WEBVTT - How Equifax Missed Its Chance to Prevent the Massive Hack 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.120 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Well, 0:00:32.159 --> 0:00:35.280 there's a debate over the National Flood Insurance Program in 0:00:35.320 --> 0:00:38.479 the wake of the damage by Hurricanes Harvey and Her 0:00:38.720 --> 0:00:42.160 and Irma, and here to explain exactly what the program 0:00:42.200 --> 0:00:44.400 does and its future is David Sampson. He is the 0:00:44.440 --> 0:00:49.040 chief executive of the Property Casualty Insurers Association of America 0:00:49.400 --> 0:00:51.640 and he's also the former Deputy Secretary of the U. 0:00:51.720 --> 0:00:55.800 S Department of Commerce under George W. Bush. David Samson, 0:00:55.840 --> 0:00:58.560 thank you for being with us. Can you just describe 0:00:58.600 --> 0:01:01.800 for people what is the National Flood Insurance Program, how 0:01:01.800 --> 0:01:04.560 does it work, and what are some of the challenges 0:01:04.600 --> 0:01:08.800 it faces. Well, the National Flood Insurance Program is in 0:01:08.880 --> 0:01:15.280 existence because your regular homeowners or business policy UH doesn't 0:01:15.319 --> 0:01:18.520 cover flood insurance. That dates it dates back to the 0:01:18.600 --> 0:01:25.280 nineteen sixties where there was problems with flood maps and 0:01:25.280 --> 0:01:28.600 and UH being able to underwrite flood risk, and so 0:01:28.760 --> 0:01:32.960 the National Flood Insurance Program was created UH in the 0:01:33.040 --> 0:01:38.080 nineteen sixties as a supplement to your regular homeowners policy, 0:01:38.720 --> 0:01:41.920 and we emphasize all the time with homeowners and business 0:01:41.920 --> 0:01:47.039 owners that your regular policy doesn't cover flood, and to 0:01:47.080 --> 0:01:49.800 be covered for flood, you need to buy that that 0:01:49.920 --> 0:01:55.080 separate policy. UM. The policy UM no pun intended is underwater. 0:01:55.160 --> 0:02:00.400 It's twenty five billion dollars UH in debt. It's not 0:02:00.560 --> 0:02:06.280 run on an actuarily sound basis UH like your private 0:02:06.320 --> 0:02:10.120 sector infurence insurance companies would be required to do. The 0:02:10.280 --> 0:02:15.640 premiums are heavily subsidized by the taxpayer, and as a 0:02:15.680 --> 0:02:20.320 result of that, after Katrina and UH Sandy, the program 0:02:20.360 --> 0:02:22.640 is now about twenty five billion dollars in debt. So 0:02:22.680 --> 0:02:25.679 there's a lot of discussion in Congress about what reforms 0:02:25.720 --> 0:02:28.040 need to be made to the program. It was set 0:02:28.080 --> 0:02:33.680 to expire September UM we supported a um an extension 0:02:33.680 --> 0:02:36.200 of that in the wake of Harvey and IRMA. It's 0:02:36.240 --> 0:02:41.720 now extended through December eight, but long term, there needs 0:02:41.720 --> 0:02:43.799 to be a discussion in Congress about how to put 0:02:43.840 --> 0:02:49.000 that program on more sound financial footing. David, you represent 0:02:49.440 --> 0:02:53.840 about a thousand companies that of the US is home, auto, 0:02:54.240 --> 0:02:58.680 and business insurance. I'm wondering what rule they could or 0:02:58.680 --> 0:03:02.560 would be willing to lay. In the flood insurance market. 0:03:02.639 --> 0:03:04.560 Do you expect that there will be some kind of 0:03:04.639 --> 0:03:09.320 convergence of public and private insurance plans to cover flooding, 0:03:09.480 --> 0:03:14.919 especially as the expectation for these types of storms increases. Yeah, well, 0:03:14.960 --> 0:03:16.720 there's always going to be a need for a federal 0:03:16.800 --> 0:03:19.040 backstop for the flood insurance. So I think there's going 0:03:19.080 --> 0:03:22.600 to need to be a long term reauthorization of the 0:03:22.639 --> 0:03:26.280 flood in National Flood Insurance program. But clearly there is 0:03:26.840 --> 0:03:31.639 increasing appetite in the private sector among private insurers and 0:03:31.720 --> 0:03:38.160 reinsurers UH to write some flood coverage. The flood mapping 0:03:38.160 --> 0:03:42.320 technology is much better today than it was in