WEBVTT - Hackers May Be Deeply Embedded In DoD: Former CIA Ops Chief 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.200 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.360 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.600 along with essential market moving news. Find the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple podcast or wherever you listen to podcasts, 0:00:17.000 --> 0:00:20.520 and on Bloomberg dot com. Well. A huge number of 0:00:20.560 --> 0:00:25.520 investigations are underway inside federal agencies and private sector companies 0:00:25.800 --> 0:00:28.680 trying to determine the extent of the cyber attack and 0:00:28.800 --> 0:00:33.240 massive cyber attack. Of course, Russian hackers are suspected. Let's 0:00:33.240 --> 0:00:34.960 bring in somebody who may be able to tell us 0:00:34.960 --> 0:00:36.800 a little bit more. At least we'll be able to 0:00:36.840 --> 0:00:40.360 tell us what the process is right now for going 0:00:40.400 --> 0:00:43.640 about trying to solve this problem. Jack Divine is former 0:00:43.720 --> 0:00:48.080 chief of c i A Worldwide Operations and its founding 0:00:48.120 --> 0:00:50.640 partner and president of the ark And Group, which is 0:00:50.720 --> 0:00:55.200 a risk consultancy and an intelligence firm. Jack, have you 0:00:55.280 --> 0:01:01.000 ever seen anything of this scope and scale? Um? No, 0:01:01.160 --> 0:01:05.160 I think this is really a critical uh point in 0:01:05.440 --> 0:01:09.480 the cyber war that's taking place. It should be a 0:01:09.520 --> 0:01:14.800 real wake up call. The dimension, the aggressiveness the the 0:01:15.560 --> 0:01:20.480 collecting intelligence around the world is a common, common event, 0:01:20.680 --> 0:01:23.720 but the magnitude of going into our health units and 0:01:23.760 --> 0:01:30.279 into every aspect of of our defense system is really 0:01:30.360 --> 0:01:33.480 over over the top, an extremely aggressive thing. There's one 0:01:33.520 --> 0:01:35.880 other point I'd make. I think we're only looking at 0:01:35.920 --> 0:01:39.840 the tip of the iceberg here, Jack, give us a 0:01:39.880 --> 0:01:42.679 sense of kind of how this has progressed, this being 0:01:42.760 --> 0:01:49.640 kind of Russian state sponsored hacking of US government operations. 0:01:49.680 --> 0:01:52.120 Give us just maybe the history of this and and 0:01:52.200 --> 0:01:55.760 where are we right now in that compendium. We talked 0:01:56.040 --> 0:01:59.000 Paul on the show before about the fact that you know, 0:01:59.240 --> 0:02:05.480 there has been a continuous um continuous intelligence activities by 0:02:05.520 --> 0:02:09.520 the Russians over the last twenty five years. When the 0:02:09.520 --> 0:02:12.440 wall fell down, there was a temper every break, but 0:02:12.800 --> 0:02:16.840 there has been an aggressive operational activity. Was particularly brought 0:02:16.880 --> 0:02:21.840 the light in which we could touch on. So the 0:02:21.919 --> 0:02:24.840 Russians are still using the Cold War strategy of trying 0:02:24.880 --> 0:02:27.800 to keep the United States off balance and the collect 0:02:27.840 --> 0:02:32.480 information inside of our our system. The difference today as 0:02:32.639 --> 0:02:37.480 exemplified by they are so aggressive that they are now 0:02:37.600 --> 0:02:41.200 going beyond the collection to putting themselves in the position 0:02:41.200 --> 0:02:44.040 where they can act on it. And that is something 0:02:44.080 --> 0:02:46.440 that I think people have missed this point, not only 0:02:46.520 --> 0:02:49.520 during the election and shrugged at the fact that they 0:02:49.520 --> 0:02:51.960 were a collection, but they used it. And I'm afraid 0:02:52.040 --> 0:02:54.639 here what we're looking at through these trap doors that 0:02:54.720 --> 0:02:58.200 we are now only getting a handle on partially there 0:02:58.200 --> 0:03:01.880 will be in a position to actually make things happen 0:03:02.040 --> 0:03:07.040 beyond collecting bringing down our utility system, our communication system. 