Speaker 1: We bring you news and analysis every day on the
Speaker 1: Bloomberg Surveillance Podcast, but now you can get the latest
Speaker 1: news on demand whenever you want. Subscribe to Bloomberg News
Speaker 1: Now to get the latest headlines at the click of
Speaker 1: a button. Get informed on your schedule. You can listen
Speaker 1: and subscribe to Bloomberg News Now on the Bloomberg Business App,
Speaker 1: Bloomberg dot Com plus Apple, Spotify, and anywhere else you
Speaker 1: get your podcasts. Search Bloomberg News Now and subscribe today.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Lisa A.
Speaker 3: Bramwoids, along with Tom Keane and Jonathan Ferrow. Join us
Speaker 3: each day for insight from the best in economics, geopolitics,
Speaker 3: finance and investment.
Speaker 2: Subscribe to Bloomberg Surveillance on demand.
Speaker 3: On Apple, Spotify and anywhere you get your podcasts, and
Speaker 3: always on Bloomberg dot Com, the Bloomberg Terminal, and the
Speaker 3: Bloomberg Business appich Nolly Boss has been parsing through the
Speaker 3: numbers listening to the call for JP Morgan because she
Speaker 3: can do everything at the same time, and I'm wondering
Speaker 3: if there are any larger takeaways before we dig into
Speaker 3: some of the details from these earnings that we can
Speaker 3: kind of draw a conclusion on with respect to the banks.
Speaker 4: Yeah, there's one thing that JP Morgan says that I
Speaker 4: think is very important in terms of caution for the
Speaker 4: industry that is so excited that things aren't so bad today.
Speaker 4: And he says, these results benefit from our over earning
Speaker 4: on both net interest income and below normal credit costs.
Speaker 5: What does that mean? Don't expect this to be normal?
Speaker 5: Per se?
Speaker 4: He raised his net interest income at least three times.
Speaker 5: There's a debate if it was a fourth time.
Speaker 4: This year, and can you imagine to that many times
Speaker 4: say we're going to make more money, We're going to
Speaker 4: make more money. We're going to make more money, and
Speaker 4: we're going to make more money.
Speaker 2: Here's the thing, there's a bigger takeaway here.
Speaker 3: And John was asking this earlier, which is how much
Speaker 3: is this pr and basically saying, don't look at us.
Speaker 3: We're not expecting to make this money. It just keeps
Speaker 3: coming through the door. Or is this something that is
Speaker 3: some sort of tea leaf of what they expect to
Speaker 3: come and saying to regulators and saying to others, hey,
Speaker 3: it's not so great, we're not really making bank.
Speaker 2: Is just sort of a quirk of the moment.
Speaker 5: There is a little bit of balancing here.
Speaker 4: Remember they are taking to Washington again soon in early December.
Speaker 4: You have the big banks that will be facing lawmakers
Speaker 4: at the beginning of their annual grilling. I love listening
Speaker 4: to this one because they are making pretty stunning profits
Speaker 4: in this environment. But you know, they can also say
Speaker 4: this is a US consumer, This is a good thing.
Speaker 4: Consumers want to borrow. They're still spending money. You are
Speaker 4: seeing some normalization. You think, look at City Group, the
Speaker 4: kind of the spend here starting to normalize. These are
Speaker 4: things that show you things could start to turn a
Speaker 4: little bit here. But the strength of the consumer is
Speaker 4: keeping the banking industry strong, plus the comeback of these
Speaker 4: institutional businesses that are aided by these very complicated dynamics
Speaker 4: in the market.
Speaker 6: They're going to really push back on potentially future bank
Speaker 6: capital requirements, aren't they when they come to Washington.
Speaker 5: There's going to be two objectives.
Speaker 4: From the banking perspective, they're going to be pushing back
Speaker 4: against those capital requirements. From the lawmaker's perspective, there's all
Speaker 4: sorts of other issues. Why aren't you lending to my constituents?
Speaker 4: Who want to buy a home. The housing market is
Speaker 4: still in dire straits in many places in the country.
Speaker 5: There's going to be the constant.
Speaker 4: Constant push pull on ESG matters, especially with this concern
Speaker 4: about energy security around the world. There's also going to
Speaker 4: be a lot of questions about headcount because besides for
Speaker 4: JP Morgan, most of these other banks are cutting jobs,
Speaker 4: not adding them.
Speaker 6: One thing that you really should need to know about
Speaker 6: Washington when there's hearings like this is actually you think
Speaker 6: lawmakers in the room listening to every question, listening to
Speaker 6: every answer, they're actually not. They come in, it's very performative,
Speaker 6: they decide the point they want to make, potentially try
Speaker 6: to embarrass an executive, and then they leave.