nineteen 0:03:42.400 --> 0:03:47.360 sixty eight. You can just imagine the advances there UH, 0:03:47.400 --> 0:03:52.200 and UH underwriting is much more advanced. Insurance underwriting is 0:03:52.200 --> 0:03:55.320 more advanced today than it was in the nineteen sixties, 0:03:55.360 --> 0:03:58.480 and so we do think that there is financial capacity 0:03:58.520 --> 0:04:03.120 out there and appetite among UH insurers, some insurers and 0:04:03.240 --> 0:04:08.720 reinsurers to take on some of this risk and to 0:04:08.720 --> 0:04:11.440 be able to take some of the risk away from 0:04:11.760 --> 0:04:16.000 the federal government and the and the federal taxpayer. David Sampson, 0:04:16.760 --> 0:04:19.159 what is being done or what can be done to 0:04:19.480 --> 0:04:24.560 avoid the scams and the frauds that are perpetrated on 0:04:24.680 --> 0:04:30.240 people who are rebuilding their lives, their homes and their neighborhoods. Well. Uh. 0:04:30.480 --> 0:04:33.560 First of all, the insurers number one priority right now 0:04:33.640 --> 0:04:35.960 is getting checks into the hands of policy holders to 0:04:36.000 --> 0:04:38.320 get families back in their homes and cars back on 0:04:38.360 --> 0:04:43.440 the road and businesses opened again. UM. We're surging um 0:04:43.880 --> 0:04:48.360 an army of claims adjusters into uh Florida just as 0:04:48.360 --> 0:04:51.960 soon as the local officials UM uh say it's safe 0:04:52.000 --> 0:04:55.880 to get back in and allow us in. But consumers 0:04:55.920 --> 0:04:58.679 need to be very uh, you know, careful. The first 0:04:58.720 --> 0:05:02.720 thing that consumers need do, UH is to call their 0:05:02.800 --> 0:05:09.400 insurance agent or their insurance company, report the damage, photograph, 0:05:09.880 --> 0:05:13.040 take video of all household items that are damaged or 0:05:13.120 --> 0:05:17.680 destroyed in the storm. Unfortunately, we know that there are 0:05:17.720 --> 0:05:20.200 some bad actors who prey on storm victims, and so 0:05:20.279 --> 0:05:24.159 we encourage folks to be very very careful of riffing 0:05:24.240 --> 0:05:29.440 companies or contractors or restoration companies that just come walking 0:05:29.480 --> 0:05:33.520 down the neighborhood and UH put pressure on people to 0:05:33.640 --> 0:05:37.000 sign to sign a contract right now and tell them 0:05:37.040 --> 0:05:39.000 that if you don't sign up right now, you're gonna 0:05:39.040 --> 0:05:42.200 be at the back of a line. UH. Consumers need 0:05:42.240 --> 0:05:46.760 to be very very suspicious of that kind of activity. 0:05:47.480 --> 0:05:52.520 Check professional references, be sure you before you sign a contract, 0:05:52.560 --> 0:05:54.480 be sure you know the scope of the work that 0:05:54.520 --> 0:05:59.080 they're going to do, the time frame, the cost um. 0:05:59.200 --> 0:06:01.919 And the good news is today that a lot of 0:06:02.440 --> 0:06:06.159 insurers are deploying a lot of technology to make it 0:06:06.240 --> 0:06:11.719 easier for policy holders to file their claims. There's mobile apps, 0:06:11.800 --> 0:06:17.760 there's online applications. Insurers will be using drones in Florida 0:06:17.880 --> 0:06:22.120 to try to assess rooftop damage. UH. And you can 0:06:22.160 --> 0:06:27.200 always ask for good references from your claims adjuster as well. 0:06:27.640 --> 0:06:29.560 David Samson, thank you so much for joining us. David 0:06:29.560 --> 0:06:33.560 Sampson is chief executive Officer of the Property Casualty Insures 0:06:33.600 --> 0:06:37.760 Association of America, also the former Deputy Secretary of the U. 0:06:37.880 --> 0:06:40.680 S Department of Commerce under George W. Bush, and he 0:06:40.720 --> 0:06:56.680 has based in Washington, d C. Equifax has been in 0:06:56.720 --> 0:07:00.440 the news, shares dropping further today, bonds as well falling 0:07:00.560 --> 0:07:05.520 after they specified that they had a particular software vulnerability 0:07:05.560 --> 0:07:09.760 that they knew about or were warned about before their 0:07:10.200 --> 0:07:14.400 whole system was breached and one hundred million US consumers 0:07:14.480 --> 0:07:19.280 data we were exposed and