WEBVTT - Fed Expected to Raise Rates; Regional Banks Fall Again 0:00:02.600 --> 0:00:05.920 From the Bloomberg Interactive Burgers Studios. This is Bloomberg day 0:00:05.920 --> 0:00:09.880 Break for Wednesday, May third. Coming up today, the Federal. 0:00:09.560 --> 0:00:13.280 Reserve is expected to hike rates for a tenth straight time. 0:00:13.280 --> 0:00:15.960 But a former Fed president said the Central Bank should 0:00:16.000 --> 0:00:16.959 not make the move. 0:00:17.320 --> 0:00:20.599 Regional banks remain in focus after yesterday's. 0:00:20.040 --> 0:00:22.720 So off, and the clock is ticking for Washington to 0:00:22.760 --> 0:00:24.320 cut a deal on the debat ceiling. 0:00:24.720 --> 0:00:27.360 It was a loud meeting over rent increases for New 0:00:27.400 --> 0:00:30.400 York City apartments. Plus the gunman accused of killing five 0:00:30.440 --> 0:00:33.800 people in Cleveland, Texas is behind bars. I'm John Tucker 0:00:33.920 --> 0:00:34.559 Moore Ahead. 0:00:34.680 --> 0:00:36.960 I'm John stashed Aaron's boards. The next beat the heat 0:00:37.000 --> 0:00:39.240 aside of the series and won. The Lakers won Game 0:00:39.280 --> 0:00:41.919 one at Golden State, a much did win for the Yankees. 0:00:43.680 --> 0:00:47.120 That's all straight ahead on Bloomberg day Break, the business 0:00:47.159 --> 0:00:49.599 news you need to sturn your day in just one 0:00:49.720 --> 0:00:54.200 fifteen minute podcast each morning on Apples, Spotify, the Bloomberg 0:00:54.240 --> 0:00:56.920 Business app, and everywhere you get your podcasts. 0:01:00.000 --> 0:01:01.680 Good morning, I'm Nathan Hager. 0:01:01.600 --> 0:01:04.840 And I'm Karen Moscow. Here are the stories we're following today. 0:01:05.959 --> 0:01:09.280 We begin this busy news day with a highly anticipated 0:01:09.360 --> 0:01:12.320 FED meeting. J Powell and company are expected to raise 0:01:12.400 --> 0:01:15.399 rates for a tenth straight time. Today we get a 0:01:15.440 --> 0:01:17.240 preview from Bloomberg's Michael McKee. 0:01:17.560 --> 0:01:20.440 Investors are convinced the Fed will raise rates once more 0:01:20.480 --> 0:01:23.880 by a quarter percentage point, but after that one they're done. 0:01:24.120 --> 0:01:26.400 They will signal rates are high enough and need to 0:01:26.440 --> 0:01:28.240 stay there for at least the rest of the year 0:01:28.319 --> 0:01:31.640 to ensure that inflation continues to slow. The owners for 0:01:31.680 --> 0:01:34.440 convincing Wall Street they will follow through will fall on 0:01:34.560 --> 0:01:35.000 Chairman J. 0:01:35.160 --> 0:01:35.600 Powell. 0:01:35.680 --> 0:01:38.080 Markets are pricing in two rate cuts by the end 0:01:38.160 --> 0:01:41.399 of twenty twenty three. Powell will also get questions about 0:01:41.400 --> 0:01:44.840 the status of the banking system and regulatory reforms the 0:01:44.840 --> 0:01:47.880 Central Bank needs to make, and no doubt about the 0:01:47.960 --> 0:01:50.960 debt ceiling, although that's an issue he's likely to dodge 0:01:51.000 --> 0:01:53.720 for the time being. Michael McKee, Bloomberg Daybreak. 0:01:53.800 --> 0:01:54.400 All right, Mike. 0:01:54.480 --> 0:01:54.880 Thanks. 0:01:54.960 --> 0:01:57.200 While the betting on Wall Street is for a twenty 0:01:57.240 --> 0:02:00.560 five point raid hike, one former FED official wants a 0:02:00.560 --> 0:02:04.080 different approach. Former Dallas Fed president Robert Kaplan tells us 0:02:04.200 --> 0:02:05.880 rates should stay where they are. 0:02:06.200 --> 0:02:09.240 I would prefer to do what's called the hawkish pause. 0:02:09.440 --> 0:02:13.919 Not raise, but signal that we're in a tightening stance 0:02:14.440 --> 0:02:18.080 because I actually think the banking situation may well be 0:02:18.200 --> 0:02:20.400 more serious than we currently understand it. 0:02:20.680 --> 0:02:23.400 And former Dallas FED President Robert Kaplan made the comments 0:02:23.440 --> 0:02:26.200 in an interview with Bloomberg's Kathleen Hayes. Stay tuned for 0:02:26.240 --> 0:02:29.400 more of that conversation coming up shortly on Bloomberg Daybreak. 