0:03:07.160 --> 0:03:09.880 And I believe they're much more deeply embedded in our 0:03:09.919 --> 0:03:14.440 defense contracting world than it's even represented by this most 0:03:14.440 --> 0:03:18.000 recent attack. You made a chilling comment a moment ago 0:03:18.080 --> 0:03:20.079 saying we're only looking at the tip of the iceberg. 0:03:20.520 --> 0:03:22.840 But before we get to that, I want to ask 0:03:22.880 --> 0:03:26.480 you what exactly are they planning on doing If they're 0:03:26.520 --> 0:03:29.920 you know, standing around in all of our systems in 0:03:29.960 --> 0:03:33.279 the Defense Department and you know, all of the agencies 0:03:33.320 --> 0:03:37.960 and in private companies, what are they waiting for? Well, 0:03:38.000 --> 0:03:42.080 I think not to go to television shows and drama 0:03:42.120 --> 0:03:44.240 and so on. But you know, they have sleepers, and 0:03:44.240 --> 0:03:48.760 they build, and we build as well, capabilities to be 0:03:48.840 --> 0:03:53.200 used in a crisis. So when you use it as 0:03:53.280 --> 0:03:55.600 part of a weapon, it's like having your nuclear weapons 0:03:55.640 --> 0:03:57.880 are all sitting there, And the question is when you 0:03:58.080 --> 0:04:00.200 use them. You use them when there's a conference, Asian 0:04:00.280 --> 0:04:06.600 or you want to exercise, um, exercise capabilities. They used 0:04:06.600 --> 0:04:08.840 it in the election. That was the That's where there 0:04:08.920 --> 0:04:10.960 was such a break in the rules that I operated 0:04:10.960 --> 0:04:12.880 and we had an understanding we weren't going to score 0:04:12.880 --> 0:04:16.479 around in each other's internal systems, and they did. That 0:04:16.680 --> 0:04:18.480 was the and I think we just didn't spend enough 0:04:18.520 --> 0:04:21.480 time analyzing that. So today they're in our systems. And 0:04:21.600 --> 0:04:23.880 when I say the defense contracting or when you look 0:04:23.920 --> 0:04:26.760 at the way they approached it, it's just classic. I 0:04:26.760 --> 0:04:29.920 mean they go through an outside contractor they get into 0:04:29.960 --> 0:04:33.080 the software system which then allows them windows in the 0:04:33.160 --> 0:04:38.680 other other other areas. So um, you know, that's to 0:04:38.800 --> 0:04:41.920 my way of thinking, that's that's actually so their preposition. 0:04:42.000 --> 0:04:44.800 Those trap doors were not meant for a one time collection, 0:04:44.920 --> 0:04:47.479 and that's been said by many many commentators on this. 0:04:48.040 --> 0:04:52.120 This was for persistent collection and for use in the 0:04:52.240 --> 0:05:00.599 time of crisis. Check. What should the US response be? Now? 0:05:00.640 --> 0:05:03.240 This is this is one of the trickiest questions I 0:05:03.279 --> 0:05:06.000 think of all that you know, the new administration has 0:05:06.040 --> 0:05:09.360 to deal with it. Um. I think there's been as 0:05:09.400 --> 0:05:11.640 I said, an awareness of this threat, but not the 0:05:11.680 --> 0:05:14.600 full dimensions of it, and there needs to be a 0:05:14.640 --> 0:05:20.960 strategy and an organizational effort to build to build a capability. 0:05:21.040 --> 0:05:25.000 We need to plus up and make additional expenditures and 0:05:25.080 --> 0:05:29.000 looking at the Russian threat, the Chinese threat, we need 0:05:29.040 --> 0:05:33.080 to give it the right priority and UH and develop 0:05:33.520 --> 0:05:37.200 the capabilities. Having said that, it's like the mutual destruction 0:05:37.360 --> 0:05:42.800 It's like the nucletor UH armament race. Eventually we could 0:05:42.800 --> 0:05:45.520 destroy each other and we sat down and started disarmament 0:05:45.560 --> 0:05:50.200 and basically not proliferation efforts. This is even more difficult 0:05:50.440 --> 0:05:52.440 because of the case of the missiles you could see it. 0:05:52.640 --> 0:05:55.320 We need to have new ground rule. New ground knows 0:05:55.360 --> 0:05:58.599 we can start threatening each other and responding and that 0:05:58.720 --> 0:06:01.680 becomes a really dangerou this world. That becomes the Cold 0:06:01.720 --> 0:06:06.040 War two UH