Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
Speaker 1: with my co host of Bonnie Quinn. Every business day
Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
Speaker 1: along with essential market moving news. Find the Bloomberg Markets
Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,
Speaker 1: and on Bloomberg dot com. We're awaiting comments from US
Speaker 1: Treasury Secretary Nominee Janet Yellen from her confirmation here and
Speaker 1: in Washington. Uh d C will bring them to you
Speaker 1: as they occur. Right now, let's go to IRA Jersey
Speaker 1: get some preview, if you will, of what we might
Speaker 1: hear from Secretary Nominee Janet Yellen. Ira Jersey, chief US
Speaker 1: Interest rate Strategists for Bloomberg Intelligence, joins us. Ira, thanks
Speaker 1: so much for coming on with us here today. What
Speaker 1: do you expect to hear from Mrs Yellen today? Well, first,
Speaker 1: I think we're gonna hear a big sales pitch for
Speaker 1: President elect Biden's one point nine trillion dollar stimulus plan. Um.
Speaker 1: I think that will be important. She'll probably be asked
Speaker 1: about how that will be funded and how that might
Speaker 1: have interest rates, and and she'll say well, interest rates
Speaker 1: rhetorically very low, so this is the time you want
Speaker 1: to be taking on more debt, not when interest rates
Speaker 1: or significantly higher. So I think those are the kind
Speaker 1: of the first the first couple of things. And then
Speaker 1: and then I suspect that at some levels she'll also
Speaker 1: be aft about um working with the Federal Reserve, which
Speaker 1: is not something that Secretary Manuchin necessarily always had a
Speaker 1: rosy um, a rosy time with. So so I think
Speaker 1: Janet Yellen will will be after you know, a number
Speaker 1: of things, both from the monetary and the fiscal side
Speaker 1: of things today. How will her rhetoric change from the
Speaker 1: time when she was when she was Federal Reserved here,
Speaker 1: I mean, obviously there were certain restrictions then that there
Speaker 1: aren't on her now. Should we anticipate a different kind
Speaker 1: of Johnny Yellen? I think a little bit. But you know,
Speaker 1: even Jennet Yellen, she was out front talking about things
Speaker 1: that quite frankly or not exactly in the Federal Reserve's purview.
Speaker 1: So things like income inequality was something that talked about
Speaker 1: both in public remarks as well as before members of
Speaker 1: Congress in the past. So so now she can speak
Speaker 1: much more directly about that. And I think that especially
Speaker 1: with Democrats, you know, Senator Grassley and others being um uh,
Speaker 1: the Democrats being in the majority, now that she'll be
Speaker 1: asked about income inequality a number of times and what
Speaker 1: can be done to fix that? And I think that
Speaker 1: she'll um, you know, she she'll she has very strong
Speaker 1: opinions about about income inequality and both the problems um
Speaker 1: uh that that it creates in the broader economy, but
Speaker 1: also um, you know how you can fix it, and
Speaker 1: you know it's it's not an easy and easy ask,
Speaker 1: and and you know, they're some of the people. I
Speaker 1: think once she answers that some Republicans may actually go
Speaker 1: on the I don't want to say attacker, but certainly
Speaker 1: take the other side and say, well, there has to
Speaker 1: be winners and losers then, and you know, how do
Speaker 1: you incentivize investment and at the same time ensure that
Speaker 1: that that incomes um can be more are normalized between
Speaker 1: between the halves and the half not al Right, what
Speaker 1: do we know about Janet Yellen's um thoughts and policies
Speaker 1: and strategies about the ongoing fiscal deficit the you know,
Speaker 1: the annual deficits we run every year in this country
Speaker 1: and the and the long term debt this country's racking up.
Speaker 1: How does she feel about that? That's a good question.
Speaker 1: We haven't heard a lot from her on that exact subject,
Speaker 1: except saying that, um, you know, it can't it can't
Speaker 1: go on forever. So she's not a modern monetary theorist
Speaker 1: at heart anyway. Um. But but I think that she'll
Speaker 1: probably come out and say, well, this is the time
Speaker 1: when you need to spend. She'll take a very neo
Speaker 1: Kanesian view, I would think, which is, you know, you
Speaker 1: have to spend when the economy is weak, when interest
Speaker 1: rates are low, and then reduce the amount of deficit
Speaker 1: spending as the economy recovers and you're in the good times. Um.
