WEBVTT - Surveillance: Fed's Balance Sheet With Bullard 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.240 Bloomberg dot Com, and of course on the Bloomberg. To me, 0:00:27.360 --> 0:00:29.800 the story that struck out to me over the weekend 0:00:30.320 --> 0:00:34.199 was about how some drillers are now paying people to 0:00:34.280 --> 0:00:38.040 take the oil away from them. Basically negative pricing in 0:00:38.080 --> 0:00:40.440 the oil patch given the glut that we're seeing in 0:00:40.440 --> 0:00:43.599 the lack of storage available, just shocking. Well, let's talk 0:00:43.640 --> 0:00:46.120 about that with Francisco Blanche Bank America Global head of 0:00:46.120 --> 0:00:49.559 Commodities and Derivotius Research. Lucky to have Francisco join us 0:00:49.560 --> 0:00:52.320 on the phone this morning. Fantastic to have you with us. Francisco, 0:00:52.400 --> 0:00:55.240 let's start the show. We are we breaching storage capacity 0:00:55.560 --> 0:01:00.760 in various parts of the United States. Thanks for having me. Jonathan, Um, 0:01:00.800 --> 0:01:02.720 we are. We are not yet, but we are going 0:01:02.760 --> 0:01:06.440 to get there very soon. I remember you were asking before, 0:01:06.600 --> 0:01:09.120 what's the bigger show because the demand show sply shock. 0:01:09.600 --> 0:01:12.479 Well it's the demand shok. We think that demand will 0:01:12.520 --> 0:01:15.559 be down seventeen million barrels a day in the month 0:01:15.600 --> 0:01:20.760 of April globally. Remember that's a seventeen percent decline on 0:01:20.760 --> 0:01:25.759 a hundred million barrel base. So UM the supply self, 0:01:25.800 --> 0:01:28.000 by contrast, I think it's probably gonna be about three 0:01:28.040 --> 0:01:32.000 or four million barrels in April. UM. So, so now 0:01:32.040 --> 0:01:34.360 we're looking at a massive glass that we've never seen before. 0:01:34.800 --> 0:01:38.679 When when when you say, when you say Francisco demand 0:01:38.680 --> 0:01:43.080 goes down seventeen million barrels, What demand drops? I mean 0:01:43.160 --> 0:01:47.600 what usage causes that drop? And demand do we stop? 0:01:47.840 --> 0:01:50.360 I mean is it John stop? And do using ubers 0:01:50.400 --> 0:01:55.840 in the Bentley and all that? What causes it? Well? So, so, 0:01:55.960 --> 0:01:58.960 first of all, um, I would say the most impacted 0:01:59.040 --> 0:02:03.480 sector is UH airlines. In the U s Alone, we've 0:02:03.520 --> 0:02:08.200 seen traffic traffic down more than eighty five percent um 0:02:08.320 --> 0:02:11.839 TOM eighty five I mean, we've basically shut down most 0:02:11.840 --> 0:02:15.639 domestic travel in Europe. We can see similar numbers down 0:02:15.680 --> 0:02:19.079 eighty nine percent across most countries. UM. If you look 0:02:19.120 --> 0:02:23.440 at China, however, which is interesting, the drop there also 0:02:23.520 --> 0:02:27.560 was about eighty five percent at the trial. However, they've 0:02:27.560 --> 0:02:33.240 only recovered to around of normal levels despite having been 0:02:33.320 --> 0:02:36.200 dealing with the virus for three months. So so clearly 0:02:36.200 --> 0:02:39.400 the airline sector is the most impacted one. Uh, followed 0:02:39.400 --> 0:02:43.760 by UM, you know you're asking about Uger's and I 0:02:43.760 --> 0:02:45.840 think a lot of people are working from home now, 0:02:46.280 --> 0:02:49.680 so that's a lot of restaurants are shut down. Uh. 0:02:50.040 --> 0:02:53.880 Basically two people are going are losing jobs, so there's 0:02:53.919 --> 0:02:56.080 a lot of people staying home either because then at 0:02:56.080 --> 0:02:58.760 have jobs because they're working remotely. So it's also heard 0:02:58.760 --> 0:03:03.639 in gulfiling demand. We're in numbers down thirty uh year 0:03:03.639 --> 0:03:07.520 and year in gasoline man here, so it's really across 0:03:07.520 --> 0:03:10.840 the board, but the most impacted sector is the airline sector. 