0:02:29.480 --> 0:02:31.760 Well, Karen, Kaplan's not the only one asking the Central 0:02:31.760 --> 0:02:34.160 Bank to pause, so are a couple of lawmakers, including 0:02:34.200 --> 0:02:37.800 Senators Elizabeth Warren and Bernie Sanders. They wrote a letter 0:02:37.800 --> 0:02:40.959 to j Powell urging the Fed to stop hiking rates. 0:02:41.040 --> 0:02:44.040 They cite the recent banking turmoil as a strong reason 0:02:44.120 --> 0:02:44.919 to pause. 0:02:45.080 --> 0:02:48.400 And Nathan that banking turmoil remains in focus again today. 0:02:48.720 --> 0:02:53.400 US regional lenders tumbledon yesterday on fresh anxiety over financial stability. 0:02:53.720 --> 0:02:57.320 Pac West Bancor plunged twenty seven percent, while Western Alliance 0:02:57.400 --> 0:03:00.840 dropped fifteen percent, and both our lower again this morning. 0:03:00.840 --> 0:03:04.760 They're down roughly two percent. PGM CEO David Hunt tells 0:03:04.840 --> 0:03:07.320 us we have yet to feel the full impact of 0:03:07.360 --> 0:03:08.720 the regional banking crisis. 0:03:09.200 --> 0:03:12.480 We are actually just starting on the implications of the 0:03:12.520 --> 0:03:16.840 banking crisis that we are now going to see a 0:03:17.800 --> 0:03:21.520 increased regulation of banks, in particular focused on the regional 0:03:21.560 --> 0:03:22.480 banks as you mentioned. 0:03:23.120 --> 0:03:24.079 We're also going to. 0:03:24.040 --> 0:03:27.320 See the result of that being a pullback in credit, 0:03:27.320 --> 0:03:30.000 which will help of course non bank lenders, and we're 0:03:30.000 --> 0:03:31.440 going to see more bank consolidation. 0:03:32.040 --> 0:03:36.200 And David Hunt of pgmc's widespread fallout, but that's not 0:03:36.320 --> 0:03:39.600 the view from Larry Summers. The former Treasury secretary tells 0:03:39.680 --> 0:03:42.880 us the worst of the banking crisis is likely behind us. 0:03:43.440 --> 0:03:48.480 I think that we actually are probably over the vast 0:03:48.560 --> 0:03:54.600 majority of the banking of the banking traumas. But look, 0:03:54.640 --> 0:04:00.760 we still have institutions that have looked vulnerable for some time, 0:04:00.880 --> 0:04:05.080 and those are the ones that are most affected today. 0:04:05.560 --> 0:04:08.280 Former Treasury Secretary Larry Summers made the comments in an 0:04:08.320 --> 0:04:11.680 interview with Bloomberg's David Weston Catch that interview coming up 0:04:11.720 --> 0:04:12.840 shortly on the program. 0:04:12.920 --> 0:04:15.880 Well, Karen, A bigger bank is also making headlines this morning. 0:04:16.000 --> 0:04:19.720 Morgan Stanley is in talks with US prosecutors and regulators 0:04:19.920 --> 0:04:22.719 to resolve a probe into its block trading practices. We 0:04:22.800 --> 0:04:24.760 get the details from Bloomberg's Doug Prisner. 0:04:25.000 --> 0:04:28.160 The bank is currently discussing a resolution with the SEC 0:04:28.279 --> 0:04:31.719 and the US Attorney. Previously, Morgan Stantley said the inquiries 0:04:31.760 --> 0:04:36.479 focused on whether employees violated securities regulations by sharing or 0:04:36.560 --> 0:04:41.320 using information on impending block trades. Now Morganstantley has discharged 0:04:41.360 --> 0:04:43.760 two bankers. The company said the move was tied to 0:04:43.800 --> 0:04:48.400 allegations about their communications on block trades and client activity. 0:04:48.560 --> 0:04:51.920 Wall Street has been watching closely as prosecutors probe how 0:04:52.000 --> 0:04:54.840 banks work with hedge funds and other buyers to privately 0:04:54.920 --> 0:04:58.240 carry out stock sales big enough to move prices in 0:04:58.320 --> 0:05:00.200 New York Time. Duck prisoner Bloomberg. 0:04:59.760 --> 0:05:02.320 Gab all right, Doug, thanks man. Now let's shift to 0:05:02.400 --> 0:05:05.000 politics and get the latest on the debt ceiling debate. 