WEBVTT - U.S. Economy Is Better Than Bonds Think: Joe Davis 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.960 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:22.560 at Bloomberg dot com. We got a better than expected 0:00:22.600 --> 0:00:25.920 headline number out of today's jobs report, we got weaker 0:00:25.920 --> 0:00:30.320 than expected growth in wages. The market initially took this 0:00:30.640 --> 0:00:35.000 as a positive report, albeit pretty much in line with expectations, 0:00:35.440 --> 0:00:38.320 but subsequently President Trump came out and said that the 0:00:38.320 --> 0:00:42.760 Federal Reserve should drop rates and stop quantitative tightening, even 0:00:42.800 --> 0:00:46.600 though the economic numbers were very very good. Joining us now, 0:00:46.920 --> 0:00:50.480 Joseph Davis, chief economist at Vanguard, We are so glad 0:00:50.520 --> 0:00:52.560 that you can join us. Before we get into the 0:00:52.640 --> 0:00:55.760 jobs report itself, what do you think, Joe, of the 0:00:55.840 --> 0:00:59.880 idea of the Federal Reserve cutting rates right now at 0:00:59.880 --> 0:01:03.120 the point in the credit cycle. Well, it's it's not 0:01:03.280 --> 0:01:07.240 of view that I would um entertain too strongly. I mean, 0:01:07.560 --> 0:01:09.199 I think if you look at the where the Fed 0:01:09.240 --> 0:01:12.160 funds rate should be. I think it's the Federal Reserve 0:01:12.280 --> 0:01:15.760 is is really navigating a global slowdown and trying to 0:01:15.880 --> 0:01:18.920 maintain the length of this expansion. And so our view 0:01:19.200 --> 0:01:21.920 continues to be that the Fed funds rate is close 0:01:21.959 --> 0:01:24.240 to where it should be. Um. And if there's if 0:01:24.720 --> 0:01:26.480 you would push me to say where the next move 0:01:26.520 --> 0:01:30.960 should be, I would say maybe one hike higher rather 0:01:31.040 --> 0:01:35.000 than cutting rates, because the fundamentals of the economy we're 0:01:35.040 --> 0:01:39.679 still accommodative. The long story short, I don't see urgent 0:01:39.800 --> 0:01:43.080 need for the Center Reserve the cut rates. So UM, 0:01:43.440 --> 0:01:46.400 was there anything in this job's report today that changes 0:01:46.560 --> 0:01:49.920 your outlook fundamentally? Now? If anything that you probably a 0:01:49.920 --> 0:01:51.960 little bit of side relief, to be honest, I mean, 0:01:52.320 --> 0:01:53.800 you know, we went into the year saying we were 0:01:53.800 --> 0:01:56.000 going to see gross scares in the market, slowdown in 0:01:56.040 --> 0:02:00.720 the global economy, but we hoped that the expected that 0:02:00.760 --> 0:02:04.080 the labor market would show signs a deceleration, but we 0:02:04.080 --> 0:02:07.760 won't see material cracks. Now. The disappointed number we saw 0:02:07.920 --> 0:02:12.120 last month gives one pause in that assessment. So to 0:02:12.200 --> 0:02:16.440 see the rebound in somewhat volatile data today I think 0:02:16.600 --> 0:02:19.320 was more of a sigh of relief. Uh, And I 0:02:19.360 --> 0:02:23.320 think a medication that yes, we will have choppy waters here, 0:02:23.440 --> 0:02:25.640 but we're not going into recession. I mean, some of 0:02:25.639 --> 0:02:28.800 the mature early bed would have to happen in the 0:02:28.800 --> 0:02:31.440 global economy, I think, to take down the U S 0:02:31.440 --> 0:02:34.240 economy at this point. So here's what I'm struggling with. 0:02:34.320 --> 0:02:37.639 A lot of people dismiss President Trump's call for the 0:02:37.639 --> 0:02:41.440 Fed to drop rates and stop q QT as being 0:02:41.480 --> 0:02:44.280 a little outrageous at this point in the cycle. People 0:02:44.320 --> 0:02:47.400 saying that's not needed, that's right now, you're seeing solid 0:02:47.480 --> 0:02:51.800 job growth, etcetera. Bond markets agree with him. Bond markets 0:02:51.840 --> 0:02:54.440 right now are pricing in more than a fifty chance 0:02:54.639 --> 0:02:57.040 that the Federal Reserve will cut rates before year end. 0:02:57.200 --> 0:02:59.880 And it's it's rising after this job's report, even though 0:03:00.000 --> 0:03:03.040 people