Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Yeah.
Speaker 1: John Riding dropping by the studio here in New York
Speaker 1: RDQ in Economics, chief economist and founding partner. So, John,
Speaker 1: that hasn't happened yet. It's the assumption of many, many
Speaker 1: individuals that follow the politics much closer than you and I.
Speaker 1: I'm just trying to understand what would happen if that
Speaker 1: headline crossed the Bloomberg. How would the market respond to
Speaker 1: that scenario. I don't think there's necessarily much that's gonna
Speaker 1: it's going to have to respond on too at this point,
Speaker 1: because that doesn't immediately start building the wall, doesn't do
Speaker 1: anything other than this will eventually get kicked to the
Speaker 1: Supreme Court, and I think there will be you know,
Speaker 1: however long that takes to play out, this may become
Speaker 1: a mechanism by which both sides get a win. Because
Speaker 1: if he is declared, if the President declares the national
Speaker 1: state of emergency. He can do it, then there's no
Speaker 1: need to keep the government closed. So presumably, uh, that
Speaker 1: would then pave the way to passing some kind of
Speaker 1: budget agreements getting the departments reopened. But by the same token,
Speaker 1: the wall's not going to be begun to be built
Speaker 1: because there has there will have to be a test. Well,
Speaker 1: it's the Congress's job to determine the budget, so the
Speaker 1: president's diverting funds. Can he legally do it? He says
Speaker 1: he can, Congress says he can't. The Supreme Court has
Speaker 1: to decide. Were used to volatility in Washington, d C.
Speaker 1: We're used to gridlock in the nation's capital. Is this
Speaker 1: different at all to what we've experienced in previous administrations
Speaker 1: for market participants where they look at this any differently
Speaker 1: to these situations we've seen in years gone by, No,
Speaker 1: and government shutdowns have never been a really big thing
Speaker 1: for the market. The question is what is the policy
Speaker 1: that needs to be resolved that drove the government to
Speaker 1: a shut down. In the past, it might have been
Speaker 1: a fiscal cliff relating to tax increases. Um this is
Speaker 1: in a sense a much smaller economic issue, So you know,
Speaker 1: you know, I I think that Uh, after a while,
Speaker 1: maybe there's acumic damage. People maybe talk about a tenth
Speaker 1: to prevent sent off GDP. We're not talking huge numbers.
Speaker 1: It's much more about executive privilege and politics, I think,
Speaker 1: than it is about economics. We have had economic growth.
Speaker 1: You predicted this, You've always been an optimist in the
Speaker 1: American experiment. Are we having these tensions because all the
Speaker 1: growth went to too few people? Well, look, just we
Speaker 1: cannot deny that distributional considerations are now very important politically.
Speaker 1: Um and that has been a theme in economics and
Speaker 1: a theme in politics. But I think but the question
Speaker 1: in the debts of the financial crisis and the Great Recession,
Speaker 1: if someone said, well, the economy is going to enjoy
Speaker 1: the longest expansion in US economic history coming out of this,
Speaker 1: we would have taken growth over where we were. So,
Speaker 1: you know, the economy has delivered the lowest unemployment rate
Speaker 1: now in fifty years. More people are coming back to
Speaker 1: the labor for US. Inflation is relatively low. You know,
Speaker 1: those compare the situation to Europe, and the US is
Speaker 1: in a far, far stronger place despite all of the
Speaker 1: dysfunctionality inside of the Beltway. And John I would totally
Speaker 1: agree with that as well. Looking at the economic data
Speaker 1: at the moment, there's been a big worry about what
Speaker 1: would happen with the global slow down and how it
Speaker 1: would spill over into the U S economy. Initial jobless claims,
Speaker 1: that's a real time indicator of this economy still really
Speaker 1: really low, multi decade lows at the moment. John, any
Speaker 1: sign of weakness anywhere that you're concerned about at the moment, well,
Speaker 1: there is weakness in areas like housing, for example, and
Speaker 1: that's one area where the government shut down may exacerbate
Speaker 1: the weakness because of the role of the government in
Speaker 1: guaranteeing mortgages and so there maybe you know mortgage applications
Speaker 1: that get delayed and some disruption there. But the point
Speaker 1: is an economy at full employment can't keep crying on
Speaker 1: all fronts. It's mathematically impossible. So interest rates are the
Speaker 1: mechanism that reallocates resources within the economy. So the Fed
Speaker 1: until recently has been on a path of steadily raising
Speaker 1: interest rates. When you raise interest rich, you're supposed to
Speaker 1: tighten financial conditions. When you type financial conditions, some hearts
Speaker 1: the economy are supposed to slow. There should be no
Speaker 1: surprises here, but John, for the first few years at
Speaker 1: the tightening cycle, financial conditions actually loosened exactly. Gold prices
Speaker 1: are hired. And when the Fed first started raising interest rates,
Speaker 1: the dollar really hasn't done very much. The equity markets
Speaker 1: a lot higher. And again, people between where we were
Speaker 1: early October and where we got to wunt Christmas Eve,
Speaker 1: the drop in the equity market to a level that
Speaker 1: none of us would have imagined going back ten years ago,
Speaker 1: that the economy could have gotten to in this timeframe.