0:05:05.080 --> 0:05:07.920 The deadline for a potential default just got a little closer, 0:05:07.960 --> 0:05:09.839 and that means there could be a need for a 0:05:09.920 --> 0:05:13.359 short term fix. May get the latest from Bloomberg's Amy Morris. 0:05:13.680 --> 0:05:16.520 Between now and June first, when the Treasury could run 0:05:16.600 --> 0:05:19.680 out of sufficient cash, President Biden and members of the 0:05:19.720 --> 0:05:22.320 House and Senate our scheduled to be in town at 0:05:22.360 --> 0:05:25.599 the same time for one week. That's not enough time 0:05:25.640 --> 0:05:27.839 for the White House and lawmakers to strike a bargain 0:05:27.880 --> 0:05:31.120 before the deadline. A short term extension is now likely, 0:05:31.360 --> 0:05:34.400 but could force Republicans to break their promise against a 0:05:34.440 --> 0:05:38.360 clean debt ceiling bill or force Democrats to concede, setting 0:05:38.400 --> 0:05:42.920 a precedent before negotiations even begin. Amy Morris, Bloomberg Daybreak. 0:05:42.560 --> 0:05:43.480 Okay, Amy, thank you. 0:05:43.520 --> 0:05:45.960 Along with the deadline, the White House is also under 0:05:45.960 --> 0:05:49.279 pressure over a potential migrant surge this spring. Now, the 0:05:49.279 --> 0:05:52.640 Biden administration plans to deploy fifteen hundred members of the 0:05:52.720 --> 0:05:55.920 US military along the Mexican border. We get that story 0:05:55.960 --> 0:05:57.200 from Bloomberg's Ed Baxter. 0:05:57.400 --> 0:06:00.480 The administration says there's already been a spike in migration, 0:06:00.560 --> 0:06:03.400 and Brigadier General pad Ryder says this is a head 0:06:03.440 --> 0:06:06.920 of an expected surge of migrants once pandemic restrictions are 0:06:06.920 --> 0:06:08.039 lifted later this month. 0:06:08.080 --> 0:06:11.240 For ninety days, these fifteen hundred military personnel, who will 0:06:11.279 --> 0:06:14.560 be sourced from the active duty component, will fill critical 0:06:14.600 --> 0:06:18.159 capability gaps such as ground based detection and monitoring. 0:06:18.360 --> 0:06:22.200 General writer says they will not participate in law enforcement. 0:06:22.560 --> 0:06:25.360 Immigration is expected to be a major campaign issue in 0:06:25.440 --> 0:06:28.680 the twenty twenty four election cycle. In San Francisco. I'm 0:06:28.680 --> 0:06:30.599 at Baxter Bloomberg Daybreak. 0:06:33.279 --> 0:06:34.480 Time Now for a look at some of the other 0:06:34.520 --> 0:06:36.560 stories making news in New York and around the world 0:06:36.600 --> 0:06:37.760 with Bloomberg's John Tucker. 0:06:37.760 --> 0:06:39.960 Good Morning, John, and Nathan, Tenna and c In New 0:06:40.040 --> 0:06:43.600 York City's one billion rent stabilized departments are looking at 0:06:43.640 --> 0:06:47.640 increases After a rent Guidelines Board meeting, the panel offered 0:06:47.680 --> 0:06:50.760 rent increases of four percent to seven percent for two 0:06:50.839 --> 0:06:54.240 year leases and two to five percent increases on one 0:06:54.279 --> 0:06:57.599 year leases. Protesters storm the stage of the meeting, calling 0:06:57.640 --> 0:07:01.360 for a rent rollback. This woman's spoke to ABC seven. 0:07:01.480 --> 0:07:04.320 How could we afford out increase right now? 0:07:05.279 --> 0:07:07.800 Marthomer, don't have no jobs well. 0:07:07.880 --> 0:07:12.080 The rentike proposals face a final vote next month. Authorities 0:07:12.120 --> 0:07:14.640 near Houston say they've caught a man suspended of killing 0:07:14.720 --> 0:07:18.160 five of his neighbors with an ar style rifle. San 0:07:18.200 --> 0:07:21.000 Jacinto County Sheriff Greg Caper says that thirty eight year 0:07:21.000 --> 0:07:24.160 old Francisco or Pesa was arrested in connection with his 0:07:24.240 --> 0:07:27.440 shooting in the town of Cleveland, Texas. He says Orpesa 0:07:27.560 --> 0:07:29.680 was found hiding in the closet of a home under 0:07:29.720 --> 0:07:33.400 a pile of laundry after investigators acted on a tip. 0:07:33.840 --> 0:07:38.040 They effectively made the arrest. He is uninjured and he 0:07:38.200 --> 0:07:42.920 is currently being taken to my facility in Cole Springs. 