Speaker 1: The you know, clearly over the left of the last
Speaker 1: half century we haven't had a great, um, a great
Speaker 1: track record of that. But what has happened during good
Speaker 1: times is that you've had a nominal GDP growth growing
Speaker 1: much faster than the fiscal deficits. So you've had debt
Speaker 1: to GDP go down. But now with the massive amounts
Speaker 1: of deficit spending over the left decade, we've we've now
Speaker 1: approached a debt to GDP and in fact, this year
Speaker 1: we will um we we will go over that, and
Speaker 1: particularly if there is another one point nine trillion dollar
Speaker 1: stimulus so um, so she'll have to address that, and
Speaker 1: it'll be interesting to see, you know, how worried she
Speaker 1: is about that and how much she um you know, says, hey,
Speaker 1: we do something now, but in the future the rest
Speaker 1: of my term as as grogury Secretary, maybe we won't
Speaker 1: be have deficits that are as high as they'll they'll
Speaker 1: likely be over the next twelve months. Jerry tomp Grassley
Speaker 1: is making his opening statement right now. That will go
Speaker 1: on for a few minutes. Eira. You know, she will
Speaker 1: obviously talk about the ways to stimulate the economy. Will
Speaker 1: she be in favor of direct checks? Will she talk
Speaker 1: a helicopter money? Well, helicopter money is different than directs,
Speaker 1: right because so helicopter money is is talking about monetary
Speaker 1: policy and and basically the Federal Reserve printing money, which
Speaker 1: is a much longer discussion and is not something that
Speaker 1: necessarily works the way that that some monetary theorists think
Speaker 1: it does, at least in my opinion. Um. But but
Speaker 1: I think that that she will um talk about some
Speaker 1: direct checks. I think, UM, the the she will acknowledge
Speaker 1: though that direct checks only help in the very short term,
Speaker 1: and that um, there's other policies that um that that
Speaker 1: may be more important for the long term sustainability of
Speaker 1: the country. So um, so things like you know, mortgage
Speaker 1: moratoriums or ensuring that people keep jobs. So like something
Speaker 1: like the PPP might be better than direct stimulus checks
Speaker 1: to to the household sector, because one of the things
Speaker 1: that we have to remember is that direct checks to
Speaker 1: the household sector, they are a one time boost and
Speaker 1: if um, if all of that money is spent or
Speaker 1: or even if some is saved, it's still only it
Speaker 1: doesn't help in the longer term. So something like keeping
Speaker 1: people in their jobs or or you know, helping people
Speaker 1: stay stay at work, or helping with longer term unemployment. UM,
Speaker 1: those are things that that will probably have a greater
Speaker 1: impact on on the long term health of the economy
Speaker 1: than you know, someone getting an extra an extra five
Speaker 1: or six hundred dollars um in you know, at one time.
Speaker 1: So I you know, in addition to this one point
Speaker 1: nine trade and fiscal stimulus that is on the table
Speaker 1: right now, there's talk of already another package behind it,
Speaker 1: perhaps even the larger that may be more infrastructure oriented,
Speaker 1: more longer term, maybe even a green component. Do we
Speaker 1: know what Janet Yellen feels about some of those strategies
Speaker 1: in those policies, Well, I don't think that she. I
Speaker 1: think that ultimately she'll be on board with with the
Speaker 1: president's general plan. So if if the President does come
Speaker 1: out with some kind of you know, green uh, you know,
Speaker 1: green New Deal or um uh and infrastructure spending, that
Speaker 1: what might go under over multiple years. So so when
Speaker 1: you think about the next plan behind this, I think
Speaker 1: it's more of a yeah, it might be three trillion dollars,
Speaker 1: but it's probably three trillion dollars over five years or
Speaker 1: six years. It's not you know, two trillion dollars right now,
Speaker 1: which is what we're talking about with the with the
Speaker 1: second fiscal stimulus UM. So, so we don't know, but
Speaker 1: I think that you'll have to be on board with that.
