WEBVTT - Surveillance: U.S. Energy Secretary Granholm 0:00:05.120 --> 0:00:09.320 Welcome to the Bloomberg Surveillance Podcast. Hometom Keene along with 0:00:09.440 --> 0:00:13.720 Jonathan Ferroll and Lisa Brownwitz Jaylie, we bring you insight 0:00:13.840 --> 0:00:18.560 from the best and economics, finance, investment and international relations, 0:00:18.960 --> 0:00:23.840 Fine Bloomberg Surveillance and Apple podcast SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.840 and of course on the Bloomberg Terminal. We've got a 0:00:30.880 --> 0:00:33.800 fantastic guest joining us from Washington. Now. I'm pleased to 0:00:33.840 --> 0:00:36.559 say the former governor of Michigan, the current Secretary of 0:00:36.640 --> 0:00:38.720 Energy here in the United States, Jennifer Granham, joins us 0:00:38.760 --> 0:00:41.479 right now. Secretary, thank you very much for joining us 0:00:41.640 --> 0:00:45.000 this morning. I'm about to commit an interview sin so 0:00:45.159 --> 0:00:48.800 forgive me. I'm gonna start really really narrow on the 0:00:49.400 --> 0:00:52.879 oil reserves in the spr they're gonna be released as 0:00:52.920 --> 0:00:54.880 part of the pay for I didn't see in the 0:00:54.960 --> 0:00:57.520 White House release, And forgive me if you've done it subsequently, 0:00:57.920 --> 0:00:59.960 how much you're looking to raise from that? What is 0:01:00.040 --> 0:01:04.240 the number? Yeah, there's there wasn't a number in there, 0:01:04.280 --> 0:01:07.560 probably strategically because some of this still has to be negotiated. 0:01:07.560 --> 0:01:09.880 But no, that it's not selling off all of the 0:01:09.920 --> 0:01:12.560 strategic petroleum reserves. It is really it will be a 0:01:12.560 --> 0:01:15.759 limited sale to be able to meet the goal, which 0:01:15.840 --> 0:01:18.840 is too I mean, the president's goal was he did 0:01:18.880 --> 0:01:21.319 not want any of these paid force as you know, 0:01:21.440 --> 0:01:25.800 to raise taxes on those earning over under four hundred thousand. 0:01:25.920 --> 0:01:29.960 He didn't want to see UH tax on electric vehicles 0:01:30.240 --> 0:01:34.720 or gas tax. So this is one of several elements 0:01:34.880 --> 0:01:36.959 that were used as a paid for and again it's 0:01:36.959 --> 0:01:39.319 a limited sale. Sexty Groundhub. It was interesting that the 0:01:39.319 --> 0:01:42.720 Republicans put out a document circulated by Republican law micer 0:01:42.720 --> 0:01:45.800 Is that had the number six billion dollars in there 0:01:45.840 --> 0:01:48.080 the amount of money that they would raise from the 0:01:48.080 --> 0:01:50.200 set of emergency all reserves. As you say, of course, 0:01:50.280 --> 0:01:52.960 not the entirety a pultion off them. Is that number wrong. 0:01:54.120 --> 0:01:56.440 I'm not saying it's wrong. I'm just saying that that is. 0:01:56.880 --> 0:02:00.480 You know, this is a framework that was announced. Everything 0:02:00.560 --> 0:02:03.480 is set in stone, and it may you know, it 0:02:03.600 --> 0:02:06.160 may move a bit, but the bottom line is it 0:02:06.240 --> 0:02:11.160 is a limited sale. Secretary grind Home, how far does 0:02:11.200 --> 0:02:15.359 this deal get toward moving to an electric future? I'm 0:02:15.360 --> 0:02:18.720 talking about vehicles in particular, given the fact that there 0:02:18.800 --> 0:02:23.160 isn't necessarily provisions for taxes on gas, higher taxes on gas, 0:02:23.200 --> 0:02:26.560 and the provision for electric vehicle charging stations is just 0:02:26.600 --> 0:02:29.240 seven and a half billion dollars versus the call for 0:02:29.280 --> 0:02:31.840 a hundred and seventy four billion dollars of Biden originally 0:02:31.840 --> 0:02:34.960 had for electric vehicle initiatives. Yeah, I mean part of 0:02:35.000 --> 0:02:37.920 that one and seventy four was a big part of 0:02:37.919 --> 0:02:41.920 it was the point of sale tax uh, you know, incentives, 0:02:42.040 --> 0:02:45.480 point of sale incentives for the purchase of electric vehicles 0:02:45.480 --> 0:02:47.800 so that they are at the same level of as 0:02:47.880 --> 0:02:51.000 internal combustion vehicles. And that's something that the President will 0:02:51.040 --> 0:02:54.080 