WEBVTT - Sen. Warren Would Defend Dodd-Frank to the Death, Eisman Says 0:00:00.120 --> 0:00:02.920 Brought you by Bank of America, Mary Lynch. Investing in 0:00:03.000 --> 0:00:07.840 local communities, economies and a sustainable future. That's the power 0:00:08.080 --> 0:00:12.360 of global connections. Mary Lynch, Pierce Fenner and Smith Incorporated 0:00:12.760 --> 0:00:27.400 member s I p C. Welcome to the Bloomberg Surveillance Podcast. 0:00:27.840 --> 0:00:31.520 I'm Tom Keene with David Gura. Daily we bring you 0:00:31.560 --> 0:00:36.600 insight from the best in economics, finance, investment, and international relations. 0:00:37.000 --> 0:00:41.600 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and 0:00:41.680 --> 0:00:48.640 of course on the Bloomberg. Let we begin this morning 0:00:48.640 --> 0:00:51.080 with Steve Eisman, familiar to anyone who's read or seeing 0:00:51.120 --> 0:00:53.120 The Big Short, of course, now he's a portfolio manager 0:00:53.120 --> 0:00:54.800 with new Burger Berman Group. He joins us here in 0:00:54.800 --> 0:00:57.080 our Bloomberg eleven three O Studios and New York right 0:00:57.120 --> 0:00:59.240 to see you here. Thanks for coming on the show. 0:00:59.680 --> 0:01:01.640 You focused on You've paid so much attention to the 0:01:01.640 --> 0:01:04.959 integrity of the strength of the financial sector in the US, 0:01:05.040 --> 0:01:06.560 and I want to just start there if I could, 0:01:06.920 --> 0:01:08.880 asking you about what you make of the rhetoric we've 0:01:08.880 --> 0:01:11.679 heard from this president, indeed from any Republicans about the 0:01:11.720 --> 0:01:15.480 future of financial reform and regulation in this country. How worried, 0:01:15.480 --> 0:01:18.240 are you about the the integrity of that apparatus going forward? 0:01:19.720 --> 0:01:22.000 You know, I'm really not that worried about it at 0:01:22.000 --> 0:01:24.760 this point. I mean, let's just throw some numbers around. 0:01:25.440 --> 0:01:27.880 You know, when pre cry Let's use City Group as 0:01:27.880 --> 0:01:31.400 an example, just to get some numbers. You know, pre crisis, 0:01:32.000 --> 0:01:35.440 City Group was levered thirty five to one. You know, 0:01:35.800 --> 0:01:38.319 five years before that, in two thousand and two, it 0:01:38.360 --> 0:01:41.559 had been levered twenty two to one. Today it's levered 0:01:41.920 --> 0:01:45.360 ten to one. You know, the last time City Group 0:01:45.800 --> 0:01:50.400 was levered ten to one, I probably wasn't alive. So, 0:01:52.360 --> 0:01:54.920 I mean, I can honestly say that what the FED 0:01:55.000 --> 0:01:58.720 has accomplished via the auspices of Dodd Frank and the 0:01:58.720 --> 0:02:01.520 Stress Test, which is how the FED regulates the banks, 0:02:02.240 --> 0:02:04.760 is that the United States banking system has never been 0:02:04.760 --> 0:02:08.600 the safe in anyone's lifetime. Now what I think is 0:02:08.639 --> 0:02:12.160 going to happen, and I think the odds of Dodd 0:02:12.240 --> 0:02:15.760 Frank being changed is extremely low because you need sixty votes. 0:02:16.160 --> 0:02:19.480 And I think Senator Elizabeth Warren will probably get on 0:02:19.520 --> 0:02:21.440 the Senate floor and say, you're gonna have to kill 0:02:21.480 --> 0:02:25.960 me if I've performing let anything happen here, now they 0:02:26.000 --> 0:02:28.520 may kill her, but that's what almost it's going to take. 0:02:29.000 --> 0:02:33.320 So let's put aside changing Dodd frank Um. The FED 0:02:33.440 --> 0:02:36.600 regulates the banks, and the person who has been the 0:02:36.680 --> 0:02:40.560 chief regulator is Governor Daniel to Rollo, and he's resigned. 