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Speaker 1: This is Bloomberg Wall Street Week. We turn our attention

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Speaker 1: to the markets this week. USCPI, Nembor's reinforcing concerns about inflation,

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Speaker 1: the financial stories that shape our worth, a really different

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Speaker 1: reaction to market. Some more indications of just how hot

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Speaker 1: the US economy really is.

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Speaker 2: Through the eyes of the most influential voices.

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Speaker 1: Katherine Keating, CEO of B and Y, Moan, Ryan Winhand

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Speaker 1: a Bank of America, Sam Zell Sharman and founder of

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Speaker 1: Equity Group Investments.

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Speaker 2: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.

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Speaker 1: Don't blame me, whether it's risking a national default or

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Speaker 1: driving banks to failure, It's got to be someone else's fault.

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Speaker 1: This is Bloomberg Wall Street Week. I'm David Weston. This

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Speaker 1: week Econa is Gled Hubbard on the damage being done

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Speaker 1: by the fight over the federal deficit that were a

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Speaker 1: layer of Edelman Global Advisory. On what China stands to

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Speaker 1: gain from US turmoil.

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Speaker 3: How do they build relations either with the United States

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Speaker 3: to keep those markets open or can they find new markets?

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Speaker 1: And Catherine Judge of Columbia and whether we need all

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Speaker 1: of those regional banks after.

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Speaker 4: All we're seeing very real questions about the regional bank

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Speaker 4: business model.

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Speaker 1: This week, Global Wall Street was looking for someone to

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Speaker 1: step up and take some responsibility, like for the failure

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Speaker 1: of three major regional banks, and the former head of

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Speaker 1: Silicon Valley Bank was there to help as he found

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Speaker 1: a host of culprits other than himself, like the FED

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Speaker 1: and social media.

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Speaker 5: I believe that svb's failure was brought about by a

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Speaker 5: series of unprecedented events, but.

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Speaker 1: The chair of the Senate Banking Committee had a decidedly

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Speaker 1: different view. We know your banks were fatally mismanaged. The

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Speaker 1: next obvious question is why.

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Speaker 6: The simple answer the same answer we find to most

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Speaker 6: questions about big bank failures.

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Speaker 7: Because the executives were getting rich.

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Speaker 1: And when it comes the debt ceiling, Republicans and Democrats

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Speaker 1: picked up the theme of pointing fingers at everyone but

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Speaker 1: themselves for the risk of the United States flirting with

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Speaker 1: renigging on its debt for the first time in two

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Speaker 1: hundred and thirty four years. As President Biden has put

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Speaker 1: the onus on Republicans, and Speaker McCarthy continues to point

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Speaker 1: his finger at President Biden.

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Speaker 7: Do we have obstacles, Yes, we have a big obstacle

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Speaker 7: in the White House.

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Speaker 1: But even as the two sides blamed one another, they

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Speaker 1: did find some room for optimism.

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Speaker 5: Confident that will get the agreement on the budget that

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Speaker 5: America will not gault.

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Speaker 1: But despite all the disagreement and the urgency, President Biden

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Speaker 1: thought things were going well enough that he could head

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Speaker 1: over the G seven meetings in Horotiaa, Japan at the

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Speaker 1: end of the week, though he did promise to get

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Speaker 1: back by Sunday.

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Speaker 5: The nature of the presidency is addressing many of the

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Speaker 5: critical matters all at once, So I'm confident we're going

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Speaker 5: to continue to make progress toward avoiding default. However, I'm

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Speaker 5: cutting my trip short.

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Speaker 1: Then. On Friday, Morgan Stanley ce James Gorman surprise Wall

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Speaker 1: Street by announcing to shareholders that he would be stepping

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Speaker 1: down at CEO within the next twelve months, raising questions

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Speaker 1: about how he's yet to be named successor may change

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Speaker 1: the direction of a firm Gorman led so successfully.

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Speaker 8: He's built the firm through all kinds of acquisitions. He's

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Speaker 8: been a brilliant acquirer. Much of it has been through

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Speaker 8: through acquisition. And so maybe now you translate an act

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Speaker 8: from an acquisitive CEO to a managing CEO. Puts all

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Speaker 8: these disparate pieces together.

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Speaker 1: Markets on the hold did pretty well this week, and

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Speaker 1: the S and P five hundred added another one point

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Speaker 1: sixty five percent, taking it to forty one ninety one,

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Speaker 1: well above almost all of our Wall Street week elves

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Speaker 1: who actually moved the other way in their median call

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Speaker 1: for the year end, taking it down to an even

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Speaker 1: four thousand. The NANZNAK did even better than the SMP,

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Speaker 1: up over three percent for the week, while the yield

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Speaker 1: on the ten year Treasury added twenty one basis points,

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Speaker 1: ending the week at three point six eighty six. To

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Speaker 1: take us through the week, we welcome now at Leash

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Speaker 1: living Bny Mellon, head of Investment Strategy and Equity Advisory Solutions,

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Speaker 1: and Gerard Cassidy, RBC Capital Markets, head of US bank

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Speaker 1: Equity Strategy. Welcome to both of you. Great jy, have

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Speaker 1: you at leash. Let's start with you. Do we have

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Speaker 1: a rally going on in the SMP. They're up now

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Speaker 1: flirting with forty two hundred again.

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Speaker 9: Look, I think I think the market is expecting that

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Speaker 9: forty two hundred ceiling to hold here if the s

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Speaker 9: andp manages to get through it. There's a little bit

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Speaker 9: of you know, blue sky out there simply because that's

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Speaker 9: where all the hedges are so expectation that we're essentially

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Speaker 9: fair valued here. Most of Wall Street says this is,

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Speaker 9: you know, we're fairly valued here. You can't get much higher.

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Speaker 9: And as you know, when all the bears say the

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Speaker 9: same thing and all the strategists say the same thing,

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Speaker 9: the market tends to go in the other direction. So

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Speaker 9: in part, the market rallied so hard this week on

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Speaker 9: the expectation that the debt ceiling was going to be

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Speaker 9: taken care of by this weekend.

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Speaker 1: By that's want to talk about it, not just this

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Speaker 1: week but this year so far. Isn't the SMP up

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Speaker 1: something like nine percent something along those lines? So what

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Speaker 1: he is doing that is because the earnings came in

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Speaker 1: better than the expectations which had been taken down. Or

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Speaker 1: is it because of the Fed.

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Speaker 9: So there's a couple of things going on. The first

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Speaker 9: thing is there's actually a lot of liquidity in the

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Speaker 9: system because johnet Yellen at Treasury has been adding liquidity

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Speaker 9: to the system to pay the US bills, which is

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Speaker 9: helping stock prices and specifically NAZAG prices as well.

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Speaker 1: Gerard, let's turn to you on the question of the banks.