Speaker 1: So here's the good news. The committee at the Federal
Speaker 1: Reserve seemed to be on the same page. Patients wait
Speaker 1: and see, and I think the inflation data gives them
Speaker 1: the capacity to do that. Inflation expectations have come in CPR.
Speaker 1: We get a little bit later, there is an urgency
Speaker 1: to raise interest rates. There is some space to be patient.
Speaker 1: The confusion is around the chairman, and the chairman continues
Speaker 1: to confuse and bewilder everyone in this market. I'm speaking
Speaker 1: for a lot of people I know. I'll speak for myself.
Speaker 1: It's confusing me. In October said rates are a long
Speaker 1: way from neutral. In November, he said he emphasized the
Speaker 1: estimate the range of estimates for the neutral rate. He
Speaker 1: walked it back December, he talked about the balance sheet
Speaker 1: runoff on autopilot, followed it up a couple of weeks
Speaker 1: later by pledging flexibility and patients, and then he speaks
Speaker 1: yesterday and says the balance sheet is going to be
Speaker 1: substantially smaller. John, Why is the chairman seemingly all over
Speaker 1: the place? Um? So, you know, you got on a
Speaker 1: bicycle for the first time, takes a little time before
Speaker 1: you can take the training wheels off. Um. I think
Speaker 1: that if you look through what he has said, and
Speaker 1: you take out the early October fireside chat with Judy
Speaker 1: Woodruff and that that long way from neutral. I think
Speaker 1: he was trying to correct the impression for when the
Speaker 1: FED took away some language in the FED in in
Speaker 1: the statement that said, well is the FED no longer accommodative?
Speaker 1: Do they see themselves at neutral? And no, No, we're
Speaker 1: a long way from neutral. I think the message that
Speaker 1: he's on it conveys the following. I think he did
Speaker 1: a reasonably good job in his last two appearances doing it.
Speaker 1: We had a view the economy is going to grow
Speaker 1: fairly stronger this year. Markets have created a range of
Speaker 1: uncertainty around that view. You said it right, inflations reasonably low.
Speaker 1: So now the Fed can afford to be patient. So
Speaker 1: they they're gonna say, we've race rates quite a bit.
Speaker 1: We're gonna sit aside and see which scenario when folds.
Speaker 1: Do you know that I've become a girl magnet here
Speaker 1: at Bloomberg because I have a Preston North End, Jersey
Speaker 1: over my chair women combined, they just stare at it
Speaker 1: in awe, Preston North. Then what happened with is it? Doncaster?
Speaker 1: How do you pronounce it? Doncaster? Doncaster? What? How do
Speaker 1: you lose to a team like that? I mean yet
Speaker 1: the post I get that, But how did this happen? Injuries? Injuries?
Speaker 1: I did not. I just want to point this out
Speaker 1: to the listeners out there who were tired of hearing
Speaker 1: about my hometown love of Preston North Then no, um,
Speaker 1: but explain, can you explain to our listeners what you're
Speaker 1: talking about? Talking about? Cup? The f A cup is
Speaker 1: different than Premier Lely against where the little guy can
Speaker 1: beat the big guy. Right, yeah, So what happens does
Speaker 1: it take the story for what happens this weekend in
Speaker 1: the f A Cup. I'm not sure who plays? Isn't
Speaker 1: it the league? The league games are back this weekend? Right,
Speaker 1: so the f A Cup round are done, tomp So
Speaker 1: the league games restart this weekend as far as I know. Okay,
Speaker 1: so like they're back to like the normal TV football. Yes,
Speaker 1: so tomorrow, Preston, I think play Swansea. Is that right?
Speaker 1: We played back in the league tomorrow. Of course, Doncaster
Speaker 1: Rovers was the little team of the knocked out the
Speaker 1: bigger t can I just explain some of our listeners
Speaker 1: here and this is like, this is like good. UK.