Speaker 4: Don't you just kind of want to go down there
Speaker 4: and buy them all a drink after? Like it is
Speaker 4: such a long day. But you know, speaking of long days,
Speaker 4: this that's us up for next week two, doesn't it,
Speaker 4: because we do have a Goldman, sax Bank of America,
Speaker 4: and Morgan Stanley starting to come in. Remember what's interesting
Speaker 4: a lot of money. Yes, the consumer's holding up the
Speaker 4: economically sensitive parts of the economy as you see it,
Speaker 4: Wells Fargo auto lending homes still under pressure. But when
Speaker 4: you look at Bank of America Morgan stilling, these are
Speaker 4: wealthier client bases that we're looking at here that are
Speaker 4: borrowing for homes and still able to spend at maybe
Speaker 4: a greater scale than you're seeing it the weaker parts
Speaker 4: of the economy.
Speaker 3: One thing that the JP Morgan CFO said on the
Speaker 3: call was that, as you mentioned, the full year net
Speaker 3: income guidance was up on as you mentioned Shnali slower reprice.
Speaker 3: Does this basically just mean that they are not passing
Speaker 3: it along as quickly as they thought they would be
Speaker 3: to depositors.
Speaker 4: And this is where that big versus small question comes
Speaker 4: into play again. JP Morgan is not passing it on
Speaker 4: as meaningfully as some of the smaller banks, where you know,
Speaker 4: Jeffries in particular puts out this great chart about just
Speaker 4: how much deposits have repriced, because across the industry they
Speaker 4: certainly have, just not at the biggest of the big
Speaker 4: banks that don't need your deposits.
Speaker 3: So at what point does that become some sort of
Speaker 3: rally and cry, If you're getting so much money, why
Speaker 3: don't you pass it along with some of your clients
Speaker 3: that you have.
Speaker 2: At what point does.
Speaker 3: That deposit beta play a role and really come under focus.
Speaker 4: And it's also that question for consumers. Do you park
Speaker 4: your money at a JP Morgan where you know your
Speaker 4: money is safe, too big to fail, right, or do
Speaker 4: you park it at a smaller bank where there could
Speaker 4: be some more worries.
Speaker 5: As we've seen earlier.
Speaker 4: This year, the smaller banks are getting a bigger rate,
Speaker 4: a better rate on your deposits. But to your point too,
Speaker 4: this has been highly politicized. The bankers have been directly
Speaker 4: asked where is this money going if we're raising interest
Speaker 4: rates and you are not giving that money back.
Speaker 3: To consumer, which raises a question of modest buybacks, and
Speaker 3: modest has been the word of the day. It's sort of,
Speaker 3: you know, something that we've seen as a theme and
Speaker 3: a lot of the banks.
Speaker 2: How much are we going to see in terms of buybacks?
Speaker 3: What will count as modest enough to satisfy investors and
Speaker 3: quell concerns by regulators.
Speaker 4: It's a great question because the banking and investor story,
Speaker 4: I don't know that it's hinging necessarily on those buybacks.
Speaker 4: They just want the numbers themselves to get better. But
Speaker 4: to that point, you're making. Also, you can't sit there
Speaker 4: and return a ton of money to investors when you're
Speaker 4: laying tens of thousands of people off at most of
Speaker 4: these banks, right, the expense story and the use of
Speaker 4: capital is a massive tension and only getting more so
Speaker 4: by the day because wage pressure still exists at these
Speaker 4: banks too.
Speaker 3: There's also a big theme, especially as we head toward
Speaker 3: Morgan Stanley Bank of America and Goldman Sachs next week,
Speaker 3: about why equity revenues, equity trading revenues disappointed and fixed
Speaker 3: income revenues beat. Do you have a sense of what
Speaker 3: was behind it? Is this a theme for the industry
Speaker 3: or is this an execution issue for both City Group
Speaker 3: as well as JP Morgan.
Speaker 4: There's one big tell that shows you that this is
Speaker 4: a theme for the industry. You had three of the
Speaker 4: biggest investment banks in the world, Goldman's at JP Morgan
Speaker 4: and Morgan Stanley on the Birkenstock IPO and the IPO
Speaker 4: whift and so that is a really big.
Speaker 5: Problem for the IPO market.
Speaker 4: This lack of equity issuance, this real scarcity here makes
Speaker 4: it tough to keep equity trading live in terms of
Speaker 4: fees for the banks. But you know, a little inside baseball,
Speaker 4: that Goldman number versus Morgan Stanley.
Speaker 5: Next week is the talk of the town.
Speaker 4: Goldman has been leading on financing the big hedge funds
Speaker 4: and trying to win that business leverage while constraint is
Speaker 4: still alive and well, Chanelli.
Speaker 2: Blasik, thank you so much.