say that it indicates ongoing strengthen the economy. How 0:03:03.040 --> 0:03:06.000 do you square that well, I think you know the times, 0:03:06.000 --> 0:03:08.120 there are differences of opinion. I mean, you know, it's 0:03:08.120 --> 0:03:10.000 always uh, you always had to be a little bit 0:03:10.040 --> 0:03:13.080 wary saying that the bond market is wrong. Uh. Uh, 0:03:13.200 --> 0:03:15.720 it's a very efficient market. But that also doesn't mean 0:03:15.720 --> 0:03:18.600 the treasury markets accurate. All the time, I think, you know, 0:03:18.720 --> 0:03:22.080 the financial condition deterioration we saw at the end of 0:03:22.160 --> 0:03:26.240 last year and in January a significant fall and risky 0:03:26.280 --> 0:03:29.800 assets and the equity market. Um, you know that clearly 0:03:29.840 --> 0:03:34.080 took UH some momentum out of the sales of of 0:03:34.080 --> 0:03:36.840 of what the FED I think was was hoping to do. 0:03:37.000 --> 0:03:39.600 And so I think we're closer. I you know, we're 0:03:39.640 --> 0:03:42.840 closer to where the Fed's forecast is rather than the 0:03:42.880 --> 0:03:45.440 bond market. And if we're right that we're not going 0:03:45.480 --> 0:03:47.960 into recession and the numbers we see today, maybe we'll 0:03:48.000 --> 0:03:51.240 see somewhat weaker job growth numbers, but nothing below on 0:03:51.280 --> 0:03:53.920 a trend basis, say below a hundred thousand jobs per month. 0:03:54.520 --> 0:03:56.800 If we're right, then what what I think could happen 0:03:56.920 --> 0:03:59.720 is that that anticipation of cuts and rates will slowly 0:03:59.800 --> 0:04:02.160 be priced out of the of the bond market. I 0:04:02.160 --> 0:04:04.800 think the key wild card is actually outside the United States. 0:04:04.800 --> 0:04:08.400 And do we see UH stabilization in China's growth picture, 0:04:08.400 --> 0:04:11.480 because right now we don't have strong evidence of that. So, Joe, 0:04:11.640 --> 0:04:14.280 we are now in the tenth year of this economic cycle, 0:04:14.360 --> 0:04:17.440 which I think is long by most standards. What do 0:04:17.480 --> 0:04:20.560 you think is different this time? If anything. Structurally well, 0:04:20.600 --> 0:04:22.200 I think the one thing that is different has just 0:04:22.279 --> 0:04:26.640 been the fact that the recovery's pace has been fairly tepid. 0:04:26.839 --> 0:04:31.159 So um, you know typical expansions, you know that haven't 0:04:31.200 --> 0:04:35.760 involved significant consumer deleveraging. You've had rapid growth out of 0:04:35.760 --> 0:04:39.799 the recession. Um, the set of reserve not the only factor, 0:04:39.920 --> 0:04:42.640 but has clearly then been much more aggressive and tightening. 0:04:42.680 --> 0:04:46.520 I think, um the low pace of inflation as well 0:04:46.560 --> 0:04:49.240 as the low pace of economic growth can in large 0:04:49.279 --> 0:04:52.880 part explain why we're into the tent Yer recession. Unless 0:04:52.920 --> 0:04:55.200 things go fundamentally wrong, we could we could still be 0:04:55.240 --> 0:04:57.960 talking about the fact that's the eleventh year of expansion 0:04:57.960 --> 0:05:01.000 this time next year. Again, we're not Pollyanna um and 0:05:01.160 --> 0:05:03.520 and the risks still remain on growth on the downside. 0:05:03.520 --> 0:05:05.599 But I think it's the peppe paste of growth that 0:05:05.680 --> 0:05:09.360 explains the duration and magnitude of it. Just to entertain 0:05:09.400 --> 0:05:13.120 this idea of a really easy monetary policy or keeping 0:05:13.279 --> 0:05:17.040 rates UH low or even going lower at this point, 0:05:17.160 --> 0:05:19.440 I have to look at the lack of wage growth 0:05:19.480 --> 0:05:22.000 that we've seen and that is ongoing, despite the fact 0:05:22.080 --> 0:05:26.599 that headline numbers are beating expectations. Even amid and otherwise 0:05:26.720 --> 0:05:31.479 decelerating US economy. Do you think that that changes the 0:05:31.560 --> 0:05:34.960 scenario the backdrop for the Federal Reserve. It means that 0:05:35.040 --> 0:05:38.360 perhaps past models don't hold true given the fact that 0:05:38.400 --> 0:05:41.240 they were based on the Phillips curve. Yeah, well, you know, 0:05:41.279 --> 0:05:42.720 we've done a lot of work on the selfs curve. 