still fight for in the second part of the two 0:02:54.160 --> 0:02:56.959 step dance that is being done, Um, the first part 0:02:56.960 --> 0:03:00.600 being the bipartisan part and the second part being reckon insciliation, 0:03:00.680 --> 0:03:02.960 which I'm sure your viewers know is the is the 0:03:03.000 --> 0:03:05.920 budget reconciliation process, and that in that part he's going 0:03:05.960 --> 0:03:10.480 to fight for a lot of the climate related measures 0:03:10.520 --> 0:03:13.359 that he put forth in the American Jobs Plan, as 0:03:13.360 --> 0:03:17.080 well as the measures in the American Families Plan, which 0:03:17.280 --> 0:03:21.280 involves you know, preschool, it involves two years of free 0:03:21.880 --> 0:03:26.640 community college, it involves the care economy. So this first 0:03:26.760 --> 0:03:30.640 step important, uh, and important I'll say this in terms 0:03:30.639 --> 0:03:34.320 of electrifying the futures, that we have a strong transmission grid. 0:03:34.639 --> 0:03:36.880 And you you saw that there was seventy four billion 0:03:36.920 --> 0:03:40.360 dollars UH in the power sector. Good chunk of that 0:03:40.480 --> 0:03:45.040 for expanding the capacity. The resiliency of the transmission grid 0:03:45.240 --> 0:03:49.480 hugely important for electrifying. Secretary, are you disappointed by the 0:03:49.520 --> 0:03:52.080 fact that there wasn't more momentum behind some of these 0:03:52.120 --> 0:03:56.720 initiatives that would push the United States further toward some 0:03:56.880 --> 0:04:01.600 of the clean energy goals. I'm I'm not surprised that 0:04:01.680 --> 0:04:06.480 this first package, this first framework doesn't include a lot 0:04:06.600 --> 0:04:09.520 of that, because there have there's you know, it's been 0:04:10.160 --> 0:04:13.800 um difficult to get a lot of tax incentives behind 0:04:14.160 --> 0:04:17.720 clean energy from the Republicans, but there's a lot of 0:04:17.760 --> 0:04:20.120 Republicans who are benefiting from it as well. And so 0:04:20.160 --> 0:04:23.080 in the second package, as the President mentioned yesterday, he's 0:04:23.080 --> 0:04:25.520 going to continue to fight for those climate measures, including 0:04:25.520 --> 0:04:29.320 a clean energy standards. So the bottom line is this 0:04:29.839 --> 0:04:32.120 is just one step, but we gotta take the second 0:04:32.120 --> 0:04:34.479 step as well to get the President's full agenda through 0:04:35.200 --> 0:04:37.040 some of the items as well that we're looking at. 0:04:37.120 --> 0:04:41.040 And I hearkened back on some of my Muni days, uh, 0:04:41.120 --> 0:04:43.919 Miss Secretary about fixing bridges. I mean, of course we 0:04:43.920 --> 0:04:46.840 talked about the electrification of buses, but it's more than that. 0:04:46.920 --> 0:04:50.839 It's updating the airports, it's fixing waterways, it's it's beyond 0:04:50.960 --> 0:04:54.320 just the size and scope of an electrification. Are those 0:04:54.360 --> 0:04:58.039 two though, enough of a green energy for you? Well, 0:04:58.240 --> 0:05:02.560 it's certainly. I mean, this is and historic investment in water. 0:05:02.880 --> 0:05:05.320 So what they're gonna do is make sure that every 0:05:05.400 --> 0:05:09.120 home in America has pipes that are safe to drink from, 0:05:09.400 --> 0:05:11.479 so that there's not lead in the pipes and so 0:05:11.640 --> 0:05:14.520 children are not poison every home, that every home in 0:05:14.560 --> 0:05:18.720 America has access to high speed internet. It's in a 0:05:18.880 --> 0:05:23.840 historic investment in rail, it's an historic investment in transit, 0:05:23.880 --> 0:05:27.120 as you suggest, and of course it's an historic investment 0:05:27.160 --> 0:05:30.400 in the transmission grid. So all of those pieces are 0:05:31.080 --> 0:05:34.360 very important for America's future, and frankly, all of them 0:05:34.440 --> 0:05:38.360 are pieces that the public, whether they're Democrats are Republicans, 0:05:38.400 --> 0:05:41.600 overwhelmingly support because who you know, who cares whether you're 0:05:41.600 --> 0:05:44.240 a Democrat or Republican. You want to have water that's 0:05:44.279 --> 0:05:47.320 safe to drink. Can we also just talk quickly about 0:05:47.360 --> 0:05:49.640 the grid. What you can do from a national level. 