Speaker 3: We'll be catching up with you throughout next week and
Speaker 3: throughout the day ahead, and of course we're going to
Speaker 3: get those earnings from Bank of America as well as
Speaker 3: Morgan Stanley and Goldman Sacks next week.
Speaker 7: Ken Leon a c if all right, Ken, you've gone
Speaker 7: through sacy what you might commit.
Speaker 8: This was a good quarter. It shows that there's a
Speaker 8: progression of the restructuring, and yet some of their core
Speaker 8: franchises such as consumer and Treasury services are doing quite well.
Speaker 8: So I think on operational basis we would give them
Speaker 8: an we also for being courageous. Jane Fraser is moving
Speaker 8: ahead as discussed in terms of removing layers of management
Speaker 8: to reduce expense, and this is critical to get efficiency
Speaker 8: for this bank and to improve returns on capital. Lastly,
Speaker 8: let's not forget there's nine thousand employees at City Group
Speaker 8: that are working on a US consent decree to improve
Speaker 8: their processing and regulatory regime for compliance. This is important.
Speaker 8: It sometimes gets lost in the weeds, but for many
Speaker 8: years City did not operationally have the best platform for surveillance,
Speaker 8: and I think they're getting there. Looking ahead. For the investor,
Speaker 8: it's always you're always tempted with any stock in the
Speaker 8: large bank's trading at half its net tangible book value
Speaker 8: when the others are well above par. And I think
Speaker 8: we need to say just a little bit more attraction
Speaker 8: with what Jane Fraser does. Not only costs, but you
Speaker 8: need a successful IPO Banamex in Mexico. As you recall,
Speaker 8: they couldn't sell it. So now they're going IPO in
Speaker 8: twenty twenty five. So things like promising, but they're still not,
Speaker 8: you know, hitting on all cylinders.
Speaker 7: Well, Ken, that's the problem. That's the question. Do they
Speaker 7: have a problem with expenses or with strategy.
Speaker 8: I think the strategy is in place, and it does
Speaker 8: take time now to get the right people in place.
Speaker 8: That would be the management teams below the C suite
Speaker 8: or the first layer, so that they can execute on
Speaker 8: the strategy. We also are talking again, this could be
Speaker 8: a conversation in two quarters of a very highly efficient
Speaker 8: global bank as they paired off all of their non
Speaker 8: US consumer banks except for a few areas. So I
Speaker 8: think overall there's still a lot of more work to do,
Speaker 8: and that means that what we've learned with the Wells
Speaker 8: Fargo turnaround is that they don't happen over six months,
Speaker 8: they take three to five years.
Speaker 3: Ken we saw JP Morgan just notch a record quarter
Speaker 3: of net interest income twenty two point nine billion dollars.
Speaker 3: They now see total full year net interest income of
Speaker 3: eighty eight and a.
Speaker 2: Half billion dollars.
Speaker 3: City Group also raise their expectation for their full year
Speaker 3: net interest income to forty seven point five billion dollars
Speaker 3: from forty six billion dollars.
Speaker 2: Is the takeaway from some of these results.
Speaker 3: That higher yields are now becoming a good thing for banks,
Speaker 3: a tailwind rather than a headwind.
Speaker 8: So one scenario that hasn't been talked about, you know,
Speaker 8: with the Fed possibly what a rate pause, is that
Speaker 8: with rates staying high and if the banks can hold
Speaker 8: the line in terms of deposit costs, they can enjoy
Speaker 8: net interest income growth, particularly if there's loan growth. But
Speaker 8: one of the worries we have is that still twenty
Speaker 8: five to thirty percent of total deposits are still non interest,
Speaker 8: fearing that can certainly shift and go to higher deposit costs.
Speaker 8: This is absolutely true, and asset and wealth management for
Speaker 8: JP Morgan Chase not so much a problem in the
Speaker 8: corporate areas where they have other reasons for keeping non
Speaker 8: interest deposits in those areas.
Speaker 2: But Ken, we're not seeing it yet.
Speaker 3: And this is something that a lot of people have
Speaker 3: pointed to that these deposits have been sticky, that it
Speaker 3: is such a pain in the butt to actually move
Speaker 3: all of your money from one place to another and
Speaker 3: rebank with an entirely new institution, that people just are
Speaker 3: not doing it. What makes you think that people are
Speaker 3: going to start doing it, especially if they do start
Speaker 3: investing in other assets and they haven't so far.
Speaker 8: Well, we actually did see that again in Acid and
Speaker 8: wealth management down eight percent on deposits. But in the
Speaker 8: other areas, I think you're right, it's a little bit stickier.
Speaker 8: There's lots of reasons for small business or sometimes for consumers,
Speaker 8: you know, to keep those large balances and checking accounts.
Speaker 7: Ken, I want to finish with a bondmark if we
Speaker 7: can something at least or not I've been talking about
Speaker 7: now for weeks.
