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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is your weekly Washington Policy Pulse, the Balance of

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Speaker 2: Power Podcast. I'm Joe Matthew. Every Monday, Bloomberg Intelligence, senior

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Speaker 2: policy analyst and friend of the show, Nathan Dean shares

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Speaker 2: his weekly call on upcoming catalysts in the nation's capital.

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Speaker 2: Listen for the most recent and relevant policy research from

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Speaker 2: our team at Bloomberg Intelligence. Now with today's installment, here's

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Speaker 2: Nathan Dean.

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Speaker 3: Okay, good morning and good afternoon everybody. Welcome again to

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Speaker 3: the Washington Policy Pulse. My name is Nathan Dean. I'm

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Speaker 3: a senior policy analyst with Bloomberg Intelligence, bringing to you

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Speaker 3: the weekly catalysts that you should be paying attention to

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Speaker 3: in the Washington area. Also, just want to say a

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Speaker 3: special shout out to those of you who are listening

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Speaker 3: to us via the Balance of Power podcast. We always

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Speaker 3: appreciate you coming on board and listening to us as well.

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Speaker 3: So a lot of random little things this week, and

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Speaker 3: so I'm just going to go through. I've got ten

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Speaker 3: things to talk about. First up, let's talk about the

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Speaker 3: National Defense Authorization Act. This is the NDAA. This is

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Speaker 3: very important for those of you in the defense contracting industry.

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Speaker 3: It's been reported that the language would be out on

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Speaker 3: December first, if Mike Rogers, the chairman of the House

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Speaker 3: Armed Services Committee, has his way, I think you'll see

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Speaker 3: language potentially out later today. From what we hit gather

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Speaker 3: over the weekend is the negotiators are quote unquote close.

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Speaker 1: Now this still has some other you know.

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Speaker 3: It still has some time to cook, it needs to

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Speaker 3: go through the other portions, but lawmakers are really hoping

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Speaker 3: that they can get this done before in the end

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Speaker 3: of the year. And just as remember, the NDAA is

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Speaker 3: generally a bipartisan affair, but it's also one of those

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Speaker 3: affairs for other most past pieces of legislation that you

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Speaker 3: try and attach it to get it to the President's desk.

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Speaker 3: And the big one that everybody's talking about right now

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Speaker 3: is this legislation to essentially preempt state laws over artificial intelligence.

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Speaker 3: Now we've talked about this in the past. I don't

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Speaker 3: want to rehash it, but essentially the story is this

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Speaker 3: is that it's going to be very challenging to get

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Speaker 3: individuals to agree to preempt state laws on artificial intelligence

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Speaker 3: this early in the debate over artificial intelligence. And I

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Speaker 3: would just say is that if you were to ask

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Speaker 3: most of the defense individuals that are allied to the

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Speaker 3: defense industry, they'd say, get this bill out of here.

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Speaker 3: I don't want to talk about it. Let's just focus

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Speaker 3: on defense, and I think that's ultimately way it plays out.

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Speaker 3: Number two on our list is let's talk about the

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Speaker 3: Enhanced supplementally leverage ratio. This is for those of you

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Speaker 3: in the banking space. Just last week, the FED, the FDIC,

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Speaker 3: and the OCC finalized its version of the ESLR. There's

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Speaker 3: actually a big news for me. I've been covering this

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Speaker 3: since the original proposal back in twenty sixteen. Certainly made

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Speaker 3: me feel a little bit old. But what the FED

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Speaker 3: and the FDIC and the OCC did here is that

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Speaker 3: they finalized this idea of a new leverage ratio. So

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Speaker 3: previously it was five or six percent, depending onto the bank.

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Speaker 3: Bank subsidies were six percent, the bank holding company was

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Speaker 3: at five percent, and now what they did is they

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Speaker 3: move to three percent plus fifty percent fifty percent surcharge

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Speaker 3: based off of a bank's size. So you're looking around

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Speaker 3: three and a half to four point three percent, depending

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Speaker 3: on the bank size, and this equates to about thirteen

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Speaker 3: billion dollars in capital return to the banks. These are

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Speaker 3: the g SIPs, the large ones. So again, you know,

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Speaker 3: this is one of those things where it's certainly the

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Speaker 3: first taste of deregulation. Was there a lot of change

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Speaker 3: between the proposal and the final but again this is

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Speaker 3: the first change, first taste of deregulation, and so we're

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Speaker 3: certainly going to see more implementation of this. The effective

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Speaker 3: date is April, but if you want to go early,

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Speaker 3: you certainly can. And I'll have a little bit more

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Speaker 3: thoughts on the implementation of it, and I'll put that

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Speaker 3: out in the terminal as well as my colleague Arnold Kakuda,

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Speaker 3: he will as well also in the bank space. Let's

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Speaker 3: talk tomorrow. Tomorrow, the House Financial Services Committee is going

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Speaker 3: to have a hearing with those bank regulators, so FED

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Speaker 3: Vice Jair Michelle Bowman, you know, the controur of the currency,

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Speaker 3: the director of the FDIIC, and we're going to get

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Speaker 3: more tastes of what it looks like from the bank

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Speaker 3: deregulatory perspective.

