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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along

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Speaker 1: with my co host of Bonnie Quinn. Every business day

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Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,

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Speaker 1: along with essential market moving news. Find the Bloomberg Markets

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Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,

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Speaker 1: and on Bloomberg dot com. We're awaiting comments from US

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Speaker 1: Treasury Secretary Nominee Janet Yellen from her confirmation here and

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Speaker 1: in Washington. Uh d C will bring them to you

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Speaker 1: as they occur. Right now, let's go to IRA Jersey

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Speaker 1: get some preview, if you will, of what we might

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Speaker 1: hear from Secretary Nominee Janet Yellen. Ira Jersey, chief US

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Speaker 1: Interest rate Strategists for Bloomberg Intelligence, joins us. Ira, thanks

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Speaker 1: so much for coming on with us here today. What

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Speaker 1: do you expect to hear from Mrs Yellen today? Well, first,

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Speaker 1: I think we're gonna hear a big sales pitch for

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Speaker 1: President elect Biden's one point nine trillion dollar stimulus plan. Um.

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Speaker 1: I think that will be important. She'll probably be asked

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Speaker 1: about how that will be funded and how that might

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Speaker 1: have interest rates, and and she'll say well, interest rates

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Speaker 1: rhetorically very low, so this is the time you want

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Speaker 1: to be taking on more debt, not when interest rates

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Speaker 1: or significantly higher. So I think those are the kind

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Speaker 1: of the first the first couple of things. And then

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Speaker 1: and then I suspect that at some levels she'll also

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Speaker 1: be aft about um working with the Federal Reserve, which

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Speaker 1: is not something that Secretary Manuchin necessarily always had a

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Speaker 1: rosy um, a rosy time with. So so I think

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Speaker 1: Janet Yellen will will be after you know, a number

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Speaker 1: of things, both from the monetary and the fiscal side

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Speaker 1: of things today. How will her rhetoric change from the

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Speaker 1: time when she was when she was Federal Reserved here,

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Speaker 1: I mean, obviously there were certain restrictions then that there

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Speaker 1: aren't on her now. Should we anticipate a different kind

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Speaker 1: of Johnny Yellen? I think a little bit. But you know,

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Speaker 1: even Jennet Yellen, she was out front talking about things

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Speaker 1: that quite frankly or not exactly in the Federal Reserve's purview.

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Speaker 1: So things like income inequality was something that talked about

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Speaker 1: both in public remarks as well as before members of

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Speaker 1: Congress in the past. So so now she can speak

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Speaker 1: much more directly about that. And I think that especially

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Speaker 1: with Democrats, you know, Senator Grassley and others being um uh,

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Speaker 1: the Democrats being in the majority, now that she'll be

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Speaker 1: asked about income inequality a number of times and what

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Speaker 1: can be done to fix that? And I think that

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Speaker 1: she'll um, you know, she she'll she has very strong

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Speaker 1: opinions about about income inequality and both the problems um

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Speaker 1: uh that that it creates in the broader economy, but

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Speaker 1: also um, you know how you can fix it, and

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Speaker 1: you know it's it's not an easy and easy ask,

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Speaker 1: and and you know, they're some of the people. I

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Speaker 1: think once she answers that some Republicans may actually go

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Speaker 1: on the I don't want to say attacker, but certainly

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Speaker 1: take the other side and say, well, there has to

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Speaker 1: be winners and losers then, and you know, how do

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Speaker 1: you incentivize investment and at the same time ensure that

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Speaker 1: that that incomes um can be more are normalized between

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Speaker 1: between the halves and the half not al Right, what

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Speaker 1: do we know about Janet Yellen's um thoughts and policies

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Speaker 1: and strategies about the ongoing fiscal deficit the you know,

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Speaker 1: the annual deficits we run every year in this country

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Speaker 1: and the and the long term debt this country's racking up.

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Speaker 1: How does she feel about that? That's a good question.

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Speaker 1: We haven't heard a lot from her on that exact subject,

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Speaker 1: except saying that, um, you know, it can't it can't

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Speaker 1: go on forever. So she's not a modern monetary theorist

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Speaker 1: at heart anyway. Um. But but I think that she'll

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Speaker 1: probably come out and say, well, this is the time

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Speaker 1: when you need to spend. She'll take a very neo

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Speaker 1: Kanesian view, I would think, which is, you know, you

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Speaker 1: have to spend when the economy is weak, when interest

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Speaker 1: rates are low, and then reduce the amount of deficit

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Speaker 1: spending as the economy recovers and you're in the good times. Um.