0:02:41.000 --> 0:02:44.840 So President Trump will appoint someone to replace him, and 0:02:45.680 --> 0:02:48.560 that person will not be Daniel to Rollo. They'll have 0:02:48.600 --> 0:02:51.080 a very different orientation. And I think what's going to 0:02:51.120 --> 0:02:56.840 happen is UM via the stress test starting in two eighteen, 0:02:57.360 --> 0:03:01.200 because it's too late now, UM for the two thousand 0:03:01.200 --> 0:03:04.160 and seventeen stress tests. Uh, this test will be let's 0:03:04.160 --> 0:03:08.600 just say, graded on a different curve, and the vocal 0:03:08.720 --> 0:03:14.000 rule will be reinterpreted. Today it's interpreted extremely strictly, tomorrow 0:03:14.040 --> 0:03:18.240 will be interpreted less strictly. So I think the leverage 0:03:18.240 --> 0:03:20.000 will start to go up, and we're not going to 0:03:20.080 --> 0:03:22.960 go back anywhere to where we were so many maybe 0:03:23.000 --> 0:03:25.799 city group goes from ten times over the next several 0:03:25.880 --> 0:03:30.520 years to twelve, thirteen, fourteen times. That's more leverage and 0:03:30.520 --> 0:03:35.440 more risk in the system, but it's still significantly significantly 0:03:35.440 --> 0:03:38.560 lower than we've ever seen anyway, So it's not it's 0:03:38.560 --> 0:03:41.920 not a calamity, and the returns will start to go 0:03:42.040 --> 0:03:43.760 up because they'll be able to do more things on 0:03:43.760 --> 0:03:46.680 their balance sheet via or like I said, the reinterpretation 0:03:46.720 --> 0:03:49.560 of the vocal rule, and the profitability of the banks 0:03:49.560 --> 0:03:52.480 will go up considerably. When you look at the softness 0:03:52.560 --> 0:03:55.400 of the thickness of that cushion, that capital cushion, do 0:03:55.440 --> 0:03:58.040 you attribute it exclusively to the work of the FIT 0:03:58.160 --> 0:04:01.800 or do we have banks and and executives here on 0:04:01.800 --> 0:04:04.400 Wall Street who learned a lesson from from what happens 0:04:05.080 --> 0:04:10.920 this way? Um, the what the FEED is accomplished has 0:04:10.960 --> 0:04:13.760 been with the banks kicking and screaming. They have not 0:04:13.800 --> 0:04:16.000 done it willingly. They've been ordered to do it, and 0:04:16.040 --> 0:04:19.760 they haven't had a choice. When when when you look 0:04:19.760 --> 0:04:21.960 at the FED, when you look at these stress tests 0:04:22.000 --> 0:04:24.919 they've changed over the years. Are we closer to getting 0:04:24.920 --> 0:04:27.680 perhaps not a perfect stress test? And again we note 0:04:27.720 --> 0:04:30.479 the departure of Mr Tribula, But how good is the 0:04:30.480 --> 0:04:34.160 FED now at assessing the integrity of these banks? Yeah, 0:04:34.240 --> 0:04:37.640 no one ever actually gets to see what's in those tests. 0:04:37.640 --> 0:04:39.440 What's very hard to say. All you can just see 0:04:39.480 --> 0:04:43.000 is the net results. And you know, like I said, 0:04:43.080 --> 0:04:46.000 going from thirty five to one leverage. To tend to 0:04:46.040 --> 0:04:49.240 one leverage is like discussing the difference the distance from 0:04:49.279 --> 0:04:54.440 Mercury to Pluto. It's just it's so it's so different, 0:04:55.000 --> 0:04:57.039 you know, for people in my world, it's it's even 0:04:57.080 --> 0:04:59.720 hard to describe what that means. It's just so unbelievable. 0:05:00.080 --> 0:05:02.159 Steve I's been working with his cell phone. It's part 0:05:02.160 --> 0:05:04.680 of being the guests. You're allowed to come into the 0:05:04.720 --> 0:05:09.640 studio with cell phone blaring. He's making cell phone adjustments 0:05:09.760 --> 0:05:13.599 right now. Help me here is you get out your 0:05:13.960 --> 0:05:17.120 the bad phone to work here on it. And you know, 0:05:17.160 --> 0:05:19.040 I know you want to go back to banking as well. 0:05:19.480 --> 0:05:23.080 But that the speed of information, the speed of flow, 0:05:23.160 --> 0:05:26.480 everybody glued to their cell phones, everybody with information flow. 0:05:26.520 --> 0:05:29.800 Has that changed the game? I actually think it has not. 0:05:30.760 --> 0:05:33.919 Um you know, if you go back to you know 0:05:34.000 --> 0:05:36.480 where I made my name in two thousand and seven 0:05:36.480 --> 0:05:39.000 and two thousand and eight, there wasn't a lack of 0:05:39.040 --> 0:05:43.479 information flow. It's just how you interpret that flow. So 0:05:44.200 --> 0:05:47.680 you know, people have more access in information. That's true, 0:05:48.120 --> 0:05:50.159 But there are no naked facts in this world. You 0:05:50.200 --> 0:05:52.280 have to interpret them, and it's how you interpret them 0:05:52.279 --> 0:05:56.440 that really matters. How do you interpret President Trump. That's 0:05:56.440 --> 0:05:59.560 a dangerous question. That's why we're here Friday. We wouldn't 0:05:59.560 --> 0:06:04.560 ask this rtion on Wednesday, but Wednesday the doors over there. 