0:05:49.880 --> 0:05:53.000 We're coming off of Texas that we just saw. I'm 0:05:53.000 --> 0:05:56.120 from California. The power goes out in the summer every afternoon. 0:05:56.160 --> 0:05:58.159 You have to unplug your appliances. You try to go 0:05:58.200 --> 0:06:00.599 to dinner and they say, we're out of power. Too bad. 0:06:01.000 --> 0:06:03.520 What can we do on a national level to make 0:06:03.520 --> 0:06:06.760 sure that we are shifting to being more climate friendly 0:06:06.920 --> 0:06:11.479 but also maintaining reliability really important question. So what we 0:06:11.560 --> 0:06:14.960 need to do is to add capacity to the transmission 0:06:15.000 --> 0:06:18.440 to grid grid to bring the clean energy that's being 0:06:18.480 --> 0:06:21.159 generated in the states that have a lot of wind 0:06:21.240 --> 0:06:24.200 and solar to the places that have load centers which 0:06:24.240 --> 0:06:26.960 are using a lot of electricity. We have to make 0:06:26.960 --> 0:06:29.400 sure that we do what the Department of Energy is doing, 0:06:29.400 --> 0:06:33.120 which is investing in the research that allows for expanded 0:06:33.520 --> 0:06:37.440 significant storage movement on energy storage so that we can 0:06:37.520 --> 0:06:41.560 use these clean energy assets. Seven. But the President also 0:06:41.640 --> 0:06:44.520 wants to see an investment, for example, in keeping the 0:06:44.600 --> 0:06:48.039 nuclear plants that we have online open, or investment in 0:06:48.120 --> 0:06:52.279 next generation nuclear which is baseload clean power, investment in 0:06:52.360 --> 0:06:56.440 geo thermal which is baseload clean power, investment, investments in 0:06:56.600 --> 0:07:00.240 hydro power, which is baseload clean power. All of at 0:07:00.240 --> 0:07:02.720 has to happen. Not all of that was included in 0:07:02.720 --> 0:07:05.640 this first piece, but um, we're going to fight to 0:07:05.640 --> 0:07:07.440 make sure that all of that is included in the 0:07:07.480 --> 0:07:10.880 second bit of legislation that we hope will arrive at 0:07:10.880 --> 0:07:13.600 the President's desk this summer. We're speaking with Jennifer Grandholme, 0:07:13.840 --> 0:07:17.480 U S Secretary of Energy and Secretary Grandholme, there's a 0:07:17.560 --> 0:07:21.239 question about the shale producers here. Even as we try 0:07:21.480 --> 0:07:24.680 to talk about a transition to clean energy. Shell producers 0:07:24.880 --> 0:07:27.840 have been behind a huge surge and economic activity for 0:07:27.920 --> 0:07:32.280 the United States, a huge concept of US oil independence. 0:07:32.480 --> 0:07:35.600 And now we've seen shale production fall up substantially during 0:07:35.600 --> 0:07:37.920 the pandemic and not really come back as much, no 0:07:38.000 --> 0:07:41.840 longer thought of as the swing producers. How important is 0:07:41.840 --> 0:07:44.840 it in your view to get that production back up 0:07:44.880 --> 0:07:47.680 and running at the capacity that it has versus the 0:07:47.680 --> 0:07:49.840 discipline that we're hearing out of the CEO is from 0:07:49.840 --> 0:07:52.200 a lot of these companies. Well, I think this is 0:07:52.240 --> 0:07:56.040 a really important question because the world, as you know, 0:07:56.200 --> 0:08:00.720 is moving to clean electricity, clean power, and and um 0:08:00.840 --> 0:08:06.320 natural gas an important baseload fuel has some problems with 0:08:06.400 --> 0:08:09.120 clean I mean, it is cleaner than coals, certainly, but 0:08:09.240 --> 0:08:12.200 it has methane emissions, which is a very potent greenhouse gas. 0:08:12.200 --> 0:08:14.920 It's got it's got CEO two emissions. What's so, what's 0:08:15.000 --> 0:08:19.560 interesting is in the framework that was announced yesterday there 0:08:19.560 --> 0:08:25.040 are demonstration significant amount of money for demonstration projects in 0:08:25.080 --> 0:08:28.200 what is known as carbon capture and sequestration which could 0:08:28.240 --> 0:08:33.000 be used to to decarbonize the fossil fuel sector. And 0:08:33.080 --> 0:08:37.640 that to me is another very important