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Speaker 1: The you know, clearly over the left of the last

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Speaker 1: half century we haven't had a great, um, a great

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Speaker 1: track record of that. But what has happened during good

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Speaker 1: times is that you've had a nominal GDP growth growing

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Speaker 1: much faster than the fiscal deficits. So you've had debt

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Speaker 1: to GDP go down. But now with the massive amounts

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Speaker 1: of deficit spending over the left decade, we've we've now

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Speaker 1: approached a debt to GDP and in fact, this year

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Speaker 1: we will um we we will go over that, and

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Speaker 1: particularly if there is another one point nine trillion dollar

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Speaker 1: stimulus so um, so she'll have to address that, and

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Speaker 1: it'll be interesting to see, you know, how worried she

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Speaker 1: is about that and how much she um you know, says, hey,

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Speaker 1: we do something now, but in the future the rest

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Speaker 1: of my term as as grogury Secretary, maybe we won't

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Speaker 1: be have deficits that are as high as they'll they'll

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Speaker 1: likely be over the next twelve months. Jerry tomp Grassley

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Speaker 1: is making his opening statement right now. That will go

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Speaker 1: on for a few minutes. Eira. You know, she will

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Speaker 1: obviously talk about the ways to stimulate the economy. Will

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Speaker 1: she be in favor of direct checks? Will she talk

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Speaker 1: a helicopter money? Well, helicopter money is different than directs,

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Speaker 1: right because so helicopter money is is talking about monetary

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Speaker 1: policy and and basically the Federal Reserve printing money, which

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Speaker 1: is a much longer discussion and is not something that

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Speaker 1: necessarily works the way that that some monetary theorists think

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Speaker 1: it does, at least in my opinion. Um. But but

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Speaker 1: I think that that she will um talk about some

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Speaker 1: direct checks. I think, UM, the the she will acknowledge

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Speaker 1: though that direct checks only help in the very short term,

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Speaker 1: and that um, there's other policies that um that that

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Speaker 1: may be more important for the long term sustainability of

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Speaker 1: the country. So um, so things like you know, mortgage

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Speaker 1: moratoriums or ensuring that people keep jobs. So like something

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Speaker 1: like the PPP might be better than direct stimulus checks

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Speaker 1: to to the household sector, because one of the things

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Speaker 1: that we have to remember is that direct checks to

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Speaker 1: the household sector, they are a one time boost and

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Speaker 1: if um, if all of that money is spent or

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Speaker 1: or even if some is saved, it's still only it

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Speaker 1: doesn't help in the longer term. So something like keeping

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Speaker 1: people in their jobs or or you know, helping people

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Speaker 1: stay stay at work, or helping with longer term unemployment. UM,

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Speaker 1: those are things that that will probably have a greater

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Speaker 1: impact on on the long term health of the economy

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Speaker 1: than you know, someone getting an extra an extra five

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Speaker 1: or six hundred dollars um in you know, at one time.

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Speaker 1: So I you know, in addition to this one point

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Speaker 1: nine trade and fiscal stimulus that is on the table

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Speaker 1: right now, there's talk of already another package behind it,

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Speaker 1: perhaps even the larger that may be more infrastructure oriented,

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Speaker 1: more longer term, maybe even a green component. Do we

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Speaker 1: know what Janet Yellen feels about some of those strategies

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Speaker 1: in those policies, Well, I don't think that she. I

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Speaker 1: think that ultimately she'll be on board with with the

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Speaker 1: president's general plan. So if if the President does come

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Speaker 1: out with some kind of you know, green uh, you know,

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Speaker 1: green New Deal or um uh and infrastructure spending, that

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Speaker 1: what might go under over multiple years. So so when

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Speaker 1: you think about the next plan behind this, I think

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Speaker 1: it's more of a yeah, it might be three trillion dollars,

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Speaker 1: but it's probably three trillion dollars over five years or

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Speaker 1: six years. It's not you know, two trillion dollars right now,

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Speaker 1: which is what we're talking about with the with the

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Speaker 1: second fiscal stimulus UM. So, so we don't know, but

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Speaker 1: I think that you'll have to be on board with that.