potentially put into the hands 0:07:19.400 --> 0:07:22.840 of mallet intended people. Jordan Robertson joins us now his 0:07:22.880 --> 0:07:26.440 technology reporter for Bloomberg News, as well as Viny Troy, 0:07:26.480 --> 0:07:30.520 a chief executive officer of night Lion Security in St. Louis. Jordan, 0:07:30.560 --> 0:07:32.720 can you just set this up for us? What is 0:07:32.760 --> 0:07:36.320 the latest development in this story and how damaging is 0:07:36.320 --> 0:07:40.560 it for Equifax? Sure, as everyone knows by now, Equifax 0:07:40.840 --> 0:07:42.520 was the victim of a breach that affected you know, 0:07:42.560 --> 0:07:44.960 more than a hundred and forty million people social security 0:07:45.040 --> 0:07:48.600 numbers and other details of their consumer credit accounts. And 0:07:48.640 --> 0:07:52.640 what Equifax announced last night was it confirmed some earlier 0:07:52.680 --> 0:07:55.160 reporting that had gotten out that it was The way 0:07:55.240 --> 0:07:58.560 the attackers got in was through a particular software vulnerability 0:07:58.920 --> 0:08:02.200 UH in software used to build websites. Many large companies 0:08:02.280 --> 0:08:05.560 use this. It's called Apache strut software. It's open source 0:08:05.600 --> 0:08:08.600 software UH and the key thing about this software is 0:08:08.640 --> 0:08:11.480 that there was a critical vulnerability in it, but that 0:08:11.640 --> 0:08:15.240 vulnerability was patched or it was fixed, was two months ago, 0:08:15.800 --> 0:08:19.960 but Equifax apparently didn't apply that fix by the time 0:08:19.960 --> 0:08:23.880 the hackers got in in mid May. There's a caveat there, though, 0:08:23.960 --> 0:08:26.680 is that many organizations take you know, can take weeks 0:08:26.680 --> 0:08:30.080 even months to apply patches. However, uh, you know, for 0:08:30.200 --> 0:08:33.160 critical vulnerabilities like this one. Uh, you know, that's that's 0:08:33.200 --> 0:08:35.080 an off a long time and and Equifax is going 0:08:35.120 --> 0:08:36.920 to take some heat, uh you know, and have to 0:08:36.920 --> 0:08:39.760 answer some questions about you know, what caused that delay. Well, 0:08:39.840 --> 0:08:42.960 the stock of equifaxes down another one percent after falling 0:08:42.960 --> 0:08:46.800 more than fourteen percent yesterday. If any Troy, maybe you 0:08:46.840 --> 0:08:50.120 could describe for us if you went to visit Equifax, 0:08:50.400 --> 0:08:53.160 what would you see. Would you see a you know, 0:08:53.360 --> 0:08:56.479 the most modern, the most up to date and secure 0:08:57.480 --> 0:09:01.319 cyberg prevention facility, or just see people that are racing 0:09:01.360 --> 0:09:04.920 around to try to put their fingers in the dike? Yeah, 0:09:04.960 --> 0:09:06.839 I mean, you know, and I could tell you kind 0:09:06.840 --> 0:09:10.760 of firsthand. I mean, Equifax had recently, you know a 0:09:10.840 --> 0:09:14.880 number of job postings um regarding you know, different security 0:09:14.880 --> 0:09:16.560 positions that they were looking for. And I mean I 0:09:16.600 --> 0:09:19.800 know firsthand some of employees over Equifax that had a 0:09:19.880 --> 0:09:24.000 number of legacy systems, all these kind of um legacy 0:09:24.080 --> 0:09:27.520 means old in technology speak, right, Yeah, that's all right. 0:09:27.520 --> 0:09:29.440 So they had all these old systems with you know, 0:09:29.480 --> 0:09:32.200 basically there's all these different technology stacks running around there, 0:09:32.200 --> 0:09:34.559 and they were trying very hard to consolidate them all. 0:09:35.120 --> 0:09:37.280 But many of those systems, from what I understand, simply 0:09:37.360 --> 0:09:40.360 we're going unchecked or unpatched. You know, they weren't updated 0:09:40.400 --> 0:09:43.360 for any of these critical vulnerabilities, and they were just 0:09:43.480 --> 0:09:45.720 left to kind of, you know, fend for themselves. And 0:09:45.760 --> 0:09:48.080 I think that's the problem. You know, that's where we 0:09:48.160 --> 0:09:51.480 ended up today. Vinny. What was the motivation behind not 0:09:51.760 --> 0:09:55.680 patching up these problems? Was it motivated