area. We need. There needs to be 0:06:06.080 --> 0:06:08.680 a break in this and so far the Russians have 0:06:08.800 --> 0:06:11.880 not seen that. They've seen no indication that they're willing 0:06:11.920 --> 0:06:15.120 to sit down. But there needs to be a This 0:06:15.279 --> 0:06:19.440 is a subterranneal weapon system, so you need a subterraneal 0:06:19.920 --> 0:06:21.719 agreement that there was no one's going to be able 0:06:21.720 --> 0:06:23.240 to get out there and talk about what are the 0:06:23.279 --> 0:06:27.400 parameters of cyber warfare among among ourselves, But there should 0:06:27.400 --> 0:06:30.760 be a diplomatic and intelligence effort to open a dialogue 0:06:30.800 --> 0:06:33.760 about what where are the rules? What are the rules 0:06:33.760 --> 0:06:36.080 of the game. We did have them during the Cold War, 0:06:36.720 --> 0:06:39.640 and we're we don't have them, and we're looking at 0:06:39.680 --> 0:06:41.800 the same type of dynamic that we had with the 0:06:41.880 --> 0:06:46.160 juncular weapons. Other than cyber is not connectic, it's not 0:06:46.200 --> 0:06:49.680 going to not directly going to kill people. But we 0:06:49.720 --> 0:06:51.960 need a new we need a new approach, and we 0:06:52.000 --> 0:06:55.280 need to put this right at the top of our agenda. 0:06:56.480 --> 0:06:58.920 You mentioned that this is only the tip of the iceberg. 0:06:59.000 --> 0:07:03.479 Give us some idea of where you think this goals. Well, 0:07:03.520 --> 0:07:05.760 I think what's missing here is these are a lot 0:07:05.800 --> 0:07:08.839 of the systems. You see the sophistication, you see the approach, 0:07:09.440 --> 0:07:13.200 but what you don't see is how deep into our 0:07:13.280 --> 0:07:16.440 most sensitive secrets are they. And you don't really see 0:07:16.480 --> 0:07:19.000 a lot in this one about what are our defense 0:07:19.080 --> 0:07:22.280 systems that have been compromised. Nobody wants to talk about that, 0:07:23.000 --> 0:07:25.560 but I can assure you that the same techniques that 0:07:25.600 --> 0:07:30.320 are used here against the Energy and Commerce and Treasury 0:07:30.400 --> 0:07:32.640 and so I've been used for years. This is why 0:07:32.680 --> 0:07:36.360 when they talk about March, we're missing the point. This 0:07:36.440 --> 0:07:40.120 particular attack is a March attack. But I tried to 0:07:40.240 --> 0:07:44.320 issue since since cyber became an operational backage, you know, 0:07:45.080 --> 0:07:49.119 the turn of this decade. You know, there has been 0:07:49.160 --> 0:07:54.560 a unceasing effort. That's my point. This battle with Russia 0:07:54.600 --> 0:07:57.440 and what has shown up here, it's a texture of 0:07:57.520 --> 0:08:00.400 the relationship that someone was thinking that Russia it's not 0:08:00.920 --> 0:08:04.360 in an adversarial mode. This really should be a wake 0:08:04.440 --> 0:08:06.560 up call because they have been doing this for the 0:08:06.600 --> 0:08:11.880 past years. Yeah, so I think we need to sharpen 0:08:11.920 --> 0:08:14.400 our attention. Hey, Jack, we're gonna have to leave it there, 0:08:14.400 --> 0:08:16.680 just out of time. Jack Divine, founding partner of the 0:08:16.800 --> 0:08:21.240 ark And Group, also author of a new book entitled 0:08:21.240 --> 0:08:28.920 Spymaster's Prison. Well, the scientists have done their job delivering 0:08:28.960 --> 0:08:32.280 that one, but two and likely at least three in 0:08:32.280 --> 0:08:35.840 the near term possible vaccines for the marketplace. Now it's 0:08:35.920 --> 0:08:39.080 up to the supply chain to get those vaccines out 0:08:39.280 --> 0:08:42.200 to consumers. UH to get a sense of kind of 0:08:42.200 --> 0:08:44.319 where we are in that process and how this whole 0:08:44.360 --> 0:08:47.400 process may play out. We welcome Craig Garthwaite, director of 0:08:47.440 --> 0:08:50.840 the Program on Healthcare and a professor in Hospital and 0:08:50.920 --> 0:08:54.439 Health Services at the Kellogg School of Management at Northwestern 0:08:54.559 --> 0:08:57.880 University based in Evanston, Illinois. Craig, thanks so much