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Speaker 1: What I'm most interested is in two things.

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Speaker 3: One is is the Bosle three in game proposal coming

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Speaker 3: out next year? Is it going to come out with

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Speaker 3: this reportedly increase. Bloomber News is reporting that there's a

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Speaker 3: three to seven percent chance or sorry, a three to

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Speaker 3: seven percent increase associated with a new reproposed bosle three

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Speaker 3: in game and will that be offset by a proposed

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Speaker 3: g SIB surcharge proposal which ultimately takes it less. Now

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Speaker 3: we've done some initial calculations of scenarios. All that being

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Speaker 3: said is that if the Feds were to come out

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Speaker 3: and increase the bosle three in game three to seven

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Speaker 3: percent and then decrease the g SIB surcharge using something

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Speaker 3: called method one, And we're not entirely sure that they

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Speaker 3: are going to go to what's called method one, but

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Speaker 3: let's just play sure whatever. If they go to method one,

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Speaker 3: then you're looking at a fifty eight billion dollar capital

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Speaker 3: reduction for those g SIB banks. So you can tack

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Speaker 3: on a thirteen per thirteen billion from the ESLR, fifty

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Speaker 3: eight billion from the bosle three g SIB surcharge, and

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Speaker 3: ultimately then you start talking about real money here that's

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Speaker 3: being returned to the banks.

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Speaker 1: So again we're going to see the taste of that tomorrow.

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Speaker 1: We'll see.

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Speaker 3: Our general theory on this is that both of those

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Speaker 3: proposals will be in the first quarter of next year.

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Speaker 3: There's a chance they could put something out before the

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Speaker 3: end of the year.

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Speaker 1: Regulators love to do that, but.

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Speaker 3: I'm thinking because of the SLR work that was done

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Speaker 3: last week, maybe this will be the.

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Speaker 1: Early parts of next year. But we'll see other things

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Speaker 1: going on.

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Speaker 3: President Trump has reportedly selected a new FED chair. He's

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Speaker 3: sold reporters over the weekend that he had made his

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Speaker 3: mind up. Bloomberger News reported just last week that National

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Speaker 3: Economic Council Director Kevin Hassett.

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Speaker 1: Is the front runner for that.

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Speaker 3: No word on when President Trump is going to make

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Speaker 3: that announcement, but ultimately he has said that this would

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Speaker 3: come before the end of the year. And we would

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Speaker 3: also note is is that this announcement would most likely

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Speaker 3: fall So let's just presume that it is Kevin Hassett.

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Speaker 3: If Kevin Hassett is the next FED vice the nedext sorry,

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Speaker 3: the next FED chair nominee, he would most likely be

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Speaker 3: nominated to fill doctor Myron's position that ends in January.

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Speaker 3: Confirmation hearing would be in February, and then when Jerme

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Speaker 3: Polli's term is up in May, that's when Kevin Hassett.

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Speaker 1: Would move over. To the FED chair perspective.

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Speaker 3: Now, I've been asked multiple times do I see any

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Speaker 3: issues of why Kevin Hassett would not get confirmation through

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Speaker 3: the Senate.

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Speaker 1: I don't.

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Speaker 3: I think it'd be a fairly easy vote for the

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Speaker 3: Senate Republicans, maybe get a couple of Democrats.

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Speaker 1: That's a big stretch there.

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Speaker 3: But even if not, I certainly think he has the

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Speaker 3: votes to get there in the Senate. And so again

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Speaker 3: we'll stay tuned, But the timeline would be President Trump

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Speaker 3: makes the announcement before the end of the year, then

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Speaker 3: you have those confirmation hearings and the confirmation hearing in February,

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Speaker 3: the confirmation in February, he then goes to the board,

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Speaker 3: and then there would be another nomination for the chair

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Speaker 3: position when Jrome pollis terms end is in May.

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Speaker 1: Other things.