0:07:43.240 --> 0:07:45.800 Authority to say the shooting began late Friday after the 0:07:45.840 --> 0:07:49.280 neighbors had confronted or Pesa about firing a gun in 0:07:49.360 --> 0:07:52.200 his yard late at night. New York City Mayor Eric 0:07:52.200 --> 0:07:56.000 Adams once again accusing Texas Governor Greg Abbott of targeting 0:07:56.080 --> 0:07:58.560 black mayors with buses full of migrants. 0:07:58.920 --> 0:08:04.120 Governor Abbott sent assilunce seekers to New York, black mayor, 0:08:04.840 --> 0:08:11.240 to Washington, black mayor, to Houston, black mayor, to Los Angeles, 0:08:11.280 --> 0:08:17.200 black mayor to Denver black mayor. He passed over thousands 0:08:17.200 --> 0:08:18.760 of cities to land here. 0:08:19.200 --> 0:08:23.000 A Governor Abbitt's office says the migrants chose for themselves 0:08:23.320 --> 0:08:26.400 which cities to travel to. Donald Trump's attorneys says the 0:08:26.440 --> 0:08:28.960 former president will not testify at a civil trial in 0:08:29.040 --> 0:08:32.000 New York. This comes after two women testified yesterday in 0:08:32.040 --> 0:08:35.599 supportive writer Ejen Carroll, who claims Trump raped her in 0:08:35.640 --> 0:08:39.160 the nineteen nineties. He has denied that it looks likely 0:08:39.200 --> 0:08:41.760 to be a long grind for Hollywood writers who've gone 0:08:41.760 --> 0:08:44.920 on strike to preserve pay and hang on to job security. 0:08:49.440 --> 0:08:52.439 Members of the Writers Guild of America picketing in New 0:08:52.480 --> 0:08:56.040 York and Los Angeles after their contract expired. It's the 0:08:56.080 --> 0:08:59.720 first writer's strike in fifteen years. Global News twenty four 0:08:59.720 --> 0:09:02.760 hours day powered bye more than twenty seven hundred journalists 0:09:02.760 --> 0:09:05.640 and analyst in over one hundred and twenty countries. I'm 0:09:05.679 --> 0:09:08.280 John Tucker, the Sea's Bloomberg Nathan. 0:09:07.840 --> 0:09:08.440 Thank you, John. 0:09:13.040 --> 0:09:15.640 Time out for the Bloomberg Sports Update with John stash Out. 0:09:15.840 --> 0:09:18.360 Thanks Nathan. The Knicks lost Game one to the Heat. 0:09:18.440 --> 0:09:21.480 Miami star Jimmy Butler didn't play Game two at the 0:09:21.480 --> 0:09:23.439 Garden due to a sprained ankle, and yet the Knicks 0:09:23.440 --> 0:09:26.320 trailed for most of the night. Jalen Brunson was zero 0:09:26.360 --> 0:09:28.880 for seven on three pointers in the opener. He called 0:09:28.880 --> 0:09:31.320 his play horrific, and he didn't play well first half 0:09:31.360 --> 0:09:34.199 of Game two. But then Brunston came alive, as in 0:09:34.240 --> 0:09:37.800 the left sideline cross Robinson a switch take some baseline 0:09:38.120 --> 0:09:40.080 tries to come up pill a bit step off the 0:09:40.120 --> 0:09:45.559 paint shotle the fat scorchch ties the game at ninety three. 0:09:45.880 --> 0:09:49.760 Time out Miami JHN ESPN Yerk Brunston scored thirty points. 0:09:49.840 --> 0:09:52.280 He made six three pointers. The Knicks pulled out the 0:09:52.320 --> 0:09:53.680 game to win one to eleven. 0:09:53.679 --> 0:09:54.200 One O five. 0:09:54.320 --> 0:09:57.199 Julius Randall back from his ankle injury. He was terrific. 0:09:57.240 --> 0:10:00.480 He scored twenty five with twelve rebounds in eighty SI RJ. 0:10:00.600 --> 0:10:02.880 Barrett out at twenty four and the series is tight. 0:10:02.960 --> 0:10:06.760 To won Game three not until Saturday in Miami. Game 0:10:06.800 --> 0:10:08.840 one in the West, the Lakers beat Golden State for 0:10:08.880 --> 0:10:12.840 Anthony Davis thirty points twenty three rebounds. Celtics and Sixers. 0:10:13.160 --> 0:10:15.800 Game two tonight in Boston. Philly won the opener without 0:10:15.880 --> 0:10:18.600 Joel Embiid and he is not expected to play tonight. 