Speaker 1: I mean, she wouldn't be nominated for Treasury Secretary without
Speaker 1: needing to be the spokesperson for the broad array of
Speaker 1: different things at President let Biden wants to do, I
Speaker 1: wrote Terry Haynes Apenergy Policy makes a good point. He
Speaker 1: says that you know, markets will receive this as positive news,
Speaker 1: this yelling you know, most likely risk asset markets might
Speaker 1: take it kindly. I'm not sure that. I'm not sure
Speaker 1: that the race market would take you know, two trillion
Speaker 1: dollars stimulus plan as as particularly kind Well, yeah, that's
Speaker 1: an excellent point. That's an extent point. We let's expend
Speaker 1: on that in a second. But just to finish that
Speaker 1: first thought, he was saying that she provides cover for regulators,
Speaker 1: for progressive regulators like for example, Arrogancer and Antiopra at
Speaker 1: the CFPB because she has been talking a lot about
Speaker 1: consumer affairs. Yeah. So, so consumer affairs is interesting because
Speaker 1: one of the one of the issues with income inequality
Speaker 1: is is who's able to get loans? Right, So, so
Speaker 1: the good things and the bad things about the CFPB
Speaker 1: and some of the work that the Consumer Financial Protection
Speaker 1: Bureaus you know, done over over the course of the
Speaker 1: last decade is you know, they want to make sure
Speaker 1: that people are getting loans that firstly are sustainable, but
Speaker 1: and and that they're not being taken to people aren't
Speaker 1: being taken advantage of, you know, like what happened at
Speaker 1: some points during the mortgage crisis. But at the same time,
Speaker 1: that also means that there's a lot of people at
Speaker 1: the margins who might not be able to get loans
Speaker 1: because they're not seen as worthy borrowers. So that means
Speaker 1: that you know, in places like under UM, you know,
Speaker 1: some underserved communities might not be able to get loans
Speaker 1: to start businesses or or to buy a house like
Speaker 1: So there's knock on effects with that. So I think
Speaker 1: that there probably needs to be some changes, and I
Speaker 1: think UM, someone like Janet Yelling can kind of find
Speaker 1: the balance between safety and soundness and UH and the
Speaker 1: ability to allow some type of risk taking h to
Speaker 1: be done and for loans to go out. You know,
Speaker 1: maybe it's on the auspices of the SBA, for example,
Speaker 1: where the Small Business Administration might ease loans in certain
Speaker 1: areas where where businesses might be able to UM might
Speaker 1: be able to take on a little bit more debt.
Speaker 1: But but all of this cost money, right, So at
Speaker 1: the end of the day, there, you know, if you
Speaker 1: do have UH riskier loans being made by the SBA,
Speaker 1: the chances for credit losses by the SBA goes up,
Speaker 1: and and that means that that has to be funded
Speaker 1: at some level, and that has to be funded via
Speaker 1: issuing treasury and security. So that's one of the reasons
Speaker 1: why I bring up. You know that that all of
Speaker 1: the spending means that you have to issue a lot
Speaker 1: more bonds, and by issuing a lot more bonds, someone
Speaker 1: has to buy them, and eventually you're going to see
Speaker 1: much high or yields because of that supply. I Jersey,
Speaker 1: thank you so much for joing us. We appreciate your
Speaker 1: extended time. Our Jersey chief US interest rate strategist for
Speaker 1: Bloomberg Intelligence. Earnings season is beginning and we always begin
Speaker 1: with the big banks in this season is no different. Uh,
Speaker 1: some mixed numbers I guess coming out of some of
Speaker 1: the big banks here. But let's break it down. We'll
Speaker 1: do that with Shanali Bassic, Wall Street porter for Bloomberg
Speaker 1: News Snally, what have we seen this morning? We had
Speaker 1: some of the big names kick us off. Yes, absolutely,
Speaker 1: I mean it's it's a very clear continuation of what
Speaker 1: we've seen all year, which is Main Street versus Wall
Speaker 1: Street and Wall Street is winning. So all right, let's
Speaker 1: talk to us about what we've seen so far that
Speaker 1: the trading numbers Sanale have been so strong for so
Speaker 1: many of these big banks. Is that trend continuing? It
Speaker 1: sure is, And a lot of this is driven by
Speaker 1: a lot of volatility and equity markets on robust I
Speaker 1: p O s Goldman Sacks just said it had one
Speaker 1: of the highest quarters from net revenue ever for equity underwriting,
Speaker 1: driven by this ip O cycle. So that's still going on.
Speaker 1: Let's see how long that can keep going on. Yeah,
Speaker 1: I mean what are on was saying, nale are the
Speaker 1: anticipation that this will continue? There certainly is an expectation,
Speaker 1: except for it's supposed to be a little less than
Speaker 1: what we've seen last year. Last year was a standout
Speaker 1: year by any means, and it was also guided higher
Speaker 1: by fixed income being so robust. We're seeing a lot
Speaker 1: of the banks here miss expectations on fixed income trading.
