1 00:00:12,480 --> 00:00:16,320 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:16,520 --> 00:00:21,160 Speaker 1: I'm Joe Wisntal and I'm Tracy halliway, so, Tracy, this 3 00:00:21,280 --> 00:00:25,000 Speaker 1: is obviously for the two of us in our career, 4 00:00:25,040 --> 00:00:27,640 Speaker 1: as we've discussed numerous times already. I mean, this is 5 00:00:27,680 --> 00:00:31,920 Speaker 1: the second big crisis that both of us have been 6 00:00:31,960 --> 00:00:34,839 Speaker 1: involved in the cover. Yeah, you know, I kind of 7 00:00:34,880 --> 00:00:37,920 Speaker 1: always used to think that nothing would ever top the 8 00:00:37,960 --> 00:00:42,280 Speaker 1: two thousand financial crisis. Uh, And boy was I wrong, 9 00:00:42,400 --> 00:00:46,240 Speaker 1: because I'm pretty sure this is going to be a much, 10 00:00:46,360 --> 00:00:49,840 Speaker 1: much bigger economic crisis. Maybe not as big a financial 11 00:00:49,880 --> 00:00:52,400 Speaker 1: crisis in terms of what's happening to the banking system, 12 00:00:52,440 --> 00:00:57,080 Speaker 1: but definitely bigger from a sort of macro perspective. Yeah, 13 00:00:57,160 --> 00:01:01,120 Speaker 1: definitely bigger from a macro perspective. It's a more global crisis. 14 00:01:01,160 --> 00:01:04,120 Speaker 1: Even the two thou thousand nine was global. It's also 15 00:01:04,240 --> 00:01:07,680 Speaker 1: just like you know, from a societal perspective, like, um, 16 00:01:07,680 --> 00:01:12,720 Speaker 1: obviously the last crisis have huge ramifications for the financial system, 17 00:01:12,840 --> 00:01:15,240 Speaker 1: but for the most part, like it didn't really change 18 00:01:15,280 --> 00:01:19,560 Speaker 1: how people lived. There wasn't really much ambiguity about, you know, 19 00:01:20,120 --> 00:01:23,080 Speaker 1: that much about what the post prisis landscape would look like. 20 00:01:23,840 --> 00:01:26,280 Speaker 1: Whereas in this case, I don't think anyone really has 21 00:01:26,400 --> 00:01:30,120 Speaker 1: any solid prediction. Yeah, for sure. This one is much 22 00:01:30,120 --> 00:01:33,240 Speaker 1: wider in scale, with the potential to affect not just 23 00:01:33,319 --> 00:01:36,840 Speaker 1: the economy but politics and society as a whole. And 24 00:01:36,959 --> 00:01:39,399 Speaker 1: even back in two thousand eight, in the worst of 25 00:01:39,440 --> 00:01:42,400 Speaker 1: the crisis, you know, right after Lehman collapsed, when people 26 00:01:42,440 --> 00:01:45,479 Speaker 1: were really worried about the entire banking system, they were 27 00:01:45,480 --> 00:01:49,080 Speaker 1: still going out to get sandwiches, you know, still going 28 00:01:49,160 --> 00:01:51,480 Speaker 1: out getting hair coats, going about their sort of day 29 00:01:51,520 --> 00:01:54,720 Speaker 1: to day business more or less, and all of that 30 00:01:54,880 --> 00:01:59,120 Speaker 1: is very different, right now. Yeah, that's exactly that's exactly right. Well, 31 00:01:59,240 --> 00:02:03,240 Speaker 1: there's never any good, by and large about crisis, and 32 00:02:03,400 --> 00:02:08,359 Speaker 1: this one is particularly horrific from so many dimensions. Um. 33 00:02:08,400 --> 00:02:11,000 Speaker 1: But one of the things that's interesting to see, and 34 00:02:11,040 --> 00:02:12,840 Speaker 1: having seen the last one and this one, is that 35 00:02:12,880 --> 00:02:15,960 Speaker 1: in any new crisis, sort of new voices are brought 36 00:02:16,000 --> 00:02:19,960 Speaker 1: to the four people with expertise that previously weren't being 37 00:02:20,000 --> 00:02:25,320 Speaker 1: paid as much attention to suddenly become very uh, widely 38 00:02:25,440 --> 00:02:28,360 Speaker 1: read and widely followed. People in this case, of course, 39 00:02:28,840 --> 00:02:33,680 Speaker 1: numerous epidemiology and health experts, but also people who really 40 00:02:34,000 --> 00:02:38,560 Speaker 1: have a detailed understanding the financial system. Who can really 41 00:02:39,000 --> 00:02:44,359 Speaker 1: explain all of these sort of new new monetary interventions 42 00:02:44,360 --> 00:02:47,120 Speaker 1: and innovations that central banks around the world are doing 43 00:02:47,440 --> 00:02:51,000 Speaker 1: are in high demand, right. I remember one of the 44 00:02:51,240 --> 00:02:53,359 Speaker 1: I guess you would say the few good things about 45 00:02:53,440 --> 00:02:56,360 Speaker 1: the two thousand eight financial crisis was that it sort 46 00:02:56,360 --> 00:02:59,960 Speaker 1: of gave birth, or gave a boost to this really 47 00:03:00,240 --> 00:03:05,920 Speaker 1: lively community almost of independent financial bloggers um and I 48 00:03:05,960 --> 00:03:07,880 Speaker 1: still remember some of them, some of them have been 49 00:03:08,440 --> 00:03:12,560 Speaker 1: on odd lots before. And also again I remember this 50 00:03:12,639 --> 00:03:15,919 Speaker 1: because I was blocking at the time over at ft Alphaville, 51 00:03:16,080 --> 00:03:21,160 Speaker 1: and it was my first job basically writing specifically about 52 00:03:21,160 --> 00:03:24,359 Speaker 1: finance and markets. And the great thing about the situation 53 00:03:24,560 --> 00:03:28,160 Speaker 1: was there was a really even playing field because everything 54 00:03:28,200 --> 00:03:31,480 Speaker 1: that was happening was so new. It basically meant that 55 00:03:31,560 --> 00:03:34,920 Speaker 1: even if you'd been following finance for ten years, you 56 00:03:34,960 --> 00:03:37,520 Speaker 1: were sort of in the same position as a newcomer 57 00:03:37,640 --> 00:03:40,800 Speaker 1: who was learning it all at once in real time. 58 00:03:40,920 --> 00:03:45,120 Speaker 1: So it was really great to see that conversation happening. Yeah, 59 00:03:45,200 --> 00:03:48,400 Speaker 1: novel crises have a nice way of, as you say, 60 00:03:48,480 --> 00:03:52,160 Speaker 1: leveling the playing field, and the sort of old incumbent 61 00:03:52,360 --> 00:03:55,240 Speaker 1: pundits don't really have an edge, which is kind of 62 00:03:55,680 --> 00:03:58,160 Speaker 1: nice to see. So today the sad thing is we 63 00:03:58,240 --> 00:04:02,160 Speaker 1: are old incumbent pundits. I know, yeah, I know. At 64 00:04:02,240 --> 00:04:04,000 Speaker 1: least we can we can talk to the new ones. 65 00:04:04,000 --> 00:04:06,520 Speaker 1: So today we are going to be talking to someone 66 00:04:07,000 --> 00:04:10,640 Speaker 1: whose voice has really become extremely influential really just over 67 00:04:10,640 --> 00:04:15,000 Speaker 1: the last several weeks, lots of people reading his writing 68 00:04:15,120 --> 00:04:19,560 Speaker 1: as one of the sort of premier experts on this crisis, 69 00:04:19,600 --> 00:04:23,400 Speaker 1: particularly from the actions of the Central Bank, and particularly 70 00:04:23,800 --> 00:04:26,000 Speaker 1: all of the extraordinary moves that we've seen from the 71 00:04:26,000 --> 00:04:31,200 Speaker 1: Federal Reserve really since late February through uh through now. Yeah, 72 00:04:31,240 --> 00:04:33,440 Speaker 1: So I know who we're about to speak to, and 73 00:04:33,520 --> 00:04:35,960 Speaker 1: I have to say, I I sort of don't know 74 00:04:36,080 --> 00:04:39,880 Speaker 1: anything about his professional background. I just know what he 75 00:04:40,000 --> 00:04:43,520 Speaker 1: does from reading reading his blog or sub stack. And 76 00:04:43,560 --> 00:04:47,520 Speaker 1: also I think we did karaoke ones. So I'm really 77 00:04:47,520 --> 00:04:51,279 Speaker 1: excited for this conversation. I wanna learn more. Alright, me too. 78 00:04:51,360 --> 00:04:53,880 Speaker 1: So I don't know anything really about his background either, 79 00:04:53,920 --> 00:04:57,520 Speaker 1: and I even so let's let's bring him in. He's 80 00:04:57,760 --> 00:05:00,520 Speaker 1: Today we're going to be talking with Nathan tank Is. 81 00:05:00,560 --> 00:05:03,680 Speaker 1: He's the research director of the Modern Money Network and 82 00:05:03,760 --> 00:05:06,920 Speaker 1: he also in the last month has launched a much 83 00:05:07,200 --> 00:05:09,920 Speaker 1: must read newsletter that everyone in the world is subscribing 84 00:05:10,000 --> 00:05:14,679 Speaker 1: to understand the actions of the Federal Reserve. Everyone should 85 00:05:14,680 --> 00:05:18,000 Speaker 1: subscribe to it. Nathan, thank you so much for joining us. 86 00:05:19,400 --> 00:05:21,360 Speaker 1: Thank you so much for half of having me. What 87 00:05:21,680 --> 00:05:26,560 Speaker 1: a generous introduction. Lots of people reading your newsletter on substack. 88 00:05:26,680 --> 00:05:30,400 Speaker 1: But who are you? I'm serious, who are you? Like? 89 00:05:30,440 --> 00:05:33,559 Speaker 1: I've I know Nathan, I know you in real life. 90 00:05:34,320 --> 00:05:36,640 Speaker 1: I've got sandwiches in drinks with you in the past 91 00:05:36,720 --> 00:05:38,960 Speaker 1: before this crisis. But I realized I don't know anything 92 00:05:38,960 --> 00:05:40,839 Speaker 1: about you. Like who are you? Then? Like? How do 93 00:05:40,880 --> 00:05:43,599 Speaker 1: you know so much about how the FED works? I 94 00:05:43,720 --> 00:05:46,080 Speaker 1: like how we booked Nathan to come on all thoughts 95 00:05:46,120 --> 00:05:51,160 Speaker 1: with without actually knowing this crutical information. Yea, Hey, the 96 00:05:51,240 --> 00:05:53,960 Speaker 1: subseex speaks for itself. Where my kind of ordinance, or 97 00:05:54,120 --> 00:05:57,680 Speaker 1: in terms of UH finance is the last financial crisis. 