for 0:08:58.200 --> 0:09:01.000 joining us here. You know, so again, the way I 0:09:01.040 --> 0:09:03.320 like to frame is, the scientists have just done a 0:09:03.360 --> 0:09:07.600 fabulous job of coming up with multiple vaccines and record time. 0:09:07.960 --> 0:09:10.559 Now the question is how do we get them distributed 0:09:10.600 --> 0:09:15.400 efficiently and timely to the marketplace. What are your thoughts 0:09:15.440 --> 0:09:19.840 as to how the US is doing on this front. Yeah, 0:09:20.160 --> 0:09:22.600 thank thanks for having me. I would expand a bit 0:09:22.640 --> 0:09:25.800 on not just it's not just distribution, it's also manufacturing. 0:09:26.800 --> 0:09:29.240 Unlike sort of a treatment for when people get sick. 0:09:29.360 --> 0:09:32.280 We have to vaccinate everyone in the United States. So 0:09:32.280 --> 0:09:35.040 we're looking at needing, you know, three hundred million people 0:09:35.080 --> 0:09:38.319 to get vaccinated. And if it's a two shot process 0:09:38.400 --> 0:09:40.520 like the Fiser and the Madurna vaccines that we have 0:09:40.559 --> 0:09:44.520 approved now for emergency use, right, that's six hundred million 0:09:44.600 --> 0:09:47.160 doses that we're going to need. Um And I think 0:09:47.160 --> 0:09:49.959 the US is, you know, initially doing well. What I 0:09:50.000 --> 0:09:52.120 mean by that is that we we placed orders to 0:09:52.160 --> 0:09:55.240 get up a lot of vaccine for our healthcare workers 0:09:55.480 --> 0:09:57.439 in December and early JUNI worry, and we're doing a 0:09:57.480 --> 0:10:00.319 good job rolling those out. My real con learned is 0:10:00.360 --> 0:10:03.520 that we seem to be are unwilling to really spend 0:10:03.559 --> 0:10:06.400 what's necessary to make sure that in the second and 0:10:06.559 --> 0:10:09.920 third quarter of one that we're getting all of the 0:10:10.000 --> 0:10:12.560 vaccine supplies that we need. And what I mean by 0:10:12.600 --> 0:10:16.199 that is we should be over investing here. We should buy, 0:10:16.320 --> 0:10:20.560 if we can, enough of the Moderna vaccine and enough 0:10:20.600 --> 0:10:23.120 of the Fiser vaccine so that either one of those 0:10:23.280 --> 0:10:25.640 will be able to treat as many Americans as possible, 0:10:25.679 --> 0:10:28.320 because you know, the supply chain could break down, there 0:10:28.320 --> 0:10:31.240 could be a manufacturing problem, uh, there could be any 0:10:31.320 --> 0:10:34.880 number of things that happened with one of the two manufacturers. 0:10:34.880 --> 0:10:36.320 And so this is this is when it's time for 0:10:36.360 --> 0:10:39.000 sort of a belt and suspenders approached to this. Is 0:10:39.000 --> 0:10:42.920 there any indication, Dr Garthwaite that we're not doing that 0:10:43.080 --> 0:10:44.840 or that there there would be the ability to do 0:10:44.880 --> 0:10:49.920 that and somebody decided not to UH for the Fiser vaccine, 0:10:49.960 --> 0:10:52.800 it appears that Fiser had asked us to exercise an 0:10:52.800 --> 0:10:55.400 option that we have in our initial contract to buy 0:10:55.440 --> 0:10:57.680 more vaccine, and for reasons that have yet to be 0:10:57.720 --> 0:11:01.199 explained by the administration, we we have not done that. 0:11:01.600 --> 0:11:04.280 Um from the reporting in the news and conversations of 0:11:04.280 --> 0:11:06.680 how people involved, it seems like Fiser asked to do that, 0:11:07.240 --> 0:11:09.480 to do that several times, we did not, and so 0:11:09.559 --> 0:11:14.200 instead Fiser then gave the option to the European governments 0:11:14.200 --> 0:11:16.080 that also had a similar options, who might have moved 0:11:16.080 --> 0:11:20.080 ahead of us in line. And I just can't understand 0:11:20.120 --> 0:11:23.599 any reason why we would not be trying to exercise 0:11:23.720 --> 0:11:25.959 every option we can to get access to as much 0:11:26.040 --> 0:11:28.920 vaccine as we can as fast as possible. There's given 0:11:28.920 --> 0:11:32.839 the amount of economic and sort of public health destruction 0:11:33.080 --> 0:11:37.880 that the pandemic is causing, there's