0:03:11.360 --> 0:03:14.200 So going forward, Sebastian Gailey of Nordea Bank earlier in 0:03:14.200 --> 0:03:16.400 the show was saying that he expects oil to go 0:03:16.440 --> 0:03:19.840 back up to forty five barrel at some point in 0:03:19.919 --> 0:03:23.240 the not so distant future. How realistic is that and 0:03:23.280 --> 0:03:26.000 how long lasting is this period of time where we 0:03:26.040 --> 0:03:30.639 could see sub twenty dollars a barrel oil? Um. So 0:03:31.480 --> 0:03:35.000 we're we're looking at this crisis into UH looking at 0:03:35.040 --> 0:03:37.680 the two main parameters. One is the depth of the 0:03:37.720 --> 0:03:43.040 initial drop and then second is the dulation of the crisis. UM. 0:03:43.080 --> 0:03:44.920 I think we have a you know, I think we 0:03:45.160 --> 0:03:48.480 have a reasonable handle on the droop. We think seventeen 0:03:48.480 --> 0:03:51.440 million barrels today is the right number. It could be twenty, 0:03:51.480 --> 0:03:55.480 it could be fifteen. Again, it's hard to tell, right, Um, 0:03:55.520 --> 0:03:58.240 there's a lot of guesswork going on here. But then 0:03:58.280 --> 0:04:01.120 the duration is a little more complete hit it um. 0:04:01.200 --> 0:04:03.280 Now in China, as I said before, we started to 0:04:03.280 --> 0:04:07.720 see a very modest recovery, although for example, traffic, which 0:04:07.840 --> 0:04:10.800 which also took a big hitting China, is back to 0:04:10.880 --> 0:04:14.880 about normal, so roughly down fifteen percent year and year. 0:04:15.000 --> 0:04:20.640 I suppose we're not earlier um earlier in in in 0:04:20.680 --> 0:04:24.360 the first quarter. So those are the key numbers really 0:04:24.400 --> 0:04:27.640 to watch the recovery rate. Do you just assume a 0:04:27.760 --> 0:04:31.960 week bundled commodity index? Do you just assume weaker Aussie 0:04:32.040 --> 0:04:35.200 dollar versus the yan or other metrics? I mean, is 0:04:35.240 --> 0:04:39.560 it just a fade away for commodities. Um, it's gonna 0:04:39.560 --> 0:04:41.400 be a little bit of straight away for a little bit. 0:04:41.520 --> 0:04:43.599 But but then remember the other thing that's gonna happen 0:04:43.680 --> 0:04:45.320 tom in the in the second half of the year 0:04:45.360 --> 0:04:48.840 maybe is that we are going to to lose a 0:04:48.880 --> 0:04:53.080 lot of supply either because in cases like copper, we 0:04:53.160 --> 0:04:55.960 have fifteen percent of supply at risk, or in cases 0:04:56.000 --> 0:04:59.960 like oil, we're just gonna decimate investment across a broad 0:05:00.120 --> 0:05:02.880 range of regions, which in turn will lead to a 0:05:02.920 --> 0:05:07.400 supply decline into one UM and then then as it 0:05:07.480 --> 0:05:10.359 released to our culture. That's the news about you know, 0:05:10.480 --> 0:05:17.600 news about UH. Potentially the some some agricultural commodity producers 0:05:18.000 --> 0:05:23.880 facing UM coronavirus risks as well at their at their plans. 0:05:23.920 --> 0:05:26.440 So I think I think the biggest risk really is 0:05:26.440 --> 0:05:30.480 is UH demand goes down nationally, prices go down. Then 0:05:31.000 --> 0:05:34.320 as we recover, we will have hampered, we will have 0:05:34.440 --> 0:05:37.080 heard our productive capacity and thus what leads to the 0:05:37.160 --> 0:05:41.160 price rally at some point in in the recovery cycle. 0:05:41.240 --> 0:05:44.640 Whether that's end of twenty one, I don't know. It 0:05:44.680 --> 0:05:48.600 depends on how long this this UH crisis last. Francisco Blach, 0:05:48.680 --> 0:05:51.400 the Bank America winking on the commodity round. They crew 0:05:51.520 --> 0:05:56.400 dressed specifically. We would like to welcome to the SIS 0:05:56.440 --> 0:06:00.160 President Jo Bollard, to Bloomberg Television and Radio Worldwide, thank 0:06:00.200 --> 0:06:03.279 you for joining us this morning. I want to see 0:06:03.320 --> 0:06:05.440 if we can't catch up a little bit about ten 0:06:05.560 --> 0:06:08.640 days ago you predicted we could see unemployment as high 0:06:08.680 --> 0:06:12.000 as thirty percent in the second quarter, and you call 0:06:12.120 --> 0:06:15.880 for a massive stimulus program. We got a massive stimulus program. 