Speaker 1: F A Cup is a is a football cup that
Speaker 1: goes back to the eighteen hundreds which pretty much any
Speaker 1: football team in the UK can participate in. It's cool,
Speaker 1: It's very cool. So like minor league baseball could play
Speaker 1: the major leagues and basically if the minor league team
Speaker 1: got far enough, they could the Yankees and got to here.
Speaker 1: There we go. See I pulled it back to America.
Speaker 1: Rich congratulations, John Ridy, Thank you, John Ridy, thank you
Speaker 1: so much, but thank you for the Preston Northern Jersey.
Speaker 1: I just it just sits there on in Montreal Canadians
Speaker 1: Jersey and closes this is a joy. We have Peter
Speaker 1: Hooper on a Friday with Deutsche Bank. He's gonna publish
Speaker 1: this weekend. He's got a team of people towards En
Speaker 1: Slock and the others, Matthew Lozetti killing it with smart research,
Speaker 1: young losing. What's it like, Peter Hooper to bring someone
Speaker 1: like Matthew Lozetti on. I mean it keeps you young, right? Uh? True, joy,
Speaker 1: I mean I would have retired years ago if it
Speaker 1: wasn't for people like uh, Matt and Torson to be
Speaker 1: working with wonderful guys, really right, fantastic research. They do,
Speaker 1: detailed research. And again to the x y Z chart,
Speaker 1: you've gotten your new research note, which is way advanced stuff.
Speaker 1: And we don't do x y z charts Peter Hooper
Speaker 1: on radio, it doesn't work. Wait, charts don't work on
Speaker 1: a radio period. But but Peter Hooper, again, it comes
Speaker 1: down to model building and our confidence in what we're doing.
Speaker 1: Let's start with the Phillips curve theory. Uh in in
Speaker 1: all out of out of your Princeton, your Michigan as well.
Speaker 1: Are we still using the Phillips curve within our analysis? Absolutely,
Speaker 1: it's it's it's Central still. Um. You know people are
Speaker 1: claiming it's dead. Uh. The fact that inflation has failed
Speaker 1: to respond to an unemployment rate which is approaching a
Speaker 1: percentage point, has been approaching a percentage point low neighru
Speaker 1: but below full employment, very tight labor market in the past,
Speaker 1: more distant past, this generated a lot of inflation. We've
Speaker 1: been there for a number of months now, um, and
Speaker 1: it hasn't not really a budge yet. So things are changing.
Speaker 1: The reasons for the reasons why I think we're changing,
Speaker 1: but there are also reasons why they haven't changed permanently.
Speaker 1: And this will spring back to life eventually. Okay. I
Speaker 1: want to take this on two things. I knew what
Speaker 1: Dr Hooper's answer would be, folks, and it sets us
Speaker 1: up for an inflation discussion. And then I want to
Speaker 1: go to the broader American landscape, Peter. If I look
Speaker 1: at service sector inflation and goods inflation, the answer is
Speaker 1: service sector has been remarkably flat positive a normal number
Speaker 1: that all our listeners know. We've had goods deflation, but
Speaker 1: then a goods inflation pick up out of deflation. Can
Speaker 1: we sustain stability and goods prices or in an age
Speaker 1: of oversupply to goods prices roll over again. Well, you know,
Speaker 1: one of the factors that I think was sort of
Speaker 1: compressing inflation over several decades was was globalization, Um, increasing
Speaker 1: supply change, a lot of competition from abroad, huge increase
Speaker 1: in labor into the world, production in China, etcetera. That's
Speaker 1: that's changing now. I mean, I think I think you are.
Speaker 1: You are seeing effects of trade restriction, etcetera, potential tariffy impacts. Uh.
Speaker 1: The the international compression on inflation beginning to shift and
Speaker 1: in a direction that means that prices eventually will be
Speaker 1: rising more in the good sector. Um. The dollar has
Speaker 1: strengthened on average over the last year, and that that's
Speaker 1: compressed import prices. But that won't go on and definitely
Speaker 1: the dollar will fall again at some point. Uh, And
Speaker 1: you will see eventually good inflation is going to come
Speaker 1: back more sustainably in the positive territory. And I beg
Speaker 1: the differ a little bit. I think the underlying train
Speaker 1: and services inflation is word healthcare, etcetera. Even rental inflation.