Speaker 9: Need lower yields or high yields.
Speaker 7: A long long time ago, we'd catch up with people
Speaker 7: who would tell us forever that what they needed was yields,
Speaker 7: higher rates up because they can become more profitable off
Speaker 7: the back of it.
Speaker 9: Can has that changed this year?
Speaker 8: It really hasn't changed. But it's you know, for nen
Speaker 8: intra syncron, which is very different than the bond conversation,
Speaker 8: it's loan volume growth. I think for the bond market,
Speaker 8: it's really what happens in an investment grade that's so critical. Again,
Speaker 8: I want to see how many of these banks talk
Speaker 8: about getting to be balance sheet light, which means possibly
Speaker 8: partnering with private credit partners, given that they may have
Speaker 8: some portfolios that just don't make any more sense with
Speaker 8: higher rates.
Speaker 7: So that means sunning off loans can Yes, it does interesting,
Speaker 7: Ken Leon Cfira, thank you sir for being with us
Speaker 7: this morning to break down JP Morgan. It's the perfect
Speaker 7: day to catch up with this man right here. Agia Denny,
Speaker 7: president of the Denny Research and ed. As I often say,
Speaker 7: but it's worth repeating the man who coined the phrase
Speaker 7: bond vigilantes. As you know me too well, you know
Speaker 7: the next question the bond vigilances backhead.
Speaker 10: I think they are yes, because it's certainly one of
Speaker 10: the reasons that the bond yield has soared from just
Speaker 10: under four percent on July thirty first to over four
Speaker 10: and a half percent and a range only four and
Speaker 10: a half to five percent recently. If we look at
Speaker 10: the tenure the thirty years been higher. But supply clearly matters,
Speaker 10: and supply is a result of fiscal profligacy. It's you know,
Speaker 10: fiscal policy is out of control. Monetary policy has actually
Speaker 10: been doing its job. I don't think the bond market
Speaker 10: or the bond vigilantes really have an issue with the
Speaker 10: monetary policy authorities. It's really well you can see they
Speaker 10: can't even get a speaker of the House.
Speaker 9: And sometimes supply doesn't matter.
Speaker 7: Typically an economic downturns, people will be willing to finance
Speaker 7: the deficit by treas rebonds with exceptionally low yields. And
Speaker 7: is this a situation that can be addressed with bad
Speaker 7: economic data? And what I mean by that is, will
Speaker 7: we buy this bond market where those auctions look better?
Speaker 9: If this economy looks worse.
Speaker 10: Well, for all the volatility we've had since the summer,
Speaker 10: I think we're fairly looking for a yield level at
Speaker 10: which the market will clear, and I think four and
Speaker 10: a half to five percent should do it. So I
Speaker 10: think some of this recent volatility, as long as it's
Speaker 10: range bound, is actually a good sign that the bond
Speaker 10: market figures this is a good yield relative to the
Speaker 10: inflation outlook. I know there are a lot of people
Speaker 10: that were concerned about the inflation numbers of CPI numbers
Speaker 10: that came out yesterday, But if you take out shelter,
Speaker 10: you know, I always take out things that don't support
Speaker 10: my story. So if you take out shelter, the CPI
Speaker 10: headline and core, we're both at two percent, exactly at
Speaker 10: two percent. It's that, you know, it's that shelter that's
Speaker 10: just way too blank blank blank too high. That's been
Speaker 10: the problem, and even in the latest number it was
Speaker 10: a problem. But we know that lease inflation and new
Speaker 10: leases has actually come down substantially.
Speaker 3: And I love that you said that you take out
Speaker 3: things that don't support your story because it's what everybody
Speaker 3: is doing. And you can take out whatever data that
Speaker 3: you want and support whatever story you want to write.
Speaker 3: A lot of people are looking at the volatility of
Speaker 3: the bond market, and you heard Michael Stowell yesterday talking
Speaker 3: about how something will break and that that will be
Speaker 3: something problematic for the market that the FED is going
Speaker 3: to have to respond to. Do you have the same
Speaker 3: feeling or is your response the opposite That the resilience
Speaker 3: that we have seen in risk aids to date in
Speaker 3: the light of such volatility is a sign that it
Speaker 3: can continue regardless of what the bond market does well.
Speaker 10: I've been in the soft landing camp since early last year,
Speaker 10: and I characterized it as a rolling recession that's sitting
Speaker 10: in different sectors at different times, and something is breaking
Speaker 10: right now, and that's in the commercial real estate market.