98 00:05:58,560 --> 00:06:00,839 Speaker 1: I was in high school at the time time, and 99 00:06:01,480 --> 00:06:07,560 Speaker 1: the financial crisis was extremely fascinating immediately and UH. I 100 00:06:07,640 --> 00:06:11,280 Speaker 1: was at a high school that was kind of alternative, 101 00:06:11,360 --> 00:06:15,279 Speaker 1: weird in New York City in Manhattan. That um had 102 00:06:15,320 --> 00:06:18,120 Speaker 1: two teachers who had discretion over the curriculum and basically 103 00:06:18,160 --> 00:06:21,919 Speaker 1: just said in January, let's just do a class on 104 00:06:21,960 --> 00:06:25,320 Speaker 1: the financial crisis um where you read the newspaper each 105 00:06:25,360 --> 00:06:28,880 Speaker 1: week and you'd argue over nationalization, over the A I G. Bonuses, 106 00:06:29,640 --> 00:06:32,960 Speaker 1: over the stimulus, and just sort of like argue out 107 00:06:33,240 --> 00:06:35,160 Speaker 1: what everyone else was arguing out on a week to 108 00:06:35,200 --> 00:06:39,039 Speaker 1: week basis. And from that I was completely hooked um 109 00:06:39,080 --> 00:06:42,360 Speaker 1: and fascinated by crisis, you know, trying to figure what 110 00:06:42,400 --> 00:06:45,280 Speaker 1: was so interesting was it felt like something that no 111 00:06:45,320 --> 00:06:48,920 Speaker 1: one really quite understood, but it was obviously the most 112 00:06:48,960 --> 00:06:51,760 Speaker 1: important thing happening. And so ever since then, was just 113 00:06:51,800 --> 00:06:56,200 Speaker 1: fascinated by crisis, wanted to learn about it, discovered writings 114 00:06:56,680 --> 00:06:59,359 Speaker 1: by Minsky Um and that sort of just set me 115 00:06:59,400 --> 00:07:02,679 Speaker 1: on at your Jet three to be very very interested 116 00:07:02,800 --> 00:07:08,360 Speaker 1: in crisis, financial market design, fiscal policy, and over the 117 00:07:08,440 --> 00:07:14,800 Speaker 1: years have kind of moved into working and writing on policy. So, Nathan, 118 00:07:14,840 --> 00:07:17,280 Speaker 1: if you don't mind me asking what do you do 119 00:07:17,440 --> 00:07:23,040 Speaker 1: now and does it overlap with your your interest in policy? 120 00:07:23,880 --> 00:07:26,960 Speaker 1: As Joe introduced me Um, research director of the Modern 121 00:07:27,000 --> 00:07:30,800 Speaker 1: Money Network. Before all this happened and with with the pandemic, 122 00:07:30,800 --> 00:07:34,360 Speaker 1: which is obviously become the top of everyone's attention that 123 00:07:34,440 --> 00:07:38,000 Speaker 1: I was working on a report on monetary policy for 124 00:07:38,160 --> 00:07:42,720 Speaker 1: Agree to Deal UM kind of been doing similar polish 125 00:07:43,240 --> 00:07:46,840 Speaker 1: policy ish things, uh in the background, kind of pushing 126 00:07:47,280 --> 00:07:50,880 Speaker 1: alternative frameworks to implement these sort of broad policy goals 127 00:07:50,920 --> 00:07:54,800 Speaker 1: that people have been interested in. So we should get 128 00:07:54,800 --> 00:07:57,920 Speaker 1: to the you know, what you've been writing about and 129 00:07:58,440 --> 00:08:01,640 Speaker 1: sort of how we can understand the Fed's extraordinary actions 130 00:08:01,800 --> 00:08:04,440 Speaker 1: in a in a moment, but you mentioned, you know, 131 00:08:04,560 --> 00:08:07,280 Speaker 1: after high school you sort of got interested in finance. 132 00:08:07,480 --> 00:08:09,880 Speaker 1: But one of the things that really stands out in 133 00:08:09,960 --> 00:08:12,960 Speaker 1: your writing it's not just that you're sort of interest 134 00:08:13,040 --> 00:08:17,320 Speaker 1: in this altogether, but the sort of extreme granularity with 135 00:08:17,400 --> 00:08:21,400 Speaker 1: which you understand monetary operations. Because I think a lot 136 00:08:21,400 --> 00:08:23,280 Speaker 1: of people have this idea it's like, Okay, the fat 137 00:08:23,480 --> 00:08:27,560 Speaker 1: is buy junk bonds and the fat is going to uh, 138 00:08:27,600 --> 00:08:30,400 Speaker 1: you know, intervene in some new market. But the way 139 00:08:30,440 --> 00:08:34,160 Speaker 1: you write about it is far more granular and detailed 140 00:08:34,160 --> 00:08:37,880 Speaker 1: than that. So between you know, over the last two years, 141 00:08:38,200 --> 00:08:40,600 Speaker 1: how did you or sorry, over the last say ten years, 142 00:08:40,800 --> 00:08:44,200 Speaker 1: how did you really educate yourself on like the sort 143 00:08:44,200 --> 00:08:47,920 Speaker 1: of finer points of topics that even a lot of 144 00:08:47,920 --> 00:08:50,520 Speaker 1: like so called experts in the field actually don't have 145 00:08:50,520 --> 00:08:54,679 Speaker 1: a ton of understanding. Um. Well, if one of the 146 00:08:54,880 --> 00:08:59,240 Speaker 1: one of the most basic levels is just understanding monetary 147 00:08:59,240 --> 00:09:03,160 Speaker 1: operations and the details of monetary operations, is really just 148 00:09:03,240 --> 00:09:07,000 Speaker 1: about learning a language that there's this language, this language 149 00:09:07,000 --> 00:09:09,959 Speaker 1: of accounting of t accounts, of drawing balance sheets, of 150 00:09:10,040 --> 00:09:13,240 Speaker 1: drawing you know, you know, saying this entity has assets 151 00:09:13,240 --> 00:09:17,200 Speaker 1: and liabilities and what set of transactions balance these balance 152 00:09:17,200 --> 00:09:20,920 Speaker 1: sheets throughout the economy. Um. That is it's it's not 153 00:09:20,960 --> 00:09:24,400 Speaker 1: so much like getting like a very detailed understanding, although 154 00:09:24,400 --> 00:09:26,680 Speaker 1: you also have to know the operations and the names 155 00:09:26,679 --> 00:09:29,760 Speaker 1: of the facilities, um, and the type of financial assets 156 00:09:29,760 --> 00:09:34,800 Speaker 1: and their legal structure. But becoming more conversational in terms 157 00:09:34,800 --> 00:09:41,240 Speaker 1: of monetary operations becomes just like a a rote doing 158 00:09:41,360 --> 00:09:44,920 Speaker 1: examples of monetary operations over and over and over again. UM, 159 00:09:45,320 --> 00:09:47,560 Speaker 1: drawing and drawing the t accounts. I mean, this is 160 00:09:47,880 --> 00:09:50,080 Speaker 1: you know, one of the best things about Perry Merlin's 161 00:09:50,160 --> 00:09:53,760 Speaker 1: passcuts in the shows. Um, of course, stero course is 162 00:09:54,160 --> 00:09:56,839 Speaker 1: that drawing of balance sheets. UM. And I think that 163 00:09:57,200 --> 00:10:00,520 Speaker 1: really is that core of that class. And um, I 164 00:10:00,559 --> 00:10:03,680 Speaker 1: think that's generally applicable that the best money of banking 165 00:10:03,720 --> 00:10:08,040 Speaker 1: and understanding of of monetary operations comes from just doing it. 166 00:10:08,040 --> 00:10:09,560 Speaker 1: It's just the language that you have to learn, like 167 00:10:09,640 --> 00:10:12,280 Speaker 1: any other language. And once you have it, once you 168 00:10:12,720 --> 00:10:15,720 Speaker 1: can speak it, quote unquote, it's very easy to get 169 00:10:15,760 --> 00:10:19,440 Speaker 1: a handle on new situations and new things going on. 170 00:10:19,679 --> 00:10:22,280 Speaker 1: So I have a pre existing framework UM and pre 171 00:10:22,400 --> 00:10:25,760 Speaker 1: existing understanding want before I look at all these different 172 00:10:26,120 --> 00:10:29,559 Speaker 1: UH facilities and just balance sheet it out and figure out, okay, 173 00:10:29,600 --> 00:10:33,559 Speaker 1: what exactly is going is going on behind these facilities. 174 00:10:33,559 --> 00:10:36,560 Speaker 1: And once you do, the operations become clear what they mean, 175 00:10:36,720 --> 00:10:41,880 Speaker 1: especially when you're used to seeing similar operating monetary operations 176 00:10:41,920 --> 00:10:46,559 Speaker 1: in past examples. Mm hmm. I think that language point 177 00:10:46,679 --> 00:10:49,600 Speaker 1: is really important, and I guess cynics would say that 178 00:10:50,080 --> 00:10:53,840 Speaker 1: maybe central bankers sort of make the language as difficult 179 00:10:53,880 --> 00:10:57,120 Speaker 1: as possible in order to sort of keep um the 180 00:10:57,200 --> 00:11:00,559 Speaker 1: riff raff out, I guess, or make it less understandable 181 00:11:00,600 --> 00:11:04,440 Speaker 1: for outsiders. But just to press on the point of 182 00:11:04,440 --> 00:11:08,280 Speaker 1: of how you learned about monetary policy, were there any 183 00:11:08,280 --> 00:11:11,600 Speaker 1: particular resources that you depended on, because I remember back 184 00:11:11,640 --> 00:11:15,040 Speaker 1: in two thousand eight in the financial crisis, then most 185 00:11:15,040 --> 00:11:17,280 Speaker 1: of what I was reading, for instance, to get up 186 00:11:17,280 --> 00:11:20,360 Speaker 1: to speed. It all came from blogs and maybe some 187 00:11:20,440 --> 00:11:23,000 Speaker 1: of the cell side notes. But is there anything in 188 00:11:23,040 --> 00:11:27,640 Speaker 1: particular that you found useful? Um? Yeah, I read you know, 189 00:11:27,760 --> 00:11:29,800 Speaker 1: blogs as well. I mean I still have I have 