0:06:15.960 --> 0:06:22.200 So does that change your forecast for unemployment and growth? Yeah, 0:06:22.200 --> 0:06:26.080 thanks for having me this morning. I did want to 0:06:26.120 --> 0:06:29.240 see pandemic relief. I wouldn't call it stimulus. I would 0:06:29.240 --> 0:06:33.919 call it pandemic relief. Uh. What I interpret the program 0:06:34.000 --> 0:06:38.800 is trying to do is stabilize incomes and stabilize businesses 0:06:39.040 --> 0:06:43.000 as we work our way through this investment in our 0:06:43.120 --> 0:06:47.160 national health over the next couple of months. Here on 0:06:47.279 --> 0:06:51.560 the unemployment, uh, we do have a blog on this. Uh. 0:06:51.600 --> 0:06:54.320 If you read the blog carefully, you'll see that there 0:06:54.640 --> 0:06:58.760 is a way to bound the unemployment rate. It's going 0:06:58.760 --> 0:07:02.359 to be somewhere between ten and I think the upper 0:07:02.360 --> 0:07:08.160 bound is like but that's because we're just identifying vulnerable 0:07:08.200 --> 0:07:13.040 workers in this environment. And what's going to happen is 0:07:13.080 --> 0:07:16.680 that those workers, some of those workers are going to 0:07:16.760 --> 0:07:19.080 have to seek relief so that they can pay their 0:07:19.080 --> 0:07:22.160 bills through this period. So we're expecting the unemployment rate 0:07:22.200 --> 0:07:26.320 to spike, but let's call that pandemic relieve. Then they 0:07:26.360 --> 0:07:29.960 can pay their bills and once the virus goes away, 0:07:30.000 --> 0:07:32.640 then we'll be able to return to normal. So hopefully, 0:07:32.800 --> 0:07:35.560 if this all works smoothly, and there's a lot in 0:07:35.560 --> 0:07:38.640 the legislation as well, UM, we'll be able to come 0:07:38.640 --> 0:07:42.360 out on the other side and get the economy rock 0:07:42.400 --> 0:07:46.280 and again. Well, Wednesday is April one. Mortgage payments are due, 0:07:46.320 --> 0:07:49.240 rent payments are due, Utility bills are do. Could we 0:07:49.280 --> 0:07:56.280 have a problem if people can't pay their bills on Wednesday? Uh? 0:07:56.920 --> 0:08:00.280 My sense is, of course, we're in a crisis situation ration. 0:08:00.440 --> 0:08:04.240 But my sense is that everyone really understands what's going 0:08:04.320 --> 0:08:09.160 on here now because obviously it's been the topic number one, 0:08:09.240 --> 0:08:11.200 not just in the US but around the world. So 0:08:11.520 --> 0:08:18.239 I think people pretty much understand that, Uh, the relief 0:08:18.320 --> 0:08:21.320 is supposed to enable people to pay their bills as 0:08:21.400 --> 0:08:26.840 best they can. Um, there might be some uh delays 0:08:26.960 --> 0:08:30.320 and things you'd expect that in a crisis situation, but 0:08:30.480 --> 0:08:33.400 by and large, I think there are plenty of resources 0:08:33.440 --> 0:08:37.319 in the fiscal package to handle what we're going to 0:08:37.400 --> 0:08:40.320 go through here. Well, the main street lending program that 0:08:40.360 --> 0:08:42.920 you guys have announced is in the package. How's that 0:08:42.960 --> 0:08:48.440 going to work? And when does that start? Uh? That's 0:08:48.480 --> 0:08:52.960 in the design phase right now. So I think from 0:08:52.960 --> 0:08:56.120 a firm's point of view, there are two ways to 0:08:56.640 --> 0:09:00.640 handle the crisis. One would be the traditional, which would 0:09:00.640 --> 0:09:05.280 be to shut down temporarily and send the workers over 0:09:05.480 --> 0:09:10.080 to the pandemic relief or unemployment line. And a lot 0:09:10.080 --> 0:09:12.240 of that is going to occur. That's already occurred. We 0:09:12.280 --> 0:09:16.680 sell the claims number last week, UH, and that's okay, 0:09:16.760 --> 0:09:20.720 you're getting UH, and the the umployment insurance benefit is 0:09:20.760 --> 0:09:24.720 beefed up, so they're going to get closer to acent 0:09:24.840 --> 0:09:27.000 or maybe a dent of what they would would have 0:09:27.080 --> 0:09:30.960 gotten had they just continued to work. So I think 0:09:30.960 --> 0:09:33.600 that part