just no rationale, particularly 0:11:37.920 --> 0:11:39.959 at the prices that are being talked about, why we 0:11:40.000 --> 0:11:42.880 wouldn't be trying to buy literally every dose we can 0:11:42.920 --> 0:11:45.400 get our hands on, because the worst cases will over 0:11:45.520 --> 0:11:47.160 buy and then we can give it to other countries 0:11:47.200 --> 0:11:50.959 when we don't need it. So, Craig, you say we 0:11:50.960 --> 0:11:54.600 we should buy, I'm not sure who we is? Is 0:11:54.600 --> 0:11:57.600 it the federal government we've because we really haven't had 0:11:57.640 --> 0:12:00.760 a federal government presence during this whole endemic. To begin with, 0:12:00.800 --> 0:12:03.640 it's really been left up to UH states, who is 0:12:03.720 --> 0:12:07.800 the we that goes out and you know, acquires the 0:12:07.840 --> 0:12:11.439 stock of vaccines, so that we is the federal government 0:12:11.480 --> 0:12:12.920 in this case. And this I agree with you that 0:12:13.080 --> 0:12:15.480 overall the federal government has really fallen down on the 0:12:15.559 --> 0:12:18.240 job yet, except when it comes to the focus on 0:12:18.280 --> 0:12:21.800 developing vaccines, where there has been there's been a lot 0:12:21.840 --> 0:12:25.160 of funding given. So the Maderna vaccine was was funded 0:12:25.600 --> 0:12:29.120 entirely by the US government. Feiser did not accept money 0:12:29.120 --> 0:12:31.240 for research and development, but did accept what we referred 0:12:31.240 --> 0:12:33.880 to as an advanced market commitment. And all that means 0:12:33.920 --> 0:12:35.880 is that we agree that if your vaccine works, if 0:12:35.880 --> 0:12:38.040 you get to prove, we're going to buy it, guarantee 0:12:38.080 --> 0:12:40.000 we will buy it. And we said we would buy 0:12:40.000 --> 0:12:43.000 a hundred million doses with an option for five million more. 0:12:43.280 --> 0:12:45.080 And that's what that's what we didn't exercise. But this 0:12:45.200 --> 0:12:48.319 is all being organized by the federal government. So if 0:12:48.320 --> 0:12:51.120 you were designing how to go about this, because certainly 0:12:51.120 --> 0:12:54.520 that the PPE rollout and that's a light chain never worked, 0:12:54.559 --> 0:12:59.640 still isn't working, apparently, how would you design this? I mean, 0:12:59.640 --> 0:13:02.560 I think think you run into some difficulties when it 0:13:02.559 --> 0:13:05.760 comes to the vaccine. That the public health authorities in 0:13:05.840 --> 0:13:08.120 every state have a lot of power as how things 0:13:08.120 --> 0:13:10.680 get distributed, and so the state of the government is 0:13:10.679 --> 0:13:13.920 really working with the state government. I don't think to 0:13:14.200 --> 0:13:16.840 date what we're seeing though, is a problem on the 0:13:16.920 --> 0:13:20.520 distribution of the vaccine to the states. But I think 0:13:20.840 --> 0:13:22.880 you know, we're we're getting it the people, We're getting 0:13:22.880 --> 0:13:25.680 it out relatively quickly. What we really need to be 0:13:25.720 --> 0:13:28.400 focusing on is making sure that we have the commitment 0:13:28.400 --> 0:13:31.680 from the manufacturers that we get the vaccine as fast 0:13:31.720 --> 0:13:35.240 as possible, and that that's it gets into what we 0:13:35.280 --> 0:13:38.199 sometimes referred to as vaccine nationalism, where you know, this 0:13:38.280 --> 0:13:41.520 is a global problem. I understand, but the federal government 0:13:41.600 --> 0:13:43.559 is supposed to be looking out for the United States 0:13:43.559 --> 0:13:45.480 citizens first. That's what we elected with them to do. 0:13:46.040 --> 0:13:48.680 Um And once we get the vaccine sort of pandemic 0:13:48.800 --> 0:13:50.959 under control here, then we can think a bit more 0:13:51.000 --> 0:13:54.560 magnantiously about the rest of the world. Alright, So, professor, 0:13:55.120 --> 0:13:59.840 if I'm a viser or Moderna or you know, Astrosencare 0:14:00.040 --> 0:14:02.680 Johnson and Johnson, if the US government comes knocking on 0:14:02.760 --> 0:14:06.720 my door and says I want