Speaker 1: We've got some positives there today. Um so so I
Speaker 1: I do think that we are going to be moving
Speaker 1: at least modestly above the fed's goal of two not
Speaker 1: enough to cause major problems, but there are risks on
Speaker 1: that side. Peter Hoover, can you or Vice Chairman Claire Hiss,
Speaker 1: a front rate macro economist D. S. G and all that,
Speaker 1: can you advise Chairman Powell in a gilded age if
Speaker 1: we have the inequality we have an income and wealth,
Speaker 1: if we have the apparent beneficial effects of technology so
Speaker 1: different for rich and poor. Can we use your knowledge
Speaker 1: in a gilded age? Or do we make it up
Speaker 1: as we go? Well, you're you're you're talking about an
Speaker 1: area that the FED unfortunately really does not have much
Speaker 1: control over it. If you can deal with the macro economy,
Speaker 1: it cannot deal so much with the distribution effects. That's
Speaker 1: more in the realm of physical policy. That's uh, you know,
Speaker 1: tax and in transfer and and certainly a lot more
Speaker 1: is needed in terms of compensating those who lose jobs
Speaker 1: because of trade or technology, and there's a lot of
Speaker 1: that going on. We need more retraining, we need no more,
Speaker 1: you know, uh. To increase the flexibility of the US
Speaker 1: labor force to deal with these challenges is a major
Speaker 1: should be a high priority. We need we need a
Speaker 1: better functioning government in Washington to get some of this
Speaker 1: done as well. What is the state of the American consumer?
Speaker 1: I guess I'm going over to touristen Slux area here
Speaker 1: give us an update on the Deutsche Bank feel on
Speaker 1: the American consumer, consumers consumers of the engine of growth here. Uh,
Speaker 1: I mean in in in the presence of all this
Speaker 1: doom and gloom about slow down globally. And there's impressively
Speaker 1: we numbers on manufacturings are manufacturing around the world of
Speaker 1: late Uh, the U S consumer is really still the
Speaker 1: engine of growth. The strong labor market, strong income growth,
Speaker 1: even with the recent correction in the stock market. Household
Speaker 1: balance sheets are very strong. There's been a lot of
Speaker 1: deleveraging there. Uh and and uh we we we. Assuming
Speaker 1: we get the numbers before too long, I think you'll
Speaker 1: see the consumers are continuing to do reasonably well. One
Speaker 1: final question, Dr Hooper, what should the Fed do January?
Speaker 1: I know we were data dependent. We've got a lot
Speaker 1: of data to go to get to January. It's easy
Speaker 1: to pause. Or should they shake things up with some drama. Well,
Speaker 1: what they should do and what they will do has
Speaker 1: been very clear in the speeches we got yesterday from
Speaker 1: the chair and vice chair. They're they're they're in wait
Speaker 1: and see mode. A lot of uncertainty going on around here,
Speaker 1: a lot of risks that need to be resolved one
Speaker 1: way or another. I don't see them doing anything for
Speaker 1: quite a while. Peter Hooper, thank you so much with
Speaker 1: Deutsche Bank. Wonderful to have you for such an extended
Speaker 1: time this morning. Can't say enough about the Deutsche Bank
Speaker 1: research through the year from Matthew Lozettie, Torsten Slack, Brendan
Speaker 1: Maran and the rest of their Brenton Ryan and the
Speaker 1: rest of their team as well. If the New York
Speaker 1: stock has changed. Mary Barra, and she is with our
Speaker 1: David Weston on Bloomberg Television and Radio. We now welcome
Speaker 1: Mary Barra. She is the chairman, the CEO and president
Speaker 1: of General Motors. Welcome to Bloomberg, Mary, So we've just
Speaker 1: heard the news about General Motors, both respected and I
Speaker 1: think surprising the upside. What happened, well, I think this
Speaker 1: is a result of what we've been working on since
Speaker 1: the time frame, you know, really working to transform the business,
Speaker 1: both the core business and also the investments were making
Speaker 1: in the e V a V and connectivity and we
Speaker 1: see all that coming tom coming to fruition. We still
Speaker 1: have more work to do. That's why we made the
Speaker 1: difficult announcement we did last at the end of last year.