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Speaker 1: I mean, she wouldn't be nominated for Treasury Secretary without

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Speaker 1: needing to be the spokesperson for the broad array of

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Speaker 1: different things at President let Biden wants to do, I

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Speaker 1: wrote Terry Haynes Apenergy Policy makes a good point. He

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Speaker 1: says that you know, markets will receive this as positive news,

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Speaker 1: this yelling you know, most likely risk asset markets might

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Speaker 1: take it kindly. I'm not sure that. I'm not sure

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Speaker 1: that the race market would take you know, two trillion

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Speaker 1: dollars stimulus plan as as particularly kind Well, yeah, that's

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Speaker 1: an excellent point. That's an extent point. We let's expend

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Speaker 1: on that in a second. But just to finish that

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Speaker 1: first thought, he was saying that she provides cover for regulators,

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Speaker 1: for progressive regulators like for example, Arrogancer and Antiopra at

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Speaker 1: the CFPB because she has been talking a lot about

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Speaker 1: consumer affairs. Yeah. So, so consumer affairs is interesting because

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Speaker 1: one of the one of the issues with income inequality

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Speaker 1: is is who's able to get loans? Right, So, so

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Speaker 1: the good things and the bad things about the CFPB

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Speaker 1: and some of the work that the Consumer Financial Protection

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Speaker 1: Bureaus you know, done over over the course of the

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Speaker 1: last decade is you know, they want to make sure

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Speaker 1: that people are getting loans that firstly are sustainable, but

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Speaker 1: and and that they're not being taken to people aren't

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Speaker 1: being taken advantage of, you know, like what happened at

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Speaker 1: some points during the mortgage crisis. But at the same time,

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Speaker 1: that also means that there's a lot of people at

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Speaker 1: the margins who might not be able to get loans

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Speaker 1: because they're not seen as worthy borrowers. So that means

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Speaker 1: that you know, in places like under UM, you know,

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Speaker 1: some underserved communities might not be able to get loans

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Speaker 1: to start businesses or or to buy a house like

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Speaker 1: So there's knock on effects with that. So I think

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Speaker 1: that there probably needs to be some changes, and I

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Speaker 1: think UM, someone like Janet Yelling can kind of find

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Speaker 1: the balance between safety and soundness and UH and the

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Speaker 1: ability to allow some type of risk taking h to

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Speaker 1: be done and for loans to go out. You know,

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Speaker 1: maybe it's on the auspices of the SBA, for example,

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Speaker 1: where the Small Business Administration might ease loans in certain

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Speaker 1: areas where where businesses might be able to UM might

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Speaker 1: be able to take on a little bit more debt.

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Speaker 1: But but all of this cost money, right, So at

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Speaker 1: the end of the day, there, you know, if you

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Speaker 1: do have UH riskier loans being made by the SBA,

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Speaker 1: the chances for credit losses by the SBA goes up,

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Speaker 1: and and that means that that has to be funded

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Speaker 1: at some level, and that has to be funded via

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Speaker 1: issuing treasury and security. So that's one of the reasons

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Speaker 1: why I bring up. You know that that all of

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Speaker 1: the spending means that you have to issue a lot

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Speaker 1: more bonds, and by issuing a lot more bonds, someone

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Speaker 1: has to buy them, and eventually you're going to see

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Speaker 1: much high or yields because of that supply. I Jersey,

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Speaker 1: thank you so much for joing us. We appreciate your

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Speaker 1: extended time. Our Jersey chief US interest rate strategist for

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Speaker 1: Bloomberg Intelligence. Earnings season is beginning and we always begin

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Speaker 1: with the big banks in this season is no different. Uh,

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Speaker 1: some mixed numbers I guess coming out of some of

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Speaker 1: the big banks here. But let's break it down. We'll

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Speaker 1: do that with Shanali Bassic, Wall Street porter for Bloomberg

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Speaker 1: News Snally, what have we seen this morning? We had

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Speaker 1: some of the big names kick us off. Yes, absolutely,

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Speaker 1: I mean it's it's a very clear continuation of what

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Speaker 1: we've seen all year, which is Main Street versus Wall

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Speaker 1: Street and Wall Street is winning. So all right, let's

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Speaker 1: talk to us about what we've seen so far that

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Speaker 1: the trading numbers Sanale have been so strong for so

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Speaker 1: many of these big banks. Is that trend continuing? It

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Speaker 1: sure is, And a lot of this is driven by

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Speaker 1: a lot of volatility and equity markets on robust I

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Speaker 1: p O s Goldman Sacks just said it had one

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Speaker 1: of the highest quarters from net revenue ever for equity underwriting,

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Speaker 1: driven by this ip O cycle. So that's still going on.

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Speaker 1: Let's see how long that can keep going on. Yeah,

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Speaker 1: I mean what are on was saying, nale are the

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Speaker 1: anticipation that this will continue? There certainly is an expectation,

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Speaker 1: except for it's supposed to be a little less than

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Speaker 1: what we've seen last year. Last year was a standout

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Speaker 1: year by any means, and it was also guided higher

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Speaker 1: by fixed income being so robust. We're seeing a lot

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Speaker 1: of the banks here miss expectations on fixed income trading.