190 00:11:29,840 --> 00:11:32,480 Speaker 1: an old reader of my Google Reader from the time, 191 00:11:33,040 --> 00:11:37,080 Speaker 1: um and you know, still still technically subscribe to all 192 00:11:37,080 --> 00:11:42,000 Speaker 1: those different sets of blogs, things like Naked Capitalism, um 193 00:11:42,160 --> 00:11:45,560 Speaker 1: uh smith even just the whole ecosystem blogs beyond like 194 00:11:45,679 --> 00:11:49,320 Speaker 1: one specific exception of maybe Naked Capitalism. It was more 195 00:11:49,400 --> 00:11:55,040 Speaker 1: reading the different arguments that would go through different sets 196 00:11:55,040 --> 00:11:58,040 Speaker 1: of blogs, things that would bounce from Krugman too to 197 00:11:58,240 --> 00:12:02,560 Speaker 1: belong to all over the play Um you've seeing people 198 00:12:02,640 --> 00:12:05,600 Speaker 1: in when they're actually arguing with each other is kind 199 00:12:05,600 --> 00:12:08,840 Speaker 1: of what you get the clearer sense of, um, what's unclear, 200 00:12:09,200 --> 00:12:12,319 Speaker 1: what's good to learn about? But um, I wou'd say 201 00:12:12,360 --> 00:12:15,479 Speaker 1: combination of that plus reading in Sky, which definitely was replatory, 202 00:12:15,520 --> 00:12:18,120 Speaker 1: and that just sort of getting obsessed and reading all 203 00:12:18,160 --> 00:12:22,880 Speaker 1: sorts of all sorts of alternative Heternox literature, post kante 204 00:12:23,000 --> 00:12:25,240 Speaker 1: In literature, and so like, you know, I felt like 205 00:12:25,280 --> 00:12:27,760 Speaker 1: I really had a hand on things. Let's talk about 206 00:12:28,440 --> 00:12:31,280 Speaker 1: Minsky because I'm sure I think a lot of our 207 00:12:31,880 --> 00:12:35,080 Speaker 1: listeners maybe have some idea who he is. They have 208 00:12:35,200 --> 00:12:40,280 Speaker 1: some idea that the financial instability hypothishness, that systems tend 209 00:12:40,360 --> 00:12:44,520 Speaker 1: towards instability. Probably some of our guests would find him 210 00:12:44,640 --> 00:12:48,960 Speaker 1: uh inside him as being influential. What was it about 211 00:12:49,040 --> 00:12:53,080 Speaker 1: his work specifically that influenced you and sort of set 212 00:12:53,120 --> 00:12:54,720 Speaker 1: you on the path, Like, what is it? What is 213 00:12:54,800 --> 00:12:57,559 Speaker 1: the sort of main idea that really set you alife? 214 00:12:57,600 --> 00:13:01,280 Speaker 1: Behind of his first that you know that you have 215 00:13:01,360 --> 00:13:04,000 Speaker 1: to be able to speak in balance sheets, that balance 216 00:13:04,040 --> 00:13:06,800 Speaker 1: sheets is how you keep yourself coherent. But then that 217 00:13:07,720 --> 00:13:11,880 Speaker 1: the instability and the innovation in finance is one in 218 00:13:11,920 --> 00:13:14,439 Speaker 1: the same thing, the idea that you're going to expand 219 00:13:14,480 --> 00:13:19,000 Speaker 1: balance sheets but with a unique uh financial uh instrument. 220 00:13:19,160 --> 00:13:20,800 Speaker 1: You know, you know what I would say today, a 221 00:13:21,200 --> 00:13:26,200 Speaker 1: unique uh legal structure to those uh to those financial instruments, 222 00:13:26,600 --> 00:13:31,400 Speaker 1: and that there's this social process by which new legal 223 00:13:31,480 --> 00:13:36,680 Speaker 1: and financial innovations convince people that financial structure that in 224 00:13:36,760 --> 00:13:39,960 Speaker 1: many respects is similar to an unstable one from in 225 00:13:40,000 --> 00:13:43,800 Speaker 1: the past, is gonna be stable uh this time. And 226 00:13:43,800 --> 00:13:46,040 Speaker 1: then you know, watching him discussed it through examples. The 227 00:13:46,080 --> 00:13:48,760 Speaker 1: examples that I think are like obscure now, Like you know, 228 00:13:48,800 --> 00:13:52,960 Speaker 1: he has a whole large sections in Stabilizing unstable economy 229 00:13:53,080 --> 00:13:56,880 Speaker 1: on real estate investment trust in the seventies and these 230 00:13:56,880 --> 00:14:00,199 Speaker 1: sort of more obscure things where you see, um, how 231 00:14:00,240 --> 00:14:04,760 Speaker 1: the financial structure evolves and uh and and its relationship 232 00:14:04,880 --> 00:14:08,440 Speaker 1: to to instability, and then also just things like you 233 00:14:08,480 --> 00:14:11,120 Speaker 1: know Minsky. You know, at the time when securitization seemed 234 00:14:11,160 --> 00:14:13,280 Speaker 1: like this new fingled thing that no one paid attention to. 235 00:14:13,840 --> 00:14:20,280 Speaker 1: Reading Minsky discussed securitization and it's benefits the prophet seeking bands, 236 00:14:20,320 --> 00:14:23,520 Speaker 1: but also it's potential for instability was like rebelatory. You know, 237 00:14:23,560 --> 00:14:26,040 Speaker 1: it felt like at the time, maybe a little less 238 00:14:26,040 --> 00:14:27,960 Speaker 1: so now, but in two thousand nine it felt like 239 00:14:28,000 --> 00:14:31,560 Speaker 1: reading a profit. Um when when you read about when 240 00:14:31,560 --> 00:14:36,280 Speaker 1: you read Minsky discussed securitization in the eighties, Well, let's 241 00:14:36,320 --> 00:14:40,680 Speaker 1: talk about the evolution that is arguably happening now and 242 00:14:40,920 --> 00:14:44,560 Speaker 1: what we're sort of seeing from the Federal Reserve. You 243 00:14:44,640 --> 00:14:47,240 Speaker 1: and I have I think we've tweeted at each other 244 00:14:47,720 --> 00:14:51,560 Speaker 1: a little bit about the sort of mingling of monetary 245 00:14:51,640 --> 00:14:56,000 Speaker 1: policy with fiscal policy or the potential for that to happen, 246 00:14:56,080 --> 00:14:58,560 Speaker 1: and it does kind of feel like, even if it's 247 00:14:58,560 --> 00:15:02,240 Speaker 1: not happening explicit le central banks are certainly talking about 248 00:15:02,280 --> 00:15:07,040 Speaker 1: it more, and there's this idea of monetary financing as well. 249 00:15:07,520 --> 00:15:10,440 Speaker 1: Could you sort of give us a broad outline of 250 00:15:10,600 --> 00:15:13,920 Speaker 1: what you're seeing on that front. UM, I mean, what 251 00:15:13,960 --> 00:15:17,600 Speaker 1: we're seeing is basically like UM, a charged up version 252 00:15:17,880 --> 00:15:22,680 Speaker 1: of quantitative easing, the large scale asset purchases UM over 253 00:15:23,680 --> 00:15:26,920 Speaker 1: two thousand, two thousand nine to two thousand twelve roughly, 254 00:15:27,240 --> 00:15:31,760 Speaker 1: but this time rather than being you know, this indirect 255 00:15:31,760 --> 00:15:36,040 Speaker 1: offense attempt to increase demand by saying, you know, you 256 00:15:36,120 --> 00:15:39,680 Speaker 1: buy a bond off of off of hedge fund and 257 00:15:39,720 --> 00:15:42,680 Speaker 1: they reinvest in somewhere else, and you know, credited availability 258 00:15:42,720 --> 00:15:45,840 Speaker 1: expands or whatever other theory you have for why quantitative 259 00:15:45,880 --> 00:15:48,480 Speaker 1: easing would work. At the most basic level, the big gift, 260 00:15:48,640 --> 00:15:52,800 Speaker 1: the sort of supercharge quantitative easing now has been about 261 00:15:53,040 --> 00:15:56,120 Speaker 1: making sure that the treasury market function, making sure that 262 00:15:56,160 --> 00:15:58,400 Speaker 1: you know, at this time, when you have a huge 263 00:15:58,440 --> 00:16:02,920 Speaker 1: collapse and income across across business sectors, that they're able 264 00:16:02,960 --> 00:16:07,080 Speaker 1: to access liquid assets they need to make payments, and 265 00:16:07,360 --> 00:16:11,000 Speaker 1: the normal financial players who would usually accommodate that demand 266 00:16:11,160 --> 00:16:13,840 Speaker 1: for whatever reason, weren't able to, and thus the FED 267 00:16:13,920 --> 00:16:17,800 Speaker 1: became essentially, you know, a buyer of treasury securities of 268 00:16:17,880 --> 00:16:21,040 Speaker 1: last resort or you know, maybe even a first resort. 269 00:16:21,280 --> 00:16:23,880 Speaker 1: And so in this case, the large scale asset purchases 270 00:16:23,960 --> 00:16:28,200 Speaker 1: have been about um fixing the financial plumbing um and 271 00:16:28,240 --> 00:16:31,720 Speaker 1: making sure people have access to treasury security liquidity, rather 272 00:16:31,760 --> 00:16:35,360 Speaker 1: than the sort of other the other sort of justifications 273 00:16:35,360 --> 00:16:39,040 Speaker 1: for large scale asset purposes that happened a decade ago, right, 274 00:16:39,120 --> 00:16:43,000 Speaker 1: so a decade ago arguably or in retrospect, obviously, the 275 00:16:43,040 --> 00:16:46,360 Speaker 1: FED did a lot of treasury buying, but it was limited. 276 00:16:46,440 --> 00:16:50,960 Speaker 1: It was arguably primarily a signaling vehicle about raids, or 277 00:16:51,080 --> 00:16:53,680 Speaker 1: maybe it was something to do with the portfolio channel 278 00:16:54,080 --> 00:16:57,360 Speaker 1: to encourage people into risky your assets to stimulate the economy. 