technological step and 0:08:37.920 --> 0:08:42.280 step that helps our climate goals UH. And and it's 0:08:42.480 --> 0:08:45.600 technology that can be used here but also helped around 0:08:45.679 --> 0:08:48.680 the world to decarbonize and everybody get to the goal 0:08:48.760 --> 0:08:51.040 that all these countries have signed onto, which is at 0:08:51.040 --> 0:08:53.120 the Paris Agreement, that we get to that zero carbon 0:08:53.160 --> 0:08:56.000 emissions by I think that will help. Those kind of 0:08:56.040 --> 0:09:00.560 technologies will help for this UH, for the oil gas sector, 0:09:00.600 --> 0:09:03.679 the gas sector in particular, to be able to ramp 0:09:03.840 --> 0:09:06.840 up production but in a way that is clean. Government 0:09:06.880 --> 0:09:09.280 just quickly just around on this interview. What's the future. 0:09:09.280 --> 0:09:13.920 What's the role of the SPR in this administration? It's 0:09:13.920 --> 0:09:17.600 a it's an emergency stockpile essentially in the in case 0:09:17.840 --> 0:09:20.720 of in case we have obviously it was something that 0:09:20.840 --> 0:09:25.120 was that was generated in particularly important during like the 0:09:25.120 --> 0:09:28.960 the oil embargo and you know the OPEC crisis. We 0:09:28.960 --> 0:09:33.320 have this, We have this as an important, important measure 0:09:33.600 --> 0:09:37.560 in case there is UM shortages, in case we need 0:09:37.600 --> 0:09:39.040 to have it, and so we're going to keep it. 0:09:39.120 --> 0:09:41.280 And in fact it's in it's underneath the Department of 0:09:41.360 --> 0:09:44.400 Energy and we're putting it uh into a section of 0:09:44.400 --> 0:09:46.719 the Department of Energy that responds to emergencies. So what 0:09:46.880 --> 0:09:48.600 is it being used to rice money if there's an 0:09:48.640 --> 0:09:51.600 emergency every year? I'm telling this is not new. This 0:09:51.640 --> 0:09:53.439 is not a new understand that you can do get 0:09:53.440 --> 0:09:55.120 a release, but to raise money to pay for an 0:09:55.120 --> 0:09:58.880 intrastructure plan. That feels honestly, every year Congress uses it 0:09:58.920 --> 0:10:01.600 for some to pay for something or another that may 0:10:01.600 --> 0:10:05.760 not be related to the reserve itself. So the reserve 0:10:05.800 --> 0:10:08.679 will be will be solid. We've got lots in the reserve, 0:10:08.760 --> 0:10:11.200 it will continue to be UM. It will continue to 0:10:11.200 --> 0:10:13.600 be there for the purposes for which it was intended. 0:10:13.840 --> 0:10:16.880 But it also has this mechanism that it's being Some 0:10:16.960 --> 0:10:20.160 of it gets sold off every year for other reasons 0:10:20.200 --> 0:10:22.040 that Congress wants to fund and this is one of 0:10:22.080 --> 0:10:25.440 those occasions. Apparently, Secretary Fantastic to catch up. Secretary of Energy, 0:10:25.520 --> 0:10:35.440 Jennifer granhow, thank you. Let's continue this thing. We can 0:10:35.480 --> 0:10:38.800 do that with Republican Congressman French Hill of Arkansas. Congressman 0:10:38.840 --> 0:10:40.679 fantastic to get you on the program with us. Can 0:10:40.720 --> 0:10:42.600 we just start with the infrastructure plan just briefly. If 0:10:42.600 --> 0:10:45.480 you make looking at these numbers, you would think that'd 0:10:45.480 --> 0:10:47.120 be a big reaction here in the bond market, and 0:10:47.120 --> 0:10:48.920 we don't have one. So I want to understand from 0:10:48.960 --> 0:10:51.200 your perspective what you've heard in the last twenty four hours, 0:10:51.600 --> 0:10:54.480 what you think can actually be passed down on Capitol 0:10:54.520 --> 0:10:58.319 Hill in d C. I think the moderate Democrats and 0:10:58.360 --> 0:11:00.720 the Republicans in the Senate have been sort of thrown 0:11:00.880 --> 0:11:05.839 under the transit bus by their proposed compromise because immediately 0:11:05.920 --> 0:11:10.640 upon reaching a constructive bipartisan agreement with the President, Nancy 0:11:10.679 --> 0:11:13.080 Pelosi and Chuck Schumer said, well, we won't support this 0:11:13.160 --> 0:11:16.640 at all until we raise taxes on working people in 0:11:16.720 --> 0:11:20.479 business and pass our Green New