Speaker 1: Remember last year we've seen so much dead underwriting as
Speaker 1: companies dashed for cash that that really helped fixed income
Speaker 1: volumes higher. So without that leg can trading stay quite
Speaker 1: as high? Not expected, but high enough to keep that
Speaker 1: profit churning? Hey, Shanali, So when you take a look
Speaker 1: at a Bank of America, I mean, obviously they have
Speaker 1: the big investment bank from the acquisition of Merrill Lynch.
Speaker 1: But I think the more of is a a corporate bank,
Speaker 1: you know, relying more on net interest income, and I'm
Speaker 1: at the rate structure right here, still gotta be tough
Speaker 1: to make money in that business. It's the number one
Speaker 1: question that they've been getting today, it's net interest income.
Speaker 1: How much pressure is there. They are saying that it's
Speaker 1: probably bottomed out in terms of how bad it could get.
Speaker 1: But with that said, it's a lot of sluggish growth
Speaker 1: there because you're also seeing loan growth very sluggish as well, Paul,
Speaker 1: So how do the banks that are so focused on
Speaker 1: the consumer continue to make money when they're not lending
Speaker 1: at a fast rate and when they're not really benefiting
Speaker 1: from what the interest rates look like here? Socially, what
Speaker 1: should we anticipate from the asset managers next week, because
Speaker 1: this gives us a little little glimpse into what we
Speaker 1: see from the likes of black Hawk. Yes, absolutely, black
Speaker 1: Rock really stand out numbers there in terms of assets
Speaker 1: under management. Remember Goldman and JP Morgan also two of
Speaker 1: the top money managers in the world. We don't think
Speaker 1: about them that way because they're mostly banks. But again,
Speaker 1: many children dollars all together there in assets. They're really
Speaker 1: benefiting here from the higher market levels. That's that's number one,
Speaker 1: But number two, they're also benefiting here from really an
Speaker 1: expansion at least for Goldman's sake, and expansion in private
Speaker 1: markets as they grow that merchant banking business as well. Socionale.
Speaker 1: With the Democrats take control of the White House and
Speaker 1: a very very slight control of Congress, there's definitely concerned
Speaker 1: there that the financial services industry is going to come
Speaker 1: under some heavier regulatory scrutiny. What if we heard from
Speaker 1: some of these early conference calls from some of these
Speaker 1: big financial institutions, are they concerned? So we have not,
Speaker 1: actually you, it's the number one question on my mind.
Speaker 1: For sure. We haven't heard a lot about it yet
Speaker 1: on these calls. What's remarkable is that just last Thursday
Speaker 1: you saw these elevated and unemployment claims almost a million,
Speaker 1: more than eighteen million altogether now, but then the next
Speaker 1: day JP Morgan comes out and says they have had
Speaker 1: their most profitable three months span in history. So how
Speaker 1: how can both things be true? What can we expect
Speaker 1: from the Biden administration? Between Janet Yellen and Gary Ginstler
Speaker 1: and others who may be more progressive in the o
Speaker 1: c C and CFPBB, which are more consumer leaning organizations.
Speaker 1: Is there going to be a concern that these banks
Speaker 1: that that are making so much money are simply not
Speaker 1: lending to the broader part of the American economy? Well,
Speaker 1: how much can tell that Yellen do about this? She's
Speaker 1: been questioned right now by you know, a multiplicity of senators,
Speaker 1: and I imagine some of these questions are going to
Speaker 1: come up. So we will hear from her, you know,
Speaker 1: on what she thinks about these things. But will the
Speaker 1: Treasury Secretary have you know, that much of an impact? Well, yes,
Speaker 1: because for one thing, she will have a starring role
Speaker 1: as the head of the Financial Stability Oversight Council. Will
Speaker 1: there be stronger rules in terms of what these banks
Speaker 1: are able to do moving forward? On top of that,
Speaker 1: there are questions about whether these banks should beholden to
Speaker 1: greater regulations when it comes to serving more lower income
Speaker 1: to middle income communities, more women, and more people of color.