0:06:06.200 --> 0:06:09.520 I mean, I look at it. Let's leave aside the 0:06:09.560 --> 0:06:12.200 social stuff, which is always dangerous to talk about, just 0:06:12.240 --> 0:06:16.960 from a pure economic perspective. Um. You know, I do 0:06:17.040 --> 0:06:20.320 think we need tax reform in this country. It's long overdue. 0:06:20.800 --> 0:06:23.599 Hopefully what they'll do will be good, but we don't 0:06:23.600 --> 0:06:26.000 know what. They haven't presented a plan, so there's nothing 0:06:26.000 --> 0:06:29.960 to criticize yet. UM. But you know, my hope is 0:06:30.000 --> 0:06:34.279 that with lower tax rates, you will see companies be 0:06:34.360 --> 0:06:38.240 more willing to invest in the United States. UM. I 0:06:38.279 --> 0:06:41.320 think that, you know, some of the criticisms that the 0:06:41.360 --> 0:06:45.960 President has gotten about trade are misplaced. And the reason 0:06:45.960 --> 0:06:47.320 why I say that is, you know, if you go 0:06:47.400 --> 0:06:51.360 back to NAFTA in the ninety nineties, NAFTA was sold 0:06:51.360 --> 0:06:54.080 to the American public as it's going to improve GDP 0:06:54.880 --> 0:06:58.200 and it's going to create millions of jobs. And now 0:06:58.279 --> 0:07:00.159 whether or not have to improve g d P not 0:07:00.480 --> 0:07:03.520 we could debate, but there's no question that we lost 0:07:03.600 --> 0:07:07.960 millions of jobs. And so I think the president's um 0:07:08.320 --> 0:07:13.880 critique of the whole way that free trade has been 0:07:13.920 --> 0:07:17.080 done in our country over the last thirty years. He 0:07:17.120 --> 0:07:21.200 has a very valid point, and you know, maybe hopefully 0:07:21.200 --> 0:07:23.640 they'll make changes that are helpful. When you hear him 0:07:23.640 --> 0:07:26.440 talk about making changes, about pursuing these bilateral deals and 0:07:26.480 --> 0:07:30.760 doing it rather quickly, is he demonstrating to you optimism 0:07:30.840 --> 0:07:33.160 or naiveness about the way that Washington works in the 0:07:33.200 --> 0:07:34.760 way the way that you can get a deal like that. 0:07:34.960 --> 0:07:36.840 That's just political rhetoric to me, What do you what 0:07:36.880 --> 0:07:39.400 do you think he's going to say? You know, we're 0:07:39.400 --> 0:07:42.080 gonna try and do this, but we might fail, so 0:07:42.240 --> 0:07:44.800 you know, he's got to position it so that things 0:07:44.840 --> 0:07:47.520 look hopeful. Is there opportunity for you in the ambiguity 0:07:47.600 --> 0:07:49.120 and when it comes to taxi form that we don't 0:07:49.120 --> 0:07:51.040 know what's going to happen as an as an investor, 0:07:51.160 --> 0:07:54.480 is somebody who's who's watching the market? Um? Is this 0:07:54.600 --> 0:07:57.520 a a? Is there any opportunity? Is just a wait 0:07:57.520 --> 0:08:01.640 and see to see what I mean? There's more than ambiguity. 0:08:01.920 --> 0:08:05.400 We don't know anything. No one's proposed, hasn't imposed anything yet, 0:08:05.400 --> 0:08:07.640 So it's more than ambiguity. I don't know anything. Is 0:08:07.640 --> 0:08:10.800 there too much money chasing distress debt you mentioned earlier 0:08:11.120 --> 0:08:13.480 on our television. It's not my area of expertise. I 0:08:13.480 --> 0:08:16.840 don't have to stress have an opinion. You mentioned subprime autos, right, 0:08:16.960 --> 0:08:19.280 I mean, is there is there? Is there just like 0:08:19.320 --> 0:08:20.960 in private equity and the rest of it. Is there 0:08:21.040 --> 0:08:23.920 just such a wall of money that you can't get 0:08:24.000 --> 0:08:27.400 advantage or is there so much dumb money chasing after 0:08:27.480 --> 0:08:32.360 opportunities in the Matthew securitized world that it creates a 0:08:32.480 --> 0:08:35.840 huge opportunity for you because they do dumb things. You know, 0:08:35.880 --> 0:08:38.160 it's a it's maybe it's an opportunity, but in a 0:08:38.240 --> 0:08:40.880 zero right world, it's it's an