Speaker 1: But we are focused on this transformation, make sure General
Speaker 1: Motors is strong and really demonstrating that even in a
Speaker 1: cyclical business, we can continue continue to deliver results. It's
Speaker 1: cyclical and all sorts requiring a lot of investment. Right now,
Speaker 1: as you go through the transformation to electric vehicles to
Speaker 1: also autonomous vehicles, will you be able to maintain the
Speaker 1: situation where you can get the money you need to
Speaker 1: invest by saving money elsewhere because you're earnings for share
Speaker 1: are up actually despite all the investment. Well absolutely, and
Speaker 1: we are investing. And one of the things that we
Speaker 1: did in this transformation is we're remixing our our global
Speaker 1: product development. We've indicated that over the next few years
Speaker 1: we will double the amount of that is spenting EVY
Speaker 1: and a by but that's not added to that's transitioning
Speaker 1: to and we've actually found a lot of synergies and
Speaker 1: not only how we engineer, but also from a capital perspective,
Speaker 1: you know, we've made a lot of investments in crossovers,
Speaker 1: full size trucks, our global family of vehicles, and so
Speaker 1: that's going to pay off, and that's investment that we
Speaker 1: can continue to leverage as we go forward. So that's
Speaker 1: what's allowing us over the near term to take the
Speaker 1: billion and a half out of our capital spot. So,
Speaker 1: so talk about electric vehials for a while. And as
Speaker 1: I understand, you're gonna have I think it's twenty twenties
Speaker 1: three miles by twenties twenty Is that got it right? Uh? Cadillac,
Speaker 1: now we know it's gonna be your lead Why well,
Speaker 1: Cadillac is our technology brand. And when we look at
Speaker 1: the technology in addition to ev that we're going to
Speaker 1: put on this vehicle, it's appropriate that Cadillac is our
Speaker 1: is our lead brand. And then you know, we'll we'll
Speaker 1: fill out the portfolio that makes sense and be customer driven.
Speaker 1: But it also is a very important part of rebuilding
Speaker 1: Catillac and demonstrating that Catillac is a true luxury brand
Speaker 1: again delighting customers with the technology and the and the
Speaker 1: electric experience. How does this fit with what you're doing
Speaker 1: a cruise Because when we've talked to Dan Ammon, he
Speaker 1: said that by twenty and nineteen. This year, you will
Speaker 1: have some commercialized versions of autonomy. Le how does that
Speaker 1: fit with, for example, a Cadillac electric vehicle. Well, first
Speaker 1: of all, um, we believe that all avies, all autonomous
Speaker 1: vehicles should be electric vehicles, and so that's a leveraging
Speaker 1: of the technology and the platform as well. We are
Speaker 1: working on the rate of iteration that we're demonstrating and
Speaker 1: we just posted a really cool video yesterday, so if
Speaker 1: you haven't seen it, for Cruise and demonstrating how we
Speaker 1: continue to learn UH new operations in the very dense
Speaker 1: and urban environment of San Francisco. So we will be
Speaker 1: gated by safety and I think we've demonstrated in the
Speaker 1: past that we will make decisions to make sure our
Speaker 1: vehicles are safe, as we demonstrated with super Cruise. But
Speaker 1: based on that rate of iteration, we're going as fast
Speaker 1: as we can and we believe that we can take
Speaker 1: the driver out and right or a constrained environment and
Speaker 1: UH and and demonstrate our electric vehicle capability and anytime.
Speaker 1: Besides announcing that Cadillac is going to be your lead
Speaker 1: in electraveals, you also have announced a new architecture which
Speaker 1: would be for China and Brazil and Mexico's I understand it,
Speaker 1: not the United States tell us about that. Why you're
Speaker 1: doing it? Well, if you look at really being customer driven,
Speaker 1: the customers in those markets, they want the latest technology
Speaker 1: and they want UH performance from safety, from connectivity, and
Speaker 1: so we step back and often those markets are served
Speaker 1: by older architectures. So we looked and said, with the
Speaker 1: scale and the significant share we have in China, the
Speaker 1: strength that we have in South America and other markets
Speaker 1: like Mexico, let's do a dedicated UH new architecture where
Speaker 1: we can really deliver something special to the customer. And
Speaker 1: so are the feedback we've gotten again will be sharing
Speaker 1: some of those vehicles today or an early glimpse of
Speaker 1: those vehicles. I think it's can be very significant, and
Speaker 1: we start that rollout UH later this year in China
Speaker 1: and then it will flow to South America, Mexico into
Speaker 1: over forty countries. As I said, this announcement is a
Speaker 1: bit of a surprise because it comes against a back
Speaker 1: job of some softness, at least perceived in the automobile marketplay.
Speaker 1: We've had some announcements for some competitors about cutting back.