Deal and other American 0:11:20.520 --> 0:11:25.360 family priorities through budget reconciliation. So, once again, I think 0:11:25.360 --> 0:11:28.640 President Joe Biden is a prisoner of the left wing 0:11:28.720 --> 0:11:32.359 of the Democratic Party here in Washington. So just quickly, Congressman, 0:11:32.640 --> 0:11:35.840 just to jump back in what was agreed yesterday, dead 0:11:35.840 --> 0:11:40.719 on arrival already. Well, the House Republicans proposed a four 0:11:40.920 --> 0:11:45.000 d billion dollar service transportation bill with a pilot program 0:11:45.120 --> 0:11:48.800 to have a vehicle's taxed on miles as opposed to 0:11:48.840 --> 0:11:51.240 the gas tax, which I think is a constructive approach. 0:11:51.720 --> 0:11:53.880 House Democrats are going to move a bill next week 0:11:53.920 --> 0:11:56.440 that's basically the Green New Deal priorities of about five 0:11:56.800 --> 0:12:00.120 and seventy billion, So it's not dead on arrival, but 0:12:00.200 --> 0:12:03.760 I wouldn't say that it's being acclaimed on both sides 0:12:03.800 --> 0:12:07.800 of the aisle and that it's not done remotely yet. Congressman, 0:12:07.960 --> 0:12:09.600 what would you be okay with when it comes to 0:12:09.640 --> 0:12:15.079 reconciliation in tandem with his bipartisan deal, Well, we need 0:12:15.080 --> 0:12:17.880 targeted spending and we need to get back to spending 0:12:17.960 --> 0:12:21.199 priorities instead of proposing to spend six trillion dollars and 0:12:21.320 --> 0:12:24.160 increase the size of the federal government way up over 0:12:25.200 --> 0:12:29.000 our gross domestic economy. We need to not raise taxes 0:12:29.080 --> 0:12:32.000 on workers and on businesses as we try to come 0:12:32.040 --> 0:12:34.280 out of the pandemic and get people back to work. 0:12:34.720 --> 0:12:36.720 So at least it's really a subject of not only 0:12:36.720 --> 0:12:39.880 the amount of money, but the target and the priorities, 0:12:39.920 --> 0:12:42.400 and that remains to be seen with the Democrats will 0:12:42.440 --> 0:12:45.440 propose in the Senate and propose in the House. So, Congressman, 0:12:45.480 --> 0:12:47.679 if there are no tax hikes attached to this or 0:12:47.920 --> 0:12:51.199 to minimus ones, ones that are more palatable to you, 0:12:51.200 --> 0:12:54.640 you would be willing to support a multi trillion dollar package, 0:12:54.840 --> 0:12:56.560 or at least not push back and vote on the 0:12:56.559 --> 0:13:00.960 bipartisan bill and allow the reconciliation to go forward. I 0:13:01.000 --> 0:13:03.040 don't think that's the way it's gonna go. Lest I 0:13:03.080 --> 0:13:05.960 think you're gonna try to have an infrastructure vote, but 0:13:06.080 --> 0:13:08.520 Nancy Pelosi and Chuck Schumer are not going to bring 0:13:08.640 --> 0:13:13.120 that infrastructure compromise approach to a vote until they get 0:13:13.160 --> 0:13:15.960 a vote on their reconciliation packed, which is a multi 0:13:15.960 --> 0:13:20.199 trillion dollar package with tax increases. That's what the Democrats 0:13:20.200 --> 0:13:22.160 in the House and the Democrats in the Senate are 0:13:22.240 --> 0:13:25.599 demanding of Chuck Schumer and of Nancy Pelosi. So I 0:13:25.640 --> 0:13:28.360 think it's premature to say, well, what does the final 0:13:28.440 --> 0:13:32.880 package look like? Does this sort of two route approach 0:13:33.240 --> 0:13:36.960 is that the way to be going well normally, No 0:13:37.280 --> 0:13:40.800 I thought, what job my Joe Mansion thought he was 0:13:40.880 --> 0:13:43.560 doing with Susan Collins and others was coming up with 0:13:43.600 --> 0:13:47.079 a way to get a bipartisan infrastructure package which with 0:13:47.120 --> 0:13:51.880 as much paying pay for from previously appropriated funding as possible, 0:13:51.880 --> 0:13:54.640 and get that passed in a clean way on a 0:13:54.679 --> 0:13:58.760 bipartisan basis in both Houses of Congress. And clearly yesterday 0:13:59.400 --> 0:14:02.040 uh Nan to Pelosi and Chuck Schumer through a wrench 0:14:02.280 --> 0:14:06.920 in that plan. Senator or Congressman, I should say, you're 0:14:07.000 --> 0:14:09.680 also ranking member as we see here on the National Security, 