0:10:18.920 --> 0:10:22.600 Embiid was just named NBA MVP Stanley Cup Playoffs. Florida 0:10:22.679 --> 0:10:25.559 and Seattle both off game seven wins down the road, 0:10:25.559 --> 0:10:27.599 and they won Game one's of Round two on the 0:10:27.679 --> 0:10:31.000 road the Panthers in Toronto, the Kracking in Dallas and overtime. 0:10:31.080 --> 0:10:33.839 The Devils off their game seven wins start their series 0:10:33.880 --> 0:10:36.480 tonight at Carolina at the Stadium. Much didn't win for 0:10:36.520 --> 0:10:38.600 the Yankees. They had dropped seven to last nine. They 0:10:38.640 --> 0:10:41.080 trailed Cleveland two nothing came back to win four to two. 0:10:41.600 --> 0:10:44.199 Home runs for Anthony Boll playing Willie Calhoun. The Mets 0:10:44.240 --> 0:10:46.480 reigned out for the third time in four days. They'll 0:10:46.480 --> 0:10:48.920 play at day night doubleheader today in Detroit. Bryce Harper's 0:10:48.920 --> 0:10:51.200 first game for the Phillies, he went oh for four 0:10:51.200 --> 0:10:53.560 and the loss of the Dodgers. Harper back earlier and 0:10:53.600 --> 0:10:57.960 expected from Tommy John Surgery, johns Stashedward. Bloomberg Sports. 0:11:00.280 --> 0:11:03.240 From coast to coast, from New York to San Francisco, 0:11:03.440 --> 0:11:07.840 Boston to Washington, DC, nationwide on Syrias exam the Bloomberg 0:11:07.920 --> 0:11:09.960 Business Appen Bloomberg dot Com. 0:11:10.120 --> 0:11:15.120 This is Bloomberg Daybreak. Good morning. I'm Nathan Hager. To 0:11:15.240 --> 0:11:18.040 hike or to pause? That is the question for the 0:11:18.080 --> 0:11:20.559 Federal Open Market Committee, and we will find out this 0:11:20.720 --> 0:11:24.560 afternoon what the committee does about interest rates when its 0:11:24.640 --> 0:11:27.880 May meeting draws to a close. But opinion is divided 0:11:28.040 --> 0:11:31.600 among leading economic voices. So let's bring those voices to 0:11:31.640 --> 0:11:34.560 you now. In a conversation with Bloomberg's Kathleen Hayes, sherry 0:11:34.559 --> 0:11:37.280 On and Heidi Stroud Watts, former Federal Reserve Bank of 0:11:37.360 --> 0:11:41.439 Dallas president Robert Kaplan called for a hawkish pause amid 0:11:41.520 --> 0:11:44.199 regional bank turmoil. Let's bring you part of that conversation. 0:11:44.880 --> 0:11:48.120 You think the FED should pause, Why, Yeah. 0:11:47.920 --> 0:11:50.040 I do think they should pause for a few reasons. 0:11:50.080 --> 0:11:53.760 One is, I think we're in the early stages, not 0:11:53.880 --> 0:11:58.240 the late stages, of this banking situation. I think there's 0:11:58.280 --> 0:12:02.760 been a pretty significant change for the prospects of small 0:12:02.760 --> 0:12:06.520 and mid sized banks. They provide most of the lending 0:12:06.840 --> 0:12:10.040 to small mid sized businesses in the United States, and 0:12:10.800 --> 0:12:13.280 we've just seen the first phase of this, which is 0:12:13.280 --> 0:12:16.080 the asset liability mismatch, which is sort of the most 0:12:16.120 --> 0:12:20.280 obvious issue, but the credit issues are about to start, 0:12:20.640 --> 0:12:22.640 and I think that's why you're seeing the reaction in 0:12:22.679 --> 0:12:25.400 the markets. The other issue for me is from a 0:12:25.480 --> 0:12:27.560 risk management point of view, if I were sitting in 0:12:27.600 --> 0:12:29.880 the seat, I think it's more important to be able 0:12:29.880 --> 0:12:33.200 to sustain the current rate for an extended period of time, 0:12:33.400 --> 0:12:36.839 longer than the market thinks, then get another twenty five 0:12:36.920 --> 0:12:40.480 or fifty basis points and risk having to cut again. 