from saving money 0:09:55.840 --> 0:09:58.560 or was it just simply that the problem didn't seem 0:09:58.640 --> 0:10:02.520 that urgent. I don't, to be honest, I don't. I 0:10:02.559 --> 0:10:04.679 think it was just a lack of resources. I mean, 0:10:04.679 --> 0:10:06.520 when you have all these different systems, with all these 0:10:06.520 --> 0:10:09.600 different technology stacks and not enough people to maintain them. 0:10:09.679 --> 0:10:12.319 I mean, I know they were in progress to try 0:10:12.360 --> 0:10:14.760 to consolidate all of them, so that they could maintain 0:10:14.800 --> 0:10:17.120 them all. Um, but I just don't think they were 0:10:17.160 --> 0:10:19.439 caught up to that point yet, Vinnie. I'd love to 0:10:19.440 --> 0:10:23.400 get a sense of how widespread this lack of taking 0:10:23.440 --> 0:10:27.240 care of business is among big corporate America. Are there 0:10:27.280 --> 0:10:31.800 other companies that have similar problems and vulnerabilities that aren't 0:10:31.840 --> 0:10:35.000 being patched simply because they don't know the resources or 0:10:35.000 --> 0:10:38.200 they're trying to do too much with too little. I mean, 0:10:38.240 --> 0:10:40.360 I think this applies to everybody. I mean, I don't 0:10:40.400 --> 0:10:43.080 think there's a large company out there that I've seen 0:10:43.160 --> 0:10:47.640 that doesn't do this. Um. You know, lack of good 0:10:47.679 --> 0:10:51.079 security resources is a is a very widespread problem right now. 0:10:51.120 --> 0:10:54.200 And organizations, I mean even if sometimes even if they 0:10:54.200 --> 0:10:56.320 are willing to spend the money, just can't find the 0:10:56.360 --> 0:10:59.160 people to do the work. I mean, there's definitely a 0:10:59.200 --> 0:11:03.079 shortage of good security people right now. Jordan's speak to 0:11:03.160 --> 0:11:05.880 the issue of the response on the part of Equifax, 0:11:05.960 --> 0:11:08.600 because there have been stories that the website tool that 0:11:08.600 --> 0:11:12.760 would let consumers see if their individual information had been breached, 0:11:13.200 --> 0:11:17.240 uh doesn't work. Also, I understand for there's been a 0:11:17.280 --> 0:11:20.559 directive that was sent out by the Federal Trade Commission 0:11:20.840 --> 0:11:25.120 earlier today saying that there are now scammers. There are 0:11:25.160 --> 0:11:30.240 people impersonating credit bureau staff. They are calling people telling 0:11:30.240 --> 0:11:33.600 them that they are from Equifax looking to verify their 0:11:33.600 --> 0:11:37.360 account information, and the FTC says, don't tell them anything. 0:11:37.440 --> 0:11:40.000 No one from Equifax is going to call you. What 0:11:40.080 --> 0:11:44.280 have you learned? Yeah, you know, my assessment is Equifax 0:11:44.320 --> 0:11:46.280 is really blown it when it comes to the response 0:11:46.320 --> 0:11:49.559 to this breach. You know, people feel very vulnerable when 0:11:49.600 --> 0:11:52.040 this type of information leaks. Uh. You know, as you 0:11:52.080 --> 0:11:56.040 mentioned Equifax's website for trying to determine if you you know, 0:11:56.080 --> 0:11:59.120 were affected, Uh, it really didn't seem to work. People 0:11:59.120 --> 0:12:01.400 punched in all kinds of random characters and codes and 0:12:01.440 --> 0:12:03.960 still got responses back that they will breach. It didn't 0:12:04.000 --> 0:12:06.560 seem to be like a very functional website. You know. 0:12:06.600 --> 0:12:10.880 In addition, Equifax originally had a language on that website saying, 0:12:11.120 --> 0:12:12.880 you know, if you sign up for these protections and 0:12:12.920 --> 0:12:15.600 if if you are a victim, you know, you remove 0:12:15.720 --> 0:12:18.440 all rights to sue the company in any class action suit. 0:12:18.679 --> 0:12:20.520 And on top of that, the thing that really kind 0:12:20.520 --> 0:12:22.760 of sticks in my cross is, you know, when companies 0:12:22.800 --> 0:12:25.160 get breached like this, there's a very standard response. There's 0:12:25.160 --> 0:12:27.920 a playbook now, which is, you know, you offer people 0:12:27.960 --> 0:12:30.720 a year or two a free credit