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Speaker 1: Remember last year we've seen so much dead underwriting as

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Speaker 1: companies dashed for cash that that really helped fixed income

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Speaker 1: volumes higher. So without that leg can trading stay quite

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Speaker 1: as high? Not expected, but high enough to keep that

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Speaker 1: profit churning? Hey, Shanali, So when you take a look

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Speaker 1: at a Bank of America, I mean, obviously they have

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Speaker 1: the big investment bank from the acquisition of Merrill Lynch.

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Speaker 1: But I think the more of is a a corporate bank,

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Speaker 1: you know, relying more on net interest income, and I'm

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Speaker 1: at the rate structure right here, still gotta be tough

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Speaker 1: to make money in that business. It's the number one

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Speaker 1: question that they've been getting today, it's net interest income.

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Speaker 1: How much pressure is there. They are saying that it's

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Speaker 1: probably bottomed out in terms of how bad it could get.

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Speaker 1: But with that said, it's a lot of sluggish growth

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Speaker 1: there because you're also seeing loan growth very sluggish as well, Paul,

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Speaker 1: So how do the banks that are so focused on

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Speaker 1: the consumer continue to make money when they're not lending

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Speaker 1: at a fast rate and when they're not really benefiting

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Speaker 1: from what the interest rates look like here? Socially, what

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Speaker 1: should we anticipate from the asset managers next week, because

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Speaker 1: this gives us a little little glimpse into what we

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Speaker 1: see from the likes of black Hawk. Yes, absolutely, black

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Speaker 1: Rock really stand out numbers there in terms of assets

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Speaker 1: under management. Remember Goldman and JP Morgan also two of

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Speaker 1: the top money managers in the world. We don't think

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Speaker 1: about them that way because they're mostly banks. But again,

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Speaker 1: many children dollars all together there in assets. They're really

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Speaker 1: benefiting here from the higher market levels. That's that's number one,

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Speaker 1: But number two, they're also benefiting here from really an

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Speaker 1: expansion at least for Goldman's sake, and expansion in private

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Speaker 1: markets as they grow that merchant banking business as well. Socionale.

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Speaker 1: With the Democrats take control of the White House and

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Speaker 1: a very very slight control of Congress, there's definitely concerned

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Speaker 1: there that the financial services industry is going to come

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Speaker 1: under some heavier regulatory scrutiny. What if we heard from

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Speaker 1: some of these early conference calls from some of these

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Speaker 1: big financial institutions, are they concerned? So we have not,

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Speaker 1: actually you, it's the number one question on my mind.

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Speaker 1: For sure. We haven't heard a lot about it yet

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Speaker 1: on these calls. What's remarkable is that just last Thursday

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Speaker 1: you saw these elevated and unemployment claims almost a million,

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Speaker 1: more than eighteen million altogether now, but then the next

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Speaker 1: day JP Morgan comes out and says they have had

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Speaker 1: their most profitable three months span in history. So how

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Speaker 1: how can both things be true? What can we expect

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Speaker 1: from the Biden administration? Between Janet Yellen and Gary Ginstler

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Speaker 1: and others who may be more progressive in the o

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Speaker 1: c C and CFPBB, which are more consumer leaning organizations.

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Speaker 1: Is there going to be a concern that these banks

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Speaker 1: that that are making so much money are simply not

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Speaker 1: lending to the broader part of the American economy? Well,

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Speaker 1: how much can tell that Yellen do about this? She's

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Speaker 1: been questioned right now by you know, a multiplicity of senators,

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Speaker 1: and I imagine some of these questions are going to

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Speaker 1: come up. So we will hear from her, you know,

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Speaker 1: on what she thinks about these things. But will the

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Speaker 1: Treasury Secretary have you know, that much of an impact? Well, yes,

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Speaker 1: because for one thing, she will have a starring role

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Speaker 1: as the head of the Financial Stability Oversight Council. Will

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Speaker 1: there be stronger rules in terms of what these banks

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Speaker 1: are able to do moving forward? On top of that,

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Speaker 1: there are questions about whether these banks should beholden to

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Speaker 1: greater regulations when it comes to serving more lower income

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Speaker 1: to middle income communities, more women, and more people of color.