0:05:42.760 --> 0:05:45.440 Is a great question. You know, it's it's still exists, 0:05:45.480 --> 0:05:47.120 but you have to control for a lot of factors 0:05:47.160 --> 0:05:49.839 to see that. Your relationship and you know, wage growth. 0:05:50.000 --> 0:05:52.280 In our mind for the past year, we said that 0:05:52.360 --> 0:05:56.440 wage growth should be around three percent because that's based 0:05:56.480 --> 0:05:59.360 upon where productivity as we estimate it at best around 0:05:59.360 --> 0:06:02.240 one in the US, and then you overlay an inflation 0:06:02.279 --> 0:06:05.240 target around one and half to two percent, and so 0:06:05.360 --> 0:06:08.360 you should be around three percent. Now you can you 0:06:08.440 --> 0:06:11.640 can also like clearly above and below that. But um, 0:06:11.680 --> 0:06:16.320 you know, we we expect wage growth to maybe modestly 0:06:16.320 --> 0:06:17.680 inch up of the rest of the year, but we 0:06:17.720 --> 0:06:20.839 would be hard pressed to see four percent wage growth. 0:06:20.880 --> 0:06:23.760 And unless we see a material rise in productivity, I 0:06:23.760 --> 0:06:26.359 think eventually we'll see a rebound there. And when I 0:06:26.360 --> 0:06:29.599 say higher proactivity, it means workers are even more productive 0:06:29.600 --> 0:06:31.360 than they currently are and hence they see, you know, 0:06:31.480 --> 0:06:35.920 higher wage increases in firms reward that productivity. But we're 0:06:35.960 --> 0:06:38.280 not there yet, and so I actually think wages are 0:06:38.320 --> 0:06:40.159 where they should be. And a great example of that 0:06:40.320 --> 0:06:42.240 is to look at places like Japan, where you have 0:06:42.320 --> 0:06:47.360 record low unemployment rates, yet given their inflation expectations and productivity, 0:06:47.400 --> 0:06:49.599 wage growth is even below where it is in the US. 0:06:50.440 --> 0:06:53.039 Joe Davis, thank you very much. Joe Davis is chief 0:06:53.080 --> 0:06:55.960 Global Econmerce for the Van Guard Vanguard Group, joining us 0:06:56.200 --> 0:06:59.240 from Malvern, Pennsylvania. And I think it's interesting, Lisa that 0:06:59.279 --> 0:07:01.400 you bring up that day on the Bloomberg terminal about 0:07:01.440 --> 0:07:05.840 the high percentage almost uh probability of a rate cut 0:07:05.880 --> 0:07:10.200 in kind of consistent with what we just heard from 0:07:10.240 --> 0:07:13.080 the President. Yet uh, there certainly are some economists out there, 0:07:13.120 --> 0:07:16.120 most notably our Carl, Ricka Donna and others, that think that, 0:07:16.520 --> 0:07:19.480 given the relative strength of the US economy, that a 0:07:19.600 --> 0:07:23.720 rate hike UH is probably more likely. So we'll have 0:07:23.760 --> 0:07:25.760 to see how that plays at And obviously the FED 0:07:25.920 --> 0:07:28.400 is data dependent, as we heard from Carl, and they 0:07:28.440 --> 0:07:31.040 will be looking at a future data points coming up 0:07:31.320 --> 0:07:44.440 to push the agenda forward for the fed well. The 0:07:44.440 --> 0:07:48.880 Eurozone continues to deal with slowing growth. The uncertainty surrounding 0:07:48.880 --> 0:07:52.320 Brexit certainly is not helping, and there is ongoing concern 0:07:52.400 --> 0:07:55.080 in the European banking sector that there may be too 0:07:55.160 --> 0:07:58.400 much supply of banks in the banking sector in Europe. 