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Speaker 1: Because that liquidity we're getting from the Fed to some extent,

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Speaker 1: if I can call it, there reversal quantitative tightening because

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Speaker 1: of what happened in the wake of Silicon Valley Bank

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Speaker 1: and the other banks. Should we expect that to keep

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Speaker 1: going out of the bank's going to keep drawing down

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Speaker 1: in that liquidity.

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Speaker 10: I really it's going to be interesting. It's a great

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Speaker 10: question because the deposit flight is over. We know from

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Speaker 10: what we saw in the middle of March when the

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Speaker 10: Silicon Valley signature and the First Republic banks failed. Now

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Speaker 10: First Republic technically failed obviously not in March, but at

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Speaker 10: the end of April early May. And I would say

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Speaker 10: that the deposits that we saw today they came out

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Speaker 10: set afternoon with the H eight data, and what you

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Speaker 10: saw with the H eight data was depositor down slightly

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Speaker 10: for the larger banks. Smaller banks generally flatted down, and

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Speaker 10: so there's really no need to have to pull down liquidity,

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Speaker 10: even though we still have, of course discount window borrowings

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Speaker 10: and the backstop borrowings with the bond portfolios from the FED.

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Speaker 10: So there's plenty of liquidity, is Lesha pointed out, and

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Speaker 10: I think that the banks are certainly going to benefit

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Speaker 10: from that as we go forward.

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Speaker 1: The failure of three major regional banks may be in

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Speaker 1: the rear view mirror, but the questions and the effects linger.

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Speaker 1: As Chryston Slock of Apollo points out this week with

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Speaker 1: one of his charts, this one on what it has

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Speaker 1: meant for the borrowing costs of all regional banks.

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Speaker 11: What's noteworthy is what has happened to bank funding costs

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Speaker 11: since Cdiconvelly Bank collapsed. Most importantly, when you look at

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Speaker 11: the bank IG index for oes credit spreads, which you

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Speaker 11: can split into regional banks and into diversified banks meaning

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Speaker 11: large money center banks, it shows you that funding costs

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Speaker 11: further out meaning five to ten years, have increased about

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Speaker 11: two hundred basis points for regional banks, whereas they have

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Speaker 11: only increased about fifty basis points for diversified banks. It

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Speaker 11: does signal that the market is still asking some questions

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Speaker 11: about what will happen in the longer run, but the

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Speaker 11: fact that funding costs further out are still permanently higher

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Speaker 11: is raising some questions about how long time will it

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Speaker 11: take before this banking crisis that we're going through is

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Speaker 11: going to be.

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Speaker 1: Over, and to take us through what has happened to

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Speaker 1: regional banks in the wake of those three failures. We

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Speaker 1: welcome now Professor Catherine Judge. She's professor at the Columbia

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Speaker 1: Law School, where she's also a vice dean. So professor,

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Speaker 1: thank you so much for being with us. We understand

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Speaker 1: we have these three major regional bank failures. We're looking

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Speaker 1: sort of in the review mirror to learn what went

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Speaker 1: wrong and what can we do to avoid it next time.

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Speaker 1: So what's your take basically on what went wrong?

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Speaker 4: A number of things went wrong. First, we made meaningful

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Speaker 4: changes in the regulatory scheme governing large regional banks with

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Speaker 4: the benefit of hindsight, that was clearly in error. We've

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Speaker 4: had three large regional banks fail, all in ways and

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Speaker 4: imposed significant hits to the deposit Insurance Fund. So clearly

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Speaker 4: the deregulation was a problem. The banks themselves were a problem.

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Speaker 4: It looks like they were taking a lot of risks

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Speaker 4: without understanding those risks, without appropriately hedging those risks and

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Speaker 4: managing those risks, and there were also shortcomings in supervision.

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Speaker 4: It does look like some of this should have been identifiable.

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Speaker 4: Some that was identified, but supervisors didn't act quickly enough

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Speaker 4: and aggressive enough in escalating the concerns in ways that

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Speaker 4: actually would have resolved the situations before we had such

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Speaker 4: messy failures.

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Speaker 1: We've heard a lot about interest rate risk, which is

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Speaker 1: a terrible thing to have. Obviously we've just seen. At

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Speaker 1: the same time, given what the FED was doing, it

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Speaker 1: shouldn't have come to as a surprise to the banks

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Speaker 1: or to the supervisors that those were interest rate risks.

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Speaker 1: I mean, we were raising interest rates like at an

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Speaker 1: unprecedented pace.

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Speaker 4: We were, and the FED really did signal that. And

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Speaker 4: again there was a long period of low for long

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Speaker 4: and a period where ways were going up more slowly.

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Speaker 4: But first of all, interest rate risk is a classic

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Speaker 4: bank risk. I mean, in my very basic banking classes,

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Speaker 4: I go back to the SNL debacle and I show

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Speaker 4: how a changing interestrate environment affects the value of.

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Speaker 1: All assets that banks hold. So this is what banks.

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Speaker 4: Are in the business of doing. And as you just

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Speaker 4: pointed out, the FED really did signal this. They said, look,

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Speaker 4: we're really worried about inflation. They're concerns about inflation, and

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Speaker 4: we're going to tighten as long as we need to

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Speaker 4: to really get that inflation under control. So both the

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Speaker 4: amount of interestrate risk the lack of hedging around that

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Speaker 4: risk looks like a really inappropriate way of.

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Speaker 1: Managing those risks. Is there also a potential flaw in

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Speaker 1: the business model? That is to say, you're taking deposits

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Speaker 1: that by definition people can have whenever they want, so

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Speaker 1: you're getting funding that is very very short term, and

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Speaker 1: you are necessarily putting in longer term investments such as

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Speaker 1: thirty year mortgages. But also, as we learn treasuries, it

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Speaker 1: does that inherently put a lot of banks at risk.

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Speaker 1: Yes and no.

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Speaker 4: So I mean the business of banking is to engage

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Speaker 4: in maturity transformation.

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Speaker 1: So there is a.

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Speaker 4: Fragility that exists. On the other hand, it's been pretty

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Speaker 4: well managed for a very long time, but then we

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Speaker 4: have these periods of significant disruption. One of the things

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Speaker 4: that's really striking right now is you look at the

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Speaker 4: small community banks and they've actually been remarkably stable. Even

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Speaker 4: before the March turmoil, we saw our depositors were leaving

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Speaker 4: regional banks, they were leaving the largest banks because they

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Speaker 4: just wanted to get a higher rate of interest than

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Speaker 4: they were getting on their deposits. But the small community

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Speaker 4: banks were really holding on to those deposits and they

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Speaker 4: managed to continue to provide meaningful credit. So it's not

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Speaker 4: the entire bank business model. I do think we're seeing

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Speaker 4: very real questions about the regional bank business model.

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Speaker 1: Professor, thank you so much for being on Wall streetetes

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Speaker 1: Professor Catherine Judge of the Columbia Law School coming up

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Speaker 1: with the fight over the debt ceiling is really costing

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Speaker 1: us and what good may still come out of it.