Speaker 1: There is an expectation that there will this will be
Speaker 1: a matter of law not too far from now. So
Speaker 1: the question is how aggressive do they get in terms
Speaker 1: of disclosures and potentially even quota as ahead. Hey Sonali,
Speaker 1: thanks so much for joining us. I know you're busy
Speaker 1: these days in business from the marriger of the week,
Speaker 1: cause we get more from the big banks and financial
Speaker 1: institutions on Wall Street Nale Basket, Wall Street Porter for
Speaker 1: Bloomberg News. Got some mixed numbers. I guess out of
Speaker 1: Goldman a Bank of America, but we'll see to get
Speaker 1: some confirmation from some of the others, including Morgan Stanley,
Speaker 1: JP Morgan and others coming up. So earning season in
Speaker 1: full swing stocks versus bonds. Boy, you look at the
Speaker 1: ten year treasury yield today trading at one point zero
Speaker 1: nine percent. Not much of return for walking up your
Speaker 1: money for ten years. That's not surprising that we see
Speaker 1: so much attention on the equity markets. Let's chat with
Speaker 1: Mike Dowdell, investment strategists and portfolio manager for BEMO Global
Speaker 1: Asset Management. They have two seventy nine billion dollars in
Speaker 1: assets on their management. Uh. Mike joins us on the
Speaker 1: phone from Chicago. Mike, thanks so much for joining us here. Well,
Speaker 1: you look at that tenure treasury at one point zero
Speaker 1: nine percent, and you're like, I just don't see that
Speaker 1: kind of return for that kind of period is very attractive.
Speaker 1: I gotta be in equities. Is that kind of how
Speaker 1: you're looking at things? Yeah, I know, I think that's
Speaker 1: a pretty good summary of kind of where the markets
Speaker 1: at right now. A lot of where we've seen in
Speaker 1: terms of this this equity rally. Uh So, a lot
Speaker 1: of it is is bond dependent. Uh there's a lot
Speaker 1: of investors out there you need to go somewhere. Where
Speaker 1: are you gonna get that growth? A lot of it's
Speaker 1: not going to come from your bond portfolio. So a
Speaker 1: lot of people have been up and been more or
Speaker 1: less forced into equities. Yeah, I mean, what about forced
Speaker 1: out of the US? Is that an alternative? Yeah? I
Speaker 1: mean if you're if you're a pure value, valuation based investor,
Speaker 1: outside the US looks particularly attractive. Um, but the US
Speaker 1: still from it. It is a pretty good place to be.
Speaker 1: It's a defensive market due to the composition. The US
Speaker 1: consumer continues to be really the driver of growth, particularly
Speaker 1: in the development markets. So we still like the US markets,
Speaker 1: although we have become a lot more constructive on emerging
Speaker 1: markets over the last few months. Alright, So an emerging markets, Mike,
Speaker 1: how much risk do I take looking there? I mean,
Speaker 1: is it simply make up trying to make some place
Speaker 1: in China? Where do I go? Perhaps even farther out
Speaker 1: than the risk curve? Yeah, we actually like a little
Speaker 1: bit broader out than just that that that straight China play. Um,
Speaker 1: you have a lot of tail wines behind you right
Speaker 1: now on emerging markets. You have when we think will
Speaker 1: be synchronized global recovery in particularly in the second half.
Speaker 1: That should help some of the higher beta markets. Um.
Speaker 1: And you also have that weaken mean dollar, which is
Speaker 1: really helpful for it give us a lot more just
Speaker 1: leeways for his person emerging market central banks to have
Speaker 1: a bit more stimulative policies than otherwise. All right, So
Speaker 1: when would be a good time using to try and
Speaker 1: make a little bit of a move in the markets?
Speaker 1: Is you know, is this a question of waiting until
Speaker 1: the vaccinations are all over the country and then we'll
Speaker 1: see rotations and things, or or do you just keep
Speaker 1: adding now? Yeah, I mean that's that's that's really the
Speaker 1: question we we think right now makes sense. So, I
Speaker 1: mean as markets aren't are aren't coincidental, they're really look
Speaker 1: forward looking. So Yeah, vaccine rollout has been flower than
Speaker 1: many had hoped. Um. However, it's it is still rolling out,
Speaker 1: particularly in the US. Here we're looking like we're gonna
Speaker 1: get up to a million uh doses a day. That
Speaker 1: should be quite positive. Um. So we think you need
Speaker 1: to get ahead of that and just looking out over
Speaker 1: we put out our our annual outlook. We called it
Speaker 1: Arousing Recovery, and we think does that make sense that uh,
Speaker 1: particularly you should see that shift from the manufacturing sector
Speaker 1: into the services sector and really see the economy start
Speaker 1: to take off in the second half of the year.