Speaker 1: We've had some announcements about some soft sales. How much
Speaker 1: of your projection in which is robust, how much of
Speaker 1: that is the overall size of the market and where
Speaker 1: the market is, and how much it is you taking
Speaker 1: market share and doing better well. I think again in
Speaker 1: the key markets, whether you look at China, the United States,
Speaker 1: South America, we think we're very well positioned. In the
Speaker 1: United States, we're going to have we we think the
Speaker 1: market will be in the low sevent teams. We have
Speaker 1: the full year of our new light duty trucks. We
Speaker 1: have the Catillac XT four, we have the Chevrolet Blazer.
Speaker 1: Second half of the year, we're going to have our
Speaker 1: heavy duties. So we have an exceptionally strong product cames
Speaker 1: building on our crossovers in our full size trucks in
Speaker 1: North America. In China, we have twenty new or or
Speaker 1: brand new or refreshed models that will be rolling out
Speaker 1: this year, and we think the market will be about
Speaker 1: the same. There's I think, you know, positive news coming
Speaker 1: out of the trade talks. There's talk in China about
Speaker 1: stimulus from a durable durbal goods perspective, so we see
Speaker 1: an opportunity there. And then South America we're starting to
Speaker 1: see recovery and in South America's where we have a
Speaker 1: very strong Chevallee franchise. So when you look at our
Speaker 1: key markets, we think we're well positioned not only with
Speaker 1: where we think the market is going to be, but
Speaker 1: also the strength of our product portfolio. You mentioned trade
Speaker 1: way back in Q two second quarter, you had to
Speaker 1: take down some projections based on concerns about tariffs. As
Speaker 1: I recall, as you look into are your projections based
Speaker 1: on status quo, on things getting better, on things getting worse?
Speaker 1: What are your projecting In order to come up with
Speaker 1: what your forecast is, we really looked at what we think,
Speaker 1: you know, the current macro environment um and what we're
Speaker 1: seeing and what you know, what outside analysts are are
Speaker 1: looking at from a from a macro perspective, and then
Speaker 1: looking and laying on where General Motors is position and
Speaker 1: that is all built into the guidance that we provided.
Speaker 1: So you've had quite a year. This is your investor
Speaker 1: day if you go all the way back three and
Speaker 1: six five days ago, there's been a lot that's happened.
Speaker 1: I mean certainly with Cruise, with investments from soft Bank
Speaker 1: as well as from Honda, You've made some management changes
Speaker 1: where you took Dan Ammond from President GM, moved him
Speaker 1: over to Cruise, brought up Mark Royce. All so announced,
Speaker 1: as you said, a very fundamental restructuring which will be
Speaker 1: difficult to implement. Is that the strategy and from now
Speaker 1: on is it execution or is there more to be
Speaker 1: done on the strategy. It's both. We have to remain
Speaker 1: agile because some of them are the transformation that we're
Speaker 1: talking about with Evies and Avies. You know, it's it's
Speaker 1: not like anyone knows exactly how that's going to play out.
Speaker 1: So we have to remain agile. We have to be quick,
Speaker 1: we have to be leaned. So we've got to do both.
Speaker 1: We've got to execute exceptionally well, but we have to
Speaker 1: stay agile to to take twists and turns that are
Speaker 1: going to happen in cease opportunities. So we're respect to
Speaker 1: electric hdeals. We hear about it a lot, but if
Speaker 1: you actually look at how many people are acquiring evis,
Speaker 1: it's not that high. It's not that higher percentage. When
Speaker 1: is it coming? I mean, when are we there? Well?