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Speaker 1: We'll talk with former Chair of the Council of Economic Advisors,

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Speaker 1: Glenn Hubbard of Columbia. That's next on Wall Street League

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Speaker 1: on Bloomberg.

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Speaker 2: This is Bloomberg Wall Street Week with David Weston from

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Speaker 2: Bloomberg Radio.

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Speaker 1: China and the United States, what was an afterthought when

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Speaker 1: President Nixon went to China in nineteen seventy two has

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Speaker 1: now been catapulted to be the most important economic relationship

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Speaker 1: in the world, as the Chinese economy has grown more

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Speaker 1: than sixfold, trailing behind only the United States, and the

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Speaker 1: US helped it get there, leading the move to admit

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Speaker 1: China into the WTO.

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Speaker 6: Bringing China into the WTO is a win win this station.

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Speaker 1: And there's no doubt that US trade with China has

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Speaker 1: grown dramatically since the end of two thousand and one

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Speaker 1: when China officially joined the WTO. But now the Chinese

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Speaker 1: economic juggernaut is showing signs of slowing as the COVID

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Speaker 1: lockdown creates uncertainty about what comes next and demographics way

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Speaker 1: on growth, not to mention continued tensions with the United States,

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Speaker 1: which the wtos O kunja Awala warrants could damage global growth.

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Speaker 12: The costs of the world frad went in into two

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Speaker 12: trading blocks very high. We've actually done some simulations of

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Speaker 12: this at the WQ and we've seen that if we

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Speaker 12: break into two tradium blocks, the world global GDP is

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Speaker 12: going to decrease like five percent in the longer term.

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Speaker 1: And JP Morgan's Jamie Diamond insists we can avoid.

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Speaker 13: American shinea of a lot of common interest climate, nuclear pliferation,

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Speaker 13: anti terrorism, global stability, you know, and we have differences.

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Speaker 13: You know, we're capitalists, they're not, you know, and it's okay,

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Speaker 13: but we could sort that out. But we need to

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Speaker 13: keep the Western alliances together, not just around war and Ukraine,

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Speaker 13: but the ram strategic economic relationships, including trade.

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Speaker 1: And to get an accurate and up to date picture

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Speaker 1: of where China is right now. We welcome now a

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Speaker 1: true expert in the area is Deborah Lair. She is

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Speaker 1: both the vice chair of the Pulse Institute as well

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Speaker 1: as the CEO of Edelman Global Advisory. Deborah, thank you

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Speaker 1: for coming back to Wall Street. We really appreciate it.

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Speaker 1: We now have the G seven meetings that are happening

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Speaker 1: this week. China is not physically there, but certainly they

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Speaker 1: are an important part of the audience. What is the

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Speaker 1: message of the United States and other members of the

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Speaker 1: G seven want China to take away from these meetings

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Speaker 1: this week?

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Speaker 4: David, You're so right.

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Speaker 3: They may not be present physically, but certainly China is

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Speaker 3: one of the main topics. And it appears that the

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Speaker 3: administration is going to work with its allies to try

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Speaker 3: and get a united and very strong statement about being

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Speaker 3: tough on China, both from a national security perspective, but

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Speaker 3: also to coordinate economically.

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Speaker 1: This president, she takes a look at his economy right now,

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Speaker 1: does he have any doubts do you think at all

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Speaker 1: about its growth pattern? Because it was a true economic

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Speaker 1: miracle in the history of the world. I don't think

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Speaker 1: we've seen anything like it. At the same time, we're

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Speaker 1: getting some numbers, including this week we've gotten some of

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Speaker 1: our China indicating that growth is really slowing down, and

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Speaker 1: some people are even saying maybe China will not after

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Speaker 1: all pass the United States in the size of its economy.

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Speaker 3: It's been clear for a long time that Chi Jinping

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Speaker 3: has been worried about the economy, and one of the

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Speaker 3: reasons behind the whole corruption campaign that he started when

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Speaker 3: he first came into office is because they couldn't govern

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Speaker 3: and they were concerned about the state of the economy.

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Speaker 3: And even until today, he's still sending out policy enforcement

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Speaker 3: teams to ensure that mayors and governors are actually implementing

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Speaker 3: the policies that he has dictated from Beijing. They have

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Speaker 3: a lot of reason to be concerned about the economy.

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Speaker 3: As we've seen in reports just recently, youth unemployment is

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Speaker 3: at an all time high at about twenty percent. Even

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Speaker 3: though they've dealt with a lot of the systemic risk

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Speaker 3: coming out of the real estate market for the small

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Speaker 3: and medium size real estate companies, a number of them

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Speaker 3: are going to go bank. This has an impact then

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Speaker 3: on the banking system, and while they're not concerned about

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Speaker 3: the large banks, they do believe that a number of

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Speaker 3: the mid sized banks who are operating in the provinces

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Speaker 3: are in facing very difficult challenges.

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Speaker 1: If, as you say, Prisionji is concerned about his economy,

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Speaker 1: does the West I mean to include both the United

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Speaker 1: States and Europe and Japan. Does it represent a potential

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Speaker 1: help to him or is it part of the problem

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Speaker 1: for him.

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Speaker 3: I think this is going to depend on Si jumping himself,

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Speaker 3: and if he decides that he wants to be engaged

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Speaker 3: with the West, then he needs to take the kind

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Speaker 3: of steps to provide market access for companies, to provide

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Speaker 3: more consistency. Regulatory risk is one of the biggest challenges

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Speaker 3: that we see today because we're not quite sure what

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Speaker 3: policies are going to come from the new she administration.

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Speaker 3: By the same token, he's very concerned about the export

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Speaker 3: markets right now. Exports are really what's driving the Chinese economy,

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Speaker 3: and we see weakness in those markets. Certainly is there

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Speaker 3: is concerns about a recession ahead and weakness in some

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Speaker 3: of their export markets, combined with the politics of trade

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Speaker 3: with the United States and trade with the European Union.

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Speaker 3: I think that's a real concern that they have to have,

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Speaker 3: and so part of it is how do they create

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Speaker 3: the confidence at home to unlock consumer demand? And they

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Speaker 3: haven't been able to do that yet. They haven't been

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Speaker 3: able to get consumers out spending their money in any

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Speaker 3: significant way. And at the same token, how do they

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Speaker 3: build relations either with the United States to keep those

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Speaker 3: markets open or can they find new markets? And part

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Speaker 3: of what we're seeing with this more active foreign policy

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Speaker 3: by Si Jimping and his new team is how they

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Speaker 3: build relations to compensate for some of the challenges that

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Speaker 3: they're seeing in their trade with the United States.

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Speaker 1: Do you read very much into the increased pattern apparently

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Speaker 1: of meetings with US representative with Jake Sullivan meeting in

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Speaker 1: Vienna this counterpart we had Nick Burns, US ambassador going

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Speaker 1: in to meet with the foreign minister. Do you read

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Speaker 1: anything into that because there's talking, Maybe Tony Blinkinn, the

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Speaker 1: Secretary of State, would go over, maybe Jennet Yellen.