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Speaker 1: There is an expectation that there will this will be

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Speaker 1: a matter of law not too far from now. So

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Speaker 1: the question is how aggressive do they get in terms

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Speaker 1: of disclosures and potentially even quota as ahead. Hey Sonali,

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Speaker 1: thanks so much for joining us. I know you're busy

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Speaker 1: these days in business from the marriger of the week,

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Speaker 1: cause we get more from the big banks and financial

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Speaker 1: institutions on Wall Street Nale Basket, Wall Street Porter for

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Speaker 1: Bloomberg News. Got some mixed numbers. I guess out of

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Speaker 1: Goldman a Bank of America, but we'll see to get

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Speaker 1: some confirmation from some of the others, including Morgan Stanley,

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Speaker 1: JP Morgan and others coming up. So earning season in

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Speaker 1: full swing stocks versus bonds. Boy, you look at the

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Speaker 1: ten year treasury yield today trading at one point zero

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Speaker 1: nine percent. Not much of return for walking up your

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Speaker 1: money for ten years. That's not surprising that we see

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Speaker 1: so much attention on the equity markets. Let's chat with

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Speaker 1: Mike Dowdell, investment strategists and portfolio manager for BEMO Global

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Speaker 1: Asset Management. They have two seventy nine billion dollars in

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Speaker 1: assets on their management. Uh. Mike joins us on the

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Speaker 1: phone from Chicago. Mike, thanks so much for joining us here. Well,

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Speaker 1: you look at that tenure treasury at one point zero

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Speaker 1: nine percent, and you're like, I just don't see that

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Speaker 1: kind of return for that kind of period is very attractive.

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Speaker 1: I gotta be in equities. Is that kind of how

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Speaker 1: you're looking at things? Yeah, I know, I think that's

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Speaker 1: a pretty good summary of kind of where the markets

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Speaker 1: at right now. A lot of where we've seen in

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Speaker 1: terms of this this equity rally. Uh So, a lot

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Speaker 1: of it is is bond dependent. Uh there's a lot

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Speaker 1: of investors out there you need to go somewhere. Where

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Speaker 1: are you gonna get that growth? A lot of it's

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Speaker 1: not going to come from your bond portfolio. So a

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Speaker 1: lot of people have been up and been more or

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Speaker 1: less forced into equities. Yeah, I mean, what about forced

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Speaker 1: out of the US? Is that an alternative? Yeah? I

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Speaker 1: mean if you're if you're a pure value, valuation based investor,

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Speaker 1: outside the US looks particularly attractive. Um, but the US

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Speaker 1: still from it. It is a pretty good place to be.

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Speaker 1: It's a defensive market due to the composition. The US

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Speaker 1: consumer continues to be really the driver of growth, particularly

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Speaker 1: in the development markets. So we still like the US markets,

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Speaker 1: although we have become a lot more constructive on emerging

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Speaker 1: markets over the last few months. Alright, So an emerging markets, Mike,

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Speaker 1: how much risk do I take looking there? I mean,

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Speaker 1: is it simply make up trying to make some place

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Speaker 1: in China? Where do I go? Perhaps even farther out

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Speaker 1: than the risk curve? Yeah, we actually like a little

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Speaker 1: bit broader out than just that that that straight China play. Um,

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Speaker 1: you have a lot of tail wines behind you right

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Speaker 1: now on emerging markets. You have when we think will

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Speaker 1: be synchronized global recovery in particularly in the second half.

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Speaker 1: That should help some of the higher beta markets. Um.

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Speaker 1: And you also have that weaken mean dollar, which is

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Speaker 1: really helpful for it give us a lot more just

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Speaker 1: leeways for his person emerging market central banks to have

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Speaker 1: a bit more stimulative policies than otherwise. All right, So

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Speaker 1: when would be a good time using to try and

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Speaker 1: make a little bit of a move in the markets?

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Speaker 1: Is you know, is this a question of waiting until

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Speaker 1: the vaccinations are all over the country and then we'll

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Speaker 1: see rotations and things, or or do you just keep

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Speaker 1: adding now? Yeah, I mean that's that's that's really the

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Speaker 1: question we we think right now makes sense. So, I

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Speaker 1: mean as markets aren't are aren't coincidental, they're really look

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Speaker 1: forward looking. So Yeah, vaccine rollout has been flower than

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Speaker 1: many had hoped. Um. However, it's it is still rolling out,

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Speaker 1: particularly in the US. Here we're looking like we're gonna

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Speaker 1: get up to a million uh doses a day. That

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Speaker 1: should be quite positive. Um. So we think you need

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Speaker 1: to get ahead of that and just looking out over

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Speaker 1: we put out our our annual outlook. We called it

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Speaker 1: Arousing Recovery, and we think does that make sense that uh,

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Speaker 1: particularly you should see that shift from the manufacturing sector

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Speaker 1: into the services sector and really see the economy start

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Speaker 1: to take off in the second half of the year.