0:14:09.720 --> 0:14:13.679 International Development, and Monetary Policy Subcommittee. When we think about 0:14:13.720 --> 0:14:16.840 the grid as being a national security issue, are we 0:14:16.920 --> 0:14:21.600 doing enough to really meet both requirements making the grid reliable, 0:14:21.880 --> 0:14:26.760 transitioning perhaps two more of a green energy friendly but 0:14:26.960 --> 0:14:30.200 it has to be protected as well from a national 0:14:30.240 --> 0:14:33.280 security perspective. Is there enough in this bill to do 0:14:33.360 --> 0:14:37.360 all of those well, that's been an ongoing priority on 0:14:37.400 --> 0:14:39.960 a Bick Parson basis in Congress. And we have two 0:14:40.000 --> 0:14:44.000 of the power control powering sharing a company's headquartered in 0:14:44.040 --> 0:14:47.760 Little Rock, Arkansas and mad District Southwest Power Pool and MISO, 0:14:48.040 --> 0:14:53.119 and in both instances they have a Reliability Transfer Authority 0:14:53.240 --> 0:14:56.560 for power across this country that includes a strong cyber 0:14:56.600 --> 0:15:01.000 protection and grid resiliency initiative, and I've met with those 0:15:01.000 --> 0:15:03.960 companies and many utilities on it. So the private sector 0:15:04.040 --> 0:15:06.880 works on this every single day, and where the government 0:15:06.880 --> 0:15:10.160 can make strategic investments, I think you'd find bipartisan support. 0:15:10.520 --> 0:15:13.200 As to the amount, that's not something I can comment 0:15:13.200 --> 0:15:17.760 on today because I haven't studied their proposal, and we 0:15:17.920 --> 0:15:21.400 will make sure to ask you as well. Another question, 0:15:21.480 --> 0:15:24.240 because we're coming off of a bank conversation that we 0:15:24.360 --> 0:15:27.440 just had. Of course, the bank's coming out and passing, 0:15:27.520 --> 0:15:30.280 of course all of those stress tests, can you confirm 0:15:30.320 --> 0:15:33.760 that you don't see systemic risk, that the banks passing 0:15:33.760 --> 0:15:36.840 those stress tests are indeed a positive thing, returning that 0:15:36.920 --> 0:15:41.080 capital to shareholders. I think the bank's financial strength through 0:15:41.120 --> 0:15:43.480 the pandemic has been one of the bright spots that 0:15:43.560 --> 0:15:46.520 gives us the strength for the economy to know that 0:15:46.560 --> 0:15:48.840 we can get people back to work and have GDP 0:15:49.000 --> 0:15:51.960 grow between six and eight percent this year. So I 0:15:51.960 --> 0:15:55.200 think that Flying Colors pass of the stress tests indicates 0:15:55.200 --> 0:15:58.360 our economy is open and ready for business, and I 0:15:58.440 --> 0:16:00.920 look forward to the results of that by moral more 0:16:00.960 --> 0:16:03.720 Americans getting back to a full time job. Congressman, just 0:16:03.760 --> 0:16:05.200 before I let you go, I just want to finish 0:16:05.200 --> 0:16:08.320 on that the usefulness of stress test if we never 0:16:08.360 --> 0:16:11.360 allow the banks to face stress again, and the Federal 0:16:11.360 --> 0:16:14.200 Reserve is cleaning seemingly pretty intent on never allowing that 0:16:14.320 --> 0:16:17.520 to happen. Last year fantastic example of that. The banks 0:16:17.520 --> 0:16:19.240 didn't get into the stress and maybe that's a good thing. 0:16:19.280 --> 0:16:20.600 I don't know, but I want you to tell me 0:16:20.640 --> 0:16:23.480 what's the value of a stress test if this Federal 0:16:23.480 --> 0:16:27.840 Reserve is how bent on these banks never facing stress again. Well, 0:16:27.880 --> 0:16:30.720 I don't agree with zero interest rates that the Fed 0:16:30.880 --> 0:16:33.360 has proposed, and I don't think they should continue at 0:16:33.360 --> 0:16:36.200 the rate of a twenty billion dollars a month. Those 0:16:36.280 --> 0:16:39.960 benefit uh the economy and the short run during the pandemic, 0:16:39.960 --> 0:16:42.400 but it's time, with an eight percent projected growth rate 0:16:42.440 --> 0:16:45.000 to move away from that. But they have a primary 0:16:45.080 --> 0:16:47.560 obligation to regulate our banks and make sure they have 0:16:47.640 --> 0:16:51.040 the capital to operate a safe and sound