Speaker 10: There's going to be a lot of things breaking in
Speaker 10: the commercial real estate market, and I think it's one
Speaker 10: of the reasons the FED is probably done raising interest
Speaker 10: rates because they realized that the bond market has been
Speaker 10: recently doing all the heavy lifting and monetary policy. With
Speaker 10: a bond yield up close to five percent, that's a
Speaker 10: disaster for a lot of commercial real estate deals that
Speaker 10: have to be refinanced, or the value of commercial real
Speaker 10: estate so those things are going to break. Very reminiscent
Speaker 10: of what happened in the early nineteen nineties when we
Speaker 10: had the SNL crisis. A lot of things broken the
Speaker 10: commercial real estate market. We did have a recession back then,
Speaker 10: but it was very mild. It was just the growth
Speaker 10: rate that was really hampered by all those problems.
Speaker 3: Let's tie that together, because we heard from the Wells
Speaker 3: Fargo CEO is saying that they do expect commercial real
Speaker 3: estate losses to increase. They are expecting loan losses to increase,
Speaker 3: even though provisions are not necessarily increasing as much as
Speaker 3: people previously expected. Is your sense right now that we're
Speaker 3: seeing things just soften and that we're not going to
Speaker 3: actually see anything break in that basically it's all been
Speaker 3: priced in based on where we are in this cycle.
Speaker 11: Yeah.
Speaker 10: Well, I'm still in that rolling recession camp, and indeed,
Speaker 10: in some areas it's starting to look like a rolling recovery.
Speaker 10: I think in the retailing sector, for example, consumers may
Speaker 10: very well be coming back to buying some goods. The
Speaker 10: single family housing market looks like it's bottoming. But yeah,
Speaker 10: I still don't think we're going to have an economy
Speaker 10: wide recession going into next year. I think it's the
Speaker 10: economy's resilience is going to be proven to be with us,
Speaker 10: and I think it's largely because of the consumer. And
Speaker 10: there's a lot of moving parts in the consumer. One
Speaker 10: of them has got seventy five million baby boomers that
Speaker 10: increasingly are retiring and talk about excess savings. I know
Speaker 10: Jamie Diamond said has been saying since May of last
Speaker 10: year that consumers are going to be running out of
Speaker 10: excess savings and that's when we have a recession. But
Speaker 10: baby boomers have a lot of access savings in their
Speaker 10: retirement assets, something like seventy five trillion dollars, and as
Speaker 10: they retire, they're going to be spending those assets to.
Speaker 7: Those boomers, not like Don Paranion out of the mh AS. Yeah, Danny,
Speaker 7: was that not the canary in a coal mine?
Speaker 10: Well, look, I think that the retiring consumers are going
Speaker 10: out to restaurants, they're taking vacations more often, they're flying,
Speaker 10: they're using hotels, motels, and these are all the areas
Speaker 10: where where industries are very labor intensive, and I think
Speaker 10: it explains why the labor market's been so tight. It's
Speaker 10: very hard to have a recession with a record employment.
Speaker 10: I know, employments always at a record right before recessions,
Speaker 10: but it just keeps going going on. It just keeps
Speaker 10: rising to new record highs. So as long as that's
Speaker 10: the case, I think that the economy's resilience is going
Speaker 10: to be attributable to the consumer. And by the way,
Speaker 10: we know that the fiscal policy is out of control,
Speaker 10: but part of that is because they're spending a lot.
Speaker 10: We're just stimulative to the economy. Even those net interest
Speaker 10: payments that they have to make, somebody is getting them.
Speaker 10: Consumers are getting a windfall relative to what they had,
Speaker 10: you know, past several years of much higher net interest income.
Speaker 7: He's sound constructive at it's going to catch up, And
Speaker 7: John Denny, if you have any research. Let's turns to
Speaker 7: Greg Value, the chief US policy strategist at AGF Investments.
Speaker 7: Greg joins us. Now, Greg, wonderful to catch up with you.
Speaker 7: We have this phrase that we borrowed from a famous
Speaker 7: comedian in the United States in the last hour, Aren't
Speaker 7: you embarrassed? Is Washington embarrassed by the dysfunction this playing
Speaker 7: gap currently? Given what's happening in the world.
Speaker 12: Well, we should be this City should be embarrassed. It's
Speaker 12: a clown show, it's a circus. And the serious part
Speaker 12: of the story, John, is that there are three big
Speaker 12: things that have to get done. One is, of course,
Speaker 12: a budget, and I think that November seventeenth deadline will slip.
Speaker 12: Maybe they'll do another extension, probably into next year. Number two,
Speaker 12: we really need more aid for Ukraine, they're starting to
Speaker 12: run low. And now a third story, of course, and
Speaker 12: that's aid to Israel, which is mandatory. The irony here
Speaker 12: is that a vast majority in both houses, in both parties,
Speaker 12: want to do all three, but they can't get it done.
Speaker 6: Greg, who can get to two seventeen within Republican caucus
Speaker 6: at this point?