0:07:58.520 --> 0:08:00.160 To help us deal with some of these issues, we 0:08:00.160 --> 0:08:03.960 welcome our guest. Geneve Fillon is the CEO of BNP 0:08:04.240 --> 0:08:06.400 Parry by U s A. He joins us in our 0:08:06.440 --> 0:08:09.920 Bloomberg Interactive Broker studio here in New York. Johnny, thank 0:08:09.920 --> 0:08:11.600 you so much for joining us. I wonder if we 0:08:11.640 --> 0:08:15.040 could just start off by getting your sense of how 0:08:15.080 --> 0:08:19.000 the European economy is doing, and maybe specifically dive into 0:08:19.040 --> 0:08:22.640 the European banking system under pressure. Certainly I would love 0:08:22.680 --> 0:08:24.600 to get your thoughts. Well. Thank you for having me. 0:08:24.640 --> 0:08:27.960 By the way, it's always a pleasure to be here. Um. Well, 0:08:28.000 --> 0:08:31.600 you said it well. The European economy is uh showing 0:08:31.680 --> 0:08:36.719 some slowdown. In the Eurozone is expected to grow g 0:08:36.880 --> 0:08:41.320 d P groles at best one uh, it's only Europe, 0:08:41.360 --> 0:08:43.319 by the way, there is a slut in Asia or 0:08:43.400 --> 0:08:46.800 slut in in China. And even though the US economy 0:08:46.800 --> 0:08:49.560 is doing really well. It's not you know, running in 0:08:49.559 --> 0:08:54.040 a vacuum and it's being impacted by by what's happening there. Um, 0:08:54.360 --> 0:08:57.880 then it's it's just a factor. Um. You mentioned European 0:08:57.920 --> 0:09:02.880 banking industry. I think it's important to uh highlight the 0:09:02.920 --> 0:09:07.920 fact that since the eleven crisis and under the leadership 0:09:07.960 --> 0:09:11.240 of the Central Bank, the European banking industry has been better, 0:09:11.440 --> 0:09:15.760 you know, uh capitalized, is probably more liquid and has 0:09:15.800 --> 0:09:19.520 made progress. Having said that, UM, this is an environment 0:09:19.559 --> 0:09:24.240 the industry has to deal with. So Johnny Feel, the 0:09:24.240 --> 0:09:28.520 CEO of BNP Pariba in US, I would love your 0:09:28.559 --> 0:09:32.360 perspective on negative rate policies and the low rate policies 0:09:32.360 --> 0:09:35.559 that we have content on an ongoing basis in the US. 0:09:35.559 --> 0:09:39.160 How much has that been the root cause of a 0:09:39.160 --> 0:09:43.280 lot of the weakness we've seen in the European banking system. Um, 0:09:43.320 --> 0:09:45.720 we should go back to the fundamentals here, because the 0:09:45.800 --> 0:09:48.760 low rate environment we have today and maybe to an 0:09:48.760 --> 0:09:52.360 extreme in Europe with negative rights, has been a major 0:09:52.480 --> 0:09:57.240 contributor to creating stimulus. By the way, in the United 0:09:57.280 --> 0:09:59.720 States and in Europe at a time it was really 0:09:59.760 --> 0:10:02.840 need in this sense by the way, we've seen convergence 0:10:02.880 --> 0:10:05.760 between what the FED has been doing here and what 0:10:05.880 --> 0:10:08.240 the ECB is doing there with the lack of time, 0:10:08.320 --> 0:10:11.760 because the status of these two economies, you know, have 0:10:11.960 --> 0:10:14.560 not been exactly the same eighteen months. Europe is about 0:10:14.559 --> 0:10:17.040 eighteen months behind the US and recovery very true, and 0:10:17.080 --> 0:10:19.160 this is what we've seen, you know, the FED taking 0:10:19.200 --> 0:10:22.280 measure on stopping QUI here and probably the e c 0:10:22.440 --> 0:10:25.480 B being still in a you know, stimulus mode, not 0:10:25.559 --> 0:10:27.920 through QUEI, but on winding the banalance field at a 0:10:28.120 --> 0:10:32.640 probably you know, slower pace and really coming back with UM. 0:10:32.679 --> 0:10:35.079 I would say tools like you know, the t l 0:10:35.280 --> 0:10:37.200 L t R row which is a way to inject 0:10:37.400 --> 0:10:40.160 liquid it directly in the banking system that you know 0:10:40.360 --> 0:10:44.040 might still be required as we probably need to support 0:10:44.160 --> 0:10:48.800 growth UM even further, maybe to the excellent point you 0:10:48.880 --> 0:10:53.839 made UM. You know, monetary policy UM is initially made 0:10:54.320 --> 0:10:58.040 to support economies, not so much to support the banking system, 0:10:58.040 --> 0:11:00.200 and the banking system I think has to a app 0:11:00.320 --> 0:11:03.600 to make sure that you know, whichever the goal for 0:11:03.760 --> 0:11:06.560 supporting the economy is, we we can be there to 0:11:06.760 --> 0:11:09.880 help and support and help clients. Is a negative right 0:11:09.960 --> 0:11:13.600 environment sustainable for the many many years. Probably not, but 0:11:13.640 --> 0:11:15.959 I just wanted to highlight the fact that the lower 0:11:16.080 --> 0:11:18.880 environment you have here as well as the FED is 0:11:18.920 --> 0:11:23.720 now UH contemplating basically not hiking anymore and potentially cutting 0:11:24.320 --> 0:11:27.760 is UH is something that has actually probably helped industries 0:11:28.280 --> 0:11:32.040 because of supporting the growth. What a politically correct answer, Paul, 0:11:32.120 --> 0:11:34.120 Because basically, at a time when a lot of people 0:11:34.160 --> 0:11:37.200 say the negative rate environments killing banks, a nuance to 0:11:37.200 --> 0:11:40.640 ANSWER's a corporate banker. He knows that this question. So, Johnny, 0:11:40.640 --> 0:11:42.480 if you know, when we think of BNP Parry Bats 0:11:42.559 --> 0:11:46.600 obviously one of the major French banks, a major European bank, 0:11:47.240 --> 0:11:49.760 but maybe people in the US don't know it as well. 0:11:49.840 --> 0:11:52.320 Tell us about your business here in the US. What 0:11:52.480 --> 0:11:54.760 is your focus here in US for BNP Pariba. We 0:11:54.880 --> 0:11:57.960 love the US. We've been here for quite a long time, 0:11:58.600 --> 0:12:01.480 you know, destinies and the platform we have here. He 0:12:01.600 --> 0:12:05.440 is actually well balanced between retail. We own a bank 0:12:05.480 --> 0:12:07.920 in California, Bank of the West, which makes us part 0:12:07.960 --> 0:12:10.120 of the fabric of this country in one of the 0:12:10.160 --> 0:12:13.920 most vibrant states in the United States. California as big 0:12:13.960 --> 0:12:16.480 as France, by the way, in terms of size and 0:12:16.559 --> 0:12:19.600 the wholesale activity we have out of New York where 0:12:19.640 --> 0:12:25.360 we serve large institutional clients, corporate clients domestically in the 0:12:25.400 --> 0:12:28.400 products which we have here, which is fairly large, and 0:12:28.440 --> 0:12:31.840 obviously our value proposition in cuizes when it's time to 0:12:31.880 --> 0:12:34.600 serve these corporates. You know, outside of the US and 0:12:34.720 --> 0:12:37.840 particularly in Europe where we lead in the yoga bound 0:12:38.120 --> 0:12:41.440 uh market, we have fourteen thou people in the US 0:12:41.600 --> 0:12:45.199 one four and this is the largest balance sheet allocation 0:12:45.320 --> 0:12:50.040 of BNBPI by group after France. It's close to groups 0:12:50.040 --> 0:12:52.640 P revenues and it is really strategic and probably more 0:12:52.679 --> 0:12:56.120 strategic today as this economy is still benefit from a 0:12:56.200 --> 0:13:00.480 strong momentum in terms of expansion. So I'm wondering going 0:13:00.760 --> 0:13:04.360 forward where you see the best opportunity for profitability in 0:13:04.400 --> 0:13:07.880 the US. Is it in the trading and sales area 0:13:08.040 --> 0:13:11.120 particularly I know on the on the dead side, is 0:13:11.160 --> 0:13:15.079 it on originally glans? Where are you seeing opportunities? Well, um, 0:13:15.120 --> 0:13:17.920 I think that I've served the practice and the platform 0:13:17.920 --> 0:13:21.520 in the US is to be very centraled around clients, 0:13:21.600 --> 0:13:26.480 and my growth and expectations for expansions is around the 0:13:26.520 --> 0:13:31.160 client base one well, and this is very good point, 0:13:31.280 --> 0:13:34.319 because clients there is a nest, right, it's prural. Then 0:13:34.360 --> 0:13:35.800 if you look at Bank of the Ways, they have 0:13:35.840 --> 0:13:40.280 two point five million clients, c IB has d strategic clients, 0:13:40.320 --> 0:13:43.120 and uh, the more we can continue to support this 0:13:43.320 --> 0:13:49.440 broad base of client in a growing economy, serving individuals, entrepreneurs, 0:13:49.480 --> 0:13:52.720 small cat meatcaps with mancos the west and serving large 0:13:52.720 --> 0:13:56.360 caps with CIB there, with convergence here and somewhere somewhat 0:13:56.440 --> 0:13:59.440 or white spaces inside. All right, So they basically it 0:13:59.480 --> 0:14:02.720 sounds like, uh, there's going to be a pretty widespread 0:14:02.760 --> 0:14:08.079 effort to just get clients in uh one one word answer. 