that's one way to go. But if if 0:09:33.640 --> 0:09:36.520 the firm goes in that direction, they might lose connection 0:09:36.600 --> 0:09:40.800 with their workers. So another direction to go is to 0:09:40.800 --> 0:09:43.880 go to the Small Business Administration get a loan, which 0:09:43.920 --> 0:09:48.480 is ultimately forgivable if you meet certain conditions, mainly that 0:09:48.559 --> 0:09:53.080 you keep your payroll more or less intact. So if 0:09:53.120 --> 0:09:55.240 you go that route as a firm, then you might 0:09:55.280 --> 0:09:58.320 be able to retain all your workers and then when 0:09:58.679 --> 0:10:03.080 the startup occurs later, you'll be able to have the 0:10:03.120 --> 0:10:06.280 same workers and you don't have to go higher all 0:10:06.320 --> 0:10:09.600 over again and get your business ramped up again. So 0:10:10.240 --> 0:10:13.480 that might be a better way to go for many companies. 0:10:13.600 --> 0:10:16.840 If companies decide to go that way, then we'll see 0:10:17.000 --> 0:10:21.040 lower unemployment and more uptake on sp a loan side. 0:10:21.600 --> 0:10:24.880 Your district has a lower incidence of infection rate at 0:10:24.920 --> 0:10:27.320 this point, So what's happening in your district? I normally 0:10:27.559 --> 0:10:29.319 ask you what the CEOs are telling you, but I 0:10:29.360 --> 0:10:31.440 also want to know what mom and pop are telling 0:10:31.440 --> 0:10:36.360 you from the mom and pop stores. Yeah, we do 0:10:36.559 --> 0:10:40.880 have a lower rate of infection, but boy, it's pretty quiet, 0:10:41.640 --> 0:10:44.880 uh the you know where I live here in the 0:10:45.280 --> 0:10:49.600 fameless metro area. You know, most things are shut down. 0:10:49.760 --> 0:10:53.400 People stay at home. So that makes me think, uh, 0:10:53.600 --> 0:10:57.160 and just reading about it across the country that the 0:10:57.280 --> 0:11:00.520 idea that there's a lot of regional variation here probably 0:11:00.640 --> 0:11:03.600 not the right way to think about this. I think 0:11:04.120 --> 0:11:08.160 pretty much everywhere has has bought into the idea that 0:11:08.920 --> 0:11:11.360 you should be very careful about going out and very 0:11:11.440 --> 0:11:15.200 careful about spreading this vibrus. Also, I think another thing 0:11:15.240 --> 0:11:17.839 to keep in mind, this is not just things that 0:11:17.920 --> 0:11:23.199 are ordered by health officials. This is individuals and families 0:11:23.480 --> 0:11:26.880 making their own decisions and businesses making their own decisions 0:11:26.920 --> 0:11:29.120 about how they want to handle the situation. So what 0:11:29.360 --> 0:11:33.240 you have is a kind of private sector and household 0:11:33.520 --> 0:11:37.959 response to the crisis, which includes them not wanting to 0:11:38.040 --> 0:11:41.520 get sick and not wanting to get others that are 0:11:41.559 --> 0:11:45.760 in their circle sick. So because of that, um, regardless 0:11:45.760 --> 0:11:47.920 of what the health officials would say, at this point, 0:11:48.040 --> 0:11:51.400 I think everyone wants to basically stay home until this 0:11:52.320 --> 0:11:55.120 virus goes away. And so because of that, I think 0:11:55.160 --> 0:11:59.280 all across the country you're basically in a partial shutdown situation. 0:12:00.120 --> 0:12:01.559 Let me ask you a couple of things about the 0:12:01.840 --> 0:12:04.720 bill that passed and the defense new powers. The language 0:12:05.200 --> 0:12:09.200 in the bill says you can buy corporate bonds down 0:12:09.280 --> 0:12:13.360 to the lowest rating for corporates, and uh, those are 0:12:13.480 --> 0:12:15.839 obviously the ones who are going to need the most help, 0:12:15.920 --> 0:12:18.360 But they're also the ones most likely to see their 0:12:18.480 --> 0:12:22.160 ratings downgraded into junk, which in theory, you can't own. 0:12:22.200 --> 0:12:27.920 So how much risk are you willing to take on? Yeah, 0:12:28.400 --> 0:12:32.480 well we've got we've got to think about exactly how 0:12:32.520 --> 0:12:35.439 to execute on that one. But the main idea of 0:12:35.559 --> 0:12:39.240 a program like that is to restore basic market functioning. 