Speaker 12: You got me? I mean I thought that Scales would
Speaker 12: be likely. Jim Jordan isn't exactly mister personality. I'm not
Speaker 12: sure he's going to get there. So I am beginning
Speaker 12: to think they go for someone less well known. There's
Speaker 12: a House member from Minnesota, someone from Oklahoma. They may
Speaker 12: go for a fresh face who's not as badly damaged
Speaker 12: as some of these others are.
Speaker 6: Democrats just as much to blame for this paralysis we're
Speaker 6: seeing in the House of Representatives.
Speaker 12: A little. I mean, nobody's blamed a pox on both
Speaker 12: of their houses. But I would say that Hakeem Jeffries
Speaker 12: and others are valid in saying why should we bail
Speaker 12: them out? They want to impeach the president, that they've
Speaker 12: done a lot of things in the last year that
Speaker 12: have been inexcusable according to the Democrats, So I think
Speaker 12: they're not in any great rush to help them out.
Speaker 7: For a long time, this stuff hasn't mattered. Does it
Speaker 7: matter out it does?
Speaker 12: I mean, we need these loan packages, we need to
Speaker 12: get a budget. People worry about government benefits, their salaries,
Speaker 12: things like that. And there's one other factor, John that
Speaker 12: I think could come into the narrative once again, and
Speaker 12: that's the credit rating agencies like Fitch and S and P.
Speaker 12: I wouldn't be surprised if we see another credit rating
Speaker 12: downgrade on the US. And that's not a good story.
Speaker 2: Every investors come on.
Speaker 3: Whos said that there is absolutely no incentive to grapple
Speaker 3: with the real issues that are going to cause serious
Speaker 3: problems for the US economy and for the US deficit Medicare, medicaid,
Speaker 3: defense spending, and the other entitlement social security. How much
Speaker 3: do you see a greater willingness later this year or
Speaker 3: next year if interest payments start to significantly be the
Speaker 3: main expense of this country.
Speaker 12: Well, you're speaking logically, and logic doesn't always apply, Lisa,
Speaker 12: I don't know that that will make a big difference.
Speaker 11: You know.
Speaker 12: The problem is that, you know, I go around the country,
Speaker 12: I talk to investors and ordinary people and they all
Speaker 12: say we have to reduce the deficit, and then I
Speaker 12: give them a list of options, and to everyone they say, no,
Speaker 12: these are not doable. These are not politically sellable to
Speaker 12: the voters. So we could have a national consensus that
Speaker 12: we need to do something on net borrowing costs, but
Speaker 12: there will not be a consensus on these specific prescriptions.
Speaker 3: Nobody wants to take the poison to come along with
Speaker 3: the medicine. There's a question here, though, Greg, especially as
Speaker 3: we face off with a number of conflicts around the
Speaker 3: world where we have the US calling for more money
Speaker 3: and more resources to be deployed, whether it's Israel, whether
Speaker 3: it's Ukraine, whether that's going to mean more borrowing and
Speaker 3: an even bigger deficit. Do you see that in the
Speaker 3: pipeline that basically not only is there no incentive to cut,
Speaker 3: but there is incentive to spend more and the result
Speaker 3: will simply be felt.
Speaker 2: Maybe at some of these bond auctions. We've been talking about.
Speaker 12: Two enormous wildcards that I think will determine the answer
Speaker 12: to your question. The first is could we see it
Speaker 12: movement by Hesbalah in the north that would be horrible
Speaker 12: to open up a second front. And secondly Iran, I
Speaker 12: think what once Hamas has dealt with, then they will
Speaker 12: be dealt with. I think the Iranians will be targeted
Speaker 12: for at least some kind of increased sanctions because of
Speaker 12: their support for both Hamas and Hezbollah. So those factors,
Speaker 12: to me, would make me think that a lot more
Speaker 12: spending on defense is going to have to recur.
Speaker 6: We saw yesterday the administration come out along with Katari
Speaker 6: officials and say that Iran at this moment cannot act
Speaker 6: sass that six billion dollars that was unfrozen from the
Speaker 6: South Korean banks for the prisoner swap. Is this administration
Speaker 6: going to come under increased criticism for their strategy in
Speaker 6: Iran specifically.
Speaker 12: Well, the Iranians are furious. The New York Times broke
Speaker 12: the story early early this morning, and I think This
Speaker 12: is going to be a big controversy, but they're not
Speaker 12: going to get that money. I think that is inconceivable.
Speaker 12: Considering all the political problems Joe Biden has, the last
Speaker 12: thing he needs is to give the Iranians six billion dollars.
Speaker 6: Just a week and a half ago, Jake Sullivan greg
Speaker 6: said the Middle East was the quietest it's been in decades.