279 00:16:57,400 --> 00:16:59,640 Speaker 1: But in this case it was literally about making sure 280 00:16:59,680 --> 00:17:03,720 Speaker 1: people could get liquidity for treasuries. The one thing that 281 00:17:03,800 --> 00:17:06,679 Speaker 1: seems like very different or sort of like a innovation 282 00:17:06,760 --> 00:17:09,840 Speaker 1: beyond what we saw in the last crisis is the 283 00:17:09,920 --> 00:17:14,359 Speaker 1: degree to which the FED is intervening in the market 284 00:17:14,440 --> 00:17:18,399 Speaker 1: for risky assets on the credit side, having clearly stepped 285 00:17:18,440 --> 00:17:22,520 Speaker 1: into the market for investment grade bonds, but even high 286 00:17:22,560 --> 00:17:27,040 Speaker 1: yield bonds, entities which carry credit risk and UM put 287 00:17:27,119 --> 00:17:30,760 Speaker 1: in theory default. Talk to us about what they've done 288 00:17:30,920 --> 00:17:33,560 Speaker 1: and how innovative it is in terms of a break 289 00:17:33,640 --> 00:17:36,840 Speaker 1: from its previous actions it represents for the FED to 290 00:17:36,880 --> 00:17:40,960 Speaker 1: get involved in these markets. I think it's hugely innovative. 291 00:17:41,000 --> 00:17:43,240 Speaker 1: I think we can't underestimate. You know, of course, there's 292 00:17:43,280 --> 00:17:46,920 Speaker 1: been UH in Europe and the e CP Japan, there 293 00:17:46,960 --> 00:17:51,600 Speaker 1: have been purchases of corporate of corporate debt, so it's 294 00:17:51,600 --> 00:17:55,800 Speaker 1: not a completely brand new innovation in terms of such 295 00:17:55,800 --> 00:17:59,359 Speaker 1: a banking, even recent central banking globally. But for UM, 296 00:17:59,400 --> 00:18:01,720 Speaker 1: the feeder was or of it's very unique because the 297 00:18:01,720 --> 00:18:06,399 Speaker 1: Federal Reserve has has UH has had more than any 298 00:18:06,480 --> 00:18:10,000 Speaker 1: other central bank has had. This commitment to our policy 299 00:18:10,119 --> 00:18:13,840 Speaker 1: is neutral. UM. We don't pick winners and losers. We're 300 00:18:13,960 --> 00:18:17,520 Speaker 1: just here to, you know, provide general credit support to 301 00:18:18,000 --> 00:18:21,880 Speaker 1: manage general economic conditions. Were not about these specific entities 302 00:18:21,920 --> 00:18:26,240 Speaker 1: and UM. The innovation today is that that is I'm 303 00:18:26,280 --> 00:18:29,480 Speaker 1: clearly not the case. They by by circumstances they feel 304 00:18:29,520 --> 00:18:33,440 Speaker 1: forced to make sure that corporate America as a whole 305 00:18:33,480 --> 00:18:37,760 Speaker 1: has access to liquidity, but that you know, the mechanism 306 00:18:37,880 --> 00:18:42,240 Speaker 1: for doing that, launching these primary corporate credit UH facility 307 00:18:42,320 --> 00:18:46,600 Speaker 1: and the secondary market corporate credit facility that launching these facilities, 308 00:18:46,640 --> 00:18:50,840 Speaker 1: they are intervening. They're making specific choices. They're choosing UM 309 00:18:50,920 --> 00:18:54,320 Speaker 1: investment grade bonds and investment grade bonds that were investment 310 00:18:54,400 --> 00:18:57,080 Speaker 1: grade H before a certain point. I think the current 311 00:18:57,080 --> 00:19:00,679 Speaker 1: one is the current caught office March and there and 312 00:19:00,680 --> 00:19:04,640 Speaker 1: then as well, they're buying extrage traded funds UM. And 313 00:19:05,160 --> 00:19:08,679 Speaker 1: this is specifically, you know, this is them saying, you know, 314 00:19:08,920 --> 00:19:12,320 Speaker 1: this set of corporate America, we we need to prevent 315 00:19:12,800 --> 00:19:16,200 Speaker 1: the spread between their borrowing rates and the risk free 316 00:19:16,240 --> 00:19:19,240 Speaker 1: borrowing right from exploding. They need to be able to 317 00:19:19,280 --> 00:19:22,600 Speaker 1: access credit at this difficult time when there's this you know, 318 00:19:22,760 --> 00:19:26,879 Speaker 1: big drop and revenue across the board. They they're they're 319 00:19:26,880 --> 00:19:29,520 Speaker 1: putting this out there, and I think it's gonna it's 320 00:19:29,560 --> 00:19:32,639 Speaker 1: gonna change the Federals are from now on, there's always 321 00:19:32,680 --> 00:19:37,520 Speaker 1: gonna be bought corporate UH credit corporate securities before you 322 00:19:37,560 --> 00:19:40,040 Speaker 1: can you know, first of all, shouldn't we give you 323 00:19:40,160 --> 00:19:42,480 Speaker 1: normal give this to you as a normal tool of 324 00:19:42,520 --> 00:19:46,600 Speaker 1: monetary policy. There's gonna be talk about UM specific sectors 325 00:19:46,600 --> 00:19:49,800 Speaker 1: that they should be supporting, especially around energy. I think 326 00:19:49,800 --> 00:19:52,000 Speaker 1: it's gonna be a huge one um in terms of 327 00:19:52,040 --> 00:19:56,120 Speaker 1: the future of monetary policy debates, and and that combined 328 00:19:56,160 --> 00:19:59,840 Speaker 1: with the municipal liquidity facility, which is state and local, 329 00:20:00,119 --> 00:20:02,840 Speaker 1: just now there's I think there's gonna be this like 330 00:20:02,960 --> 00:20:05,880 Speaker 1: debate between Okay, if you're at the zero lower band 331 00:20:05,880 --> 00:20:08,720 Speaker 1: and you can't really have anywhere else to go, what 332 00:20:08,840 --> 00:20:12,320 Speaker 1: should you be doing to trying to uh support the economy? 333 00:20:12,359 --> 00:20:17,280 Speaker 1: Should you be loostening financial constraints of non financial corporations 334 00:20:17,440 --> 00:20:20,560 Speaker 1: or should you be loosening the financial constraints of municipalities, 335 00:20:21,119 --> 00:20:25,400 Speaker 1: especially the most disadvantaged municipalities who experience a lot of musterity, 336 00:20:25,480 --> 00:20:27,520 Speaker 1: especially over the last decade. And so I think that 337 00:20:27,960 --> 00:20:30,680 Speaker 1: I think that is the future of of debates over 338 00:20:31,119 --> 00:20:34,600 Speaker 1: monetary policy. And it's a very different world, and it's 339 00:20:34,600 --> 00:20:37,959 Speaker 1: a world that the Federal Reserve is uncomfortable with above 340 00:20:38,080 --> 00:20:42,400 Speaker 1: everything else. Post two thousand eight, I remember we saw 341 00:20:42,440 --> 00:20:45,520 Speaker 1: people up in arms over you know, well, people are 342 00:20:45,600 --> 00:20:48,520 Speaker 1: up in arms over quantitative easing and talking about moral 343 00:20:48,560 --> 00:20:51,280 Speaker 1: hazard and stuff like that. And of course now we 344 00:20:51,359 --> 00:20:55,080 Speaker 1: see the FED taking on credit risk on an entirely 345 00:20:55,640 --> 00:21:00,320 Speaker 1: different scale from your perspective. And this is kind of 346 00:21:00,320 --> 00:21:03,000 Speaker 1: a tough question, but do you think they should be 347 00:21:03,280 --> 00:21:06,880 Speaker 1: assuming that credit risk and what kind of moral hazard 348 00:21:07,000 --> 00:21:11,600 Speaker 1: debates would you expect this to open up? I think 349 00:21:11,880 --> 00:21:15,840 Speaker 1: the corporate credit facilities aren't necessary. I do think that 350 00:21:15,880 --> 00:21:18,920 Speaker 1: you can't, like you can let specific companies go down, 351 00:21:18,920 --> 00:21:22,119 Speaker 1: but you can't let UM they're to basically be a 352 00:21:22,200 --> 00:21:25,640 Speaker 1: run on corporate America as a whole. What I would 353 00:21:25,680 --> 00:21:28,399 Speaker 1: say is, I think the fact that you know that 354 00:21:28,520 --> 00:21:31,159 Speaker 1: the safety net is revealed that you know not just 355 00:21:31,240 --> 00:21:33,399 Speaker 1: that specific banks are too big to fail, but corporate 356 00:21:33,440 --> 00:21:35,639 Speaker 1: America as a whole is too big to fail, and 357 00:21:35,680 --> 00:21:39,400 Speaker 1: we'll always get some sort of generalized support UM. And now, 358 00:21:39,480 --> 00:21:42,240 Speaker 1: especially in the finance side through the Federal Reserve, opens 359 00:21:42,320 --> 00:21:46,120 Speaker 1: up questions about what responsibilities do they have as uh 360 00:21:46,280 --> 00:21:48,680 Speaker 1: to the public, as we're essentially treating them as part 361 00:21:48,720 --> 00:21:51,679 Speaker 1: of public infrastructure. You know, there are central workers, but 362 00:21:51,760 --> 00:21:55,879 Speaker 1: now there are also essential corporations, and I think that 363 00:21:56,480 --> 00:22:01,240 Speaker 1: opens up a question to you know, how firms operate 364 00:22:01,520 --> 00:22:03,200 Speaker 1: and to the extent to which that they're going to 365 00:22:03,320 --> 00:22:06,919 Speaker 1: be truly especially multig multinational corporations are going to operate 366 00:22:07,200 --> 00:22:11,800 Speaker 1: truly as these like purely private entities, or whether there's 367 00:22:11,800 --> 00:22:15,080 Speaker 1: going to be a transition to seeing them as sites 368 00:22:15,119 --> 00:22:18,920 Speaker 1: of governance that involve a series of stakeholder who all 369 00:22:19,000 --> 00:22:24,040 Speaker 1: have rights, um and I think that that is gonna 370 00:22:24,119 --> 00:22:25,800 Speaker 1: be a v piece, And of course I think it's 371 00:22:25,800 --> 00:22:29,520 Speaker 1: going to be. I think the municipality stuff is uh, 372 00:22:30,040 --> 00:22:32,800 Speaker 1: very is very critical as as well, and in fact, 373 00:22:32,800 --> 00:22:34,639 Speaker 1: it should be expanded a lot. I think, you know, 374 00:22:35,119 --> 00:22:38,040 Speaker 1: it hasn't been anywhere near uh near enough what they've 375 00:22:38,080 --> 00:22:54,520 Speaker 1: been