opportunity that you can't 0:08:40.880 --> 0:08:44.360 really take advantage of yet, because I mean, you know, 0:08:44.559 --> 0:08:46.600 when you take a step back, you know, how do 0:08:46.600 --> 0:08:51.160 you value any asset or or company. You know, in theory, 0:08:51.160 --> 0:08:54.840 it's a discounted cash flow And and and the question 0:08:54.880 --> 0:08:56.920 and the discount of cash flow is what discount rate 0:08:56.920 --> 0:08:58.800 do you use? And in the world of zero rates, 0:08:59.280 --> 0:09:01.760 discount rate is heres are gonna We're gonna continue with 0:09:01.760 --> 0:09:04.360 Steve Weisman and and this is the third or fourth 0:09:04.400 --> 0:09:07.319 time this morning he's mentioned the great distortion about the 0:09:07.840 --> 0:09:12.280 complete linkage of central bank to fixed income distortion that 0:09:12.360 --> 0:09:14.640 we'll see. Let's come back and talk about that and 0:09:14.800 --> 0:09:17.079 the path as we get out to where he wants 0:09:17.120 --> 0:09:19.240 to be, which I believe he said earlier was three 0:09:19.360 --> 0:09:22.080 or four rate increases out. We'll do that with Steve 0:09:22.240 --> 0:09:25.559 Eisman and new Burger Berman. Steve I just put out 0:09:25.559 --> 0:09:28.280 on Twitter, it's a log normal world after all, and 0:09:28.320 --> 0:09:31.880 there's something about being in the finance business where we're smart, 0:09:32.040 --> 0:09:37.280 well meaning people outside of finance start lecturing finance people 0:09:37.640 --> 0:09:40.880 on a log normal world, people get a little moved, 0:09:41.000 --> 0:09:43.960 which brings us to the president of the Minneapolis Fed. 0:09:44.840 --> 0:09:47.720 Right now, Neil cash Carry has ideas about how to 0:09:47.800 --> 0:09:52.080 fix the banks, and many in your world go maybe not. 0:09:52.400 --> 0:09:57.680 What's he getting wrong? Well, I mean cash Car seems 0:09:57.720 --> 0:10:02.640 to think that the banks are um still too levered 0:10:03.040 --> 0:10:08.440 and that they should have three times more capital than 0:10:08.480 --> 0:10:12.560 they currently have. Um. So, let me say, as politely 0:10:12.600 --> 0:10:16.040 as I can, I think that view is ridiculous. I mean, 0:10:16.080 --> 0:10:21.400 he's outswissing the Swiss. It's insane. I mean, let's let's 0:10:21.480 --> 0:10:25.040 do some math. City group today is leveraged ten to 0:10:25.160 --> 0:10:31.000 one and has in return equity of eight. So if 0:10:31.000 --> 0:10:34.280 you triple the capital, City group is going to have 0:10:34.360 --> 0:10:39.720 a return equity of two and a half. Bad things 0:10:39.840 --> 0:10:43.520 happen to banks when it is mathematically impossible for them 0:10:43.559 --> 0:10:48.200 to achieve uh their costs of capital. And let me 0:10:48.240 --> 0:10:50.920 elaborate on that for a second. That would mean there's 0:10:50.920 --> 0:10:56.040 only two eventualities that could happen here. Either spreads on 0:10:56.080 --> 0:11:00.840 new loans would have to explode so that the banks 0:11:00.840 --> 0:11:03.360 would be able to make their return on capital, which 0:11:03.360 --> 0:11:08.320 would not be good for anybody, or all banks would 0:11:08.360 --> 0:11:11.040 have to shrink because every single loan that you would 0:11:11.040 --> 0:11:14.560 make would destroy capital. You know, the point of a 0:11:14.600 --> 0:11:19.000 banking system when you think about leverage, leverage is like 0:11:19.120 --> 0:11:22.720 little bears porridge. It has to be just right. Too 0:11:22.800 --> 0:11:27.199 much leverage is bad, but too little leverage is bad too, 0:11:27.240 --> 0:11:31.080 because the banks recycle money, and if and if you 0:11:31.160 --> 0:11:34.920 have too little leverage, they're not performing their function of 0:11:35.000 --> 0:11:38.439 recycling money into the banking system. It betrays a complete 0:11:38.480 --> 0:11:42.360 misunderstanding of how banks work. I want to elaborate on 0:11:42.400 --> 0:11:44.800 this for a second. You know, I don't have any 0:11:44.800 --> 0:11:47.920 institutional obligations to anybody. I work at New Burger Berman. 