Speaker 6: Today we have Jamie Timon, a CEO of JP Morgan,
Speaker 6: coming out and saying the world is the most dangerous
Speaker 6: we've seen in decades. Is this administration going to face
Speaker 6: the consequences of what is going on in the foreign
Speaker 6: policy sphere come in November of next year, they may.
Speaker 12: I mean, there are so many things, my lord, the
Speaker 12: fact that we're averaging eight thousand illegal immigrants a day
Speaker 12: coming into the US, we have big urban crime, average
Speaker 12: voters don't think inflation has been subdued. So yeah, I mean,
Speaker 12: this could be still another huge albatross for Joe Biden.
Speaker 12: He's in a difficult spot. I think that Blincoln is good.
Speaker 12: I think Sullivan's good. I think they may calm this
Speaker 12: thing down by the end of the year. But I
Speaker 12: think we got several really rocky weeks ahead.
Speaker 9: Greg, doesn't look great. It really doesn't greg value of
Speaker 9: jeff investments.
Speaker 7: Greg, Thank you, sir, joining us now, I'm pleased to say,
Speaker 7: is Congressman Mike laud a Republican from New York Congressman.
Speaker 7: Great to have you with us on the program, Sir.
Speaker 7: I'm sure this is immensely frustrating for you. A time
Speaker 7: for America to project power and at the moment, Washington
Speaker 7: d C seems to be projecting dysfunction.
Speaker 9: How frustrated? Are you?
Speaker 11: Pretty frustrated?
Speaker 13: But you know, right behind the camera lens is the
Speaker 13: capital and I was just looking at it before the
Speaker 13: commercial break, and the sun is shining down on it.
Speaker 13: And we've been through tough times in this country and we.
Speaker 11: Will get through it.
Speaker 13: We will be meeting this morning to reconvene and begin
Speaker 13: the process anew to elect a speaker. We have to
Speaker 13: come together as a conference two hundred and seventeen to
Speaker 13: elect a Republican speaker in a Republican majority. The American
Speaker 13: people elected us to serve as a check in balance
Speaker 13: on the Biden administration, from spending to the border to
Speaker 13: international policy. There's a lot of work to do, and
Speaker 13: obviously one of the first orders of business is to
Speaker 13: support our closest ally in the Middle East, the state
Speaker 13: of Israel, to ensure that they have the resources financially
Speaker 13: militarily to do what they need to do to defeat Hamas.
Speaker 7: What can you do, Congressman, in the next twenty four
Speaker 7: hours to make sure that happens. There's a big issue
Speaker 7: right now for your party. Not only should this country
Speaker 7: be projecting power and solid aritory with Israel, your party
Speaker 7: also needs to demonstrate to this country that you can govern.
Speaker 7: Why is your party failing to do that?
Speaker 13: Well, look what happened last week with the removal of
Speaker 13: Speaker Kevin McCarthy never should have happened. Eight Republicans teamed
Speaker 13: up with two hundred and eight Democrats, and I think
Speaker 13: people need to remember that both parties threw us into
Speaker 13: chaos here for no reason and it was totally unnecessary, unwarranted,
Speaker 13: and unjustified. And so now we're forced to pick a
Speaker 13: new speaker. This is not like just electing a class president.
Speaker 13: You actually need somebody who can do the job and
Speaker 13: do it well. There's a lot, a lot that is
Speaker 13: entailed in it. And you know, I think we're going
Speaker 13: to get back in the room today, hash it out
Speaker 13: even further, and hopefully elect a speaker ultimately again, when
Speaker 13: we get back to the work of the American people,
Speaker 13: there is a lot of critical work to be done,
Speaker 13: from the appropriations process, to securing our border, to increasing
Speaker 13: aid to Israel. We also have to deal with aid
Speaker 13: to Ukraine. These are critical issues and I'm focused on
Speaker 13: that work. Commers, especially as a member of the Foreign
Speaker 13: Affairs Committee and the Financial Services Committee.
Speaker 6: It's not just about who can do the job of speaker.
Speaker 6: It's about who can get two hundred and seventeen votes.
Speaker 6: A lot of your colleagues say they don't see anyone
Speaker 6: that can actually get to two seventeen. Do you know
Speaker 6: an individual that can get to that number.
Speaker 13: Look, we're going to come back the room. We'll see
Speaker 13: who puts their name forward. I believe our strongest speaker
Speaker 13: is Kevin McCarthy. I said it this week, I said
Speaker 13: it last week, I said it the week before, I
Speaker 13: said it in January fifteen times. We're going to have
Speaker 13: to hash it out, and obviously there's some anger, some frustration,
Speaker 13: some hardened feelings in the room. But you know, if
Speaker 13: we need to bring a Festivus poll in and let
Speaker 13: everybody air their grievances.
Speaker 11: So be it, but we have to get back to work.