monitoring protection. These 0:12:30.720 --> 0:12:33.840 are paying These are pay services that normally cost uh, 0:12:33.880 --> 0:12:37.320 you know, fifteen dollars a month. Uh, you know, and 0:12:37.400 --> 0:12:40.720 that that shields companies from liability. In other words, if 0:12:40.760 --> 0:12:43.320 you can't prove damages and you can't prove you were harmed, 0:12:43.760 --> 0:12:46.240 and the company says, hey, we offered these slee protections, 0:12:46.640 --> 0:12:48.960 then you can't sue. So it's illegal. Is illegal shield 0:12:49.200 --> 0:12:51.240 What Equifax did in this case is they didn't go 0:12:51.320 --> 0:12:54.160 with a third party company to provide that service all 0:12:54.200 --> 0:12:56.800 clear ideas a big company that does this LifeLock and others. 0:12:57.120 --> 0:12:59.520 They went with their own service. They're signing people up 0:12:59.840 --> 0:13:03.040 for for credit fraud monitoring, you know, from one of 0:13:03.040 --> 0:13:05.120 their own services, which you know, in theory at the 0:13:05.200 --> 0:13:08.160 end of the year, which is their their their monitoring period, 0:13:08.440 --> 0:13:09.760 you know, they're going to try to sign you up 0:13:09.760 --> 0:13:12.080 for the service. You're already of the database. It's very cynical. 0:13:12.480 --> 0:13:14.720 I understand why the company would do it. Uh, you know, 0:13:14.760 --> 0:13:17.040 it's a service under their control and they can they 0:13:17.040 --> 0:13:19.599 can account for that. But from a public relations and 0:13:19.679 --> 0:13:23.600 a perspective, a perception standpoint. You know, it's really it's 0:13:23.760 --> 0:13:26.480 it's deeply cynical to be a victim of their breach 0:13:26.720 --> 0:13:28.040 and then have to go sign up for one of 0:13:28.120 --> 0:13:30.800 their services. Indeed, well, I know you're gonna be following 0:13:30.840 --> 0:13:34.000 this story because it is nowhere near over talking about 0:13:34.080 --> 0:13:38.319 Equifax and a hundred and forty three million US consumers 0:13:38.360 --> 0:13:43.160 whose specific information, whether that is social security numbers, addresses, passwords, 0:13:43.679 --> 0:13:46.160 user ID numbers, have been breached. I want to thank 0:13:46.200 --> 0:13:49.640 you very much. Jordan Robertson. Robertson is our technology reporter 0:13:49.679 --> 0:13:52.840 for Bloomberg News, joining us from our Washington, d C. Bureau, 0:13:52.840 --> 0:13:56.680 and you can follow Jordan's at Jordan's are one thousand 0:13:56.800 --> 0:13:59.240 on Twitter. And our thanks also to Any Troya, the 0:13:59.280 --> 0:14:03.880 chief executive of of night Lion Security. They're based in St. Louis. 0:14:16.360 --> 0:14:21.080 The Sheepa Corporation, the struggling Japanese conglomerate, has been trying 0:14:21.120 --> 0:14:25.080 to sell it's immensely valuable microchip business to a group 0:14:25.080 --> 0:14:29.040 of American and Japanese buyers. Bain Capital has emerged as 0:14:29.080 --> 0:14:32.160 the leader, along with some other investors that are contributing money. 0:14:32.320 --> 0:14:35.520 And now we're getting news that Apple maybe joining that 0:14:35.640 --> 0:14:39.920 particular team to bid on this business. To discuss more, 0:14:39.960 --> 0:14:42.560 I want to bring in Alex Sherman, Technology Media and 0:14:42.560 --> 0:14:45.440 Telecom m and a reporter for Bloomberg News, as well 0:14:45.440 --> 0:14:48.040 as an On Street of Austin senior semiconductor and hardware 0:14:48.080 --> 0:14:52.760 analyst for Bloomberg Intelligence. Alex, let's start with you. Is 0:14:52.800 --> 0:14:55.040 this a surprise Apple is joining this and what would 0:14:55.040 --> 0:14:57.880 be the structure of this arrangement. I don't think Apple 0:14:57.960 --> 0:15:00.520 joining it is necessarily. The surprise is they've been sort 0:15:00.520 --> 0:15:03.240 of hovering around this process the the you know, for 0:15:03.360 --> 0:15:06.120 months and months. What's the surprise might be the number 0:15:06.280 --> 0:15:10.320 that they're thinking about investing in this Bain consortium, which 0:15:10.360 --> 0:15:12.920 we broke the story yesterday that they're in