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Speaker 1: So getting in front of that is important. If you

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Speaker 1: wait until that actually shows up in the data, you're

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Speaker 1: probably going to be behind the eight ball. Alright, So Mike,

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Speaker 1: you know, it's this is a market that's been driven

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Speaker 1: by the FED, all the liquidity in the marketplace, uh,

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Speaker 1: fiscal stimulus. It seems like there's you know, multiple rounds

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Speaker 1: uh maybe even still to come. Here. At what point

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Speaker 1: as we enter this earning season right now, at what

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Speaker 1: point the earnings really come front and center. That's a

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Speaker 1: good question. Uh yeah, I mean earnings matter at the

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Speaker 1: micro level, there's no doubt about that. UM. At the

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Speaker 1: macro level. Yeah, the tail winds, particularly from policy aren't

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Speaker 1: going anywhere anytime soon. So for for Paris trades, earninges matter,

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Speaker 1: but for from a broader market perspective, we think that

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Speaker 1: that really the market is going to give a bit

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Speaker 1: of a mulligan on on the earnings more broadly until

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Speaker 1: for for a little bit here, we think that Fed

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Speaker 1: policy is going to remain a commody for the foreseeable

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Speaker 1: future fiscal policies coming through. Even more so, as long

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Speaker 1: as you have those killin, it's really hard to see

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Speaker 1: a large scale uh pullback in markets without some buyers

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Speaker 1: coming back in. What do you imagine John at Yellen's

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Speaker 1: priorities will be as Treasury Secretary and how will they

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Speaker 1: impact to the markets? Yeah, we think that Yelling and

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Speaker 1: just the broader binding administration are looking at really what

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Speaker 1: happened under the Obama years and that slow grinding recovery

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Speaker 1: and using that as a cautionary tale. They really want

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Speaker 1: to get back to tight labor markets and as soon

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Speaker 1: as possible. There are ten million fewer people on the

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Speaker 1: payroll today than there were this time last year, and

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Speaker 1: we think that they want to accelerate that recovery and

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Speaker 1: make sure that we can get to tighter labor markets

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Speaker 1: much much quicker than what occurred after the Great Recession.

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Speaker 1: So really that that labor market, clearly that yelling specialty,

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Speaker 1: but but but tidying up that labor market is probably

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Speaker 1: going to be first and foremost on our agenda. Hey, Mike,

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Speaker 1: we've seen this rotation trade play very well since let's

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Speaker 1: call it September. Are you a proponent of this rotation

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Speaker 1: trade out of maybe some of the core growth names

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Speaker 1: into some of more cyclical names that might benefit from

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Speaker 1: this economic recovery. Yeah, so I'd say we're we're cautiously

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Speaker 1: optimistic on that rocation rather than value growth. We actually

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Speaker 1: like a small rather than than large. It's just the

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Speaker 1: way to really play this this uh, this pick up

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Speaker 1: in activity, you should seem premyser already at high level.

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Speaker 1: You should see them actually continue to increases the recovery

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Speaker 1: takes hold. Just that that that recovery should help sick

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Speaker 1: with those number one but small caps in particular, which

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Speaker 1: are really dependent upon this domestic market, dependent upon the consumer,

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Speaker 1: and should really be a nice play into this this

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Speaker 1: strong bounce back and growth. Alright, Mike, thank you so

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Speaker 1: much for joining us today. A lot going on today

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Speaker 1: and we appreciate your time. That is my doubt all

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Speaker 1: investment strategist and portfolio manager at BEMO Global Asset Management.

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Speaker 1: Just to bring you some more commons now from Yellow

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Speaker 1: at Treasury Secretary. She's answering questions to the Senate Finance Committee.

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Speaker 1: She says, if we don't contain the pandemic, help American

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Speaker 1: suffering from it and invest in long term growth, will

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Speaker 1: be worse off with respect to growth and debt. So

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Speaker 1: she's definitely getting questioned on the long term effects of

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Speaker 1: this stimulus, whatever it be. Joe Biden, of course looking

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Speaker 1: for one point nine trillion dollars, but will he get

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Speaker 1: all of that? Hardly, it's hardly likely. Well, it has

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Speaker 1: been almost two weeks since the uprising, since the riot,

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Speaker 1: since the insurrection on Capitol Hill in Washington, d C.

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Speaker 1: And we're starting to just learn more and more about

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Speaker 1: what happened from a security perspective. Let's get the latest.