doing. I want to get a little bit, you know, 376 00:22:54,640 --> 00:22:57,080 Speaker 1: soon into what more the FEN could be doing. But 377 00:22:57,119 --> 00:22:59,560 Speaker 1: before we do, I mean Tracy asked about this sort 378 00:22:59,600 --> 00:23:05,000 Speaker 1: of moral hazard entanglement questions governance. What about the pure 379 00:23:05,080 --> 00:23:08,000 Speaker 1: legality question of what they we've done. There are people say, oh, 380 00:23:08,040 --> 00:23:11,679 Speaker 1: this is blatantly illegal, and then they cite some line 381 00:23:11,680 --> 00:23:13,959 Speaker 1: of the law regarding the Federal Reserve Act and they 382 00:23:13,960 --> 00:23:16,399 Speaker 1: say they can't be taken on credit risk like that 383 00:23:17,040 --> 00:23:19,159 Speaker 1: just from a sort of purely within the bounds of 384 00:23:19,160 --> 00:23:21,840 Speaker 1: what they're allowed to do. In your view, are they 385 00:23:21,840 --> 00:23:26,040 Speaker 1: sort of still unambiguously within uh the letter of the law. 386 00:23:28,040 --> 00:23:33,240 Speaker 1: I don't think it's unambiguous. I think it's definitely stretching 387 00:23:33,440 --> 00:23:37,639 Speaker 1: the law sum um, but it's stretching the law in 388 00:23:37,680 --> 00:23:41,960 Speaker 1: the way that the exact way that that happened in 389 00:23:42,000 --> 00:23:44,719 Speaker 1: two thousand eight. And what's so, I mean, to back up, 390 00:23:45,320 --> 00:23:49,199 Speaker 1: the key legal innovation that was employed in two tho 391 00:23:49,600 --> 00:23:53,359 Speaker 1: and employed today was Okay, we don't have the legal 392 00:23:53,359 --> 00:23:58,000 Speaker 1: authority to do sets of purchases that directly, so we'll 393 00:23:58,080 --> 00:24:01,320 Speaker 1: launder these purchases through some leave the straw purchaser that 394 00:24:01,400 --> 00:24:03,920 Speaker 1: will create which is a special purpose vehicle. At the time, 395 00:24:03,960 --> 00:24:07,080 Speaker 1: they were named Maiden Lane one, Maiden Lane two, Maiden 396 00:24:07,160 --> 00:24:09,720 Speaker 1: Lane three, UM. As far as I know, there isn't 397 00:24:09,760 --> 00:24:13,840 Speaker 1: any really names today um for them, or if they're 398 00:24:13,840 --> 00:24:16,560 Speaker 1: just like named after the facility or whatever. But they're 399 00:24:16,560 --> 00:24:19,760 Speaker 1: setting up the set of special purpose vehicles where there 400 00:24:19,960 --> 00:24:25,040 Speaker 1: is um a injection of equity from the treasury where 401 00:24:25,080 --> 00:24:27,720 Speaker 1: they'll they'll buy you know, ten billion dollar equity state 402 00:24:27,840 --> 00:24:30,600 Speaker 1: or thirty billion dollar equity state, whatever it is, um 403 00:24:30,680 --> 00:24:33,760 Speaker 1: into the special purpose vehicle, and then that special purchase 404 00:24:33,880 --> 00:24:36,400 Speaker 1: vehicle will conduct all the purchases that we're talking about. 405 00:24:36,400 --> 00:24:39,560 Speaker 1: So the corporate credit facilities, these are special technically special 406 00:24:39,560 --> 00:24:42,359 Speaker 1: purpose vehicles UM. And I think the idea behind that 407 00:24:42,520 --> 00:24:45,720 Speaker 1: is that the equity stake from the Treasury IS makes 408 00:24:45,760 --> 00:24:48,520 Speaker 1: this sort of like a partnership between the Treasury and 409 00:24:48,520 --> 00:24:51,760 Speaker 1: the Federal Reserve rather than the Reserve purely acting on 410 00:24:51,800 --> 00:24:55,720 Speaker 1: its own authority. And thus, you know, it's it's legal. 411 00:24:55,720 --> 00:24:58,240 Speaker 1: I think it's I think the case for these special 412 00:24:58,240 --> 00:25:02,080 Speaker 1: purpose vehicles being legal is pretty strong, you know, and 413 00:25:02,119 --> 00:25:04,600 Speaker 1: also who would have standing in the court to challenge them? 414 00:25:05,000 --> 00:25:09,080 Speaker 1: But I think that they open up big questions like 415 00:25:09,320 --> 00:25:13,439 Speaker 1: why if we think that this is an appropriate emergency tool, 416 00:25:13,960 --> 00:25:17,720 Speaker 1: then the use of the IS facilities should be legislated, Like, 417 00:25:17,840 --> 00:25:20,399 Speaker 1: there's no reason why we can't legislate that there a 418 00:25:20,440 --> 00:25:24,520 Speaker 1: facility exists, that is, you know, a special emergency Treasury 419 00:25:24,680 --> 00:25:26,560 Speaker 1: that are reserved facility, which by the way, could have 420 00:25:26,600 --> 00:25:31,359 Speaker 1: a permanent staff that is UH studying crises and you know, 421 00:25:31,480 --> 00:25:35,320 Speaker 1: tail risks on all the time. UM, that could get 422 00:25:35,400 --> 00:25:37,200 Speaker 1: up and running when it needs to and it's running 423 00:25:37,240 --> 00:25:40,240 Speaker 1: scenarios and so on and so forth. UM, and then 424 00:25:40,359 --> 00:25:45,160 Speaker 1: specifically specify what sort of powers that that UH, that 425 00:25:45,160 --> 00:25:50,000 Speaker 1: that Joint Treasury FT reserved facility has UH in extraordinary times. 426 00:25:50,359 --> 00:25:53,000 Speaker 1: So I think in broke strits, I think these facilities 427 00:25:53,080 --> 00:25:56,600 Speaker 1: are legal, that the defense of them being lehical is 428 00:25:56,720 --> 00:25:59,960 Speaker 1: very strong. But I think it's a huge policy fail 429 00:26:00,040 --> 00:26:03,240 Speaker 1: here that we are leaning in special purpose vehicles. And 430 00:26:03,280 --> 00:26:06,040 Speaker 1: I don't think it was at all clear to anyone um, 431 00:26:06,080 --> 00:26:10,639 Speaker 1: including experts and the public at large, that recourse to 432 00:26:10,680 --> 00:26:13,960 Speaker 1: special purpose vehicles to do whatever you want was still 433 00:26:14,000 --> 00:26:16,600 Speaker 1: on the board, after on the table, after dot Frank 434 00:26:16,680 --> 00:26:19,560 Speaker 1: and I think you know, there's there's a big question 435 00:26:19,600 --> 00:26:23,040 Speaker 1: of democratic accountability in terms of having this sort of 436 00:26:23,280 --> 00:26:25,200 Speaker 1: state of exception where you can set up a special 437 00:26:25,240 --> 00:26:28,520 Speaker 1: purpose vehicle and do whatever you want. Right, the FED 438 00:26:28,600 --> 00:26:32,320 Speaker 1: is sort of, I guess, cobbling together these various facilities 439 00:26:32,440 --> 00:26:36,440 Speaker 1: under immense time pressure, or maybe they're sort of mcgivering 440 00:26:36,480 --> 00:26:39,280 Speaker 1: it right, like putting it together in any way they 441 00:26:39,280 --> 00:26:42,919 Speaker 1: can um But as you say, if they had the 442 00:26:43,040 --> 00:26:45,760 Speaker 1: explicit ability to do that, then we would save a 443 00:26:45,760 --> 00:26:48,160 Speaker 1: little bit of time, and maybe we shouldn't be coming 444 00:26:48,240 --> 00:26:50,640 Speaker 1: up with new policies or new ways of doing things 445 00:26:50,800 --> 00:26:55,280 Speaker 1: in the middle of an emergency. In this way, you've 446 00:26:55,320 --> 00:26:59,400 Speaker 1: written thousands and thousands of words at this point about 447 00:26:59,440 --> 00:27:03,280 Speaker 1: what the FED has been doing, what else could they 448 00:27:03,320 --> 00:27:05,800 Speaker 1: do at this point, what's sort of top of the 449 00:27:05,840 --> 00:27:08,080 Speaker 1: list or number one if you had a wish list 450 00:27:08,200 --> 00:27:11,119 Speaker 1: from the bad Number one is definitely just expanding the 451 00:27:11,200 --> 00:27:15,040 Speaker 1: municipal liquidity facility. UM. I mean, I think it should 452 00:27:15,040 --> 00:27:18,840 Speaker 1: just be like an unlimited swap line to state and 453 00:27:18,840 --> 00:27:21,280 Speaker 1: local governments for the duration of the crisis. You know, 454 00:27:21,560 --> 00:27:24,920 Speaker 1: we we provide unlimited swap lines to foreign governments. I 455 00:27:24,960 --> 00:27:28,200 Speaker 1: don't see any reason why we can't provide unlimited swap 456 00:27:28,200 --> 00:27:31,240 Speaker 1: lines now, especially you know, a pandemic is an especially 457 00:27:31,280 --> 00:27:34,800 Speaker 1: unique circumstance where you need a public spending on the 458 00:27:34,800 --> 00:27:38,639 Speaker 1: grounds and that spending literally saves lives, you know, in 459 00:27:38,640 --> 00:27:41,280 Speaker 1: a very immediate direct way when you provide that that 460 00:27:41,280 --> 00:27:45,560 Speaker 1: that those financial support. So I think, UM massive expansion 461 00:27:45,880 --> 00:27:48,000 Speaker 1: at the state and local level is He's kind of 462 00:27:48,320 --> 00:27:51,360 Speaker 1: the biggest thing for me. I think. Second is UM 463 00:27:51,400 --> 00:27:55,200 Speaker 1: I think not only is like it's weird that we're 464 00:27:55,200 --> 00:27:58,000 Speaker 1: doing special purpose vehicles, but the way that they have 465 00:27:58,359 --> 00:28:01,679 Speaker 1: structured it legally with the Cares Act where and and 466 00:28:01,760 --> 00:28:05,600 Speaker 1: they're they're essentially their legal argument where the beds proposed 467 00:28:05,680 --> 00:28:09,000 Speaker 1: purchases and taking on of credit risk. UM is somehow 468 00:28:09,040 --> 00:28:12,399 Speaker 1: in proportion to the equity stakes that the Treasury is 469 00:28:12,400 --> 00:28:15,760 Speaker 1: putting up through the Exchange