0:11:48.240 --> 0:11:52.400 If I have the opinion that that the banks are 0:11:52.480 --> 0:11:56.000 under capitalized, I could say it. Nobody owes me anything. 0:11:56.120 --> 0:11:58.320 They could agree with me, they could disagree with me. 0:11:58.600 --> 0:12:02.000 There's been a process in place for six years of 0:12:02.320 --> 0:12:06.360 regulating banks and delivering them and last year Kushkari shows 0:12:06.480 --> 0:12:09.120 up and and the first thing out of his mouth 0:12:09.760 --> 0:12:13.920 is the process is broken and we need more capital. 0:12:13.960 --> 0:12:16.600 It's like, you know, wait a second, you're part of 0:12:16.600 --> 0:12:19.440 the new Minneapolis fed. You you just don't show up 0:12:19.480 --> 0:12:21.720 and try and blow up what people have been doing 0:12:21.760 --> 0:12:23.520 for the last six years. And you know, and I, 0:12:23.640 --> 0:12:26.880 like I said on the TV, you know, prior to 0:12:28.679 --> 0:12:33.240 the financial crisis, bank regulators did about his bad job 0:12:33.280 --> 0:12:37.200 as anybody's ever did done and history Planet Earth, um, 0:12:37.240 --> 0:12:40.480 you know, thankfully, you know, Governor Daniel Torula took over 0:12:41.120 --> 0:12:44.800 and he's done a fantastic job. And I take great umbrage. 0:12:44.840 --> 0:12:48.480 And somebody's showing up and announcing to the whole world 0:12:48.960 --> 0:12:52.320 that the guy to Rula who's interest a fantastic job, 0:12:52.440 --> 0:12:55.400 doesn't know what he's talking about, because it's insane. We 0:12:55.400 --> 0:12:57.719 were talking about the transparency lack through of in these 0:12:57.720 --> 0:12:59.439 stress tests, and let me just ask you the last 0:12:59.440 --> 0:13:01.439 minute we've got with you about the call that we've 0:13:01.440 --> 0:13:03.720 heard of the last week from Senator Tom Cotton and others. 0:13:04.320 --> 0:13:05.959 You know, a letter to the Treasury Secretary to look 0:13:06.000 --> 0:13:10.199 at the jurisdiction of the Financial Stability Oversight accounts that 0:13:10.240 --> 0:13:13.040 to reevaluate that and look more closely at too big, 0:13:13.120 --> 0:13:16.280 too big to failness and systemic importance. Do you see 0:13:16.280 --> 0:13:18.400 an erosion with the f stock as well? Is that 0:13:18.559 --> 0:13:21.120 is the Is the role of the f SO gonna change? No, 0:13:21.280 --> 0:13:25.800 I don't know that that letter is irrelevant. It's who cares. 0:13:25.920 --> 0:13:27.679 It's just I mean you mean anything. You know, that's 0:13:27.760 --> 0:13:31.560 some politicians. Mollot Off doesn't mean the thing. Steve Iceman, 0:13:31.600 --> 0:13:34.319 thank you so much. Thank your room, always valuable, some 0:13:34.440 --> 0:13:37.200 real insight there, and particularly thank you for your comments 0:13:37.240 --> 0:13:41.480 earlier on the sport of asset management. Mr Heisman clearly 0:13:41.559 --> 0:13:45.840 optimistic on the good times for active management once we 0:13:45.920 --> 0:13:49.760 get rate normalization. That was such a good band, David 0:13:49.760 --> 0:13:53.360 Gurrow right, and they were awesome. The band reunited Emerson 0:13:53.440 --> 0:13:56.559 like and Palmer like Noboddy. You know, it's they were 0:13:56.600 --> 0:14:11.000 just super bud. You've got a wonderful interview coming up. 0:14:11.000 --> 0:14:14.600 Our David Weston, Alex Steele, and John Farrell with Peter Navarro. 0:14:14.760 --> 0:14:18.000 Let's be clear here, he's got he's got bulletproof chops, 0:14:18.040 --> 0:14:21.720 tough university, as doctorate is from Harvard and economics. He's 0:14:21.760 --> 0:14:25.520 out of Irvine. His acclaim book Death by China, and 0:14:25.600 --> 0:14:29.160 he has been a lightening rod of support and criticism, 0:14:29.720 --> 0:14:33.480 uh for Trump economics. So this is a timely conversation, 0:14:33.840 --> 0:14:37.400 certainly with the leadership of China meeting with Mr Trump 0:14:37.600 --> 0:14:41.320 tomorrow and now to David Weston. Trump will be signing 0:14:41.320 --> 0:14:44.000 two executive orders on trade and joining us now on 0:14:44.040 --> 0:14:46.720 both Bloomberg Television and on radio to take us through 0:14:46.760 --> 0:14:48.840 these two orders as the Director of the National Trade 0:14:48.840 --> 0:14:51.560 Council in the White House, Dr Peter Navarro. Peter, welcome 0:14:51.560 --> 0:14:53.760 back to the program. Good to have you here, David, 0:14:53.800 --> 0:14:56.360 How are you today? Good? Thanks. So we've had some 0:14:56.480 --> 0:14:59.040 preview of these two orders. I'd like to talk about themselves. First. 