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Speaker 1: We can do that with Clint Watts, Distinguished Research Fellow

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Speaker 1: for the Foreign Policy Research Institute, also a Senior Fellow

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Speaker 1: at the Center for Cyber and Homeland Security at George

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Speaker 1: Washington University. Clint thanks so much for joining us again,

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Speaker 1: and we continue to see more and more the shocking

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Speaker 1: images and video from what happened on Capitol Hill. From

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Speaker 1: a security perspective, what broke down? What do we know?

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Speaker 1: How did you break down? I think really there's two parts. One,

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Speaker 1: the District of Columbia is ultimately commanded by the President

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Speaker 1: as much as the mayor, and so I think the

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Speaker 1: mayor has limited resources. The Capitol Police have to coordinate

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Speaker 1: with the DC Police. Generally when we're doing federal uh

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Speaker 1: sort of defensive mechanisms, there's a lot of coordination there.

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Speaker 1: I think it really comes down to the politicization of

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Speaker 1: law enforcement in the military and really hampering the response.

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Speaker 1: People not being sure are wanting to be out front.

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Speaker 1: A large part because the President was there for that

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Speaker 1: rally up to a certain point, he was giving speeches.

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Speaker 1: It was his supporters. I think they were afraid to

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Speaker 1: get involved. Asarily on the response. You know, once it

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Speaker 1: was breached, became very clear that National Guard needed to

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Speaker 1: be there, We needed a lot more people on the ground.

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Speaker 1: They were very slow to respond, and I think this

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Speaker 1: shows the damage done by the two months prior where

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Speaker 1: there was lots of debate and the military was signaling

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Speaker 1: very strongly that they did not want to be involved

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Speaker 1: in the election. It's turnover. I would tell you from

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Speaker 1: the supporters that were there that day, one of the

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Speaker 1: conspiracies that many of them believed was that the U. S.

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Speaker 1: Military would show up, declare martial law under the governance

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Speaker 1: of the president, President Trump, and then keep him in power.

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Speaker 1: That was one of the conspiracies they believe. So sure,

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Speaker 1: this all played into the thinking in terms of response,

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Speaker 1: and you saw it just a domino effective breakdown, ultimately

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Speaker 1: leading to why didn't the president tell the supporters, you know,

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Speaker 1: get out of the capital much much quicker, Clint. There's

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Speaker 1: obviously a lot getting done in Washington, d C. But

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Speaker 1: do other estates have the resources to have men and

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Speaker 1: women defending their estate houses? And how much do you

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Speaker 1: anticipate violence in other states? I think a week ago,

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Speaker 1: the worry was around the capital and you saw this

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Speaker 1: massive mobilization. You know, it's four to five times the

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Speaker 1: number of troops we have in Iraq and Afghanistan, you

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Speaker 1: know at this point, and that sent a downward signal.

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Speaker 1: You could see it in extremist forums. They were essentially

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Speaker 1: saying stand down and don't go to the nation's capital.

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Speaker 1: Then the fear was state capital. Even with the so

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Speaker 1: called mobilization in the protests that we expected to see

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Speaker 1: on January seventeenth and eighteen and different cities and states,

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Speaker 1: they were lightly attendant. Um, you know, five to ten people.

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Speaker 1: I think the message you've gotten out what you do

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Speaker 1: see in the background of some of these forums right

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Speaker 1: now is really a call to go outside of the capitals.

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Speaker 1: They know that law enforcement national guards there um, and

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Speaker 1: to make yourself known. But then way to essentially have

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Speaker 1: a propagation against you and use that as impetus. I

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Speaker 1: think that it will be light attendance in this What

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Speaker 1: I am worried about is the odd one or small

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Speaker 1: group of cells of two or three that see this

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Speaker 1: is their last chance to make a real show on Wednesday.

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Speaker 1: Those are the folks that are on dark uh. You know,

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Speaker 1: communication platforms can be easily observed. They may maybe you know,

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Speaker 1: better trained or better skilled, or they could just be

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Speaker 1: literally mentally disturbed people that want to sort of finish

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Speaker 1: this out. That's most of the worry I imagine for

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Speaker 1: law enforcement. Now. I I'm hoping that that the best

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Speaker 1: outcome comes, which is a peaceful day tomorrow. Clinton. One

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Speaker 1: of the real concerns coming out of the investigation on

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Speaker 1: what happened on the Capitol is to what extent, if any,

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Speaker 1: was their coordination, was their planning, whether it's inside Congress,

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Speaker 1: perhaps even members of Congress providing tours the day before,

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Speaker 1: or maybe external funding. Why don't we know about some

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Speaker 1: of the organization and planning and issues. Yeah. I think

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Speaker 1: what's interesting is this was well organized all the way

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Speaker 1: up to the day. I have researchers, we we watched this.

