 --> 00:55:58,480 Speaker 15: and the ability to move deposits so quickly with just 1052 00:55:58,560 --> 00:56:02,920 Speaker 15: a flick of a finger, And what about uninsured deposits? 1053 00:56:02,960 --> 00:56:06,200 Speaker 15: Should should that be part of the calculation for some 1054 00:56:06,360 --> 00:56:09,560 Speaker 15: of these different capital and liquidity ratios, because that was 1055 00:56:09,680 --> 00:56:15,000 Speaker 15: really what drove the failures essentially of these three institutions. 1056 00:56:15,680 --> 00:56:18,319 Speaker 2: All right, catch me over here taking notes, Herman, Thank 1057 00:56:18,360 --> 00:56:20,680 Speaker 2: you very much for the excellent question and for all 1058 00:56:20,719 --> 00:56:24,040 Speaker 2: your insight. Of course, that was Herman Chan, Bloomberg Intelligence, 1059 00:56:24,160 --> 00:56:26,480 Speaker 2: Senior Regional Banks Analysts. 1060 00:56:30,520 --> 00:56:32,360 Speaker 1: Thanks for listening to the Sound On podcast. 1061 00:56:32,480 --> 00:56:35,560 Speaker 14: Make sure to subscribe if you haven't already, at Apple, Spotify, 1062 00:56:35,640 --> 00:56:38,040 Speaker 14: and anywhere else you get your podcasts, And you can 1063 00:56:38,120 --> 00:56:41,080 Speaker 14: find us live every weekday from Washington, DC at one 1064 00:56:41,160 --> 00:56:43,520 Speaker 1: Pm Eastern Time at Bloomberg dot com