0:14:59.200 --> 0:15:01.960 The one that's going to review country by country possible 0:15:02.000 --> 0:15:05.640 unfair trade practices. Is that based largely on the question 0:15:05.720 --> 0:15:10.200 of a trade deficit with those countries. That's correct, David. 0:15:10.280 --> 0:15:14.280 There's uh about sixteen countries with which we have significant 0:15:14.320 --> 0:15:17.760 trade deficits. And the bigger picture here is that the 0:15:17.840 --> 0:15:21.240 United States is the freest trader in the world. Let's 0:15:21.240 --> 0:15:25.480 be clear about that. On balance, we have the lowest tariffs, 0:15:25.520 --> 0:15:28.160 we have the lowest non tariff barriers, yet we have 0:15:28.400 --> 0:15:34.440 the largest trade deficit. And these deficits are causing the 0:15:34.520 --> 0:15:37.960 job loss, They're causing our factories to move off shore 0:15:38.080 --> 0:15:43.080 their reflection of that, and so uh. Historically, what's going 0:15:43.160 --> 0:15:47.880 to happen with this omnibus investigation into trade abuses is 0:15:47.920 --> 0:15:52.080 that the Secretary of Commerce Wilber Ross, with the U. S. 0:15:52.160 --> 0:15:56.480 Trade Representative are going to take a comprehensive look at 0:15:56.520 --> 0:16:00.480 all of the different ways uh that that trade deficit 0:16:00.720 --> 0:16:03.880 might be happening. UM in the trade space. We're gonna 0:16:03.880 --> 0:16:08.000 look at differential tariffs, non tariff barriers, things like forced 0:16:08.040 --> 0:16:11.840 technology transfer, all of these things, and in ninety days, 0:16:12.200 --> 0:16:15.040 UM wilber Ross is going to deliver a report to 0:16:15.080 --> 0:16:18.120 the desk of the President and the information in that 0:16:18.200 --> 0:16:22.400 report will basically be the foundation of which will guide 0:16:23.200 --> 0:16:28.400 our our future trade policy. The purpose of this investigation 0:16:29.000 --> 0:16:32.040 is basically to fulfill a promise to the American people 0:16:32.080 --> 0:16:36.400 that that the Canada Trump made, uh to basically look 0:16:36.480 --> 0:16:42.000 into these trade abuses, correct them, smart new deals in 0:16:42.040 --> 0:16:45.040 a way which will basically put our people back to 0:16:45.080 --> 0:16:48.360 work and bring our factories back on shore. So so, Peter, 0:16:48.920 --> 0:16:51.000 certainly trade deficits or something to take a look at. 0:16:51.080 --> 0:16:53.360 But as an economist, I'm sure you would agree that 0:16:53.440 --> 0:16:57.240 a trade deficit does not necessarily equate to unfair trade practices. 0:16:57.240 --> 0:16:59.080 There are lots of reasons you can have a trade deficits, 0:16:59.200 --> 0:17:01.080 so it's a possible at least some of these countries 0:17:01.160 --> 0:17:02.760 you'll take a look at and decide, you know what 0:17:02.960 --> 0:17:06.000 it's for other factors, it's not because of untare practices. Yeah, 0:17:06.080 --> 0:17:08.239 that's a great question, and you're act exactly right. I mean, 0:17:08.280 --> 0:17:12.480 take Canada for example, We run a trade deficit in 0:17:12.560 --> 0:17:14.800 goods with them of over ten billion dollars, but a 0:17:14.800 --> 0:17:18.800 lot of that is driven by oil energy, so no 0:17:18.880 --> 0:17:21.480 big deal air. On the other hand, we have other 0:17:21.520 --> 0:17:25.560 countries which are cheating us blind uh. We have also 0:17:25.640 --> 0:17:30.840 a systemic problem um with our taxes, our income tax 0:17:30.880 --> 0:17:34.040 system relative to the rest of the world, which runs 0:17:34.040 --> 0:17:38.199 on a vat, which creates a disadvantage for us for 0:17:38.200 --> 0:17:40.719 for our country. So these are all the things we 0:17:40.760 --> 0:17:44.679 need to look at. Trade deficits aren't bad per se, 0:17:45.040 --> 0:17:48.280 but when you run a large and persistent trade deficit 0:17:48.400 --> 0:17:51.560 for as long as we have, UH, it's basically a 0:17:51.560 --> 0:17:55.280 proxy for all of the job loss, the slow economic growth, 0:17:55.280 --> 0:17:58.760 the low wages that we've suffered over the last fifteen years. 