0:12:40.600 --> 0:12:43.720 I think that would be very troubling. And I'd say 0:12:43.720 --> 0:12:46.920 one more comment if I were at the FED, I'd 0:12:46.960 --> 0:12:50.439 call out that we need a whole of government approach 0:12:50.720 --> 0:12:53.000 to fight inflation. Right now, the FED is saying we've 0:12:53.040 --> 0:12:53.640 got this. 0:12:53.960 --> 0:12:56.200 We can solve it. I don't think that's the case. 0:12:56.640 --> 0:12:59.640 I would prefer to do what's called the hawkish pause, 0:13:01.080 --> 0:13:05.400 but signal that we're in a tightening stance, because I 0:13:05.440 --> 0:13:09.360 actually think the banking situation may well be more serious 0:13:09.400 --> 0:13:11.840 than we currently understand, and I'd like to turn over 0:13:11.880 --> 0:13:14.800 a few more cards rather than regret not doing that 0:13:14.920 --> 0:13:15.719 three months from now. 0:13:15.800 --> 0:13:20.000 Okay, put on your former golden vice chair hat. If 0:13:20.040 --> 0:13:23.640 you were advising a desk, a trading desk, an investment desk. 0:13:24.080 --> 0:13:25.320 What do you think the risk is now? 0:13:25.880 --> 0:13:27.640 Have we not seen the end of it? It seems 0:13:27.760 --> 0:13:29.520 we know that there's shorts out there. Are there? 0:13:29.559 --> 0:13:30.520 No people are nervous? 0:13:30.559 --> 0:13:32.840 But is there fundamental risk right now that could keep 0:13:32.880 --> 0:13:37.640 this small and medium sized banking turmoil problem going? 0:13:38.280 --> 0:13:38.480 Yeah. 0:13:38.559 --> 0:13:41.760 Normally when we're discussing problems with banks, it's after we've 0:13:41.760 --> 0:13:44.600 been through a credit cycle. We have not been we 0:13:44.640 --> 0:13:48.199 haven't even started the credit cycle. We've just had an 0:13:48.240 --> 0:13:52.400 asset liability mismatch issue where banks were overinvested in long 0:13:52.480 --> 0:13:56.360 term treasuries and bank equity has been marked down just 0:13:56.440 --> 0:13:59.960 based on that. We've got the credit issues yet to come, 0:14:00.440 --> 0:14:04.160 we're at a different stage in the cycle. And there's 0:14:04.559 --> 0:14:09.160 also potential deposit instability down the road when those credit 0:14:09.240 --> 0:14:13.280 issues start to unfold. And so I would say we're 0:14:13.320 --> 0:14:16.560 in the second or third inning of this situation, not 0:14:16.679 --> 0:14:19.640 the first inning or seventh inning. I should say we 0:14:19.800 --> 0:14:23.600 just finished the first phase potentially, but there's a lot 0:14:23.640 --> 0:14:26.160 more to go. The credit phase, I think normally is 0:14:26.200 --> 0:14:26.880 more serious. 0:14:27.240 --> 0:14:30.960 Robert, on your point about pausing at this moment, you 0:14:31.000 --> 0:14:33.240 don't expect that there might be the risk that if 0:14:33.240 --> 0:14:36.000 you pause at this level, then you might be forced 0:14:36.080 --> 0:14:38.880 to hike again like we saw with ASTRADI the eye 0:14:38.920 --> 0:14:42.040 and what is really more detrimental to credibility at this point. 0:14:42.280 --> 0:14:45.000 Yeah, So I think there's a way to position this. 0:14:45.600 --> 0:14:48.360 And let's say they raise then pause, or they pause 0:14:48.520 --> 0:14:53.000 and signalog so called hawkish pause. Either way, the rhetoric 0:14:53.080 --> 0:14:57.360 needs to be that the FED stands ready to raise rates. 0:14:57.760 --> 0:15:00.760 All you're doing is we've raised a lot very quickly. 0:15:01.280 --> 0:15:03.760 We want to absorb and digest some of it. 0:15:04.240 --> 0:15:07.480 I think people will understand it, think it's prudent, but 0:15:07.640 --> 0:15:09.840 signal we're prepared to do more. And I think the 0:15:09.840 --> 0:15:13.280 markets will understand that message. If they give that message. 0:15:13.040 --> 0:15:15.400 And your concerns about credit tightening coming out of time 0:15:15.400 --> 0:15:18.480 when we saw the Jewel's numbers really fall, we're seeing 0:15:18.720 --> 0:15:23.280 layoffs out of a two three year high. How concerning 0:15:23.360 --> 0:15:25.440 is this for the most vulnerable part of this of 0:15:25.480 --> 0:15:30.480 the American population, especially when you're thinking that a lot 0:15:30.520 --> 0:15:34.640 of people will be left out when inflation is this fast. 0:15:34.920 --> 0:15:40.280 So normally at this stage you worry about the unemployed. 