0:12:40.360 --> 0:12:43.760 Which broke down as this crisis broke out here. So 0:12:44.320 --> 0:12:48.600 I think we've got backing from the Treasury that's at 0:12:48.880 --> 0:12:53.000 three program very powerful, and I think we'll be able 0:12:53.040 --> 0:12:59.199 to keep price discovery going in that in that sector there. Uh, 0:12:59.640 --> 0:13:02.360 you need bus also getting a nod in the bill. 0:13:02.800 --> 0:13:04.880 Is that going to be a new program to buy 0:13:05.120 --> 0:13:07.240 immunees or are you just going to use the existing 0:13:07.520 --> 0:13:12.040 program that you set up last week? Well, again, I 0:13:12.120 --> 0:13:17.760 think uh. And eventually that kind of market is mostly 0:13:18.000 --> 0:13:21.439 that we want market functioning to occur. So I think 0:13:21.520 --> 0:13:24.760 investors got so worried about state and local government that 0:13:25.400 --> 0:13:28.640 they started to pull away from those kinds of investments, 0:13:29.240 --> 0:13:33.719 which have historically been pretty solid. So hopefully we'll get 0:13:34.120 --> 0:13:38.640 price discovery going in and and uh, I think the 0:13:39.080 --> 0:13:41.839 market will actually be fine here. Again, I think there 0:13:41.880 --> 0:13:45.880 are plenty of resources in the bill uh to handle 0:13:46.120 --> 0:13:50.200 our current situation, and that should reassure investors that state 0:13:50.240 --> 0:13:53.679 and local governments will be made whole here. Uh, the 0:13:53.800 --> 0:13:56.880 law unintended consequences is kicked it in the mortgage market. 0:13:57.000 --> 0:14:00.320 The big massive purchases you've made it NBA are now 0:14:00.440 --> 0:14:05.199 leading to big margin calls for brokers. Uh. Is that 0:14:05.360 --> 0:14:07.600 something you can do something about, or there are other 0:14:08.280 --> 0:14:15.120 possible unintended consequences you worry about. UM. We we have 0:14:15.320 --> 0:14:19.640 heard reports of that, and I think that uh, the 0:14:20.120 --> 0:14:24.920 MBS purchases can be adjusted so that we get uh 0:14:25.280 --> 0:14:29.040 sort of accurate pricing in that in that market to 0:14:30.080 --> 0:14:34.520 meet the needs of those that are producing mbs. Uh. 0:14:34.760 --> 0:14:37.920 We'll see how that goes. That's a very uh, minute 0:14:37.960 --> 0:14:43.320 by minute kind of decision on intervention and purchases of MBS. 0:14:43.440 --> 0:14:46.320 But we have a great team in New York that's 0:14:46.840 --> 0:14:48.560 that's working on that. I think we'll be able to 0:14:48.640 --> 0:14:53.080 get good outcomes there. I'm wondering when you think about 0:14:53.200 --> 0:14:57.640 where all this leads what you see ahead. You're going 0:14:57.680 --> 0:15:01.640 to have trillions in a aditional national debt. You're going 0:15:01.680 --> 0:15:05.400 to have billions in loans out to companies at very 0:15:05.480 --> 0:15:08.120 low rates. Can you raise rates? Are you pretty much 0:15:08.200 --> 0:15:15.320 stuck forever? Now? Stuck forever? Well? I think near term, 0:15:16.040 --> 0:15:18.720 as we come out of this, interest rates so will 0:15:18.840 --> 0:15:23.280 probably stay very low for quite a while. UM. We 0:15:23.400 --> 0:15:27.080 are taking on more debt as a nation, but we're 0:15:27.120 --> 0:15:29.320 taking it on a very low interest rate, so that 0:15:29.520 --> 0:15:33.920 part should work good well for the near term. UM. 0:15:34.520 --> 0:15:37.400 You know, as we get further out past the crisis, 0:15:37.720 --> 0:15:41.440 we'll have to evaluate our fiscal strategy and see it. 0:15:41.640 --> 0:15:45.120 But that'll be up to Congress what they want to do. Uh. 0:15:45.280 --> 0:15:48.080 It's a big country. We can carry, you know, ten 0:15:48.160 --> 0:15:51.200 percent more debt. You know, it's not ideal, but we 0:15:51.280 --> 0:15:53.040 can certainly do it. And if there was ever a 0:15:53.160 --> 0:15:57.920 time where you wanted to uh do something like this, 0:15:58.120 --> 0:16:01.240 now