Speaker 1: I believe the customers exceptionally rational. So if you look
Speaker 1: at China, you know this will be because of some
Speaker 1: of the regulatory environment you'll see. I think it grow
Speaker 1: more quickly there. But one of the things we're focused
Speaker 1: on is if we can have a desirable, profitable, appropriate
Speaker 1: range ANXI from a range perspective, so we don't have
Speaker 1: range anxiety, we think we can start to create the
Speaker 1: man So for us, we're not only working on the
Speaker 1: electric vehicle technology itself and the learning all the learnings
Speaker 1: from VOLT, the cheval Vault and the Chevallet Voult, but
Speaker 1: we're also working on the infrastructure. We made an announcement
Speaker 1: that will allow us to have the largest uh you know,
Speaker 1: charging infrastructure available to our customers. So it's if you
Speaker 1: can continue to solve customer perceived or real pain points
Speaker 1: with e V, we think that's really going to allow
Speaker 1: the growth to occur. If you look at the industry overall,
Speaker 1: would we be where we are today with electric vehicles
Speaker 1: if Tesla had never existed? The Tesla really spur this
Speaker 1: or was it going to happen anyway? You know? Um,
Speaker 1: I think when I look at EV's we've been in
Speaker 1: e V since e V one and you know, in
Speaker 1: the Chevallet Vault and really driving uh because we knew
Speaker 1: that technology was important. So I think there's been many
Speaker 1: important players that have helped from an electric vehicle, and
Speaker 1: I think you know, there's even more coming now. So
Speaker 1: that's why we have to be quick. What's the biggest
Speaker 1: risk you see to your predictions for two nineteen as
Speaker 1: you look forward? What is the thing that worries you
Speaker 1: if anything? Well, again, I said, our guidance is based
Speaker 1: on kind of the look of the current Macrock indum state,
Speaker 1: which is not it's not like it's it's a complete glass,
Speaker 1: you know, full or glass completely empty, but looking at
Speaker 1: that so something dramatically changes. If there's a you know,
Speaker 1: a very sudden shift, then we'll have to reevaluate. But
Speaker 1: I'm also confident on our in our team and how
Speaker 1: we're able to seize opportunities and to really mitigate an
Speaker 1: offset some of the things we based in eighteen and
Speaker 1: what we've been able to demonstrate. Okay, Mary bar Chairman
Speaker 1: and CEO of General Motors, thank you so much for
Speaker 1: being here. David Weston with this UH this morning from
Speaker 1: the floor of the New York Stock Exchange with the
Speaker 1: chairman and CEO of General Motors, Mary burt. I am
Speaker 1: one who does not do a lot of look back books.
Speaker 1: They look back in their history and all that. But
Speaker 1: every once in a while there's a enormous exception. That
Speaker 1: is true of the two pages of the FED in
Speaker 1: Lehman Brothers. Because it's not done by some crackpot. Lehman
Speaker 1: was wrong, the FED was wrong. Everybody's wrong, wrong, wrong, wrong,
Speaker 1: And you go, yeah, but what do they know? Unfortunately
Speaker 1: it's Lawrence Ball the Johns Hopkins University. He's a first
Speaker 1: class economist. Gregg Manque among others up at Harvard raves
Speaker 1: about the FED in Lehman Brothers. Lawrence Ball, good morning.
Speaker 1: I found your two pages chilling and riveting. I want
Speaker 1: to cut right to the key chapter, which is that
Speaker 1: Lehman wasn't insolvent. How do you know that? Well, thank
Speaker 1: you for having me on your show. Uh. The way
Speaker 1: we know Lehman's financial condition is there's actually a tremendous
Speaker 1: amount of evidence gathered primarily by investigations by the Bankruptcy
Speaker 1: Examiner for the Bankruptcy Court and also Congression Commission, which
Speaker 1: had subpoena power and got a lot of documents about
Speaker 1: Lehman's finances and real time and essentially Lehman had stated
Speaker 1: um in its financial statements what it's what its assets
Speaker 1: were worth, and what its equity was. But we also
Speaker 1: have in real time estimates by other financial institutions or
Speaker 1: how much they overvalued their assets, and we can combine
Speaker 1: those to get us sense of how do you respond
Speaker 1: to someone who says, Okay, you're having a cup with
Speaker 1: a cup of coffee with Chairman Bernankey and someone collegial
Speaker 1: says that's great, Professor Ball, but hindsight, how do you
Speaker 1: respond to that criticism of the great tenure look back? Well,
Speaker 1: I think I can answer that question on two levels.
Speaker 1: I think, um it is a little unfair with hindsight
Speaker 1: to say they should have done everything perfectly and measured
Speaker 1: everything perfectly at the time. Where I have more problem
Speaker 1: in a way with FED officials uh is not the
Speaker 1: fact that what they did then was not ideal. It's
Speaker 1: what they've said over the last ten years. They've dug
Speaker 1: in their heels um with a story saying that they
Speaker 1: didn't make any mistake, that there were legal impediments that
Speaker 1: made it impossible to rescue Lehman brothers, whereas we know
Speaker 1: with hindsight that that was not true. Professor Ball. There
Speaker 1: are quotes that come from a variety of emails. I
Speaker 1: know that you have written about it, but I just
Speaker 1: want to offer a flavor of some of them, where
Speaker 1: a former Secretary the Treasury, Paulson told people, quote, I
Speaker 1: can't do it again. I can't be Mr bailout. In addition,
Speaker 1: Secretary Paulson's chief of staff put the point as you
Speaker 1: described it bluntly. There was an email to Paulson's press
Speaker 1: secretary quote, I just can't stomach us bailing out Lehman
Speaker 1: will look horrible in the press. Don't you think is
Speaker 1: this the right way to go about thinking about these crises? Well,
Speaker 1: I think that is the right interpretation, that it was
Speaker 1: a political decision made primarily by Treasury Secretary Paulson. I mean,
Speaker 1: certainly is not how the decision should have been made.