talks to 0:15:12.960 --> 0:15:16.240 invest about three billion dollars maybe even a little more 0:15:16.600 --> 0:15:20.080 um in Toshiba's memory chip business. The strategic logic here 0:15:20.560 --> 0:15:23.520 is simply that these chips are in iPhones, so you know, 0:15:23.560 --> 0:15:26.880 they their flash memory chips that store photos and video 0:15:26.920 --> 0:15:31.680 clips and augmented reality. So Apple has a you know, 0:15:31.760 --> 0:15:35.040 has a big reason to to to to want to 0:15:35.040 --> 0:15:38.080 have control over the future of these chips and not 0:15:38.160 --> 0:15:42.120 to lose them um or at least lose pricing power 0:15:42.640 --> 0:15:45.080 over them. However, you know, three billion dollars that may 0:15:45.080 --> 0:15:46.880 not seem like a lot to Apple. You figure, what 0:15:47.000 --> 0:15:49.840 Apple has two hundred and sixty one billion dollars of 0:15:49.880 --> 0:15:52.920 cash on their balance sheet. What's three billion dollars? But 0:15:52.960 --> 0:15:55.080 Apple does not have a big track record of doing 0:15:55.120 --> 0:15:57.040 investments in M and A like this. In fact, the 0:15:57.120 --> 0:15:59.640 largest deal they've ever done was the three billion dollar 0:15:59.760 --> 0:16:02.880 deal for Beats a few years ago. Uh and this 0:16:03.000 --> 0:16:05.320 may actually exceed that. So really, if you put it 0:16:05.320 --> 0:16:10.000 into those terms, it would be Apple's largest acquisition slash investment. Ever, 0:16:10.720 --> 0:16:12.360 I want to bring it on entrene of us and 0:16:12.800 --> 0:16:17.240 on speak to the actual hardware and semiconductor aspect. That 0:16:17.360 --> 0:16:20.760 is the technical sort of situation and the value that 0:16:20.800 --> 0:16:24.920 this company has to to Apple and to Bain capital. Look, 0:16:25.000 --> 0:16:27.720 this is supply sourcing, right, so you moreant to lock 0:16:27.880 --> 0:16:32.640 up as many components of your supply in clear way 0:16:32.720 --> 0:16:35.280 as possible for as long as you can, so to 0:16:35.400 --> 0:16:40.960 the extent that you can relieve. The financing situation of 0:16:40.080 --> 0:16:45.440 a of a key component of yours is a wind 0:16:45.440 --> 0:16:49.160 for Apple in so far it's a commodity, right, So 0:16:49.280 --> 0:16:51.800 the fact that they're able to get a long term 0:16:51.880 --> 0:16:54.800 view on commodity clear sourcing. On a long term view, 0:16:54.840 --> 0:16:58.040 it's a wind for It's a wind for Apple. Yeah one. 0:16:58.240 --> 0:16:59.880 But if you step back and look at the longer 0:17:00.040 --> 0:17:02.560 room carn text of Apple, Apple is fast becoming one 0:17:02.560 --> 0:17:05.520 of the largest semiconnector companies. To the extent that it's 0:17:05.640 --> 0:17:10.280 logic chips, highly differentiated chips with their substantial intellectual property, 0:17:10.520 --> 0:17:13.439 Apples designing and making those chips. To the extent that 0:17:13.480 --> 0:17:16.800 it's a commodity, it is trying to show up supply agreement. 0:17:16.920 --> 0:17:21.600 So depending on the value of that component in the 0:17:21.640 --> 0:17:25.639 Apple food chain, Apple staking different steps. You know, given 0:17:25.840 --> 0:17:29.800 the importance to Apple of this business and that it's 0:17:29.800 --> 0:17:32.360 trying to lock up its supply chain, it is a commodity. 0:17:32.840 --> 0:17:35.760 I have to wonder, Alex, are there any other competing 0:17:35.840 --> 0:17:39.640 bids that could even be floated that could rival this 0:17:39.960 --> 0:17:44.280 composite bid that now includes Apple. Uh sure? So there 0:17:44.280 --> 0:17:46.960 have been there are three bits around this, and there 0:17:46.960 --> 0:17:49.479 have been three bits around this for some time. Although 0:17:49.640 --> 0:17:54.480 the bit players have shifted, the biggest hurdle for a 0:17:54.480 --> 0:17:57.359 deal to get done here still is the presence of 0:17:57.400 --> 0:18:01.119 Western Digital which feels like it has some legal rights 0:18:01.800 --> 0:18:06.119 to the Toshiba memory chip business through a deal it 0:18:06.200 --> 0:18:08.679 did with sand Disc a couple of years ago. So 0:18:08.760 --> 0:18:12.480 Western Digital has paired with KKR for a competing bid 0:18:12.520 --> 0:18:16.640 here and sort of continues to threaten UH litigation if 0:18:16.680 --> 0:18:20.320 in fact Toshiba decides to go with any other consortium 0:18:20.640 --> 0:18:22.880 in the bank consortium seems like the most likely one 0:18:23.160 --> 0:18:25.399 I mentioned earlier. Apple had been hovering around this for 0:18:25.440 --> 0:18:29.960 a while. Initially, Apple actually back to bid from a 0:18:30.200 --> 0:18:33.359 consortium led by fox Con, which of course makes iPhones, 0:18:34.040 --> 0:18:36.840 But it became clear over the past few weeks that 0:18:37.240 --> 0:18:41.680 there was very strong political opposition, Japanese opposition towards fox 0:18:41.760 --> 0:18:45.080 Con winning a bid um given UH, you know, fox 0:18:45.160 --> 0:18:48.919 CON's presence in China and Taiwan and the political implications 0:18:48.920 --> 0:18:52.760 of losing a a gold star business like this UH 0:18:52.800 --> 0:18:55.320 and and and setting it over from Japan to a 0:18:55.440 --> 0:18:59.440 sort of you know, Chinese Taiwanese business UH that didn't 0:18:59.480 --> 0:19:04.160 fly plow. So. So a couple of things that interesting. 0:19:04.320 --> 0:19:06.320 One is the deal price is very high. If you 0:19:06.359 --> 0:19:08.320 wanted the maximumount of money, you would have gone with 0:19:08.359 --> 0:19:12.160 han Hi. Obviously, the China Japan venture doesn't fly so easily. 0:19:12.560 --> 0:19:16.320 Western digitals interested in this in the Toshiba stake where 0:19:16.359 --> 0:19:21.400 sandsc It's acquired entities already a JB partner. Is also 0:19:21.400 --> 0:19:25.480 about supply. Remember that the flash memory business is relatively 0:19:25.520 --> 0:19:30.800 consolidated with Samsung with share, so Toshiba sandes because the 0:19:30.920 --> 0:19:35.240 next in the in the thirties, so that wouldn't have 0:19:35.280 --> 0:19:39.760 flown that easily. So this is all about shoring up supply. 0:19:39.880 --> 0:19:42.840 And the reason Apple is important is because they consume 0:19:43.640 --> 0:19:46.840 of nan memory supply and too Man thanks very much 0:19:46.880 --> 0:19:49.800 on answer us and our senior semi conductor hardware analysts 0:19:49.840 --> 0:19:53.320 for Bloomberg Intelligence and alex A. Sherman M and a 0:19:53.400 --> 0:19:57.439 reporter for Bloomberg speaking about Apple, Bain Capital and a 0:19:57.480 --> 0:20:13.440 potential acquisition of Toshiba's chip business. Can we call upon 0:20:13.520 --> 0:20:16.879 Laura Litvin, our congressional reporter for Bloomberg News who can 0:20:16.920 --> 0:20:19.560 be followed on Twitter at Laura Litvin, l I t 0:20:19.840 --> 0:20:22.960 v A N and Laura maybe just begin with what 0:20:23.040 --> 0:20:27.240 was in the food last night? With the President's dinner 0:20:27.280 --> 0:20:31.280 with Nancy Pelosi, minority leader and the Bernard leader in 0:20:31.320 --> 0:20:33.720 the Senate, Senator Chuck Schumer. Were they eating from the 0:20:33.800 --> 0:20:35.919 same menu, because it seems as they came away with 0:20:35.960 --> 0:20:39.200 two different versions of the meeting. Well, they apparently ate 0:20:39.240 --> 0:20:41.480 the same Chinese food at the meal, but they did 0:20:41.480 --> 0:20:44.159 certainly come away with very different representations of what happened. 0:20:44.160 --> 0:20:46.960 At least initially, UH. They seemed to pull a closure 0:20:47.000 --> 0:20:51.280 together the UH. Senate Minority Leader Chuck Schumer and House 0:20:51.320 --> 0:20:53.960 Minority Leader Against Plosi said last night that they had 0:20:54.560 --> 0:20:59.600 a tentative deal with the President to marry UH protections 0:20:59.640 --> 0:21:02.680 against deportation for eight hundred thousand young immigrants brought whose 0:21:02.800 --> 0:21:05.880 kids with a worder security package, and they said there 0:21:06.080 --> 0:21:08.199 was an understanding there would not be funding for a 0:21:08.200 --> 0:21:11.320 border wall as part of that. And then Trump this 0:21:11.359 --> 0:21:14.760 morning tweeted there was no deal UH, and but also 0:21:14.800 --> 