0:14:08.520 --> 0:14:10.600 Do you think the next move for the Federal Reserve 0:14:10.840 --> 0:14:13.520 is a rate hike or a rate cut? That there 0:14:13.559 --> 0:14:18.760 is no one world answer here. That's a good try. No, no, 0:14:18.800 --> 0:14:23.560 But in fifteen seconds, you know, central bankers are evidence 0:14:23.600 --> 0:14:27.680 based and react on data and quite independently and quite well. 0:14:27.720 --> 0:14:30.000 And I think the FED and the CB are doing 0:14:30.120 --> 0:14:32.880 going to go exactly the same thing onward, look look 0:14:32.880 --> 0:14:35.680 at data and try to continue to support this economy 0:14:35.760 --> 0:14:38.320 the best way they can to benefit all industries, including 0:14:38.320 --> 0:14:41.440 the banking industry. John, you Pion, thank you so much 0:14:41.480 --> 0:14:44.840 for being with US chief executive Officer of BNP powered 0:14:44.880 --> 0:14:48.600 by USA and Chairman of the Central Aspect the c 0:14:48.760 --> 0:14:52.480 i B America's for VNP Party by joining us in 0:14:52.520 --> 0:15:06.400 our interactive broker's studios. Today is Jobs Day. It also 0:15:06.680 --> 0:15:09.920 is a day in which President Trump is discussing FED 0:15:10.040 --> 0:15:15.200 policy and ongoing talks with China. So very much UH 0:15:15.480 --> 0:15:19.760 Washington d C Front in focus today Chris Lee joining us, 0:15:19.760 --> 0:15:22.200 now senior fellow at the University of Virginia Miller Center, 0:15:22.280 --> 0:15:27.680 also former Deputy Secretary of Labor under President Obama. Chris, 0:15:27.800 --> 0:15:29.960 thank you so much for being with us. We want 0:15:30.000 --> 0:15:33.440 to get to a piece that you wrote for Newsday 0:15:33.480 --> 0:15:36.120 that is really interesting. Before we get there, do you 0:15:36.160 --> 0:15:39.280 have an initial read on today's jobs report and the 0:15:39.320 --> 0:15:41.960 idea that the Fed should cut rates as President Trump 0:15:41.960 --> 0:15:45.720 said going forward? You know what a couple a couple 0:15:45.720 --> 0:15:47.960 of months that we were talking about the said raising rates, 0:15:47.960 --> 0:15:50.440 and now we're talking about said cutting rates. You know, Look, 0:15:50.480 --> 0:15:53.080 I don't we always say don't read too much into 0:15:53.120 --> 0:15:55.680 one month. I think last month, you know, was a 0:15:55.720 --> 0:15:58.560 blipped down. Um, I want to see a couple more 0:15:58.600 --> 0:16:01.360 months of job growth. We've seen over the first three 0:16:01.400 --> 0:16:03.840 months of this year. Uh the economy is averaging about 0:16:03.880 --> 0:16:06.160 a hundred and eighty thousand. That's pretty good. That's kind 0:16:06.160 --> 0:16:08.040 of right where we ought to be. Uh. So I 0:16:08.040 --> 0:16:09.760 would if I were advising the set, I would just 0:16:09.760 --> 0:16:11.560 tell them to keep things where they are, see a 0:16:11.600 --> 0:16:15.760 couple more months before we make decisions on interest rate 0:16:15.920 --> 0:16:18.920 hikes or cuts. Chris, I know, a couple of days 0:16:18.920 --> 0:16:22.560 ago you wrote an opinion piece in Newsday talking about 0:16:23.000 --> 0:16:27.560 security clearances, why they matter, and just security protocols overall, 0:16:27.600 --> 0:16:30.200 why they matter in the White House, any white House. 0:16:30.560 --> 0:16:33.000 How is the Trump White House different in terms of 0:16:33.040 --> 0:16:37.160 traditional security clearances and protocols. Yes, So let me give 0:16:37.160 --> 0:16:39.080 you a little bit of context. Before I was the 0:16:39.160 --> 0:16:43.560 Deputy Secretary of Labor, I managed President Obama's cabinet. Before that, 0:16:44.040 --> 0:16:47.120 I managed his presidential transition. So I've seen the security 0:16:47.120 --> 0:16:51.080 clearance um both coming into office in two thousand nine 0:16:51.080 --> 0:16:53.680 and then processing all of the people who served in 0:16:53.720 --> 0:16:57.480 the White House. This is a process that's handled by 0:16:57.560 --> 0:16:59.760 career professionals who work in the White House and the 0:16:59.760 --> 0:17:04.439 different UM intelligence agencies. It's