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Speaker 10: Well.

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Speaker 3: I hope that this is a recognition that there's concerned

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Speaker 3: about the free fall of the bilateral relationship, and both

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Speaker 3: sides seem concerned about that. We run the risk of

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Speaker 3: being slightly isolated, as we talked about in the G

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Speaker 3: seven context. Certainly the Biden administration would like to ensure

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Speaker 3: that our allies are moving and lockstep with us on China,

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Speaker 3: but we haven't been seeing that necessarily.

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Speaker 1: One of the stories has gotten a lot of attension

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Speaker 1: in the United States press release is set of the

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Speaker 1: curtailment of operations and so of the consulting organizations over

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Speaker 1: in China. The cutting off of data. Is there a

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Speaker 1: risk that we're going to know even less than we

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Speaker 1: did before about what's really going on in the country.

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Speaker 3: I think there's a large concern about data in many

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Speaker 3: different ways. One is China definitely has been limiting access

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Speaker 3: by foreigners to data, whether it's economic data, whether it's

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Speaker 3: data that they're concerned about on national security purposes. We

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Speaker 3: saw the whole issue when ddlisted overseas and they were

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Speaker 3: forced to dlist then from the United States. That was

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Speaker 3: an issue over national security concerns about the kind of

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Speaker 3: data that DD would be sharing. The other thing, obviously,

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Speaker 3: one part of that is the access that American or

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Speaker 3: foreign consulting firms get to data. But another part of

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Speaker 3: it is also what the Chinese are planning to do

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Speaker 3: with data.

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Speaker 1: Never Finally, what about capital markets? Because there is a

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Speaker 1: reposers I understand executive order at the White House to

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Speaker 1: limit US investment in Chine, particularly in technology areas. How

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Speaker 1: big a threat would that be perceived to be by prison.

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Speaker 3: G Well, initially, I think it's very clear that the

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Speaker 3: outbound some kind of outbound investment restrictions are going to

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Speaker 3: be put in place by the administration. And the big

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Speaker 3: question is how broad they're going to be and whether

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Speaker 3: they're voluntary initially or if you have to have pre approval.

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Speaker 9: And so.

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Speaker 3: It's going to be a big test, and it's going

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Speaker 3: to be much bigger than just capital markets. It's going

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Speaker 3: to actually impact anyone who's looking to invest, even companies

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Speaker 3: who might be looking to make acquisitions or invest in

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Speaker 3: different sectors in China. Initially the administration is say it's

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Speaker 3: going to be limited to just a few categories, but

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Speaker 3: subsequent administrations can broaden that. It's going to set an

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Speaker 3: interesting precedent, and it, of course is of concern to

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Speaker 3: the Chinese in part they've been able to benefit, certainly

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Speaker 3: from capital flowing into China these days. There's actually a

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Speaker 3: lot of capital in China, and one of the interesting

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Speaker 3: statistics that we've seen recently is China has almost one

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Speaker 3: thousand billionaires. There's a lot of money in China, and

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Speaker 3: more and more money from other countries, particularly from the

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Speaker 3: Middle East, is now flowing into China. So it's yet

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Speaker 3: to be seen what the impact is going to be

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Speaker 3: of these outbound investment. But hopefully when the administration does

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Speaker 3: put it in it's not putting it in place in

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Speaker 3: a way that disadvantages American companies.

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Speaker 1: Deborah, thank you so much. It's always such a treat

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Speaker 1: to have you with Wall Street Week. That's debau Lair

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Speaker 1: of the Paulson Institute as well as Edelman Global Advisory

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Speaker 1: coming up with the fight over the debt ceiling is

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Speaker 1: really costing us and what good may still come out

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Speaker 1: of it. We'll talk with former chair of the Council

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Speaker 1: of Economic Advisors, Glenn Hubbard of Columbia. That's next on

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Speaker 1: Wall Street Week on Bloomberg.

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Speaker 2: This is Bloomberg Wall Street Week with David Weston from

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Speaker 2: Bloomberg Radio.

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Speaker 6: I've had a lot of affair in the last year,

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Speaker 6: right in this book with Thomas Jefferson, who reminded us

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Speaker 6: I think that he thought the Constitution should prevent us

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Speaker 6: from passing debt on to our kids, because, as he said,

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Speaker 6: you'd swindle futerity and the earth would belong to the

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Speaker 6: dead and not the living. I think at some point,

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Speaker 6: what's going to happen as our kids are going to

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Speaker 6: understand what fourteen trillion dollars of unfunded liabilities mean.

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Speaker 1: That, of course, was the late Great Pete Peterson talking

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Speaker 1: about the growing crisis he saw in the federal debt

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Speaker 1: back in October of nineteen ninety three, and at that

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Speaker 1: point the debt total to four point five trillion dollars,

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Speaker 1: which was then forty eight percent of the nation's GDP.

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Speaker 1: Today it stands at thirty one point five trillion dollars

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Speaker 1: and is a whopping ninety seven percent of GDP. To

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Speaker 1: give us a broader perspective on the current crisis over

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Speaker 1: the debt ceiling and what lies behind it, welcome Glenn

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Speaker 1: Hubbard of the Columbia Business School, where he was dean

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Speaker 1: after serving as chair of President George W. Bush's Council

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Speaker 1: of Economic Advisors. Doctor Hubbard is the author, most recently

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Speaker 1: of The Wall and the Bridge, Fear and Opportunity in Disruptions,

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Speaker 1: Wake so Glenn, thank you so much for bringing back

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Speaker 1: with great to have you this. So we have a

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Speaker 1: lot of talk about the default every degrees. We can't

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Speaker 1: have a default be terrible. We don't spend it quite

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Speaker 1: as much time talking about what lies behind this crisis,

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Speaker 1: which is addressing the debt problem. There is a real

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Speaker 1: debt problem, is there not?

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Speaker 7: Well, there is.

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Speaker 14: I mean Pete was right, and I think the way

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Speaker 14: to think about the debt sealing crisis is to break

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Speaker 14: it into two pieces.

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Speaker 7: What do we have to do right now?

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Speaker 14: And that's going to be some near term spending restraint

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Speaker 14: like returning unspent COVID funds, some of the spending caps

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Speaker 14: for example that Senator Manchin has talked about. But longer term,

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Speaker 14: we've got to go to a different model, and we

443
00:22:23,760 --> 00:22:26,720
Speaker 14: have to have either a spending limitation as I've argued

444
00:22:26,760 --> 00:22:29,800
Speaker 14: in the past, or are some kind of model for

445
00:22:29,840 --> 00:22:32,800
Speaker 14: example like the Swedes do of a fiscal policy commission.

446
00:22:32,840 --> 00:22:33,480
Speaker 7: It takes a.

447
00:22:33,400 --> 00:22:34,320
Speaker 1: Look at the budget.