0:21:19.280 tweeted in UH defending the young immigrants and the fairness 0:21:19.280 --> 0:21:21.320 of letting them stay here because their parents have brought 0:21:21.359 --> 0:21:24.359 them here. And then he later did make some comments 0:21:24.359 --> 0:21:27.280 to reporters where he said UH seemed to confirm the deal, 0:21:27.320 --> 0:21:29.119 and he said he wants to pursue a wall, but 0:21:29.160 --> 0:21:32.520 it would be later. The White House is really wrestling 0:21:32.560 --> 0:21:36.040 with this, though, they a White House spokes appointedly said 0:21:36.080 --> 0:21:38.000 they will not be amnesty in this bill. Wanted to 0:21:38.040 --> 0:21:40.840 make that case this morning to reporters. Well, Laura, I 0:21:40.880 --> 0:21:44.040 want to also touch on President Trump's comments that he 0:21:44.200 --> 0:21:48.000 just made when he was on the tarmac in Florida. 0:21:48.280 --> 0:21:52.119 He talked about the wall being crucial important. If the 0:21:52.119 --> 0:21:55.040 wall doesn't get done, nothing gets done. Uh. You know, 0:21:55.240 --> 0:21:58.680 this is is clearly talking to his base, which has 0:21:58.720 --> 0:22:03.520 been expressing some uh dissatisfaction with his deals with the 0:22:03.560 --> 0:22:06.560 Democrats recently. How realistic is it that he would come 0:22:06.560 --> 0:22:09.000 through on something like that and really kind of put 0:22:09.040 --> 0:22:14.600 the wall into some legislation. Well, I he's if you 0:22:14.720 --> 0:22:17.440 really look at it, he's not really saying necessarily has 0:22:17.520 --> 0:22:20.840 to be done this year or at this time when 0:22:20.880 --> 0:22:23.240 he says that we're going to do a wall. Um. 0:22:23.320 --> 0:22:25.840 And but the fact is the fact that he keeps 0:22:26.320 --> 0:22:28.720 seeming to send different messages to people, and the fact 0:22:28.760 --> 0:22:30.840 that he's under pressure and is even being attacked by 0:22:30.880 --> 0:22:34.679 bart news headlines today that say he's amnesty don and 0:22:34.840 --> 0:22:38.680 is being attacked by tweets by uh conservative Republican Steve 0:22:38.800 --> 0:22:40.639 King in the House. These things are a lot of 0:22:40.640 --> 0:22:42.920 pressure and it makes people wonder where this is going 0:22:42.960 --> 0:22:46.240 and if things could fall apart, and um, there's some 0:22:46.359 --> 0:22:49.440 prospect for that. But I did notice today that Republican 0:22:49.560 --> 0:22:51.760 leaders in the Senate, two of them told us that 0:22:52.200 --> 0:22:56.000 they do see some potential in doing something that marries um, 0:22:56.040 --> 0:23:00.000 what's called DOCCA, the Deportation Order, the protections that Obama 0:23:00.400 --> 0:23:03.439 put in place with a strong border security bill. Um. 0:23:03.480 --> 0:23:05.320 They said, there's negotiating to be done, but there's some 0:23:05.400 --> 0:23:09.919 possible uh, you know, some possible agreement here. Well, we 0:23:09.960 --> 0:23:13.520 know that the President is also speaking in Fort Maris, Florida, 0:23:13.560 --> 0:23:18.760 as you mentioned, arriving to check on the reconstruction and 0:23:18.800 --> 0:23:25.200 the rescue operations related to Hurricane Irma. Do many Republicans, 0:23:25.680 --> 0:23:30.200 Republican senators who are represent the border states, do they 0:23:30.200 --> 0:23:34.880 really want this wall? Uh? No, there's been opposition from 0:23:35.520 --> 0:23:39.520 border state lawmakers about a wall. Um. There's been a 0:23:39.560 --> 0:23:44.560 real effort by members like John Cornyn from Texas, Republican 0:23:44.640 --> 0:23:48.040 leader and the House Homeland Security Chairman might call both 0:23:48.040 --> 0:23:50.960 are from both from Texas. Both have really pushed the 0:23:50.960 --> 0:23:54.359 president very hard behind the scenes to treat levies that 0:23:54.400 --> 0:23:57.119 are down along the Rio Grand River as a wall 0:23:57.280 --> 0:23:59.199 and to put more money into those and then just 0:23:59.320 --> 0:24:02.320 move on to other things like fencing technologies, other things 0:24:02.320 --> 0:24:05.959 that are needed. Um and you know there there may 0:24:06.000 --> 0:24:08.159