is that time? Uh? One last question here. Someone said, 0:16:01.240 --> 0:16:03.440 when you first cut rates and set up lending programs, 0:16:03.480 --> 0:16:05.840 you were throwing the kitchen sink at things. And then 0:16:05.880 --> 0:16:08.120 you cut rates again and set up more programs and 0:16:08.360 --> 0:16:10.600 through the kitchen sink again. Do you have more than 0:16:10.680 --> 0:16:13.200 one sink or do you throw the same sink over 0:16:13.280 --> 0:16:18.400 and over again? Basically what's left in the toolbox. Well, 0:16:18.520 --> 0:16:22.360 I think the bottom line is that this these thirteen 0:16:22.480 --> 0:16:26.560 three authorities that are in the Federal Reserve Act are 0:16:26.720 --> 0:16:32.120 very powerful and uh because they're they're set up to 0:16:32.600 --> 0:16:35.960 allow the FED to do lending in unusual and excitent 0:16:36.200 --> 0:16:40.920 circumstances with the consent of the Treasury, and so you 0:16:41.040 --> 0:16:43.040 can do a lot with that. And I think that's 0:16:43.080 --> 0:16:45.440 what we're seeing right now. And if we had to 0:16:45.480 --> 0:16:47.560 do more with that we could. It's a board of 0:16:47.640 --> 0:16:51.280 governors programs now an FMC programers aboard, and we do 0:16:51.440 --> 0:16:55.880 need treasury authority, but in special situations like this one, 0:16:55.960 --> 0:16:58.800 and what could be more special than this one, makes 0:16:58.840 --> 0:17:00.960 a lot of sense to go ahead use that power 0:17:01.720 --> 0:17:05.280 and uh and simply in smooth out this ride as 0:17:05.320 --> 0:17:08.159 we get to the other side of this virus very quickly. 0:17:08.560 --> 0:17:10.720 Do you think baseball season stants this year? You're a 0:17:10.760 --> 0:17:14.640 big Cardinals fan, I adam, I haven't seen anything about 0:17:14.680 --> 0:17:17.480 baseball so far, so I was actually I don't know 0:17:17.520 --> 0:17:20.040 about you, but I was. One of the aspects of 0:17:20.119 --> 0:17:24.720 this crisis is I was very shocked when when sports 0:17:25.480 --> 0:17:30.040 decided to shut down. That really jolted me. So one 0:17:30.119 --> 0:17:33.280 of one of many jolts during this crisis, but it 0:17:33.400 --> 0:17:36.800 was shocking. Jim Bullard, President of the St. Louis Fat 0:17:36.840 --> 0:17:38.520 thank you very much for joining us this morning on 0:17:38.560 --> 0:17:47.080 Bloomberg Radio and television worldwide. I found myself watching football 0:17:47.119 --> 0:17:50.440 games from twenty years ago, watching the highlights this seasons 0:17:50.480 --> 0:17:54.480 twenty years ago, over the weekend, just trying to also, yeah, 0:17:54.480 --> 0:17:57.600 I just trying to keep in touch with with sport. Yeah, 0:17:57.640 --> 0:17:59.479 I just didn't do that. What I know is Bullard 0:17:59.520 --> 0:18:02.359 mentioned he's a Cardinals fan, and that Bill started barking 0:18:02.520 --> 0:18:05.320 right away. You know, well that Bill was Red Cells, right, 0:18:05.760 --> 0:18:10.639 die Hard. Well, you know he loves the Dodgers. He 0:18:10.760 --> 0:18:15.760 likes love Okay, Yeah, Hayley from Beverly Hills got him 0:18:15.760 --> 0:18:18.000 into the Dodgers. He's got the coat and the whole thing. 0:18:18.840 --> 0:18:21.399 That Bill can come on and talk about. You know, 0:18:21.440 --> 0:18:23.520 we're talking about Jim Bullers and we gotta go to break, 0:18:23.520 --> 0:18:25.440 we gotta come back and talk about this. I mean, 0:18:26.080 --> 0:18:28.760 I just what are these guys supposed to say? I mean, 0:18:28.800 --> 0:18:30.720 they gotta wait to see what happens. We're gonna carry 0:18:30.760 --> 0:18:34.840 on talking about this. We've got missed the castle. Great 0:18:34.840 --> 0:18:36.840 to have you with us on the fine, fantastic to 0:18:36.920 --> 0:18:38.359 have you with us. In fact, let's talk about the 0:18:38.400 --> 0:18:41.760 Federal Reserve. That a meet again until April twenty nine. 0:18:42.359 --> 0:18:44.480 We've learned that that doesn't really matter. Do you expect 0:18:44.520 --> 0:18:48.159 anything else from them anytime