environment. And 0:16:51.120 --> 0:16:53.680 that's what's been done, and it's been a big change 0:16:53.720 --> 0:16:56.240 from the O eight oh nine crisis, and that's why 0:16:56.280 --> 0:16:58.880 you saw so many street firms convert to a commercial 0:16:58.880 --> 0:17:01.320 bank charter so it could build the capital and the 0:17:01.360 --> 0:17:06.160 resiliency necessary if there was an economic downturn. Congressman, always smile, 0:17:06.160 --> 0:17:07.840 always shop, and it's going to catch up, sir, come 0:17:07.880 --> 0:17:11.359 back soon, Republican Congressman French Hill of Arkansas, Thank you, sir. 0:17:18.560 --> 0:17:21.480 Perfect guests, the man himself might mayor wilst Fargo Securities 0:17:21.520 --> 0:17:24.479 US Large Camp Bank Research Managing director Joy just now 0:17:24.560 --> 0:17:27.880 to discuss Michael. Let's start here. After the closed Monday, 0:17:28.160 --> 0:17:30.600 we could get some big capital return plans. What are 0:17:30.600 --> 0:17:35.920 the numbers that you're looking for, sir? Well, wow, this 0:17:36.040 --> 0:17:38.040 was the FED stress test, and it used to be 0:17:38.119 --> 0:17:41.920 the Super Bowl banking and now it's like a preseason game. 0:17:42.080 --> 0:17:44.679 It was. It was boring, but you know what, boring 0:17:44.760 --> 0:17:47.680 is beautiful for banks. The FED through the kitchen sink 0:17:47.760 --> 0:17:50.800 at the banks with the stress test. The banks passed 0:17:50.800 --> 0:17:54.959 with blind colors. As you mentioned, Monday at four thirty pm, 0:17:55.040 --> 0:17:59.600 we expect a flurry of press releases that announces increases 0:17:59.640 --> 0:18:02.960 and divid it ends and buy backs, and we ultimately 0:18:03.000 --> 0:18:07.919 expect capital return to double versus the prior year and 0:18:07.960 --> 0:18:10.600 that should lead to a and all in yields. That 0:18:10.680 --> 0:18:13.639 the dividend yield plus buy backs, that's better than what 0:18:13.680 --> 0:18:15.840 it is for even junk bots. So there's a lot 0:18:15.840 --> 0:18:18.520 of value with banks and we think that will draw 0:18:18.560 --> 0:18:22.199 in new investors, quants, dived in funds, given in growth 0:18:22.240 --> 0:18:26.520 funds to Ultimately, what this means is redemption for the banks. 0:18:26.520 --> 0:18:29.760 Remember during the pandemic, banks were going to fail, they 0:18:29.800 --> 0:18:33.200 were going to cut the dividends. Now you have dividend 0:18:33.200 --> 0:18:38.480 increases and a bevy of banks with buy back increases 0:18:39.040 --> 0:18:42.080 after Monday. So this is very good news for banks 0:18:42.280 --> 0:18:45.399 and I would say thank you regulators after the global 0:18:45.480 --> 0:18:50.879 pral work and now banks and their investors should be 0:18:50.920 --> 0:18:53.280 able to reap the benefits. So, Mike, why are we 0:18:53.320 --> 0:18:57.239 not saying more of a reaction in markets. You know, 0:18:57.680 --> 0:19:02.000 people have been skeptical about banks the past year. As 0:19:02.000 --> 0:19:04.160 you know, we upgraded a few of the large banks 0:19:04.560 --> 0:19:07.840 in the middle of the crisis. They didn't trust the 0:19:08.640 --> 0:19:11.880 resiliency of the banks, right they It was kind of 0:19:11.920 --> 0:19:15.320 the memories from the global financial crisis. It was still 0:19:15.600 --> 0:19:17.760 front and center and it's like, okay, if something goes wrong, 0:19:17.800 --> 0:19:19.679 banks are going to get hurt, and that was the 0:19:19.720 --> 0:19:23.120 farthest from the truth. If anything, you know, the more 0:19:23.160 --> 0:19:25.960 of the risk that's been outside of the banking industry. 