Speaker 1: So getting in front of that is important. If you
Speaker 1: wait until that actually shows up in the data, you're
Speaker 1: probably going to be behind the eight ball. Alright, So Mike,
Speaker 1: you know, it's this is a market that's been driven
Speaker 1: by the FED, all the liquidity in the marketplace, uh,
Speaker 1: fiscal stimulus. It seems like there's you know, multiple rounds
Speaker 1: uh maybe even still to come. Here. At what point
Speaker 1: as we enter this earning season right now, at what
Speaker 1: point the earnings really come front and center. That's a
Speaker 1: good question. Uh yeah, I mean earnings matter at the
Speaker 1: micro level, there's no doubt about that. UM. At the
Speaker 1: macro level. Yeah, the tail winds, particularly from policy aren't
Speaker 1: going anywhere anytime soon. So for for Paris trades, earninges matter,
Speaker 1: but for from a broader market perspective, we think that
Speaker 1: that really the market is going to give a bit
Speaker 1: of a mulligan on on the earnings more broadly until
Speaker 1: for for a little bit here, we think that Fed
Speaker 1: policy is going to remain a commody for the foreseeable
Speaker 1: future fiscal policies coming through. Even more so, as long
Speaker 1: as you have those killin, it's really hard to see
Speaker 1: a large scale uh pullback in markets without some buyers
Speaker 1: coming back in. What do you imagine John at Yellen's
Speaker 1: priorities will be as Treasury Secretary and how will they
Speaker 1: impact to the markets? Yeah, we think that Yelling and
Speaker 1: just the broader binding administration are looking at really what
Speaker 1: happened under the Obama years and that slow grinding recovery
Speaker 1: and using that as a cautionary tale. They really want
Speaker 1: to get back to tight labor markets and as soon
Speaker 1: as possible. There are ten million fewer people on the
Speaker 1: payroll today than there were this time last year, and
Speaker 1: we think that they want to accelerate that recovery and
Speaker 1: make sure that we can get to tighter labor markets
Speaker 1: much much quicker than what occurred after the Great Recession.
Speaker 1: So really that that labor market, clearly that yelling specialty,
Speaker 1: but but but tidying up that labor market is probably
Speaker 1: going to be first and foremost on our agenda. Hey, Mike,
Speaker 1: we've seen this rotation trade play very well since let's
Speaker 1: call it September. Are you a proponent of this rotation
Speaker 1: trade out of maybe some of the core growth names
Speaker 1: into some of more cyclical names that might benefit from
Speaker 1: this economic recovery. Yeah, so I'd say we're we're cautiously
Speaker 1: optimistic on that rocation rather than value growth. We actually
Speaker 1: like a small rather than than large. It's just the
Speaker 1: way to really play this this uh, this pick up
Speaker 1: in activity, you should seem premyser already at high level.
Speaker 1: You should see them actually continue to increases the recovery
Speaker 1: takes hold. Just that that that recovery should help sick
Speaker 1: with those number one but small caps in particular, which
Speaker 1: are really dependent upon this domestic market, dependent upon the consumer,
Speaker 1: and should really be a nice play into this this
Speaker 1: strong bounce back and growth. Alright, Mike, thank you so
Speaker 1: much for joining us today. A lot going on today
Speaker 1: and we appreciate your time. That is my doubt all
Speaker 1: investment strategist and portfolio manager at BEMO Global Asset Management.
Speaker 1: Just to bring you some more commons now from Yellow
Speaker 1: at Treasury Secretary. She's answering questions to the Senate Finance Committee.
Speaker 1: She says, if we don't contain the pandemic, help American
Speaker 1: suffering from it and invest in long term growth, will
Speaker 1: be worse off with respect to growth and debt. So
Speaker 1: she's definitely getting questioned on the long term effects of
Speaker 1: this stimulus, whatever it be. Joe Biden, of course looking
Speaker 1: for one point nine trillion dollars, but will he get
Speaker 1: all of that? Hardly, it's hardly likely. Well, it has
Speaker 1: been almost two weeks since the uprising, since the riot,
Speaker 1: since the insurrection on Capitol Hill in Washington, d C.