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Speaker 1: It became very clear about two weeks out this was

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Speaker 1: going to be a sizeable event by Sunday before. We

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Speaker 1: were all hands on deck watching this. It was not

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Speaker 1: surprising I think to anybody had been watching the scale

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Speaker 1: of this. Part of that is because of the online

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Speaker 1: communication coordination. They were crowdfunding, uh, you know, to support

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Speaker 1: their travel. They're coordinating their travel to d C. There

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Speaker 1: were discussions about how do you can you or can

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Speaker 1: you not get weapons, you know, into the district of Columbia.

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Speaker 1: So this is pretty significant. I think what will happen

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Speaker 1: over time is with each of these arrest and more

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Speaker 1: and more witnesses surfacing, the evidence will gather to where

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Speaker 1: you can put together a loose chain of command. In

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Speaker 1: terms of who was inciting the actual breaking in of

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Speaker 1: the capital, there were barely clearly people that are just

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Speaker 1: there because of the present. There were others that were

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Speaker 1: there and exciting kind of got caught up with moment.

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Speaker 1: But beyond that, there were groups of militant extremists essentially

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Speaker 1: that we're going there for the express purpose of breaking

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Speaker 1: into the capital. And they had the tools, they had

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Speaker 1: the equipment, they had the resources, they had the guidance

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Speaker 1: to get there. And I think that's where I will

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Speaker 1: be interested in the next two to three we see

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Speaker 1: how these FBI investigations on FOAM. So the way the

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Speaker 1: mall is set up right now, and you know that

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Speaker 1: that basically all around d C is that there are

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Speaker 1: flags in the places of four people might be standing

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Speaker 1: typically at a regular inauguration day, that coupled with some

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Speaker 1: wise words from Joe Biden, might be enough to sort

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Speaker 1: of talk to these people. Can do you think, I mean,

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Speaker 1: are there words that can reach across the aisle to

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Speaker 1: these people for those that are the furthest out on

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Speaker 1: the extreme that have been absorbing these conspiracy theories and

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Speaker 1: lies for the last three to four years. I don't

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Speaker 1: really think there's much coming back, and you can you

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Speaker 1: can see that in some interviews with President Trump's most

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Speaker 1: ardent supporters that they saw this as either okay or

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Speaker 1: justifiable based on what they've seen at other protests in

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Speaker 1: the past. They kind of rationalize it. I think it's

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Speaker 1: a dangerous phenomenon. Part of it. What complicates all of

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Speaker 1: this is the pandemic. We have a nation divided about it.

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Speaker 1: They're not divided about that, they're divided about the economy.

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Speaker 1: Patching all those things instantaneously just won't happen. The forces

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Speaker 1: that will matter will ultimately come down to how does

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Speaker 1: President Trump behave when he's out of office. I think

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Speaker 1: we kind of know how President Biden will govern. He

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Speaker 1: will look a lot like a trade additional sort of president.

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Speaker 1: Will that really calm down this sort of storm of

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Speaker 1: disinformation and conspiracies, these mobilization to violences. I'm not convinced

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Speaker 1: at the moment, based on both the fact that the

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Speaker 1: president kind of repeats the electoral fraud rhetoric despite all evidence,

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Speaker 1: and you also had more than a hundred GOP members

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Speaker 1: still vote after that mobilization inside the Cambal still vote

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Speaker 1: based on a conspiracy, so I'm not hopeful yet. Until

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Speaker 1: that changes that we'll see much of a change in

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Speaker 1: terms of the course of which the country is going.

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Speaker 1: All right, can't the story, then we'll continue. We will

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Speaker 1: welcome you back very soon. Clint Watt's Distinguished Research Fellow

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Speaker 1: at the Foreign Policy Research Institute, also former FBI agents

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Speaker 1: specializing in terrorism, and we are very grateful for his time.

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Speaker 1: Thanks for listening to the Boomberg Markets podcast. You can

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00:29:50,760 --> 00:29:54,440
Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever

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00:29:54,640 --> 00:29:57,960
Speaker 1: podcast platform you prefer. I'm Bonnie Quinn. I'm on Twitter

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Speaker 1: at Bonny Quinn and on Paul Swee. I'm on Twitter

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00:30:00,600 --> 00:30:03,400
Speaker 1: at pt Sweeney. Before the podcast, you can always catch

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Speaker 1: us worldwide at Bloomberg Radio m