everything yet, got I mean, 0:14:08.040 --> 0:14:11.200 how do I say? No? Yeah, I mean they do 0:14:11.280 --> 0:14:13.559 have contractual obligations, right, they did sign things with the 0:14:13.559 --> 0:14:17.640 European Union. But I'm very sympathetic in your position. No. Um, 0:14:17.679 --> 0:14:20.800 we've been debating why the United States pays high drug 0:14:20.840 --> 0:14:23.280 prices and higher drug prices and the rest of the 0:14:23.320 --> 0:14:27.560 world for over decades now. Um, I would hope that 0:14:27.640 --> 0:14:30.600 one thing we've gotten for being such good customers now 0:14:30.640 --> 0:14:32.600 and I promise to be good customers in the future, 0:14:33.000 --> 0:14:34.880 is a little bit of preference when it comes to 0:14:34.880 --> 0:14:37.600 getting access to things like the vaccine. UM. And so 0:14:37.800 --> 0:14:41.000 I do think that the door is not shut, probably 0:14:41.080 --> 0:14:44.680 on those visor doses. I think there's more negotiation that 0:14:44.720 --> 0:14:49.200 will happen. And I really just want to implore policymakers 0:14:49.240 --> 0:14:52.480 to not be pennywise poundful. Is here right that you 0:14:52.960 --> 0:14:55.520 pay extra for the vaccine. I don't care pay sixty 0:14:55.560 --> 0:14:59.240 dollars a dose, given what it can do for the 0:14:59.280 --> 0:15:01.800 economy for of a country. Thinking about we're passing a 0:15:01.880 --> 0:15:05.840 nearly one trillion dollar stimulus again to try and keep 0:15:05.880 --> 0:15:09.560 the economy limping along. Right, if we just get all 0:15:09.600 --> 0:15:11.440 of the vaccine we need, we don't have to worry 0:15:11.480 --> 0:15:13.280 about today. Most we can get people back to work, 0:15:13.320 --> 0:15:15.840 we can open back up businesses, and so they're really 0:15:16.320 --> 0:15:19.400 at the prices we're talking about, it is almost impossible 0:15:19.480 --> 0:15:21.440 to overpay for the vaccine. And we should make that 0:15:21.520 --> 0:15:24.560 clear to manufacturers that our checkbook is open if you 0:15:24.600 --> 0:15:27.200 will give us the supplies. How do you price this 0:15:27.400 --> 0:15:29.960 if you're a fiser or a cover or or or 0:15:30.000 --> 0:15:33.440 a Maderna or somebody with a vaccine that's maybe a 0:15:33.480 --> 0:15:37.680 little less desirable. So so for the fiser over there, 0:15:37.720 --> 0:15:40.960 they've actually I think shown remarkable restraint in terms of 0:15:41.000 --> 0:15:43.760 the amount of value of their vaccine capture or creates 0:15:43.880 --> 0:15:45.640 that they're trying to capture with their price. So we're 0:15:45.640 --> 0:15:48.040 looking at about four dollars for the two dose vaccine 0:15:48.360 --> 0:15:51.680 for fiser um and that's, you know, given what that 0:15:51.760 --> 0:15:53.920 vaccine is doing for someone that that's a pretty low 0:15:53.960 --> 0:15:56.240 price and well below a lot of you know, food 0:15:56.280 --> 0:15:58.520 vaccines and other things that people take that off far 0:15:58.680 --> 0:16:01.880 less efficacious um. And so I do think that they're 0:16:01.880 --> 0:16:04.160 going to earn a lot of money, Let's be clear, right, 0:16:04.200 --> 0:16:07.360 because forty times a billion doses is you know a 0:16:07.400 --> 0:16:09.960 lot that that that no one's gonna be upset about that, 0:16:10.120 --> 0:16:12.000 but I don't think that the pharmaceutical companies are trying 0:16:12.040 --> 0:16:14.920 to take too much value. Yeah, it really is a 0:16:14.920 --> 0:16:18.760 phenomenal thing to watch playoffs from a safe distance. Of course, 0:16:19.320 --> 0:16:22.840 our thanks to you, Professor Craig garth Waite. He's director 0:16:22.840 --> 0:16:26.160 of the Program and Healthcare at Northwestern University's Kellogg School 0:16:26.280 --> 0:16:31.400 of Management. It is time for Bloomberg Opinion were joined 0:16:31.440 --> 0:16:36.000 this morning by Bloomberg Opinion columns Brian Schapatta. He covers 0:16:36.040 --> 0:16:39.840 all things on the fixed income site and fascinating column 0:16:39.880 --> 0:16:45.080 out Brian has uh Jamie Diamond gets his thirty billion 0:16:45.120 --> 0:16:48.200 dollar buy back wish. Brian, thanks so much for joining 0:16:48.320 --> 0:16:53.320 us here. Boy, Jamie Diamond wasted no time in announcing 0:16:53.440 --> 0:16:56.160 this significant buyback program. Give us the background of what's 0:16:56.240 --> 0:16:59.760 happening here with the big banks. Yeah, it was pretty incredible. 