0:17:58.760 --> 0:18:02.280 And President Trump is going to deliver on this promise 0:18:02.600 --> 0:18:05.080 to turn that right around. And this is a big 0:18:05.160 --> 0:18:08.960 first step and his historic No American president has ever 0:18:09.080 --> 0:18:12.840 looked at this problem UH and committed to solving it. 0:18:12.960 --> 0:18:15.919 This and the Secretary of Commerce is going to deliver 0:18:16.119 --> 0:18:18.840 an historic report in a ninety days. We're going to 0:18:18.920 --> 0:18:21.239 start moving and Peter, it raises the question about what 0:18:21.280 --> 0:18:24.440 the proper remedy is insofar as you find unfair practices. 0:18:24.800 --> 0:18:27.879 Is it to enforce the existing laws, including under w 0:18:28.000 --> 0:18:30.520 t O more effectively or is it new agreements? Is 0:18:30.520 --> 0:18:32.439 it possible, and this goes to the second order as 0:18:32.480 --> 0:18:34.920 I understand it, that goes to anti dumping and countervailing 0:18:34.960 --> 0:18:37.399 duty enforcement. Is it possible that we have the rules 0:18:37.400 --> 0:18:40.720 in place, we just haven't been enforcing them effectively. Well, 0:18:40.760 --> 0:18:43.040 that is the day. That's a great segue to the 0:18:43.080 --> 0:18:46.159 second order. And let me describe that for the for 0:18:46.160 --> 0:18:50.040 for your viewers. UM, there's there's two ways that we 0:18:50.119 --> 0:18:55.520 can enforce against cheating. UH. One is he called anti dumping, 0:18:55.960 --> 0:19:00.640 and that's basically to defend our manufacturers and workers against 0:19:00.680 --> 0:19:05.679 countries that dump products into our markets below cost. And 0:19:05.720 --> 0:19:08.880 then the other part of that is what's called countervailing duties, 0:19:09.240 --> 0:19:14.800 and that's when foreign governments unfairly subsidize their industries and 0:19:14.840 --> 0:19:18.840 we get products essentially at costs lower than they should be. 0:19:18.960 --> 0:19:22.280 So the Department of Commerce historically has been able to 0:19:22.359 --> 0:19:25.679 file these anti dumping und availing duty cases. We have 0:19:25.800 --> 0:19:30.679 almost four hundred of them active right now, covering forty countries. 0:19:31.160 --> 0:19:34.720 But the problem is that the duties we are supposed 0:19:34.760 --> 0:19:39.280 to collect, UM, we haven't always been collecting. Since two 0:19:39.320 --> 0:19:43.560 thousand one, we failed to collect two point eight billion 0:19:43.640 --> 0:19:46.879 dollars in these duties. And it's not just the revenues 0:19:47.000 --> 0:19:50.359 we lose when we fail to collect them, it's also 0:19:50.400 --> 0:19:54.040 the fact that our industries don't get the kind of 0:19:54.040 --> 0:19:57.280 relief that they were promised when they filed their cases. 0:19:57.680 --> 0:20:01.480 So Customs and Border Protection we're giving them the tools 0:20:01.880 --> 0:20:06.160 basically to turn that situation around. And this order besides 0:20:06.200 --> 0:20:09.000 being a great order on trade in the economy, is 0:20:09.119 --> 0:20:14.000 a beautiful example of interagency cooperation and a new Trump administration. 0:20:14.040 --> 0:20:18.280 Because Secretary Ross and Commerce Secretary Kelly at the Department 0:20:18.280 --> 0:20:22.560 of Homeland Security, and the Commissioner at Customs and Boarder 0:20:22.600 --> 0:20:26.440 Protection Kevin mcaleen, and they all work together on this, 0:20:26.560 --> 0:20:29.360 it's a great order. Well, Peter, nowhere is this more 0:20:29.440 --> 0:20:31.719 clear than what has already happened over the last few 0:20:31.800 --> 0:20:34.080 years in terms of China and the anti dumping tariffs 0:20:34.080 --> 0:20:36.840 on steel, which at some point a triple digit taxes 0:20:36.880 --> 0:20:39.240 and that did wind up benefiting the steel industry. Here 0:20:39.800 --> 0:20:42.200 are you looking at those kind of tariffs like triple 0:20:42.280 --> 0:20:48.080 digit uncertain products from certain countries and what about retaliation? Well, 0:20:48.720 --> 0:20:51.160 you managed to go off in in in a direction 0:20:51.240 --> 0:20:53.720 that has nothing to do with what we're talking about today. 