exhaustive. UM. I was cleared 0:17:04.480 --> 0:17:08.400 three different times when I worked for Barack Obama. UM 0:17:08.440 --> 0:17:12.119 it's not only you know, exhaustive information about your job 0:17:12.200 --> 0:17:17.080 history and financial information, foreign contexts, drug use, alcohol use, UM. 0:17:17.119 --> 0:17:21.200 They go out and talk to your associates, friends, colleagues, neighbors, UM, 0:17:21.600 --> 0:17:24.280 and they gather a lot of information. And career professionals 0:17:24.280 --> 0:17:27.080 make these decisions. And the reason they spent so much 0:17:27.119 --> 0:17:29.320 time on this is that when you're cleared for you know, 0:17:29.400 --> 0:17:33.280 top secret access to information, you have access to some 0:17:33.320 --> 0:17:36.360 of the most sensitive information in the US government. These 0:17:36.400 --> 0:17:39.720 are this is information that's been gathered at great financial 0:17:39.760 --> 0:17:43.240 costs and often at a cost to the people that collected. 0:17:43.320 --> 0:17:44.480 So you want to make sure it gets in the 0:17:44.520 --> 0:17:48.040 hands of people who deserve it. So earlier this week, UM, 0:17:48.280 --> 0:17:50.840 there was a whistleblower who indicated at least twenty and 0:17:50.840 --> 0:17:53.800 at least twenty five cases in the White House. UM 0:17:53.960 --> 0:17:57.320 career officials denied the security clearances for White House officials, 0:17:57.359 --> 0:18:01.920 and then those were overruled by political folks above them. 0:18:01.920 --> 0:18:04.480 And so you know, look, this is it's sometimes hard 0:18:04.520 --> 0:18:07.159 to keep track of what really matters in Washington. This 0:18:07.200 --> 0:18:09.600 should really matter, and this should matter regardless of what 0:18:09.720 --> 0:18:14.800 party you're a member of. Why what are the potential consequences. Well, look, 0:18:15.200 --> 0:18:19.080 part of the reason why, UM, this process is so exhaustive. UM, 0:18:19.200 --> 0:18:21.760 if you want to make sure people don't have vulnerabilities, 0:18:21.800 --> 0:18:25.920 they don't have weaknesses, because foreign governments, foreign adversaries are 0:18:26.040 --> 0:18:29.560 looking to exploit those weaknesses to get access to this information. 0:18:30.040 --> 0:18:33.040 And if you've got something in your past personal issues, 0:18:33.119 --> 0:18:36.159 financial issues, if you've got to set the foreign context, UM, 0:18:36.200 --> 0:18:40.280 that makes it easier to manipulate you. UM. And so again, 0:18:40.320 --> 0:18:43.040 as I said, this information comes at great cost to 0:18:43.080 --> 0:18:44.879 the US government, and we want to make sure it 0:18:44.880 --> 0:18:47.320 gets into the hands only of those people who can 0:18:47.359 --> 0:18:51.560 be trusted. So, Chris, I know this, uh, this report 0:18:51.600 --> 0:18:55.160 that came out and sited quote to senior White House officialist, 0:18:55.400 --> 0:18:58.879 I guess they were presumed to be uh Trump's uh 0:18:59.119 --> 0:19:02.080 daughter Ivancantre and son in law Jared Kushner got their 0:19:02.080 --> 0:19:06.080 clearances only after the intervention of President Trump. How common 0:19:06.320 --> 0:19:10.640 is that type of arrangement. Well, it's incredibly unusual. I mean, 0:19:10.680 --> 0:19:13.159 I look, I'm not aware of a single instance where 0:19:13.840 --> 0:19:18.360 UM a security clearance denial was overturned during the Obama administration. 0:19:18.400 --> 0:19:20.879 I know that, UM, subsequent reporting is indicated there may 0:19:20.880 --> 0:19:23.439 have been one or two, and it dealt with, you know, 0:19:23.520 --> 0:19:26.600 an initial denial based on drug use that was then overturned. 