Stabilization Fund. I think that 470 00:28:16,000 --> 00:28:19,960 Speaker 1: is a limited structure that hits the problem with quantitative easing, 471 00:28:20,000 --> 00:28:22,679 Speaker 1: where you can't simply set rates. You just have to 472 00:28:22,720 --> 00:28:26,040 Speaker 1: announce specific quantities and hope that they have the the 473 00:28:26,119 --> 00:28:29,640 Speaker 1: interest rate and credit availability effects that you want. I think, 474 00:28:29,680 --> 00:28:33,360 Speaker 1: you know, an alternative, you know, accounting gemmick essentially um 475 00:28:33,440 --> 00:28:36,160 Speaker 1: to that accounting gimmick would have given them the ability 476 00:28:36,200 --> 00:28:40,040 Speaker 1: to set interest rates across the board, and it's unfortunately 477 00:28:40,280 --> 00:28:44,040 Speaker 1: set up a special account of crisis facility account where 478 00:28:44,080 --> 00:28:47,120 Speaker 1: losses are booked too, that gets booked as a negative equity, 479 00:28:47,160 --> 00:28:50,440 Speaker 1: the negative liability of the Treasury and isolated from all 480 00:28:50,440 --> 00:28:53,320 Speaker 1: the other remittance a negative negative liability of the Federal 481 00:28:53,360 --> 00:28:56,360 Speaker 1: Reserve that gets booked as a that that gets you know, 482 00:28:56,560 --> 00:29:00,320 Speaker 1: separated from remittances. Would have, you know, given them much 483 00:29:00,400 --> 00:29:04,880 Speaker 1: broader scopes. You would have let congressional preparations actually go 484 00:29:05,080 --> 00:29:09,200 Speaker 1: to grants and spending um and you know, would would 485 00:29:09,240 --> 00:29:13,680 Speaker 1: make their their emergency monitory policy much more effective. So 486 00:29:13,760 --> 00:29:16,320 Speaker 1: I think, you know, those those two big things really 487 00:29:16,360 --> 00:29:19,600 Speaker 1: expanding on the municipal front and then an alternative accounting 488 00:29:19,600 --> 00:29:23,520 Speaker 1: gimmick so they could really expand purchases lending. I think 489 00:29:24,360 --> 00:29:27,240 Speaker 1: really the way to go. One of the weird things 490 00:29:27,400 --> 00:29:31,440 Speaker 1: about the recovery effort, and uh, you know the payroll 491 00:29:31,480 --> 00:29:35,320 Speaker 1: protection component of the CARES Act is that it's all 492 00:29:35,440 --> 00:29:38,160 Speaker 1: run through the banking system, So even though it's a 493 00:29:38,360 --> 00:29:42,760 Speaker 1: it's treasury backstopping all of these dischargeable loans to companies. 494 00:29:43,160 --> 00:29:45,720 Speaker 1: Companies that want to keep workers on their payroll have 495 00:29:45,800 --> 00:29:47,760 Speaker 1: to go to their bank and fill out paperwork and 496 00:29:47,880 --> 00:29:51,720 Speaker 1: their different issues. Every bank has their different issues. Um, 497 00:29:51,760 --> 00:29:54,440 Speaker 1: what in your view, we've been talking a lot about 498 00:29:55,160 --> 00:29:58,560 Speaker 1: asset purchases and so forth. What could the FED do 499 00:29:58,760 --> 00:30:03,320 Speaker 1: on the regulatory side so that the banks are in 500 00:30:03,360 --> 00:30:07,160 Speaker 1: a better position themselves to provide money or provide credit 501 00:30:07,520 --> 00:30:11,920 Speaker 1: to keep the economy going or yeah, just generally speaking, 502 00:30:12,080 --> 00:30:14,240 Speaker 1: is there something that they could be doing to the 503 00:30:14,280 --> 00:30:19,840 Speaker 1: banks directly that would help the help the economy overall? Um, 504 00:30:19,880 --> 00:30:23,160 Speaker 1: I don't think that there is anything. You know, one 505 00:30:23,160 --> 00:30:24,880 Speaker 1: thing we forgot to talk about was the main Street 506 00:30:25,000 --> 00:30:26,840 Speaker 1: or I forgot to mention was the main Street learning 507 00:30:26,840 --> 00:30:30,120 Speaker 1: program that they're doing direct lending to small or launching 508 00:30:30,120 --> 00:30:32,760 Speaker 1: a program to do direct lending small and medium sized 509 00:30:32,760 --> 00:30:36,560 Speaker 1: businesses again through banks in a similar way to the 510 00:30:36,680 --> 00:30:41,360 Speaker 1: um P P P UH and I think that banks 511 00:30:41,480 --> 00:30:45,440 Speaker 1: are you know, as there's a mccronics is running about 512 00:30:45,480 --> 00:30:48,560 Speaker 1: it recently. I'm thinking on her name UM and someone 513 00:30:48,600 --> 00:30:51,280 Speaker 1: who comes from the money view was writing about recently 514 00:30:51,280 --> 00:30:55,280 Speaker 1: about how banks are actually very unused to being credit intermediaries. 515 00:30:55,600 --> 00:30:58,960 Speaker 1: Their payment energy comediaries. They make payments all the times, 516 00:30:59,000 --> 00:31:02,240 Speaker 1: but they're not used to being credit intermaters, despite you know, 517 00:31:02,280 --> 00:31:06,280 Speaker 1: they could sort of textbook UM examples saying that that's 518 00:31:06,280 --> 00:31:09,960 Speaker 1: how things work, and so they're they're very uncomfortable in 519 00:31:10,040 --> 00:31:12,960 Speaker 1: meaning these pass through mechanisms for the Federal Reserve or 520 00:31:13,240 --> 00:31:17,120 Speaker 1: the Small Business Association from operating. And so I think 521 00:31:17,920 --> 00:31:20,240 Speaker 1: one thing is to sort of kind of be tighter 522 00:31:20,280 --> 00:31:23,360 Speaker 1: on regulatory pressure to make sure that loans are going 523 00:31:23,480 --> 00:31:28,320 Speaker 1: out the door as fast as possible. UM. But also 524 00:31:29,560 --> 00:31:34,760 Speaker 1: UH that that consolidating these programs into one program makes 525 00:31:34,960 --> 00:31:37,400 Speaker 1: a lot of sense. Like they've launched the Federal Reserve 526 00:31:37,440 --> 00:31:40,880 Speaker 1: has actually wants the facility to provide liquidity UM two 527 00:31:41,280 --> 00:31:44,920 Speaker 1: PPP loans where they're providing term financing and the loans 528 00:31:44,960 --> 00:31:48,480 Speaker 1: get pledged as collateral UM on a no recourse basis, 529 00:31:48,520 --> 00:31:50,480 Speaker 1: which means that the bank could just walk away and 530 00:31:50,480 --> 00:31:54,040 Speaker 1: the FED takes the collateral UM and nothing else is said, 531 00:31:54,200 --> 00:31:57,120 Speaker 1: you know, just kind of like a effectively a purchase 532 00:31:57,240 --> 00:32:01,200 Speaker 1: with an upside to uh to the seller UM. And 533 00:32:01,400 --> 00:32:03,360 Speaker 1: you know, if we're gonna do that, if essentially, you know, 534 00:32:03,880 --> 00:32:06,560 Speaker 1: the Federal reserves balance sheet is going to be backstopping 535 00:32:06,560 --> 00:32:10,440 Speaker 1: things loans UM, just like the main street lending program, 536 00:32:10,480 --> 00:32:14,640 Speaker 1: and all the quote unquote government guarantee does is improve 537 00:32:14,720 --> 00:32:18,640 Speaker 1: the Federal reserves net worth after the fact, then it seems, 538 00:32:18,640 --> 00:32:20,880 Speaker 1: you know, in retrospect, it feels like these facilities could 539 00:32:20,880 --> 00:32:24,080 Speaker 1: have been consolidated. You could have booked losses, like I 540 00:32:24,120 --> 00:32:29,520 Speaker 1: was saying to UM, a special crisis facility account UM, 541 00:32:29,760 --> 00:32:31,720 Speaker 1: and you know, segregated that from the rest of the 542 00:32:31,720 --> 00:32:35,400 Speaker 1: Federal reserves balance sheet UM, and these programs would have 543 00:32:36,200 --> 00:32:40,640 Speaker 1: run on a uh a much simpler, smoother basis with 544 00:32:40,800 --> 00:32:43,320 Speaker 1: one bureaucracy and you know, dealing with the FED, which 545 00:32:43,320 --> 00:32:46,080 Speaker 1: them we're used to dealing with on on these banking sides. 546 00:32:46,160 --> 00:32:49,360 Speaker 1: But uh, it's a it's a it's a tough problem. 547 00:32:49,480 --> 00:32:53,080 Speaker 1: Regulators can can loosen things that can lower capital requirements, 548 00:32:53,080 --> 00:32:56,560 Speaker 1: they can lower liquidity requirements, they can they can incurred banks, 549 00:32:56,600 --> 00:33:00,040 Speaker 1: they can threatened banks, um. But at the end of 550 00:33:00,040 --> 00:33:02,400 Speaker 1: the day, banks are in the business of lending, and 551 00:33:02,440 --> 00:33:05,040 Speaker 1: the problem right now is income. You know, they're doing 552 00:33:05,080 --> 00:33:08,080 Speaker 1: a small bit through the mainstream lending program of deferring 553 00:33:08,160 --> 00:33:10,280 Speaker 1: principle and interest paints for a year, and that's nice, 554 00:33:10,320 --> 00:33:13,120 Speaker 1: and that's better than what they would have been doing otherwise. 555 00:33:13,200 --> 00:33:17,400 Speaker 1: But you know, the FED is very under unused and 556 00:33:17,920 --> 00:33:21,200 Speaker 1: does not like being a fiscal authority with a good reason, 557 00:33:21,720 --> 00:33:26,880 Speaker 1: and we really need to be doing this through UH glance. 558 00:33:27,000 --> 00:33:28,640 Speaker 1: And you know, of course the small the p p 559 00:33:28,760 --> 00:33:32,160 Speaker 1: P program is an attempt to do that, uh through 560 00:33:32,480 --> 00:33:35,040 Speaker 1: a kind of a kind of sort of grant structure. 