0:20:54.080 --> 0:20:57.440 We're talking today about two orders, one which will look 0:20:57.520 --> 0:21:01.240 at trade abuses in a copy handsome way, and another 0:21:01.560 --> 0:21:05.640 which is directed at collecting customs duties. The principle here 0:21:05.640 --> 0:21:09.639 for the Trump administration is smart, tough trade negotiations. The 0:21:09.680 --> 0:21:13.560 information we're gonna get from the Omnibus investigation will inform 0:21:13.640 --> 0:21:17.960 that the second pillar of President Trump's trade policy is 0:21:18.000 --> 0:21:22.879 strict enforcement and compliance. And when you have cheaters basically 0:21:23.000 --> 0:21:27.400 sending products in here after we've already had duties assessed 0:21:27.400 --> 0:21:29.520 and they don't pay them, that's not the kind of 0:21:29.560 --> 0:21:33.120 behavior we're going to tolerate. So this is the let's 0:21:33.160 --> 0:21:35.399 not don't even go there. I mean, we're not talking 0:21:35.440 --> 0:21:38.080 about trade wars or tariffs or anything like that. That's 0:21:38.119 --> 0:21:42.640 that's your rhetoric. We're talking and tariff barriers. I mean 0:21:42.640 --> 0:21:45.000 you specifically mentioned you're looking at tariff and non tariff 0:21:45.000 --> 0:21:48.679 barriers and anti dumping, and that's exactly what we're talking about, exactly, 0:21:48.720 --> 0:21:51.280 and what we're gonna do with this report, if I may, 0:21:51.840 --> 0:21:54.240 what we're gonna do with this report is lay a 0:21:54.320 --> 0:22:01.359 strong foundation for measured, analytically based steps that we're going 0:22:01.400 --> 0:22:05.119 to take to fight what's happening with unfair trade practices 0:22:06.000 --> 0:22:08.800 in this world. Look, I go back to the beginning 0:22:08.880 --> 0:22:11.280 of what I said. We are the freest trader in 0:22:11.320 --> 0:22:14.000 the world. We have the lowest tariffs, we have the 0:22:14.040 --> 0:22:16.919 lowest non tariff barriers, and that's not fair of the 0:22:16.920 --> 0:22:19.880 American people. And and we're gonna look at the causes 0:22:19.880 --> 0:22:22.879 of these trade deficits. There's gonna be some causes that 0:22:22.960 --> 0:22:27.960 are unrelated to trade per se. But when it's trade 0:22:28.200 --> 0:22:31.320 and when there's unfair or non reciprocal behavior by any 0:22:31.359 --> 0:22:34.240 of our trading partners, I can assure you President Trump 0:22:34.280 --> 0:22:38.200 is going to take action. How significant paid effects distortions 0:22:38.240 --> 0:22:42.920 to the problems that you're talking about currently? Say again, 0:22:43.119 --> 0:22:46.920 how significant our FECs distortions to the problem that you're 0:22:46.960 --> 0:22:51.080 talking about currently? Okay, little code word there? The effects 0:22:51.119 --> 0:22:54.240 you're talking about the currency issue? Pay that you're familiar 0:22:54.240 --> 0:22:59.560 with foreign exchange and ECT go U. Yeah, Come on, um, Look, 0:23:00.840 --> 0:23:05.840 Secretary Ross is going to look carefully at many many factors. 0:23:06.240 --> 0:23:11.120 Currency misalignments are certainly one of them in an international environment. 0:23:11.119 --> 0:23:13.720 Will he will look at that, uh and come up 0:23:13.760 --> 0:23:15.960 with an assessment and see where we are. Is that 0:23:16.080 --> 0:23:18.080 something that we'll be brought up with a president? She next, 0:23:18.080 --> 0:23:22.639 sweet pizza? Uh. These orders are totally unrelated to the 0:23:22.720 --> 0:23:24.919 Chinese visit, and I have nothing to say about the 0:23:25.000 --> 0:23:27.280 Chinese visit. I'm here to talk about the two orders today, 0:23:27.320 --> 0:23:29.400 So let's let's talk about what's happening within the White House. 0:23:29.400 --> 0:23:31.560 Has been a lot of reporting about a division between 0:23:31.600 --> 0:23:33.800 the nationalists like your South Peter and the Bannons of 0:23:33.840 --> 0:23:36.960