Speaker 1: And we're starting to just learn more and more about
Speaker 1: what happened from a security perspective. Let's get the latest.
Speaker 1: We can do that with Clint Watts, Distinguished Research Fellow
Speaker 1: for the Foreign Policy Research Institute, also a Senior Fellow
Speaker 1: at the Center for Cyber and Homeland Security at George
Speaker 1: Washington University. Clint thanks so much for joining us again,
Speaker 1: and we continue to see more and more the shocking
Speaker 1: images and video from what happened on Capitol Hill. From
Speaker 1: a security perspective, what broke down? What do we know?
Speaker 1: How did you break down? I think really there's two parts. One,
Speaker 1: the District of Columbia is ultimately commanded by the President
Speaker 1: as much as the mayor, and so I think the
Speaker 1: mayor has limited resources. The Capitol Police have to coordinate
Speaker 1: with the DC Police. Generally when we're doing federal uh
Speaker 1: sort of defensive mechanisms, there's a lot of coordination there.
Speaker 1: I think it really comes down to the politicization of
Speaker 1: law enforcement in the military and really hampering the response.
Speaker 1: People not being sure are wanting to be out front.
Speaker 1: A large part because the President was there for that
Speaker 1: rally up to a certain point, he was giving speeches.
Speaker 1: It was his supporters. I think they were afraid to
Speaker 1: get involved. Asarily on the response. You know, once it
Speaker 1: was breached, became very clear that National Guard needed to
Speaker 1: be there, We needed a lot more people on the ground.
Speaker 1: They were very slow to respond, and I think this
Speaker 1: shows the damage done by the two months prior where
Speaker 1: there was lots of debate and the military was signaling
Speaker 1: very strongly that they did not want to be involved
Speaker 1: in the election. It's turnover. I would tell you from
Speaker 1: the supporters that were there that day, one of the
Speaker 1: conspiracies that many of them believed was that the U. S.
Speaker 1: Military would show up, declare martial law under the governance
Speaker 1: of the president, President Trump, and then keep him in power.
Speaker 1: That was one of the conspiracies they believe. So sure,
Speaker 1: this all played into the thinking in terms of response,
Speaker 1: and you saw it just a domino effective breakdown, ultimately
Speaker 1: leading to why didn't the president tell the supporters, you know,
Speaker 1: get out of the capital much much quicker, Clint. There's
Speaker 1: obviously a lot getting done in Washington, d C. But
Speaker 1: do other estates have the resources to have men and
Speaker 1: women defending their estate houses? And how much do you
Speaker 1: anticipate violence in other states? I think a week ago,
Speaker 1: the worry was around the capital and you saw this
Speaker 1: massive mobilization. You know, it's four to five times the
Speaker 1: number of troops we have in Iraq and Afghanistan, you
Speaker 1: know at this point, and that sent a downward signal.
Speaker 1: You could see it in extremist forums. They were essentially
Speaker 1: saying stand down and don't go to the nation's capital.
Speaker 1: Then the fear was state capital. Even with the so
Speaker 1: called mobilization in the protests that we expected to see
Speaker 1: on January seventeenth and eighteen and different cities and states,
Speaker 1: they were lightly attendant. Um, you know, five to ten people.
Speaker 1: I think the message you've gotten out what you do
Speaker 1: see in the background of some of these forums right
Speaker 1: now is really a call to go outside of the capitals.
Speaker 1: They know that law enforcement national guards there um, and
Speaker 1: to make yourself known. But then way to essentially have
Speaker 1: a propagation against you and use that as impetus. I
Speaker 1: think that it will be light attendance in this What
Speaker 1: I am worried about is the odd one or small
Speaker 1: group of cells of two or three that see this
Speaker 1: is their last chance to make a real show on Wednesday.
Speaker 1: Those are the folks that are on dark uh. You know,
Speaker 1: communication platforms can be easily observed. They may maybe you know,
Speaker 1: better trained or better skilled, or they could just be
Speaker 1: literally mentally disturbed people that want to sort of finish
Speaker 1: this out. That's most of the worry I imagine for
Speaker 1: law enforcement. Now. I I'm hoping that that the best
Speaker 1: outcome comes, which is a peaceful day tomorrow. Clinton. One
Speaker 1: of the real concerns coming out of the investigation on
Speaker 1: what happened on the Capitol is to what extent, if any,
Speaker 1: was their coordination, was their planning, whether it's inside Congress,
Speaker 1: perhaps even members of Congress providing tours the day before,
Speaker 1: or maybe external funding. Why don't we know about some
Speaker 1: of the organization and planning and issues. Yeah. I think
Speaker 1: what's interesting is this was well organized all the way
Speaker 1: up to the day. I have researchers, we we watched this.