448
00:22:34,560 --> 00:22:37,200
Speaker 14: But we need that longer term discussion. Dare I say,

449
00:22:37,240 --> 00:22:39,680
Speaker 14: maybe even another commission to take.

450
00:22:39,480 --> 00:22:40,080
Speaker 1: A look at it.

451
00:22:40,119 --> 00:22:41,919
Speaker 7: But it has to be separate from the short term,

452
00:22:41,960 --> 00:22:42,920
Speaker 7: which we have to do first.

453
00:22:43,280 --> 00:22:46,160
Speaker 1: But I wonder we'll come back if we could possible

454
00:22:46,200 --> 00:22:49,720
Speaker 1: solutions to the immediate crisis with the default or would

455
00:22:49,760 --> 00:22:52,960
Speaker 1: be default. But are the Republicans some other crises? Right,

456
00:22:53,200 --> 00:22:56,479
Speaker 1: We'll never get to the second part if we don't

457
00:22:56,520 --> 00:22:59,360
Speaker 1: hold hostage on the first. That's basically, as I understanding

458
00:22:59,359 --> 00:23:02,080
Speaker 1: a lot of position. If we go along with you

459
00:23:02,200 --> 00:23:04,720
Speaker 1: on the debt ceiling, we'll never do the second part,

460
00:23:04,720 --> 00:23:05,600
Speaker 1: which is so important.

461
00:23:06,040 --> 00:23:08,639
Speaker 14: Well, that's right, But when you catch the car, you

462
00:23:08,680 --> 00:23:11,040
Speaker 14: have to know what to do, and you also have

463
00:23:11,119 --> 00:23:11,680
Speaker 14: to have a plan.

464
00:23:12,080 --> 00:23:13,600
Speaker 7: And since neither side.

465
00:23:13,320 --> 00:23:15,840
Speaker 14: Has what I would call a reasonable long term fiscal

466
00:23:15,920 --> 00:23:18,080
Speaker 14: plan at the moment, the right thing to do would

467
00:23:18,119 --> 00:23:21,359
Speaker 14: be to take a deep breath. The problem is the

468
00:23:21,440 --> 00:23:25,000
Speaker 14: same problem actually when Pete talked in nineteen ninety three.

469
00:23:25,119 --> 00:23:27,800
Speaker 14: It has to do with runaway social spending. This is

470
00:23:27,800 --> 00:23:30,280
Speaker 14: at a time where we need to spend more on defense,

471
00:23:30,800 --> 00:23:34,200
Speaker 14: we need to spend more on preparing Americans for the future.

472
00:23:34,640 --> 00:23:37,000
Speaker 14: So we're going to have to make some fiscal adjustments.

473
00:23:37,000 --> 00:23:40,159
Speaker 14: Some of those maybe tax increases, some maybe spending adjustments.

474
00:23:40,400 --> 00:23:41,960
Speaker 7: But we have to pivot to that world.

475
00:23:41,960 --> 00:23:44,240
Speaker 1: So let's talk about getting past the immediate crisis for

476
00:23:44,280 --> 00:23:48,080
Speaker 1: the moment, you know, Washington, Well, put aside from a

477
00:23:48,160 --> 00:23:50,160
Speaker 1: moment what you think is the right answer, Let's talk

478
00:23:50,160 --> 00:23:52,880
Speaker 1: about what is the doable answer, because that's the important

479
00:23:53,000 --> 00:23:56,240
Speaker 1: There are some red lines here, such as, for example,

480
00:23:56,280 --> 00:23:59,359
Speaker 1: the publients say we cannot increase revenue full stop, can't

481
00:23:59,359 --> 00:24:01,960
Speaker 1: do it? Is that right? Does a White House have

482
00:24:02,040 --> 00:24:03,560
Speaker 1: to give on that point We're not going to do

483
00:24:03,560 --> 00:24:05,640
Speaker 1: anything in terms of raising revenue.

484
00:24:05,760 --> 00:24:08,000
Speaker 14: Well, I think in a negotiation you have to let

485
00:24:08,080 --> 00:24:10,280
Speaker 14: the other side tell you a bit about what it

486
00:24:10,320 --> 00:24:12,840
Speaker 14: takes to have victory. And I think if Republicans have

487
00:24:12,960 --> 00:24:16,119
Speaker 14: said there's no revenue increases in the near term, I

488
00:24:16,160 --> 00:24:18,520
Speaker 14: wouldn't put that in a negotiation. I think a near

489
00:24:18,680 --> 00:24:23,639
Speaker 14: term is the spending restraint, So something like returning the

490
00:24:23,680 --> 00:24:27,280
Speaker 14: youn spent COVID funds and a two year spending cap.

491
00:24:27,400 --> 00:24:30,720
Speaker 14: Even there's something that can be done so Republicans have

492
00:24:30,760 --> 00:24:34,560
Speaker 14: a victory. Biden, I think knows independent voters also agree

493
00:24:34,600 --> 00:24:37,320
Speaker 14: with Republicans on many of these points, and he could

494
00:24:37,320 --> 00:24:38,960
Speaker 14: come to the middle on that. That's where I think

495
00:24:39,000 --> 00:24:40,000
Speaker 14: the solution has to be.

496
00:24:40,160 --> 00:24:42,520
Speaker 1: What about the work requirement? Because I suspect a lot

497
00:24:42,560 --> 00:24:44,320
Speaker 1: of Americans do look at them and say, it's not

498
00:24:44,359 --> 00:24:46,880
Speaker 1: too outrageous to day you should have to try to work.

499
00:24:46,920 --> 00:24:47,960
Speaker 1: If you're really getting a lot of.

500
00:24:47,880 --> 00:24:49,720
Speaker 7: Funds, it's definitely not too outrageous.

501
00:24:49,720 --> 00:24:53,000
Speaker 14: And if you look at polls independence in the middle, about.

502
00:24:52,760 --> 00:24:56,199
Speaker 7: Two thirds support the work requirements. The only risk in

503
00:24:56,240 --> 00:24:57,479
Speaker 7: the negotiation.

504
00:24:57,080 --> 00:24:59,680
Speaker 14: Is when you start adding things that aren't central to

505
00:24:59,720 --> 00:25:03,840
Speaker 14: the discussion i e. Taxus spending, you make it difficult

506
00:25:03,880 --> 00:25:05,880
Speaker 14: to get the resolution. So each side has to look

507
00:25:05,920 --> 00:25:07,520
Speaker 14: the other in the eye and say, well, what is

508
00:25:07,560 --> 00:25:10,200
Speaker 14: he or she need to win or at least think

509
00:25:10,240 --> 00:25:11,760
Speaker 14: they've won and move on.