Speaker 1: That a decision should have been made by the Federal
Speaker 1: Reserve based on the costs Lehman bankruptcy was likely to
Speaker 1: do the to the economy. And it's very, very unfortunate
Speaker 1: that political pressure, um is what drove the decision, because
Speaker 1: didn't Lehman brothers have collateral that would have served as
Speaker 1: the backstop for a loan from the Federal Reserve. Absolutely.
Speaker 1: That's really the central point of my book is that
Speaker 1: feede officials say there was no way we could legally
Speaker 1: lend the money because alone legally requires collaterally, they didn't
Speaker 1: have collateral, And to make a rather long story short, uh,
Speaker 1: there's detailed evidence that they did have plenty of collaterals.
Speaker 1: So it's at the collateral story is really just an
Speaker 1: excuse for what was actually a political decision. Lawrence Baul
Speaker 1: joining us to Johns Hopkins University, the Fed, and Lehman
Speaker 1: Brothers setting the record straight on a financial disaster. Professor
Speaker 1: ball I interviewed John Charles roth Schave to lose with
Speaker 1: his wonderful monograph I'm gonna say, eight nine years ago,
Speaker 1: why are there so many banking crises? And he came
Speaker 1: back within a lot of Mathewinist folks to it's all
Speaker 1: about politics. What was the political calculus that good economists
Speaker 1: and treasury officials faced? What was the politics where they
Speaker 1: were wrapped around? I think the politics are really based
Speaker 1: on a misunderstanding that there's the term bailouts, which is
Speaker 1: a very unpopular term, and people have the impression that
Speaker 1: what happened with a I g and bear Stearns, And
Speaker 1: what could have happened with Lehman was the government giving
Speaker 1: away taxpayer money. A lot of people resent the idea
Speaker 1: of giving away taxpayer money to Wall Street executives who
Speaker 1: get in trouble. That the reality is that these aren't giveaways.
Speaker 1: We're talking about short term loans that are very likely
Speaker 1: to be paid back, that have good collateral. So so
Speaker 1: really the economics of it is that these this kind
Speaker 1: of assistance by the Federal Reserve does not really have
Speaker 1: costs to the taxpayer, and it has a tremendous benefit
Speaker 1: in dampening financial crises. So but unfortunately politically that that
Speaker 1: message doesn't get through. Has that message gotten through the
Speaker 1: current lawmakers in the sense that Dodd Frank places restrictions
Speaker 1: on Federal Reserve lending. Yes, I'm afraid that because of
Speaker 1: the unpopularity of bailouts, uh, the Dodd Frank Act adds
Speaker 1: new restrictions um restricting what the Fed can do in
Speaker 1: lending money. So, actually, if an exact replica of the
Speaker 1: Lehman crisis were to happen today, it arguably would actually
Speaker 1: be illegal for the FED to rescue the new Lehman
Speaker 1: because of the new legal restrictions and whereas they could
Speaker 1: have done it legally during uh, the actual crisis, and
Speaker 1: that's a big step in the wrong direction. I think,
Speaker 1: tying the Fed's hands in a crisis, you know the
Speaker 1: ballet here in academics, as we go back to Badget
Speaker 1: and lender of last resort, I mean Allen Meltzer, the
Speaker 1: lady Allen Meltzer, Carnegie Mellon went on and on about
Speaker 1: this within the history of the FED, the lender of
Speaker 1: last resort just fail here in the crucible of crisis. Yes,
Speaker 1: I think it's really as simple as that that there
Speaker 1: was essentially version of a bank run on Lehman Brothers
Speaker 1: and going back to Badget in the nineteenth century, the
Speaker 1: central purpose of a central bank is to provide liquidity,
Speaker 1: provide cash during a run like that and prevent um
Speaker 1: an unnecessary calamity um. And unfortunately that just didn't do that. Again,
Speaker 1: I think for political reasons and again the bankruptcy. They've
Speaker 1: tried to give explanations for why they couldn't do it,
Speaker 1: but those just don't hold water. This has been wonderful,
Speaker 1: Lawrence Paul, thank you so much. Thanks for listening to
Speaker 1: the Bloomberg surveillance podcast. Subscribe and listen to interviews on
Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm
Speaker 1: on Twitter at Tom Keane before the podcast. You can
Speaker 1: always catch us worldwide. I'm Bloomberg Radio