0:19:26.760 --> 0:19:29.040 But these are overturned like at a very low level, 0:19:29.240 --> 0:19:31.640 you know, and you know, different administrations sort of look 0:19:31.640 --> 0:19:34.480 at particularly drug use in sort of different ways. I 0:19:34.520 --> 0:19:36.800 am not aware, and I don't think I've seen any 0:19:36.840 --> 0:19:41.280 reporting indicating that a previous president has overturned one of 0:19:41.280 --> 0:19:44.159 these rulings. Uh. And obviously doing it for your family 0:19:44.200 --> 0:19:47.560 member raises a whole other set of issues, and so, um, yes, 0:19:47.640 --> 0:19:50.720 it should be concerning. What's interesting though, with regard to 0:19:50.840 --> 0:19:54.640 Jared Kushner is that while his top secret clearance denial 0:19:54.760 --> 0:19:57.879 was overturned, now his top secret clearance UM. There's an 0:19:57.920 --> 0:20:01.680 additional level of clearance the the CIA offers UM. It's 0:20:01.720 --> 0:20:05.000 called s c I clearance. Apparently they have not given 0:20:05.080 --> 0:20:08.439 him that clearance. So one of his parts, one of 0:20:08.560 --> 0:20:12.160 the parts of his portfolios to negotiate Middle East peace, 0:20:12.200 --> 0:20:15.720 and he's doing that without with access to some information 0:20:15.760 --> 0:20:17.920 which is sensitive, but not to all of the information. 0:20:17.960 --> 0:20:20.080 So that's a little odd. We're speaking with Chris Lew 0:20:20.119 --> 0:20:22.639 Senior fellow at the University of Virginia Miller Center. He 0:20:22.720 --> 0:20:26.240 also has a twenty year career in public service in 0:20:26.280 --> 0:20:29.600 the highest echelons of the Obama administration and before that 0:20:30.320 --> 0:20:33.760 eight years working for Representative Henry Waxman is Deputy Chief Council. 0:20:34.080 --> 0:20:37.200 I'm just wondering, given your extensive experience and your extensive 0:20:37.440 --> 0:20:41.600 roots in Washington, d C. How many old timers are 0:20:41.640 --> 0:20:45.119 there left? In other words, given some of the institutional 0:20:45.160 --> 0:20:47.919 knowledge that is built up over time, how much of 0:20:47.920 --> 0:20:51.560 that remains in Washington today? Well, not much of it. 0:20:51.600 --> 0:20:54.399 And I think it's the challenge in a social media 0:20:54.440 --> 0:20:57.639 environment to sort of try to put the context what 0:20:57.880 --> 0:21:01.160 is happening, and what matters and what doesn't matter, you know, Um, 0:21:01.200 --> 0:21:03.080 I mean, if you think about sort of the news 0:21:03.080 --> 0:21:05.480 of this past week. Um. The other one of the 0:21:05.480 --> 0:21:08.720 other big news items is that House Democrats requested um, 0:21:09.240 --> 0:21:12.760 President Trump's tacks returns. Well, it's worth noting for history 0:21:12.760 --> 0:21:17.000 purposes that president's going back to Richard Nixon, have either 0:21:17.040 --> 0:21:20.000 disclosed their tax returns when they are running for office 0:21:20.119 --> 0:21:23.439 or shortly after becoming president. And so yes, I know, 0:21:23.600 --> 0:21:26.000 in the kind of the swirl of social media, we 0:21:26.119 --> 0:21:29.479 love to say everything is unprecedented, but sometimes you have 0:21:29.520 --> 0:21:31.280 to look in the lens of history and say, Okay, 0:21:31.280 --> 0:21:34.560 really what is where are the norms? And where is 0:21:34.640 --> 0:21:38.520 this president's actions conduct words outside of that norms? And 0:21:38.520 --> 0:21:40.920 and so it's sometimes hard because, as you say, there 0:21:40.960 --> 0:21:43.520 aren't a lot of people now in Washington who have 0:21:43.640 --> 0:21:47.399 that historical uh knowledge. Well, Chris, the you know, the 0:21:47.480 --> 0:21:51.000 House Oversight Committee is looking at the security clearance issue. 0:21:51.800 --> 0:21:55.280 What's the endgame here for them? Can they affect any change? 0:21:55.920 --> 0:21:58.960 We revoke anything? Do they have any power? Well, look, 0:21:59.000 --> 0:22:03.399 they've issued subpoenas to the supervisor who was in charge 0:22:03.400 --> 0:22:06.520 of overturning um a lot of these denials. Uh. They've 0:22:06.560 --> 0:22:10.120 also asked for copies of memos on this subject. According 0:22:10.119 --> 0:22:13.680 to news reporting, former Chief of Staff John Kelly um 0:22:13.680 --> 0:22:18.200 put in writing his concerns about Jared Kushner getting a clearance. 0:22:18.240 --> 0:22:19.919 So it'll be interesting to see where they get all that. 0:22:20.280 --> 0:22:22.080