510
00:25:11,920 --> 00:25:13,639
Speaker 1: So this week we saw the hopes go up, we

511
00:25:13,640 --> 00:25:15,480
Speaker 1: saw the hopes go down. I mean we heard they

512
00:25:15,520 --> 00:25:18,159
Speaker 1: were making real progress, and then on Friday they stormed

513
00:25:18,200 --> 00:25:21,240
Speaker 1: out of the meeting, which is not unheard of in Washington. You,

514
00:25:21,359 --> 00:25:23,560
Speaker 1: Glenn Hubbard, knowing Washington the way you do, knowing the

515
00:25:23,600 --> 00:25:25,560
Speaker 1: situation the way you do, how worried are you about

516
00:25:25,560 --> 00:25:28,800
Speaker 1: an actual default? I'm not terribly worried.

517
00:25:29,640 --> 00:25:33,320
Speaker 14: That said, the probability isn't zero, and so the two

518
00:25:33,400 --> 00:25:36,840
Speaker 14: sides have to be significantly working harder to come together.

519
00:25:37,160 --> 00:25:39,359
Speaker 14: In the past, I always knew this was theater, it

520
00:25:39,400 --> 00:25:40,440
Speaker 14: would simply work.

521
00:25:40,280 --> 00:25:42,760
Speaker 7: Out and we just have to endure it. This time

522
00:25:42,880 --> 00:25:44,320
Speaker 7: is a little bit more uncertainty.

523
00:25:44,320 --> 00:25:46,800
Speaker 14: So I do think pressure needs to be brought to

524
00:25:46,800 --> 00:25:49,200
Speaker 14: bear on both sides to come to a near term

525
00:25:49,240 --> 00:25:51,600
Speaker 14: agreement and then pivot, as you say, to the longer

526
00:25:51,680 --> 00:25:53,720
Speaker 14: term discussion that we've really got to have as a nation.

527
00:25:53,920 --> 00:25:55,800
Speaker 1: So let's turn to that. Let's make that pivot actually

528
00:25:55,920 --> 00:25:58,000
Speaker 1: the longer term discussion. Let's get so we get past

529
00:25:58,040 --> 00:26:00,480
Speaker 1: the default issue. Now we're going to address it. Suggested

530
00:26:00,520 --> 00:26:02,800
Speaker 1: for example, a commission might be one. We've done that

531
00:26:02,800 --> 00:26:05,560
Speaker 1: with social security, We've done that with base closings. Is

532
00:26:05,600 --> 00:26:08,400
Speaker 1: there political will on the two sides, at least enough

533
00:26:08,400 --> 00:26:10,960
Speaker 1: political will to actually do something about this instead of

534
00:26:10,960 --> 00:26:11,600
Speaker 1: just talk about it.

535
00:26:12,320 --> 00:26:14,719
Speaker 7: There has to be The math will catch up.

536
00:26:14,760 --> 00:26:17,920
Speaker 14: We're already in fiscal year twenty twenty three for the

537
00:26:17,960 --> 00:26:21,639
Speaker 14: government will have interest payments exceeding the money that we

538
00:26:21,680 --> 00:26:22,600
Speaker 14: spend on children.

539
00:26:23,200 --> 00:26:23,880
Speaker 7: That's crazy.

540
00:26:24,359 --> 00:26:26,800
Speaker 14: We need to be spending more on defense. We need

541
00:26:26,840 --> 00:26:28,840
Speaker 14: to be writing a number of ships in the country.

542
00:26:28,880 --> 00:26:30,720
Speaker 14: We have to take a look at the composition of

543
00:26:30,760 --> 00:26:34,600
Speaker 14: spending and revenue. A commission gives both sides a chance

544
00:26:34,640 --> 00:26:37,880
Speaker 14: to have that discussion, and I think it's absolutely essential.

545
00:26:37,920 --> 00:26:39,320
Speaker 1: I want to come back to your book The Wall

546
00:26:39,320 --> 00:26:41,240
Speaker 1: of Bridge for a moment because one of the issues

547
00:26:41,320 --> 00:26:44,200
Speaker 1: is how can we grow the pie by investing and

548
00:26:44,560 --> 00:26:47,680
Speaker 1: spending the money, however much it is, in a way

549
00:26:47,680 --> 00:26:50,119
Speaker 1: that grows the pie. Is there an appetite for that

550
00:26:50,320 --> 00:26:53,000
Speaker 1: because Republicans certainly say it's all got to be about growth.

551
00:26:54,080 --> 00:26:56,879
Speaker 14: Well, but you also have the social support and the

552
00:26:56,880 --> 00:27:01,159
Speaker 14: political support for growth. If we had pro that supported

553
00:27:01,200 --> 00:27:04,680
Speaker 14: work that prepared more Americans for the future that they

554
00:27:04,720 --> 00:27:07,960
Speaker 14: will have as opposed to a nostalgia for the past,

555
00:27:08,520 --> 00:27:11,359
Speaker 14: we could do that fairly modestly.

556
00:27:10,960 --> 00:27:11,840
Speaker 1: With new spending.

557
00:27:12,240 --> 00:27:14,440
Speaker 14: We would need to pay for that by cutting other

558
00:27:14,520 --> 00:27:17,840
Speaker 14: spending or raising taxes, but it's doable. In my book,

559
00:27:17,840 --> 00:27:21,360
Speaker 14: I suggested programs that together costs less than President Biden's

560
00:27:21,359 --> 00:27:24,040
Speaker 14: student loan forgiveness. We know how to do this, we

561
00:27:24,119 --> 00:27:26,119
Speaker 14: know how to find the money. We need to do

562
00:27:26,160 --> 00:27:27,040
Speaker 14: it for something useful.

563
00:27:27,040 --> 00:27:28,359
Speaker 1: I let to come back to here and now and

564
00:27:28,359 --> 00:27:30,080
Speaker 1: where we are with the economy right at the moment,

565
00:27:30,119 --> 00:27:31,760
Speaker 1: and what the FED needs to do. Where we're looking

566
00:27:31,760 --> 00:27:33,760
Speaker 1: at economy. Let's assume we get past the default for

567
00:27:33,840 --> 00:27:36,399
Speaker 1: just a moment we hear that, in fact, maybe the

568
00:27:36,520 --> 00:27:39,200
Speaker 1: neutral rate will go back down. What do you think,

569
00:27:39,480 --> 00:27:41,200
Speaker 1: Where do you think we are right now with the economy,

570
00:27:41,200 --> 00:27:42,320
Speaker 1: and what does the Fed need to do.

571
00:27:43,200 --> 00:27:45,639
Speaker 14: I don't think this is a time for the Fed

572
00:27:45,720 --> 00:27:48,520
Speaker 14: to do what markets are suggesting is start cutting rates

573
00:27:48,880 --> 00:27:51,560
Speaker 14: in the very near future. The Fed at a minimum

574
00:27:51,560 --> 00:27:53,600
Speaker 14: would have to keep the funds rate where it is.

575
00:27:53,680 --> 00:27:55,560
Speaker 14: I would argue if there's a change in the funds

576
00:27:55,600 --> 00:27:58,440
Speaker 14: rate in the next several months, it's probably up, not down.