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Speaker 3: Number five on our list, well, last week, if you

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Speaker 3: weren't on this call last week, I would recommend if

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Speaker 3: you go back to it if you care about the

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Speaker 3: healthcare industry, because my colleague Dwayne Right and I had

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Speaker 3: a discussion about what's going on with the ACA subsidies. Now,

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Speaker 3: in that call, we were operating under the presumption that

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Speaker 3: the White House was going to release its own plan

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Speaker 3: for an extension of two years for these ACA, these

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Speaker 3: Alabamacare subsidies, and due to Congressional pressure, that plan didn't

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Speaker 3: come out. So now Congress is essentially in a wait

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Speaker 3: and sea mode. I mean, I think scouring the news

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Speaker 3: reports from Bloomberg News over the weekend, it sounds like

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Speaker 3: a lot of folks are just taking their direction from

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Speaker 3: the White House in the moment and waiting for the

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Speaker 3: White House to make a decision on what they want

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Speaker 3: to do. Because if these Obamacare subsidies aren't extended and

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Speaker 3: premiums go up January first, from the Democratic perspective, like

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Speaker 3: what Dwayne said last week, that's a message for twenty

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Speaker 3: twenty six. So I think everybody's just now in a

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Speaker 3: wait and see mode. The Senate is still promised that

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Speaker 3: they would have a vote. There's only twelve legislative days

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Speaker 3: left between now and the end of the year, and

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Speaker 3: so we'll see when that vote comes up. But everybody's

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Speaker 3: now still in a wait and see mode. Number six

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Speaker 3: on the list, let's talk about appropriations. Remember we have

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Speaker 3: a government shutdown in January thirty first for nine of

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Speaker 3: the twelve appropriation bills.

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Speaker 1: Now there's still work on going.

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Speaker 3: It's been fairly slow, and honestly, I don't anticipate this

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Speaker 3: really kicking off until January. But the new current thought

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Speaker 3: is is that they're going to plan another vote to

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Speaker 3: get five of those remaining nine across the line, and

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Speaker 3: it would be Defense, Labor, Transportation, Commerce, and interior. Now,

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Speaker 3: can they do this by the end of the year,

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Speaker 3: Probably in the Senate. Maybe if they get agreement, then

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Speaker 3: it would go to the House and the Senate would

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Speaker 3: most likely jam the House and the House would grumble about.

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Speaker 1: It, but ultimately do it.

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Speaker 3: But again, you know, we have plenty of time here,

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Speaker 3: and if you get five of the remaining nine, that's

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Speaker 3: the bulk of discretionary spending. Most of it's with tied

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Speaker 3: with defense, so you get the bulk of discretionary spending.

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Speaker 3: It takes a lot of the shutdown risk away if

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Speaker 3: they were to do this. So we'll see what happens

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Speaker 3: over the next twelve legislative days. And again there's no

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Speaker 3: deadline here. They can certainly go home for the holiday

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Speaker 3: and come back in January.

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Speaker 1: But that's just the current thinking. A couple other things

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Speaker 1: on our list.

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Speaker 3: Number seven, there is a special election in Tennessee tomorrow

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Speaker 3: that a lot of people in Washington have been paying

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Speaker 3: attention to. This is a district that President Trump won

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Speaker 3: by twenty points obviously, is a very red district, very

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Speaker 3: Republican district, but there's been a lot of news talk

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Speaker 3: about how well are the Democrats going to perform there,

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Speaker 3: A lot of money's been coming in, so a lot

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Speaker 3: of people are paying attention to this race because they

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Speaker 3: want to see evidence of whether or not the blue

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Speaker 3: wave that happened in the Virginia, New Jersey elections continues

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Speaker 3: into this special election in Tennessee. Now, the Republican's likely

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Speaker 3: going to win, that's not my opinion. I think that

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Speaker 3: I actually took that from the Cook Political Report because

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Speaker 3: I don't really do political opinions like that. But you know,

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Speaker 3: we'll have to see how well the Democrat does. So again,

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Speaker 3: just something to keep an eye and as you see

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Speaker 3: the headlines coming out tomorrow. Number eight, Jared Isaacman is

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Speaker 3: going to have a confirmation hearing to be the Director

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Speaker 3: of the NASA. Number third, This is his second attempt

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Speaker 3: to being the director of the NASA. He's actually an

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Speaker 3: astronaut flow flu with SpaceX. So if you are in

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Speaker 3: that space you're looking at SpaceX or maybe a Blue

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Speaker 3: Origin or any of the type of the commercialized space industry.