soon? Well, there's a lot 0:18:48.240 --> 0:18:51.280 of details to come out, especially about this main street 0:18:51.400 --> 0:18:54.119 lending program um and I think they're going to roll 0:18:54.200 --> 0:18:56.960 with the punchers here. And I think you heard from 0:18:57.000 --> 0:18:59.800 Bullard and we've been seeing the set is very creative 0:18:59.840 --> 0:19:03.359 and very aggressive here when it's these problems. So UM 0:19:03.760 --> 0:19:05.600 I wouldn't rule out more FED action, but we're not 0:19:05.680 --> 0:19:09.639 forecasting anything specifically at this point. First, we're making it 0:19:09.840 --> 0:19:12.800 up as we go, and all of our listeners, whatever 0:19:12.840 --> 0:19:17.840 their level of sophistication, know that what's the attribute of 0:19:18.040 --> 0:19:20.200 how we make this up as we go that we 0:19:20.240 --> 0:19:24.000 should focus on. Well, I would say from the point 0:19:24.040 --> 0:19:27.760 of view of government policy, there's there's two pieces to this. 0:19:27.960 --> 0:19:29.800 One is not making it up. We've gone through the 0:19:30.240 --> 0:19:33.919 global financial crisis, We've dealt with issues that are threatened 0:19:33.920 --> 0:19:38.280 systemic uh stability. We've kind of created an infrastructure around that, 0:19:38.359 --> 0:19:40.200 and we're drawing on that and that's a really good 0:19:40.240 --> 0:19:42.960 thing and it's happening really quickly. The thing that's really 0:19:43.040 --> 0:19:47.120 unique about this crisis is how much we're hurting individuals, 0:19:47.160 --> 0:19:50.680 small businesses, and a targeted way in a very short time. 0:19:50.800 --> 0:19:53.760 And that's where making things up in terms of getting 0:19:53.800 --> 0:19:56.959 these loan programs out, having the FED to a remarkable 0:19:57.000 --> 0:20:00.919 amount to actually become a creditor to the corporate sector 0:20:00.960 --> 0:20:04.159 at the at the lowest level, UM is really starting 0:20:04.200 --> 0:20:07.760 to be kind of really unprecedented, and as you say, 0:20:08.119 --> 0:20:10.119 it's really making things up. So there's some of this 0:20:10.240 --> 0:20:12.879 which is got a very good toolbox, but there definitely 0:20:12.960 --> 0:20:15.480 is some stuff here which we're we're really responding in 0:20:15.520 --> 0:20:18.560 an unprecedented way. I want to talk about that unprecedented 0:20:18.640 --> 0:20:21.760 function here, the fiscal stimulus function right now. If the 0:20:21.800 --> 0:20:24.320 Federal Reserve, essentially with the four hundred and fifty billion 0:20:24.359 --> 0:20:27.480 dollars they're being provided by the US Treasury that they're 0:20:27.480 --> 0:20:31.000 going to lever up and lend out, how are they 0:20:31.080 --> 0:20:35.560 going to do that given their staffing and expertise. Well, 0:20:35.640 --> 0:20:37.480 I think to a large degree, they're going to work 0:20:37.560 --> 0:20:42.200 through banks and other financial intermediaries. The SPA is basically 0:20:42.440 --> 0:20:44.920 going to guarantee loans taken by banks. The FED is 0:20:44.960 --> 0:20:47.080 going to oversee it, Treasury is going to oversee it 0:20:47.119 --> 0:20:49.240 in some ways. But you have to work through the 0:20:49.359 --> 0:20:52.560 channels that exist. If you had to have the Treasury 0:20:52.600 --> 0:20:55.399 and the Fed manage the individual loan decisions that we 0:20:55.480 --> 0:20:57.080 made here, we'd never get things out. And this is 0:20:57.119 --> 0:20:59.560 a big issue. Even going through the banking system. We've 0:20:59.560 --> 0:21:02.120 been going through channels. As Bullard was saying a few 0:21:02.160 --> 0:21:05.040 minutes ago, we know unemployment is rising, people are being 0:21:05.119 --> 0:21:07.160 laid off. The question is can you get the money 0:21:07.560 --> 0:21:10.760 into the system quickly enough to limit the damage. Cushion 0:21:10.760 --> 0:21:13.159 has provide us with a sense that not too much 0:21:13.240 --> 0:21:15.440 damage is being done once the economy turns on the 0:21:15.520 --> 0:21:18.480 lights