577
00:27:58,960 --> 00:28:02,760
Speaker 14: Inflation is still very, very sticky. So despite what markets think,

578
00:28:03,160 --> 00:28:05,159
Speaker 14: I think the Fed still has an awful lot of

579
00:28:05,200 --> 00:28:05,520
Speaker 14: work too.

580
00:28:05,640 --> 00:28:08,160
Speaker 1: There was a report of the Bloomberg actually that in fact,

581
00:28:08,440 --> 00:28:11,000
Speaker 1: if we get past the DeVault problem, there will be

582
00:28:11,040 --> 00:28:14,800
Speaker 1: a tightening necessarily in liquidity. Because the Fed has been

583
00:28:14,840 --> 00:28:17,280
Speaker 1: spending the treasure ram, sorry, it has been spending down

584
00:28:17,440 --> 00:28:20,200
Speaker 1: what's in the coffers. They're gonna have to replenish that

585
00:28:20,240 --> 00:28:22,200
Speaker 1: by issuing a lot of tea bills over the course

586
00:28:22,240 --> 00:28:24,159
Speaker 1: of the summer as a pregnant. That will soak a

587
00:28:24,200 --> 00:28:26,320
Speaker 1: lot of liquidy out of the system. Will that tighten

588
00:28:26,600 --> 00:28:28,320
Speaker 1: enough in itself? Some people say it's at least twenty

589
00:28:28,359 --> 00:28:29,040
Speaker 1: five basis points.

590
00:28:29,720 --> 00:28:31,960
Speaker 7: I don't think so. It's a modest effect.

591
00:28:32,000 --> 00:28:34,120
Speaker 14: As you suggest, there are two ways in which those

592
00:28:34,160 --> 00:28:36,440
Speaker 14: tea bills can be bought. One is through bank reserves,

593
00:28:36,520 --> 00:28:38,880
Speaker 14: the other through money market funds. But I think it's

594
00:28:38,920 --> 00:28:42,960
Speaker 14: a modest effect. The bigger concern, it strikes me, would

595
00:28:42,960 --> 00:28:45,280
Speaker 14: be a credit crunch that's in the offing from the

596
00:28:45,360 --> 00:28:49,280
Speaker 14: banking problems. If you're thinking about effective monetary tightening, there's

597
00:28:49,280 --> 00:28:53,120
Speaker 14: probably another one hundred basis points of effective federal funds

598
00:28:53,200 --> 00:28:54,959
Speaker 14: rate increases in that credit crunch.

599
00:28:55,240 --> 00:28:57,040
Speaker 1: That's the one to watch. When will we have a

600
00:28:57,080 --> 00:28:58,720
Speaker 1: sense of fun fact whether we have that one hundred

601
00:28:58,800 --> 00:29:01,120
Speaker 1: basis points, because I've heard that before, but I'm not

602
00:29:01,160 --> 00:29:03,120
Speaker 1: sure if we know yet whether we have it well.

603
00:29:03,160 --> 00:29:05,440
Speaker 14: That number is a blend between effects on small and

604
00:29:05,520 --> 00:29:07,720
Speaker 14: mid sized banks where it would be much larger, and

605
00:29:07,720 --> 00:29:09,480
Speaker 14: then of course the very large banks where it would

606
00:29:09,480 --> 00:29:11,440
Speaker 14: be very small. I think the FED in the next

607
00:29:11,440 --> 00:29:14,040
Speaker 14: several months will be watching that very closely, which is

608
00:29:14,080 --> 00:29:15,560
Speaker 14: an argument for the kind.

609
00:29:15,360 --> 00:29:17,400
Speaker 7: Of pause that share Powell has signaled.

610
00:29:17,640 --> 00:29:19,720
Speaker 1: So many of us are not particularly pleased with what

611
00:29:19,720 --> 00:29:21,840
Speaker 1: we're seeing going on in this negotiation. Of a default.

612
00:29:21,840 --> 00:29:24,320
Speaker 1: The notion that we would even think about nigga on

613
00:29:24,360 --> 00:29:27,120
Speaker 1: the full faith and credit is really embarrassing. What does

614
00:29:27,160 --> 00:29:29,520
Speaker 1: it do to us globally? Does it affect the value

615
00:29:29,560 --> 00:29:32,120
Speaker 1: of the US currency as reserve currency? What is the

616
00:29:32,160 --> 00:29:33,840
Speaker 1: rest of the world thinking right now? Will there be

617
00:29:33,960 --> 00:29:34,920
Speaker 1: longer term effects?

618
00:29:35,360 --> 00:29:37,640
Speaker 14: Well, I think they think we're crazy, and of course

619
00:29:37,640 --> 00:29:40,440
Speaker 14: we are in this kind of process. But the point

620
00:29:40,480 --> 00:29:43,160
Speaker 14: is we need a new spending process. We have had

621
00:29:43,280 --> 00:29:47,120
Speaker 14: a series of budget resolutions and budget performs over the years.

622
00:29:47,400 --> 00:29:50,560
Speaker 14: I mentioned Sweden before. I think using something like the

623
00:29:50,600 --> 00:29:54,240
Speaker 14: Swedish Plan and the Swedish Fiscal Policy Council. It's hard

624
00:29:54,240 --> 00:29:57,600
Speaker 14: to advise conservatives to look at Sweden as an example.

625
00:29:57,160 --> 00:29:59,560
Speaker 7: But that I do, that I think is our roadmap.

626
00:29:59,640 --> 00:30:01,880
Speaker 1: Are there people Washington talking about these things right now?

627
00:30:02,920 --> 00:30:06,840
Speaker 14: There are, But I think at the moment the negotiation.

628
00:30:06,400 --> 00:30:09,840
Speaker 7: Is so mired in each side thrashing the other it's

629
00:30:09,840 --> 00:30:11,560
Speaker 7: hard to get out.

630
00:30:11,560 --> 00:30:13,080
Speaker 1: What about think tanks are they helping?

631
00:30:13,640 --> 00:30:14,040
Speaker 12: I think so.

632
00:30:14,480 --> 00:30:17,480
Speaker 14: I think they're trying to get information to both sides

633
00:30:17,480 --> 00:30:20,440
Speaker 14: of the aisle on the costs of what is happening

634
00:30:20,760 --> 00:30:23,280
Speaker 14: and on things that might be proposed in the medium

635
00:30:23,360 --> 00:30:25,880
Speaker 14: or long run as opposed to the action we have

636
00:30:25,960 --> 00:30:27,280
Speaker 14: to take before June first.