0:15:40.800 --> 0:15:43.880 Right now, we're in a crisis of the employed. The 0:15:43.960 --> 0:15:46.960 problem that's going on out there, fifty million workers that 0:15:47.000 --> 0:15:49.880 make fifty thousand dollars a year or less cannot make 0:15:50.000 --> 0:15:53.840 ends meet, okay, And part of it is there's been 0:15:53.840 --> 0:15:57.560 a substantial amount of fiscal spending which hasn't stopped, by 0:15:57.560 --> 0:16:03.480 the way, and substantial about monetary easing, and really the 0:16:03.800 --> 0:16:06.360 low moderate income families are paying the price of it. 0:16:06.720 --> 0:16:09.400 So you do need some adjustment in the labor market. 0:16:09.800 --> 0:16:13.400 We've got demographically in the United States shortage of workers 0:16:13.440 --> 0:16:15.360 for as far as the eye can see, at fifty 0:16:15.400 --> 0:16:18.360 thousand or less, and so I think you could tolerate 0:16:18.400 --> 0:16:22.280 some loosening in the labor market. I'm more worried about 0:16:22.320 --> 0:16:25.960 the family who is working that tells me they can't 0:16:25.960 --> 0:16:29.040 make ends meet, and that is a widespread group of 0:16:29.080 --> 0:16:29.840 people right now. 0:16:30.000 --> 0:16:32.240 Does the FED to deserve bear responsibility for what is 0:16:32.240 --> 0:16:33.320 happening to these banks. 0:16:33.720 --> 0:16:36.800 I don't blame the FED for making the hikes, although 0:16:36.800 --> 0:16:39.880 I would have eased off monetary policy a couple of 0:16:39.920 --> 0:16:42.120 years ago so these weren't necessary. But once they had 0:16:42.200 --> 0:16:43.920 to do it, I don't blame it for that. I 0:16:44.040 --> 0:16:46.920 do think there's a problem with a lack of supervision 0:16:47.360 --> 0:16:50.480 once they knew they were in a hiking mode, and 0:16:50.520 --> 0:16:52.960 I think it was up to the FED to supervise 0:16:53.640 --> 0:16:57.080 and make sure that if there were outliers, like two 0:16:57.160 --> 0:17:00.000 of the largest fifteen banks, that they caught that earth 0:17:00.040 --> 0:17:02.120 early so we wouldn't be going through what we're going 0:17:02.160 --> 0:17:02.760 through right now. 0:17:02.960 --> 0:17:05.520 You left the FED at twenty twenty one, the new 0:17:05.520 --> 0:17:09.479 framework was being put in place. The new framework said, oh, 0:17:09.480 --> 0:17:11.760 we're not going to raise rates until we're well above 0:17:11.800 --> 0:17:15.840 two percent, until we've got maximum employment. Is that another 0:17:16.000 --> 0:17:19.880 factor that helped set the stage for where we are now? 0:17:20.359 --> 0:17:21.360 It might have, As you know. 0:17:21.359 --> 0:17:25.760 I dissented on the guidance in the September of twenty twenty. 0:17:25.760 --> 0:17:27.600 It was only descent I ever made at the FED. 0:17:28.000 --> 0:17:32.280 But I dissented because I thought locking into that guidance 0:17:34.320 --> 0:17:38.359 did not make sense, and I wish that that hadn't 0:17:38.359 --> 0:17:40.560 been done. But yes, that may have led the FED 0:17:40.960 --> 0:17:43.760 to be more inclined to keep buying bonds to be 0:17:43.880 --> 0:17:48.560 later to raise rates. And I've said many many times 0:17:48.640 --> 0:17:52.880 taking the foot off the accelerator earlier would have made 0:17:52.920 --> 0:17:54.720 it so they didn't have to slam on the brakes 0:17:54.800 --> 0:17:55.840 like they're doing right now. 0:17:55.960 --> 0:17:58.800 What do you think is the big challenge for the 0:17:58.840 --> 0:18:01.080 FED and the federal government? 0:18:01.160 --> 0:18:01.679 Right now? 0:18:01.880 --> 0:18:02.920 Here's the issue. 0:18:03.040 --> 0:18:07.359 There's the monetary policy element of this cyclical part, but 0:18:07.480 --> 0:18:11.080 we've got a few other issues. We need more fiscal discipline. 0:18:11.080 --> 0:18:13.760 We still have a lot of fiscal spending in the pipeline. 