561 00:33:35,080 --> 00:33:37,600 Speaker 1: But I think there probably was an alternative way to 562 00:33:37,640 --> 00:33:40,520 Speaker 1: do it UM that was simpler, especially one that wasn't 563 00:33:40,560 --> 00:33:43,760 Speaker 1: rely on that specific appropriations. You just had you qualify 564 00:33:43,880 --> 00:33:46,760 Speaker 1: if you're this type of small business and you get 565 00:33:46,960 --> 00:33:51,040 Speaker 1: this amount of forgivable load of forgivable loads or grants 566 00:33:51,080 --> 00:33:53,320 Speaker 1: or whatever it is, UM And I think that would 567 00:33:53,320 --> 00:33:56,880 Speaker 1: have been a smoother process, that would have been easier 568 00:33:56,920 --> 00:33:59,840 Speaker 1: to administer you know more just like you know, a 569 00:34:00,040 --> 00:34:03,760 Speaker 1: basic income, but for businesses that UM the sort of 570 00:34:04,080 --> 00:34:08,040 Speaker 1: almost means tested, almost loane, almost clan um structure that 571 00:34:08,080 --> 00:34:12,200 Speaker 1: they've been going lest right, UM, I want to get 572 00:34:12,239 --> 00:34:14,840 Speaker 1: back to something you said earlier or you touched on it, 573 00:34:15,280 --> 00:34:20,400 Speaker 1: the idea of UM. I guess how expanded powers for 574 00:34:20,440 --> 00:34:25,080 Speaker 1: the Federal Reserve would interact with democracy? So the FED 575 00:34:25,440 --> 00:34:29,400 Speaker 1: is an unelected body, and whenever we start talking about 576 00:34:29,760 --> 00:34:34,040 Speaker 1: the FED actually doing stuff and maybe having expanded responsibilities 577 00:34:34,120 --> 00:34:38,239 Speaker 1: or expanded powers, this inevitably comes up. But how do 578 00:34:38,320 --> 00:34:43,480 Speaker 1: you view that debate? Should the FED be basically enacting UM, 579 00:34:43,640 --> 00:34:46,640 Speaker 1: well almost fiscal policy in some senses of the word, 580 00:34:46,719 --> 00:34:52,360 Speaker 1: with without having been um voted into office from a 581 00:34:52,440 --> 00:34:54,319 Speaker 1: from a legal perspective, which you know, a lot of 582 00:34:54,600 --> 00:34:58,879 Speaker 1: my organizations filled with lawyers, having some sort of administrative 583 00:34:58,920 --> 00:35:02,680 Speaker 1: agency which at a reserve board is conducts some have 584 00:35:02,880 --> 00:35:07,279 Speaker 1: some discretion over fiscal policy. UH isn't totally out there 585 00:35:07,320 --> 00:35:09,160 Speaker 1: from our point of view. You can have you can 586 00:35:09,200 --> 00:35:13,320 Speaker 1: have you know, administrative agencies conducting fiscal policy. The issue 587 00:35:13,400 --> 00:35:18,160 Speaker 1: is is designing a legal structure which defines the bounds 588 00:35:18,320 --> 00:35:23,640 Speaker 1: of UM that conductive fiscal policy and integrates it into 589 00:35:23,640 --> 00:35:27,239 Speaker 1: a larger macroeconomic framework that the government is operating it. 590 00:35:27,400 --> 00:35:29,840 Speaker 1: And you know, the problem you know with our government, 591 00:35:29,920 --> 00:35:33,720 Speaker 1: probably most governments, is there isn't really a macroeconomic framework 592 00:35:33,760 --> 00:35:37,120 Speaker 1: that's being operated in. There's you know, a congressional budgeting process, 593 00:35:37,480 --> 00:35:39,840 Speaker 1: and then there is the Central Bank and its powers, 594 00:35:39,960 --> 00:35:43,879 Speaker 1: and you know, there's you know, some fiscal automatic stabilizers, 595 00:35:43,960 --> 00:35:46,359 Speaker 1: some programs like so security, but basically, you know, the 596 00:35:46,360 --> 00:35:50,720 Speaker 1: FED is the macroeconomic policymaker of the of the federal 597 00:35:50,760 --> 00:35:54,160 Speaker 1: government and as a result, it gets leaned on more 598 00:35:54,200 --> 00:35:59,279 Speaker 1: and more as as we encounter macroeconomic instability, whether it's 599 00:35:59,320 --> 00:36:03,279 Speaker 1: pandemic call or financial crisis caused. And so I think 600 00:36:03,320 --> 00:36:06,480 Speaker 1: that does strain uh democratic norms in the sense that 601 00:36:06,520 --> 00:36:10,080 Speaker 1: we have this administrative amasis that's very difficult to understand 602 00:36:10,200 --> 00:36:13,000 Speaker 1: for the public to understand and understand what's going It's 603 00:36:13,040 --> 00:36:15,680 Speaker 1: not clear what their emergency powers are, like you know, 604 00:36:16,120 --> 00:36:18,520 Speaker 1: I I think if you've taken a hundred answers to 605 00:36:18,560 --> 00:36:21,480 Speaker 1: a layman of what the Fed's emergency powers are for 606 00:36:21,640 --> 00:36:25,839 Speaker 1: Dodd Frank before this latest crisis, you know, probably an 607 00:36:25,840 --> 00:36:29,120 Speaker 1: idea of the answers would have been wrong, not one UM, 608 00:36:29,239 --> 00:36:32,040 Speaker 1: given what we what we what? What has happened now? 609 00:36:32,719 --> 00:36:36,680 Speaker 1: And I think you know that is extremely corrosive. You know, 610 00:36:36,719 --> 00:36:40,280 Speaker 1: I think that you know, our macro economic policy framework 611 00:36:40,440 --> 00:36:43,480 Speaker 1: is an essential component of civics. It's what you know 612 00:36:43,600 --> 00:36:46,160 Speaker 1: defines what whether you're going to have a job, what 613 00:36:46,320 --> 00:36:48,759 Speaker 1: the quality of your job is, what the quality of 614 00:36:48,800 --> 00:36:51,080 Speaker 1: your retirement security is, what the quality of your health 615 00:36:51,080 --> 00:36:54,400 Speaker 1: care is um And it needs to be an understandable 616 00:36:54,480 --> 00:36:58,759 Speaker 1: part of being a resident of of of of a 617 00:36:58,800 --> 00:37:02,360 Speaker 1: country and centering so much more things in the FED. 618 00:37:02,680 --> 00:37:05,080 Speaker 1: Where the Fed by nature has to come up with 619 00:37:05,120 --> 00:37:08,680 Speaker 1: complicated innovations to do what it's being asked is very 620 00:37:08,719 --> 00:37:13,200 Speaker 1: corrosive and you know, erodes people's ability to understand, um, 621 00:37:13,400 --> 00:37:16,560 Speaker 1: what's going on and what our policy intervention is. And 622 00:37:16,640 --> 00:37:20,080 Speaker 1: Congress is essentially asked Federal Reserve to take on that 623 00:37:20,200 --> 00:37:24,040 Speaker 1: role when it devoted four n four billion dollars of 624 00:37:24,120 --> 00:37:27,680 Speaker 1: the Cares Act to capitalize these Federal Reserve facilities. And 625 00:37:28,360 --> 00:37:31,120 Speaker 1: I think that that is extremely corrosive and we need 626 00:37:31,400 --> 00:37:33,640 Speaker 1: we need a math. It's it's not the Fed's fault, 627 00:37:33,920 --> 00:37:37,880 Speaker 1: um for the most part, and we need uh, Congress 628 00:37:37,920 --> 00:37:40,960 Speaker 1: and the rest of the federal government to take on 629 00:37:41,640 --> 00:37:44,719 Speaker 1: much more of the burden of macro economic policy making 630 00:37:44,760 --> 00:37:47,840 Speaker 1: and become competent in acarreconotic policy making. And that expertise 631 00:37:47,920 --> 00:37:50,920 Speaker 1: is far too concentrated in the Federal Reserve, but not 632 00:37:51,040 --> 00:37:54,239 Speaker 1: what you would decide ex anti to, you know, to 633 00:37:54,719 --> 00:37:59,719 Speaker 1: in terms of your relative decision making. I think, you know, 634 00:37:59,760 --> 00:38:02,279 Speaker 1: we they think we could have a whole another episode 635 00:38:02,360 --> 00:38:05,440 Speaker 1: on just what Congress should be doing now, But like 636 00:38:05,480 --> 00:38:09,160 Speaker 1: I said, that would be a whole different episode. But 637 00:38:09,360 --> 00:38:12,759 Speaker 1: this was really great to chat with you and hopefully 638 00:38:13,120 --> 00:38:15,680 Speaker 1: you enjoyed it, And thanks for coming on AVEL. Thank 639 00:38:15,680 --> 00:38:19,160 Speaker 1: you very much for happening. Thanks Nathan, that was great 640 00:38:19,640 --> 00:38:39,640 Speaker 1: and now we know who you are well obviously, Tracy, 641 00:38:39,719 --> 00:38:43,360 Speaker 1: I really liked that episode and I thought his last 642 00:38:43,400 --> 00:38:47,719 Speaker 1: point actually at the end was sort of the key 643 00:38:47,760 --> 00:38:50,520 Speaker 1: to understanding the whole thing, which is, you know, people 644 00:38:50,560 --> 00:38:53,319 Speaker 1: get angry about the Federal Reserve, or they feel like 645 00:38:53,320 --> 00:38:57,400 Speaker 1: the Federal Reserve is overstepping against mandate or engaging in 646 00:38:57,920 --> 00:39:01,520 Speaker 1: activities that really shouldn't be engaged ding in. Like the 647 00:39:01,560 --> 00:39:04,719 Speaker 1: fact of the matter is, our entire system is basically 648 00:39:04,760 --> 00:39:08,000 Speaker 1: designed so that only the Federal Reserve is in a 649 00:39:08,080 --> 00:39:14,000 Speaker 1: position to conduct robust and timely macrocon on politics. Yeah, 650 00:39:14,040 --> 00:39:16,600 Speaker 1: and there have been a few people who have said 651 00:39:16,600 --> 00:39:19,680 Speaker 1: in the current crisis that the Central Bank has basically 652 00:39:20,000 --> 00:39:22,879 Speaker 1: acted in the role of I guess the grown up 653 00:39:23,040 --> 00:39:26,120 Speaker 1: in the room, Like they have been probably the most 654 00:39:26,200 --> 00:39:30,040 Speaker 1: responsive not only domestically for the United States, but we 655 00:39:30,120 --> 00:39:34,279 Speaker 1: have also seen them taking on this growing international role 656 00:39:34,320 --> 00:39:37,440 Speaker 1: when it comes to providing dollar liquidity through the swap lines. 