0:17:00.280 --> 0:17:03.120 Just ten minutes after the Federal Reserve released its second 0:17:03.200 --> 0:17:06.240 round of bank stress tests, they decided to do another 0:17:06.320 --> 0:17:09.760 round because of the coronavirus pandemic and obviously it's impact 0:17:10.000 --> 0:17:13.919 wouldn't be clear for many months to come. So the 0:17:13.960 --> 0:17:17.240 Fed released its stress tests and basically said all the 0:17:17.280 --> 0:17:20.359 banks passed with flying colors UM, which was which was 0:17:20.400 --> 0:17:22.879 a clear bill of health, and as a result, they 0:17:22.920 --> 0:17:26.480 sort of loosened the restrictions on whether banks could buy 0:17:26.480 --> 0:17:29.639 back stock. And so within ten minutes of that announcement, 0:17:29.960 --> 0:17:33.160 Jamie Diamond and and uh JP Morgan came out late 0:17:33.160 --> 0:17:35.560 Friday after markets closed and said we're starting a thirty 0:17:35.560 --> 0:17:39.680 billion dollars buyback program. Overall, eleven billion dollars among the 0:17:39.720 --> 0:17:44.080 sixth largest US banks uh could potentially be bought back UM. 0:17:44.240 --> 0:17:46.280 So it's a it's a big win for the banks, 0:17:47.000 --> 0:17:49.480 a pretty decent win for the bank shareholders, and for 0:17:49.560 --> 0:17:51.760 Jamie Diamond, who has been counting the table wanting to 0:17:51.800 --> 0:17:54.680 buy back his stock when it's been so low over 0:17:54.720 --> 0:17:56.879 the past year. It's a big win as well. What 0:17:57.040 --> 0:18:01.359 were the assumptions made presume They were pretty harsh to 0:18:01.760 --> 0:18:06.000 allow for the pandemic, But were they harsh enough? By yeah, 0:18:06.119 --> 0:18:08.320 I mean one of the things that I looked at 0:18:08.480 --> 0:18:11.359 most closely was the unemployment rate that was assumed. And 0:18:11.440 --> 0:18:13.800 so there were a couple of assumptions with the unemployment 0:18:13.880 --> 0:18:17.800 rate would spike to twelve percent and either come back 0:18:17.840 --> 0:18:20.720 pretty quickly, or with spike into the double digits and 0:18:20.840 --> 0:18:24.400 recover more slowly, and in both of those scenarios, UM 0:18:24.600 --> 0:18:26.320 the banks did find. It was always going to be 0:18:26.359 --> 0:18:29.600 a question of whether UM the sides looking at slightly 0:18:29.640 --> 0:18:33.640 the right metrics, whether uh it's it was harsh enough. 0:18:33.680 --> 0:18:35.880 But I think what we learned over the course of 0:18:35.920 --> 0:18:39.679 this year especially is the SET itself can step in 0:18:39.880 --> 0:18:43.119 and and do a lot to uh stymy any um, 0:18:43.600 --> 0:18:46.840 any major crisis. UM. I won't expected that it could 0:18:46.840 --> 0:18:49.160 be a potentially for a long recession when we were 0:18:49.280 --> 0:18:51.360 staring at the worst of it in March and April, 0:18:51.440 --> 0:18:54.199 and it turned out to be to be pretty short lived. UM. 0:18:54.600 --> 0:18:57.800 Congress came through with obviously with a fiscal package on 0:18:57.840 --> 0:19:01.320 the SET as well on the market side. So, Brian, 0:19:02.680 --> 0:19:05.879 how do how do we characterize the I guess the 0:19:05.880 --> 0:19:08.560 financial health of some of these big banks here as 0:19:08.600 --> 0:19:11.280 they think about you know, buy backs and and things 0:19:11.320 --> 0:19:13.840 like that. Are they in I guess the FED feels 0:19:13.840 --> 0:19:18.520 pretty comfortable at this stage. Yeah, only little BRAINERD potential 0:19:18.560 --> 0:19:20.879 candidates to be the next SET chair actually just sensed 0:19:20.920 --> 0:19:23.159 and said that she would prefer that they don't do 0:19:23.200 --> 0:19:25.480 that and and hold on to more of their cash 