0:18:13.800 --> 0:18:16.359 And right now the federal government, in my view, is 0:18:16.400 --> 0:18:18.920 working in some ways at cross purposes with the FED 0:18:19.440 --> 0:18:23.440 energy policy, and the integration to the transition is being 0:18:23.440 --> 0:18:26.320 done on the backs of low modern income families. There's 0:18:26.359 --> 0:18:29.679 many actions outside the FED that are making it harder 0:18:29.720 --> 0:18:32.359 for people making fifty grand a year or less to 0:18:32.440 --> 0:18:35.000 make ends meet. And yes, I think you want a 0:18:35.040 --> 0:18:39.040 whole of government approach to inflation, not just a FED 0:18:39.400 --> 0:18:40.600 does this alone. 0:18:40.480 --> 0:18:42.919 Approach, and I mean we come back to always a 0:18:43.119 --> 0:18:47.720 US debt sealing issues, default possibilities, you enforced. We know 0:18:47.920 --> 0:18:50.280 sort of where this is going. But if we continue 0:18:50.320 --> 0:18:53.160 to see that stand of what will be the implications. 0:18:53.640 --> 0:18:57.720 So there's the back and forth of the standoff, which 0:18:58.160 --> 0:19:00.840 is going to stress people out. But there's a real 0:19:00.880 --> 0:19:03.639 issue in here. As we sit here right now, we 0:19:03.680 --> 0:19:06.640 haven't even gone into a downturn. The deficit is right 0:19:06.680 --> 0:19:10.240 now already ten percent of GDP. We actually have a 0:19:10.320 --> 0:19:14.080 legitimate issue about the need for more fiscal restraint. 0:19:15.200 --> 0:19:16.200 And if this. 0:19:16.240 --> 0:19:18.760 Game of chicken, I don't like the tactics, and I 0:19:18.760 --> 0:19:21.879 don't think it's healthy to be threatening or making people 0:19:21.880 --> 0:19:22.840 worried about default. 0:19:23.040 --> 0:19:26.760 But the discussion about controlling. 0:19:26.280 --> 0:19:30.359 Spending is necessary, and I think fifty million families that 0:19:30.400 --> 0:19:33.080 can't make ends meet out there, I think might welcome 0:19:33.119 --> 0:19:33.760 that debate. 0:19:34.040 --> 0:19:39.320 Final quick quick question, quick answer in June, in July, 0:19:39.560 --> 0:19:42.320 in August, are we still going to be where we are? 0:19:42.600 --> 0:19:44.760 Is the FED going to in effect have been done 0:19:44.840 --> 0:19:45.679 hiking rates? 0:19:45.920 --> 0:19:47.120 Do you think there's more to come? 0:19:47.280 --> 0:19:48.359 How is this going to play out? 0:19:49.080 --> 0:19:51.880 I think getting from where we are down to say 0:19:51.960 --> 0:19:55.439 four percent headline inflation will be doable. I think what 0:19:55.480 --> 0:19:57.679 we're going to find is it's going to be very 0:19:57.720 --> 0:20:02.120 sticky to get headline inflation. That the wage price spiral 0:20:02.320 --> 0:20:05.119 of people making fifty thousand or less is alive and 0:20:05.160 --> 0:20:09.960 well and intense, and that's going to affect services inflation. 0:20:10.400 --> 0:20:11.960 So I think this is going to be a two 0:20:12.040 --> 0:20:14.760 or three year battle, not a six month battle. 0:20:15.080 --> 0:20:18.000 And that was former Dallas FED President Robert Kaplan speaking 0:20:18.000 --> 0:20:21.119 there with Bloomberg's Kathleen Hayes, sherry On and Heidi Stroud 0:20:21.160 --> 0:20:24.720 watts Well. Robert Kaplan calls for a hawkish pause. Former 0:20:24.800 --> 0:20:28.639 Treasury Secretary Larry Summers says the Fed should remain just 0:20:28.680 --> 0:20:32.159 plain hawkish. In a discussion with Bloomberg's David West, and 0:20:32.320 --> 0:20:35.000 Summers talked about a potential rate hike today as well 0:20:35.040 --> 0:20:37.080 as the dead ceiling. Let's listen into that. 0:20:37.160 --> 0:20:37.400 Now. 0:20:37.800 --> 0:20:39.920 We heard from Jamie Diamond after the First Republic that 0:20:40.000 --> 0:20:41.720 you thought pretty much we were over maybe there'd be 0:20:41.720 --> 0:20:44.280 a small under left. Looks like we're not over this. 0:20:44.480 --> 0:20:46.720