0:19:26.040 --> 0:19:29.840 So just like there's been skepticism too much over the 0:19:29.880 --> 0:19:33.440 past year, there's still skepticism. But connect the dots. I mean, 0:19:34.000 --> 0:19:37.080 banks past the FED stress test Monday at four thirty pm, 0:19:37.119 --> 0:19:40.440 you get the announcements, then you get the increases. Hold 0:19:40.480 --> 0:19:42.640 on a second, I'm sorry. I don't think I hear 0:19:42.680 --> 0:19:44.280 from a lot of people that they're worried about some 0:19:44.280 --> 0:19:46.440 sort of systemic risk from the banks. I hear the 0:19:46.440 --> 0:19:48.280 fact that the field curve is flattening if this has 0:19:48.280 --> 0:19:50.360 been priced in. I mean, are you saying that it's 0:19:50.359 --> 0:19:53.800 not that the people are still worried about systemic risk. No, 0:19:53.920 --> 0:19:56.000 I think that's past. That's what happened in the last 0:19:56.040 --> 0:20:00.200 six to twelve months. But now people are like, oh, 0:20:00.280 --> 0:20:03.080 we don't really we know the dividends are coming, but 0:20:03.160 --> 0:20:04.959 we don't really care that much. But I think they 0:20:04.960 --> 0:20:07.760 should care because if you look at the the dividend 0:20:07.840 --> 0:20:12.280 yield adjusted for buybacks should be about eight percent compared 0:20:12.320 --> 0:20:15.920 to the tenure yield of under two percent. That gap 0:20:16.400 --> 0:20:18.840 is one of the widest in history. Where can you 0:20:18.880 --> 0:20:22.840 get an eight percent yield globally? And in fact that's 0:20:22.880 --> 0:20:25.960 three bases points above the junk bond yield. So I 0:20:26.000 --> 0:20:30.600 think people are just cynical and skeptical about the sustainability 0:20:30.640 --> 0:20:34.200 of banks cap returns, the sustainability of earnings. At least 0:20:34.240 --> 0:20:37.239 you raise a great point. The flatter yield curve is 0:20:37.280 --> 0:20:40.240 on people's minds. But look what just happened last week. 0:20:40.280 --> 0:20:44.399 The Fed said now it's likely to have two increases 0:20:44.400 --> 0:20:48.120 in the Fed funds rate in three and banks benefit 0:20:48.200 --> 0:20:51.639 twice as much from increases in short term rates as 0:20:51.640 --> 0:20:54.960 they do from increases in long term rates. Mike, you're 0:20:54.960 --> 0:20:57.280 famous for your calls coming on the program and saying 0:20:57.280 --> 0:21:01.160 banks aren't financials, Banks are just tech companies. Despite all 0:21:01.200 --> 0:21:04.520 of the buy backs and dividends, are they investing enough 0:21:04.600 --> 0:21:09.439 to keep up with big tech? Well, the largest banks 0:21:09.440 --> 0:21:12.120 certainly are. I mean, some of the best fintech players 0:21:12.200 --> 0:21:15.399 on the planet are Bank of America and JP Morgan. 0:21:15.520 --> 0:21:19.000 You have tens of millions of customers, and this is 0:21:19.040 --> 0:21:23.280 going from digital interactions to digital relationships. They're not just 0:21:23.359 --> 0:21:27.199 touching customers through one point, but through multiple points, and 0:21:27.240 --> 0:21:30.359 they continue to invest and they continue to gain customers. 0:21:30.680 --> 0:21:33.200 And both Bank America, which is our number one pick, 0:21:33.560 --> 0:21:38.280 and JP Morgan grew deposits over the past year equal 0:21:38.320 --> 0:21:40.879 to the sixth largest bank, and that was organic growth 0:21:41.040 --> 0:21:43.719 and a lot of that is aided through digital banking. 0:21:44.800 --> 0:21:47.920 And Mike gotta run apologize for my colleague Lisa Brownwitz 0:21:48.440 --> 0:21:53.359 joking Lisa las Fagger Securities US Large Camp Bank Research, Moneatil. Right, 0:22:00.160 --> 0:22:02.480 let's hit this stanks and right now we're torsting. Slock Cobler, 0:22:02.520 --> 0:22:05.320 Global Management, Chief Economy is tosting, just pouring through the 0:22:05.400 --> 0:22:07.640 days of this morning the recent economy dactors. Well, what's 0:22:07.640 --> 0:22:11.240 your take, sir? So there are two very important components here. 0:22:11.240 --> 0:22:14.000 Of course, the first thing to watch this inflation core 0:22:14.080 --> 0:22:18.320 PC inflation was exactly as the consensus expected three point four. 0:22:18.440 --> 0:22:21.200 So that means, of course that we do see inflation 0:22:21.280 --> 0:22:23.680 higher and that is just confirming what we saw. Remember, 0:22:23.720 --> 0:22:26.280 we've got the CPI numbers already, so that means that 0:22:26.320 --> 0:22:30.040 we already knowing that this month was indeed a very 0:22:30.080 --> 0:22:32.560 elevated level of inflation. The second thing is what Lesa 0:22:32.640 --> 0:22:36.280 just mentioned, this shift away from goods to services to 0:22:36.359 --> 0:22:39.160