637
00:30:27,360 --> 00:30:31,480
Speaker 1: So you're concerned, but hopeful always always. That's Glenn Embert,

638
00:30:31,480 --> 00:30:34,440
Speaker 1: I should say, in a nutshell, that's Glen Hubbard. Many

639
00:30:34,440 --> 00:30:38,640
Speaker 1: thanks Glen Hubbard of Columbia Business School. Coming up, China

640
00:30:38,680 --> 00:30:41,520
Speaker 1: tries to get its economy back on track after the

641
00:30:41,520 --> 00:30:45,239
Speaker 1: COVID shutdown. Devrolair of Edelman Global Advisory. It takes us

642
00:30:45,240 --> 00:30:49,719
Speaker 1: through what's become of the Chinese economic miracle. This is

643
00:30:49,760 --> 00:30:51,400
Speaker 1: Wall Street Week on Bloomberg.

644
00:30:53,040 --> 00:30:57,240
Speaker 2: This is Bloomberg Wall Street Week with David Weston from

645
00:30:57,360 --> 00:30:59,200
Speaker 2: Bloomberg Radio Global.

646
00:30:59,200 --> 00:31:02,240
Speaker 1: Wall Street the leading light this week. When Sam Zell

647
00:31:02,320 --> 00:31:05,200
Speaker 1: passed away at the age of eighty one, he went

648
00:31:05,240 --> 00:31:07,880
Speaker 1: from managing student apartments in his dorm room at the

649
00:31:08,000 --> 00:31:11,240
Speaker 1: University of Michigan to being a legendary investor in real

650
00:31:11,320 --> 00:31:15,160
Speaker 1: estate and energy, making billions of dollars along the way.

651
00:31:15,680 --> 00:31:18,960
Speaker 1: Zell was known first and foremost for his real estate investing,

652
00:31:19,240 --> 00:31:22,479
Speaker 1: acquiring office space over many years in his Equity Office

653
00:31:22,520 --> 00:31:25,720
Speaker 1: Properties Trust, and then selling it all to Blackstone in

654
00:31:25,720 --> 00:31:28,800
Speaker 1: two thousand and seven for thirty nine billion dollars. At

655
00:31:28,960 --> 00:31:30,480
Speaker 1: just the right time, we.

656
00:31:30,520 --> 00:31:33,840
Speaker 15: Made a deal, and that deal was significantly higher than

657
00:31:33,880 --> 00:31:40,160
Speaker 15: the Navy, and consequently it was an easy decision for me,

658
00:31:40,240 --> 00:31:43,040
Speaker 15: even though it was my baby with something might started

659
00:31:43,080 --> 00:31:44,160
Speaker 15: from scratch.

660
00:31:44,000 --> 00:31:47,200
Speaker 1: Though in later years valuations made Zell think twice before

661
00:31:47,240 --> 00:31:51,280
Speaker 1: becoming a real estate buyer again for all practical purposes.

662
00:31:51,280 --> 00:31:55,960
Speaker 15: I haven't bought anything in ten years, and where the

663
00:31:56,000 --> 00:31:58,800
Speaker 15: opportunity has created, I've sold a.

664
00:31:58,680 --> 00:32:01,880
Speaker 1: Lot, Zell and energy of all sorts.

665
00:32:02,240 --> 00:32:07,320
Speaker 15: I've always believed that diversification is your friend, and I've

666
00:32:07,320 --> 00:32:12,440
Speaker 15: always attempted to have some kind of energy diversification and

667
00:32:12,560 --> 00:32:13,960
Speaker 15: continue to do.

668
00:32:13,880 --> 00:32:16,960
Speaker 1: So, and recognize that the world needs to move away

669
00:32:16,960 --> 00:32:19,719
Speaker 1: from fossil fuels, while warning that it is going to

670
00:32:19,760 --> 00:32:20,360
Speaker 1: take time.

671
00:32:20,680 --> 00:32:24,960
Speaker 15: William Got to reduce their energy exposure. The transition from

672
00:32:26,160 --> 00:32:30,360
Speaker 15: fossil fuels to renewables is going to be a very

673
00:32:30,560 --> 00:32:31,880
Speaker 15: long process.

674
00:32:32,200 --> 00:32:35,360
Speaker 1: Zell was called the grave Dancer, taken from an article

675
00:32:35,400 --> 00:32:39,040
Speaker 1: he wrote about resurrecting dead properties. But he always warned

676
00:32:39,040 --> 00:32:41,000
Speaker 1: about the risks involved.

677
00:32:40,960 --> 00:32:44,200
Speaker 15: And you know, and as you're dancing around the graves,

678
00:32:44,520 --> 00:32:46,680
Speaker 15: you have to we really care for your own fall, in.

679
00:32:46,920 --> 00:32:49,720
Speaker 1: Which he very nearly did in his leveraged buyout of

680
00:32:49,760 --> 00:32:53,200
Speaker 1: the Tribune Company, for which he was roundly criticized and

681
00:32:53,240 --> 00:32:56,760
Speaker 1: on which he lost three hundred million dollars. Sam Zel

682
00:32:56,920 --> 00:32:59,880
Speaker 1: was deeply concerned about the fiscal health of the United States,

683
00:33:00,280 --> 00:33:03,200
Speaker 1: alarmed about the growing debt and concern for what it

684
00:33:03,280 --> 00:33:05,480
Speaker 1: could mean for the country's economic health.

685
00:33:05,880 --> 00:33:09,880
Speaker 15: We added seven trillion to our debt in three years.

686
00:33:11,080 --> 00:33:13,560
Speaker 7: This is this is you know, this is.

687
00:33:13,520 --> 00:33:18,280
Speaker 15: The Viemar Republic. And if the United States isn't careful,

688
00:33:18,720 --> 00:33:21,800
Speaker 15: they're going to find themselves in the Viemar Republic.

689
00:33:22,120 --> 00:33:25,120
Speaker 1: His memoir was titled am I Being Too Subtle? The

690
00:33:25,160 --> 00:33:29,360
Speaker 1: Adventures of a Business Maverick. Whatever Samzel was, he was

691
00:33:29,600 --> 00:33:33,480
Speaker 1: never subtle. He was a true original as an investor

692
00:33:33,800 --> 00:33:37,240
Speaker 1: and as a person, always preferring to follow his own,

693
00:33:37,480 --> 00:33:39,920
Speaker 1: sometimes idiosyncratic instincts.

694
00:33:40,520 --> 00:33:45,800
Speaker 15: I was very, very successful at listening to my own song.

695
00:33:47,360 --> 00:33:54,920
Speaker 15: I was very capable of ignoring the noise. Number of

696
00:33:54,960 --> 00:33:57,800
Speaker 15: times people have told me you don't understand.

697
00:33:59,080 --> 00:34:00,160
Speaker 1: Is legendary.

698
00:34:00,720 --> 00:34:03,600
Speaker 15: And yet I was comfortable and had the level of

699
00:34:03,680 --> 00:34:07,360
Speaker 15: self confidence that allowed me to make the right decisions

700
00:34:07,400 --> 00:34:08,120
Speaker 15: at the right time.

701
00:34:09,080 --> 00:34:11,040
Speaker 1: That does it. For this episode of Wall Street Week,

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00:34:11,080 --> 00:34:13,799
Speaker 1: I'm David Weston. This is Bloomberg. See you next week,