657 00:39:38,120 --> 00:39:42,759 Speaker 1: There seems to be some recognition recognition that the Fed is, um, well, 658 00:39:42,840 --> 00:39:47,640 Speaker 1: it's a needed entity, isn't it. Could you imagine like 659 00:39:47,719 --> 00:39:53,040 Speaker 1: Congress of voting on things like swap lines dollar swaps. Yeah, 660 00:39:53,120 --> 00:39:55,120 Speaker 1: like I just imagined of that or something that they 661 00:39:55,920 --> 00:39:59,200 Speaker 1: are system were premised on Congress of voting each time 662 00:39:59,239 --> 00:40:01,719 Speaker 1: to open up doll or swap line before or to 663 00:40:01,800 --> 00:40:05,279 Speaker 1: raise or lower interest rates. I can only imagine, um, 664 00:40:05,400 --> 00:40:08,840 Speaker 1: hellish that would be. But I also think like it 665 00:40:08,840 --> 00:40:11,480 Speaker 1: it sort of speaks to and you know, he talked 666 00:40:11,480 --> 00:40:15,000 Speaker 1: about like essentially it's all of these things are on 667 00:40:15,120 --> 00:40:18,560 Speaker 1: some level accounting gimmicks, whether it's the fact that the 668 00:40:18,640 --> 00:40:22,839 Speaker 1: Treasury has to invest in a special purpose vehicle which 669 00:40:22,880 --> 00:40:25,040 Speaker 1: is then levered up by the FED, which then remits 670 00:40:25,080 --> 00:40:28,920 Speaker 1: its profits back to the treasury. They're all accounting gimmicks, 671 00:40:28,960 --> 00:40:33,640 Speaker 1: but they're accounting gimmicks because on some level, that's the 672 00:40:33,680 --> 00:40:38,080 Speaker 1: only way that you shoehorn these actions into our existing 673 00:40:38,520 --> 00:40:41,800 Speaker 1: legal and institutional structure, right, And I think the point 674 00:40:41,920 --> 00:40:43,800 Speaker 1: is that you don't want the FED to be spending 675 00:40:43,800 --> 00:40:47,440 Speaker 1: its time thinking of accounting gimmicks or trying to structure 676 00:40:47,719 --> 00:40:50,279 Speaker 1: these things in an emergency. You want them to be 677 00:40:50,320 --> 00:40:53,440 Speaker 1: thinking about the actual policy um and what makes the 678 00:40:53,480 --> 00:40:56,359 Speaker 1: most sense for the current situation, instead of pouring over, 679 00:40:56,560 --> 00:40:59,279 Speaker 1: you know, reams and realms of legal documents to figure 680 00:40:59,320 --> 00:41:01,920 Speaker 1: out how they can kind of create a thing in 681 00:41:02,040 --> 00:41:05,839 Speaker 1: order to enable them to do something similar to what 682 00:41:05,880 --> 00:41:08,600 Speaker 1: they would like to do. It's sort of a waste 683 00:41:08,600 --> 00:41:12,279 Speaker 1: of resources. As Nathan pointed out, I do think it's 684 00:41:12,360 --> 00:41:15,759 Speaker 1: interesting also. It's like after the last crisis, like the 685 00:41:15,800 --> 00:41:17,719 Speaker 1: sort of smoke cleared a little bit, then we got 686 00:41:17,760 --> 00:41:20,520 Speaker 1: DoD Frank because there was the sort of realization that's like, 687 00:41:20,560 --> 00:41:24,000 Speaker 1: all right, well, if the infrastructure of government is going 688 00:41:24,120 --> 00:41:26,560 Speaker 1: to sort of or the infrastructure of the FED is 689 00:41:26,560 --> 00:41:29,440 Speaker 1: going to backstop all these central banks or backstop all 690 00:41:29,480 --> 00:41:32,080 Speaker 1: these banks, then we need to apply some new rules 691 00:41:32,080 --> 00:41:35,240 Speaker 1: so this doesn't happen again. And Nathan sort of alluded 692 00:41:35,280 --> 00:41:37,480 Speaker 1: to this, but it's like, Okay, well, in this crisis, 693 00:41:37,840 --> 00:41:42,000 Speaker 1: we've decided that the entire public, the entire corporate sector 694 00:41:42,600 --> 00:41:47,200 Speaker 1: is a de facto public infrastructure that's worried, that's deserving 695 00:41:47,280 --> 00:41:50,040 Speaker 1: of a FED back stuff. And maybe that's true, But 696 00:41:50,080 --> 00:41:53,200 Speaker 1: are we really going to let the corporate sector then 697 00:41:53,320 --> 00:41:56,839 Speaker 1: return to normal after this or will there be some 698 00:41:57,080 --> 00:42:01,000 Speaker 1: version of DoD frank for all co operations or should 699 00:42:01,040 --> 00:42:03,800 Speaker 1: there be once that we've sort of crossed this rubicon 700 00:42:03,880 --> 00:42:07,160 Speaker 1: where we decided that they're all kind of banks to 701 00:42:07,400 --> 00:42:11,040 Speaker 1: with access to FS, right, Like imagine if corporations had 702 00:42:11,080 --> 00:42:16,319 Speaker 1: to start holding onto liquid assets for instance, or I 703 00:42:16,360 --> 00:42:19,360 Speaker 1: guess the most political thing out there at the moment 704 00:42:19,440 --> 00:42:22,360 Speaker 1: is the notion of curving dividends or buy backs or 705 00:42:22,400 --> 00:42:25,760 Speaker 1: something like that. Yeah, And in fact that it's funny 706 00:42:25,760 --> 00:42:28,760 Speaker 1: because Nathan actually had one of the post he's written 707 00:42:28,800 --> 00:42:32,840 Speaker 1: in his newsletter is about should we have arguing for 708 00:42:33,040 --> 00:42:38,120 Speaker 1: a liquidity coverage ratio for non bank public entities, which 709 00:42:38,200 --> 00:42:40,520 Speaker 1: basically this idea is like, Okay, if you're an airline 710 00:42:40,680 --> 00:42:44,040 Speaker 1: or if your restaurant chain or whatever it is, how 711 00:42:44,120 --> 00:42:46,960 Speaker 1: much cash on hand should you have to be able 712 00:42:46,960 --> 00:42:50,080 Speaker 1: to cover expenses? I mean, we do it for banks 713 00:42:50,080 --> 00:42:53,000 Speaker 1: so plausibly in this case where we've seen now that 714 00:42:53,400 --> 00:42:56,680 Speaker 1: all business for some normally operating companies can come to 715 00:42:56,800 --> 00:43:00,399 Speaker 1: de facto hall overnight. Is it that crazy to start 716 00:43:00,480 --> 00:43:04,960 Speaker 1: thinking about similar legs for non bank entities. All these 717 00:43:04,960 --> 00:43:07,839 Speaker 1: things are now sort of open the question. Yeah, it's 718 00:43:07,880 --> 00:43:11,040 Speaker 1: sort of overwhelming to think just how much this crisis 719 00:43:11,320 --> 00:43:14,359 Speaker 1: has the potential to change. I mean, after the two 720 00:43:14,360 --> 00:43:17,319 Speaker 1: thousand eight financial crisis, we did see all these new 721 00:43:17,320 --> 00:43:21,400 Speaker 1: banking rules put in place, new basil rules, Dodd Frank, 722 00:43:21,680 --> 00:43:24,360 Speaker 1: as you pointed out already. But this time around, we 723 00:43:24,400 --> 00:43:27,400 Speaker 1: could get WHOA, we could get new financial rules, We 724 00:43:27,400 --> 00:43:30,000 Speaker 1: could get new rules for the way the FED operates, 725 00:43:30,000 --> 00:43:32,440 Speaker 1: new rules for the way the government potentially operates, and 726 00:43:32,440 --> 00:43:35,200 Speaker 1: of course new rules for the way companies operate as well. 727 00:43:35,800 --> 00:43:41,000 Speaker 1: Everything and people to society. Yeah, yeah, no, it feels 728 00:43:41,040 --> 00:43:43,560 Speaker 1: like that's what really separates this is just that everything 729 00:43:43,680 --> 00:43:48,359 Speaker 1: is on some level, it's on the table. Okay, well, uh, 730 00:43:48,920 --> 00:43:52,000 Speaker 1: instead of talking about everything, shall we shall we call 731 00:43:52,040 --> 00:43:55,440 Speaker 1: it a night or day for you. Sounds good? This 732 00:43:55,480 --> 00:43:57,080 Speaker 1: is this. This is the point where, by the way, 733 00:43:57,080 --> 00:44:02,200 Speaker 1: we're recorded this on April twenty, so if you're depending 734 00:44:02,239 --> 00:44:04,360 Speaker 1: on when you're listening to this and depending on what 735 00:44:04,440 --> 00:44:07,160 Speaker 1: has happened since then, just for a point of reference, 736 00:44:07,160 --> 00:44:10,480 Speaker 1: it's April. Yeah. If the Federal Reserve started issuing its 737 00:44:10,520 --> 00:44:15,200 Speaker 1: own securities already, h it's April. Okay. This has been 738 00:44:15,239 --> 00:44:18,680 Speaker 1: another episode of the All Thoughts podcast. I'm Tracy Alloway. 739 00:44:18,760 --> 00:44:22,440 Speaker 1: You can follow me on Twitter at Tracy Alloway and 740 00:44:22,480 --> 00:44:24,680 Speaker 1: I'm Joe Why Isn't All? You could follow me on 741 00:44:24,719 --> 00:44:27,480 Speaker 1: Twitter at the Stalwarts, and you should follow our guests 742 00:44:27,520 --> 00:44:31,040 Speaker 1: on Twitter. Nathan Tankus He's at Nathan Tanks. Be sure 743 00:44:31,080 --> 00:44:35,239 Speaker 1: to subscribe to his newsletter Nathan tank Is dot substat 744 00:44:35,640 --> 00:44:38,400 Speaker 1: dot com. Also, you should be sure to follow our 745 00:44:38,440 --> 00:44:42,160 Speaker 1: producer on Twitter, Laura Carlson. She's at Laura M. Carlson. 746 00:44:42,560 --> 00:44:45,680 Speaker 1: Follow the Bloomberg head of Podcasts on Twitter, Francesca Leavie. 747 00:44:45,760 --> 00:44:48,759 Speaker 1: She's at Francesca Today, and check out all of our 748 00:44:48,800 --> 00:45:15,160 Speaker 1: podcasts at Bloomberg under the handle at podcasts. Thanks for listening. 749 00:45:04,920 --> 00:45:05,080 Speaker 1: Se