Speaker 1: It became very clear about two weeks out this was
Speaker 1: going to be a sizeable event by Sunday before. We
Speaker 1: were all hands on deck watching this. It was not
Speaker 1: surprising I think to anybody had been watching the scale
Speaker 1: of this. Part of that is because of the online
Speaker 1: communication coordination. They were crowdfunding, uh, you know, to support
Speaker 1: their travel. They're coordinating their travel to d C. There
Speaker 1: were discussions about how do you can you or can
Speaker 1: you not get weapons, you know, into the district of Columbia.
Speaker 1: So this is pretty significant. I think what will happen
Speaker 1: over time is with each of these arrest and more
Speaker 1: and more witnesses surfacing, the evidence will gather to where
Speaker 1: you can put together a loose chain of command. In
Speaker 1: terms of who was inciting the actual breaking in of
Speaker 1: the capital, there were barely clearly people that are just
Speaker 1: there because of the present. There were others that were
Speaker 1: there and exciting kind of got caught up with moment.
Speaker 1: But beyond that, there were groups of militant extremists essentially
Speaker 1: that we're going there for the express purpose of breaking
Speaker 1: into the capital. And they had the tools, they had
Speaker 1: the equipment, they had the resources, they had the guidance
Speaker 1: to get there. And I think that's where I will
Speaker 1: be interested in the next two to three we see
Speaker 1: how these FBI investigations on FOAM. So the way the
Speaker 1: mall is set up right now, and you know that
Speaker 1: that basically all around d C is that there are
Speaker 1: flags in the places of four people might be standing
Speaker 1: typically at a regular inauguration day, that coupled with some
Speaker 1: wise words from Joe Biden, might be enough to sort
Speaker 1: of talk to these people. Can do you think, I mean,
Speaker 1: are there words that can reach across the aisle to
Speaker 1: these people for those that are the furthest out on
Speaker 1: the extreme that have been absorbing these conspiracy theories and
Speaker 1: lies for the last three to four years. I don't
Speaker 1: really think there's much coming back, and you can you
Speaker 1: can see that in some interviews with President Trump's most
Speaker 1: ardent supporters that they saw this as either okay or
Speaker 1: justifiable based on what they've seen at other protests in
Speaker 1: the past. They kind of rationalize it. I think it's
Speaker 1: a dangerous phenomenon. Part of it. What complicates all of
Speaker 1: this is the pandemic. We have a nation divided about it.
Speaker 1: They're not divided about that, they're divided about the economy.
Speaker 1: Patching all those things instantaneously just won't happen. The forces
Speaker 1: that will matter will ultimately come down to how does
Speaker 1: President Trump behave when he's out of office. I think
Speaker 1: we kind of know how President Biden will govern. He
Speaker 1: will look a lot like a trade additional sort of president.
Speaker 1: Will that really calm down this sort of storm of
Speaker 1: disinformation and conspiracies, these mobilization to violences. I'm not convinced
Speaker 1: at the moment, based on both the fact that the
Speaker 1: president kind of repeats the electoral fraud rhetoric despite all evidence,
Speaker 1: and you also had more than a hundred GOP members
Speaker 1: still vote after that mobilization inside the Cambal still vote
Speaker 1: based on a conspiracy, so I'm not hopeful yet. Until
Speaker 1: that changes that we'll see much of a change in
Speaker 1: terms of the course of which the country is going.
Speaker 1: All right, can't the story, then we'll continue. We will
Speaker 1: welcome you back very soon. Clint Watt's Distinguished Research Fellow
Speaker 1: at the Foreign Policy Research Institute, also former FBI agents
Speaker 1: specializing in terrorism, and we are very grateful for his time.
Speaker 1: Thanks for listening to the Boomberg Markets podcast. You can
Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever
Speaker 1: podcast platform you prefer. I'm Bonnie Quinn. I'm on Twitter
Speaker 1: at Bonny Quinn and on Paul Swee. I'm on Twitter
Speaker 1: at pt Sweeney. Before the podcast, you can always catch
Speaker 1: us worldwide at Bloomberg Radio m