again, Bruce, That's where I wanted to go, this 0:21:18.680 --> 0:21:21.560 question of speed and the sense that it needed to 0:21:21.600 --> 0:21:25.000 be done last week, two weeks ago, not now, And 0:21:25.080 --> 0:21:26.960 we still don't have the program up and running. And 0:21:27.000 --> 0:21:28.960 I'm wondering, do you have a sense of how much 0:21:29.000 --> 0:21:32.040 of the damage has already been done in an irreversible 0:21:32.160 --> 0:21:34.879 way in terms of layoffs and small businesses that have 0:21:35.040 --> 0:21:38.520 to shut down. UM, I don't think we know what. 0:21:38.640 --> 0:21:40.840 We can see a hint of that in last week's 0:21:40.880 --> 0:21:43.600 claims numbers. We know there's going to be a huge 0:21:43.760 --> 0:21:47.399 rise in unemployment in the next month or two. How 0:21:47.440 --> 0:21:49.399 many businesses closed, I don't know, but it's going to 0:21:49.480 --> 0:21:51.240 be a lot. And let me just say, because I 0:21:51.280 --> 0:21:54.840 think there's an interesting international comparison here. Europe has a 0:21:54.920 --> 0:21:59.720 system where institutionally it's a lot harder to have that flexibility, 0:21:59.800 --> 0:22:02.720 and and I think over long periods of time, flexibility 0:22:02.760 --> 0:22:05.600 has been very helpful for the US, but in this situation, 0:22:05.720 --> 0:22:09.679 their structures, their programs that actually provided a very important 0:22:09.960 --> 0:22:12.480 circuit breaker. And I don't think you're gonna see unemployment 0:22:12.600 --> 0:22:15.360 rise in Europe anyway like what we're expecting to see 0:22:15.400 --> 0:22:18.439 in the US in the coming few months. Why can't 0:22:18.480 --> 0:22:20.760 we be like that? Man, it's a brilliant insight. Dr 0:22:20.960 --> 0:22:24.159 kas was great. Okay, everybody out there wants us to 0:22:24.240 --> 0:22:27.200 be like Europe for a cup of coffee, maybe three 0:22:27.240 --> 0:22:29.400 cups of coffee maybe out of the fourth of July. 0:22:29.920 --> 0:22:33.639 Why can't we european ee and then pull back and 0:22:33.760 --> 0:22:38.760 become like we are later on? Well, I think that's 0:22:38.800 --> 0:22:40.800 in some ways what we're trying to do. All those 0:22:40.880 --> 0:22:44.119 to be to be accurate. Here, we are still largely 0:22:44.200 --> 0:22:46.800 providing the support to income to people who are laid off, 0:22:47.280 --> 0:22:49.600 providing checks to people. We're not doing what the UK 0:22:49.800 --> 0:22:53.320 is doing, which is providing companies support for their payrolls. 0:22:53.520 --> 0:22:56.120 We're not doing the German government is doing in terms 0:22:56.160 --> 0:22:59.399 of subsizing short term work. I mean, that's a good question. 0:22:59.640 --> 0:23:01.840 I mean, is the institutional side, which you can't change 0:23:01.880 --> 0:23:04.440 at this point, but the way our approach is going 0:23:04.480 --> 0:23:07.240 on policy, well, it could be different, but but it 0:23:07.359 --> 0:23:09.320 is definitely a different one right now than what the 0:23:09.359 --> 0:23:11.879 Europeans are doing. The backdrop to give you guys a 0:23:11.920 --> 0:23:15.240 window window this listening across this nation is JP Morgan 0:23:15.400 --> 0:23:19.040 launches off the great work of Robert Melman from years ago, 0:23:19.600 --> 0:23:23.040 a fifteen page report Friday Evening which is a must 0:23:23.119 --> 0:23:26.400 read on Global Wall Street, and Faroly Walas is through 0:23:26.440 --> 0:23:29.240 with the US view, and then Kasmin drops in with 0:23:29.440 --> 0:23:32.080 the Global view and it just has you, brother, there, 0:23:32.119 --> 0:23:35.000 how many people put that report together, Bruce, like, literally 0:23:35.080 --> 0:23:38.840 like fifteen people right, well globally now we've got actually 0:23:38.840 --> 0:23:42.480 a bit more than thirty economists, Yeah, exactly, And it's 0:23:42.520 --> 0:23:47.600 just extraordinary. And so I I just I'm absolutely fascinated 0:23:48.200 --> 0:23:52.800 by what the American outcome is. If the EU approach 0:23:52.920 --> 0:23:57.000