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Speaker 3: You certainly want to watch that hearing just because you know,

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Speaker 3: mister Isaacman is very very much a proponent of the

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Speaker 3: commercialization of space, and so it'll be interesting to see

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Speaker 3: what comes out at that hearing.

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Speaker 1: Number nine.

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Speaker 3: Venezuela, you know, again, lots of talk about Venezuela again

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Speaker 3: this week, it's been reported that President Trump is going

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Speaker 3: to have a meeting in the Oval Office at five

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Speaker 3: pm Eastern today with many of his advisors. Secretary of

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Speaker 3: War slash Defense Pete Hegseth, Secretary of State Marco Rubio,

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Speaker 3: a lot of Indian individuals are going to be in

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Speaker 3: that Oval Office meeting at five pm.

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Speaker 1: So just keep that in mind.

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Speaker 3: If you're looking at headlines, maybe you're in the energy space,

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Speaker 3: you can you know, you have some exposure to Venezuela

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Speaker 3: in that space, you know, definitely.

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Speaker 1: Keep an eye on that.

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Speaker 3: And the last thing I want to talk about is

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Speaker 3: if before I give it up to any questions, if

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Speaker 3: there are is the farm Maide. Now we've talked about

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Speaker 3: this in the past twelve to thirteen billion dollar package

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Speaker 3: that is coming out for US farmers. We've heard it

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Speaker 3: could potentially come out tomorrow or Wednesday. Again, these are

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Speaker 3: just hearings. It can be pushed back, it can be

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Speaker 3: made you.

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Speaker 1: Know, it can do anything.

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Speaker 3: Now that I've said it, wait for President Trump to

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Speaker 3: release this thing tomorrow.

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Speaker 1: But just keep that in mind.

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Speaker 3: You know, the Secretary of Rollins, the Secretary has said

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Speaker 3: that she would most likely put this out the first

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Speaker 3: week in December. Therefore, it makes sense that would come

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Speaker 3: out Tuesday or Wednesday. And for any of you in

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Speaker 3: the farmer space, you know, our thesis has always been

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Speaker 3: a thirteen billion dollar aid package doesn't really get you

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Speaker 3: all that much. Spring season is already really the spring

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Speaker 3: planting season has already really kicked off.

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Speaker 1: You know. It's more of a band aid.

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Speaker 3: And as I've taken from some of our agricultural analysts,

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Speaker 3: the farming industry wants trade, not aid. So again we'll

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Speaker 3: have to see if more aid is coming. But if

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Speaker 3: you ask the House House Agricultural Committee, they some of

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Speaker 3: the members over there said that they could potentially up

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Speaker 3: to fifty billion dollars in aid being passed between this

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Speaker 3: year and next year for the US farming industry. And

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Speaker 3: actually just the last thing I want to call out

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Speaker 3: just spur the moment. Just saw this headline come over

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Speaker 3: the terminal. Just keep an eye on the Supreme Court

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Speaker 3: for this IEPA case. We've talked about this many times

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Speaker 3: in the past where President Trump obviously his Liberation Day tariffs,

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Speaker 3: where his reciprocal tariffs. You know, our analyst Holly from

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Speaker 3: just put her update on the terminal. That made me

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Speaker 3: think of this off the moment is that, you know,

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Speaker 3: her belief is that the Supreme Court is going to

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Speaker 3: find those tariffs to be unlawful. And when that happens,

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Speaker 3: you're going to see a lot of red islands coming

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Speaker 3: over the terminal. You're going to see a lot of that,

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Speaker 3: and then we're gonna have to talk about the refund

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Speaker 3: chast that comes out from after that. So if you

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Speaker 3: need a deep dive on what that's going to look like,

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Speaker 3: Holly's done some work on that. Just give me a

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Speaker 3: contact to send me an ib afterwards and I'll be

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Speaker 3: more than happy to put you in touch with her.

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Speaker 3: We'll have that conversation. But again I'm gonna pause there.

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Speaker 3: I don't see any other questions. Say thank you very

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Speaker 3: much for attending. We really appreciate it, and if we

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Speaker 3: can ever be of assistance, please don't hesitate to reach out.

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Speaker 2: Our thanks to Nathan Dean, Bloomberg Intelligence Senior policy analyst,

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Speaker 2: bringing you the latest installment of his weekly Washington Policy Pulse.

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Speaker 2: For more from BI or to join this call live

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Speaker 2: each week, you can email Nathan at Ndean at Bloomberg

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Speaker 2: dot net. That's n d e a n at Bloomberg

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Speaker 2: dot net and come back to the podcast later today

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Speaker 2: for the latest edition of Balance of Power.