0:19:25.480 --> 0:19:28.000 and their capital. UM. But I mean I think the 0:19:28.040 --> 0:19:30.199 moral of the story is that it was such a 0:19:30.240 --> 0:19:34.440 sharp snapback that even though you saw these massive loan 0:19:34.520 --> 0:19:37.879 lost provisions from the banks earlier this year, UM, a 0:19:37.920 --> 0:19:40.640 lot of those loans are performing now and it's not 0:19:40.680 --> 0:19:43.959 necessarily going to be as bad as initially feared, in 0:19:44.040 --> 0:19:47.320 part because there was a tremendous fiscal stimulus package. I mean, 0:19:47.359 --> 0:19:49.640 make no mistake, there's still a lot of pain out there, 0:19:50.000 --> 0:19:54.200 but it's not quite as widespread and potentially systemic as 0:19:54.240 --> 0:19:56.200 I think a lot of people feared. There are pockets 0:19:56.200 --> 0:19:59.480 and weakness as opposed to put all over the board. 0:20:00.040 --> 0:20:02.040 On the face of it, I can understand how the 0:20:02.080 --> 0:20:04.240 FED would give the go ahead. Right we're hearing a 0:20:04.240 --> 0:20:06.720 lot about how markets are at all time highs. The 0:20:06.960 --> 0:20:10.919 Khad recovery means that affluent people are not really experiencing 0:20:10.920 --> 0:20:13.560 a recession, and of course it's affluent people that are 0:20:13.600 --> 0:20:16.879 invested in the stock market and in banks. At the 0:20:16.920 --> 0:20:19.760 same time, the FED itself has suggested that it doesn't 0:20:19.760 --> 0:20:21.480 know what's going to happen next year. We don't know 0:20:21.520 --> 0:20:24.080 how much of this unemployment is going to be structural unemployment, 0:20:24.160 --> 0:20:27.600 and we don't know if there's going to be more 0:20:27.720 --> 0:20:31.080 pain when we expect demand to return, Will that demand 0:20:31.119 --> 0:20:34.000 return or will have habits have changed forever? Is that 0:20:34.080 --> 0:20:37.560 taken into account at old Bryan, Yeah, I think that 0:20:38.000 --> 0:20:39.560 the real thing that's going to be an issue for 0:20:39.560 --> 0:20:41.879 the FED going forward, all of your you know, like 0:20:41.920 --> 0:20:44.240 you said, they don't have a clear sense of what's 0:20:44.280 --> 0:20:47.679 going to happen with the economy. But even still, I 0:20:47.720 --> 0:20:49.480 think they have to be started starting to be looking 0:20:49.480 --> 0:20:54.200 at financial conditions today, notwithstanding um and just thinking, wow, 0:20:55.000 --> 0:20:58.200 the markets are wide open. People are people are happy, 0:20:58.359 --> 0:21:02.000 people are seeing their stock work ohios go up. Anybody 0:21:02.000 --> 0:21:04.359 who wants to borrow, whether it's a large corporation or 0:21:04.400 --> 0:21:07.800 a small municipality, is able to do so pretty easily 0:21:08.000 --> 0:21:11.200 at record low interest rates, And so I think they're 0:21:11.200 --> 0:21:13.479 trying to balance that that. There is still a lot 0:21:13.480 --> 0:21:16.119 of pain out there. The labor market is very uncertain, 0:21:16.280 --> 0:21:19.439 and inflation outlook looks better than it has been but 0:21:19.560 --> 0:21:22.720 still kind of dicey. On the other hand, financial markets, 0:21:22.760 --> 0:21:27.000 which they have a large hand in, are doing incredibly well, 0:21:27.080 --> 0:21:30.720 so that I think they're trying to balance both of those. Alright, 0:21:30.720 --> 0:21:35.000 we will see certainly the banks are performing just find 0:21:35.160 --> 0:21:39.000 day daping Morgan itself of three even as this market decreases. 0:21:39.040 --> 0:21:42.240 So we'll see how long that good feeling lasts. Daping 0:21:42.280 --> 0:21:47.200 Morgan itself with a thirty billion dollar buy back. Brian Chapatta, 0:21:47.359 --> 0:21:50.880 thank you very much. Brian is Bloomberg opinion columnist and 0:21:51.040 --> 0:21:55.640 has written a great column today on this stress test results, 0:21:55.640 --> 0:21:59.200 which children banks are weathering the pandemic and can actually 0:21:59.560 --> 0:22:04.200 give it's some dividend payments and also start buying back 0:22:04.240 --> 0:22:07.200