Speaker 6: Your district voted for President Joe Biden. Is it time
Speaker 6: for members like you to reach across the aisle and
Speaker 6: find a centrist speaker with the Democrats?
Speaker 13: Well, respectfully, again, the Democrats helped create this mess. Everybody
Speaker 13: should remember that two hundred and eight Democrats voted to
Speaker 13: remove the speaker, and the American people elected a House
Speaker 13: Republican majorit to govern. So any deal with the Democrats
Speaker 13: would be to elect a Republican speaker. We need to
Speaker 13: exhaust all options within the conference, but ultimately as a nation,
Speaker 13: as a country, we need to get back to work.
Speaker 11: And frankly, in.
Speaker 13: My conversations with many of my Democratic colleagues, they regret
Speaker 13: their vote to remove Kevin McCarthy because they see the
Speaker 13: chaos that they've helped create.
Speaker 3: But then the congressmen, to build on Emory's point, are
Speaker 3: you getting close, especially with your Democratic colleagues, to move
Speaker 3: towards some sort of centrist candidate to put up and
Speaker 3: then to be able to elect any bipartisan measure.
Speaker 11: Look, right now we are meeting again today.
Speaker 13: I think we owe it to the conference to continue
Speaker 13: the discussion, to see any other candidates that put their
Speaker 13: name forward, take a vote, see where it lands, and
Speaker 13: then take it from there.
Speaker 11: Obviously, we want to.
Speaker 13: Get back to work as expeditiously as possible and get
Speaker 13: back to governing.
Speaker 11: That is why we're here. That is the focus.
Speaker 13: The American people are not interested in inner party squabbles.
Speaker 13: They're not interested in the parlor game that often.
Speaker 11: Goes on in this place.
Speaker 13: There's real work that needs to get done and that
Speaker 13: has been and will continue to be my focus.
Speaker 3: A lot of people talk about the former President Trump
Speaker 3: as being the front runner, and frankly the leader of
Speaker 3: the Republican Party. Who do you think is the leader
Speaker 3: of the Republican Party at a time when it desperately
Speaker 3: seems to need a leader.
Speaker 13: Look, Kevin McCarthy was doing a phenomenal job as the
Speaker 13: highest ranking Republican official in Washington, and I think it
Speaker 13: was the single stupidest political act that I've ever seen
Speaker 13: to remove Kevin McCarthy as speaker. It undermined the majority,
Speaker 13: a torpedoed the work that we were doing. Uh And
Speaker 13: you know, I said earlier this week that he is
Speaker 13: our best player on the field and should have been
Speaker 13: should have remained a speaker, and you know, ideally would
Speaker 13: come back. But you know, obviously right now we need
Speaker 13: to elect a speaker. That's the focus, uh for me
Speaker 13: in in Washington, Congressman.
Speaker 6: This week you called in the Biden administration to start
Speaker 6: charter flights out of Israel. The State Department announced those
Speaker 6: flights yesterday. You have hundreds of constituents stuck in Israel.
Speaker 6: What are you hearing from them on the ground.
Speaker 13: Well, there's a lot of frustration, a lot of angst,
Speaker 13: a lot of concern.
Speaker 11: Uh. You know, people want to come home.
Speaker 13: Many of my constituents were in Israel for the holidays,
Speaker 13: and you know, when the war broke out, and so
Speaker 13: obviously they want to get back to the United States.
Speaker 11: I've been in.
Speaker 13: Touch with the White House multiple times, State Department multiple
Speaker 13: times to try and expedite this process to get these
Speaker 13: folks home. I had called for chartered aircraft as well
Speaker 13: as military aircraft to try and expedite this process. We
Speaker 13: have nearly six hundred thousand American citizens in Israel, many
Speaker 13: of them dual citizens, but it's six hundred thousand Americans,
Speaker 13: and so you know, obviously anytime you're in a war zone,
Speaker 13: you want to protect the American people that are there. Obviously,
Speaker 13: over twenty American lives lost, we still have people missing,
Speaker 13: potentially hostages. We need to do everything we can to
Speaker 13: bring our Americans home.
Speaker 7: A congressman, A lot of your constituents in the Jewish community,
Speaker 7: I'm sure here at home are on edge Hamas, which
Speaker 7: as you know, designated a terrorist group by the United States,
Speaker 7: also by the EU and the UK, calling for a
Speaker 7: day of rage today across the Muslim world, the mass
Speaker 7: protests against Israel. Congressmen, A, you're worried about the safety
Speaker 7: of your constituents and what are you doing to make
Speaker 7: sure they have the security they need.
Speaker 13: I'm always concerned. You know, I have one of the
Speaker 13: largest Jewish communities in the country in the seventeenth Congressional
Speaker 13: District of New York. Unfortunately, you know, threats of violence
Speaker 13: against the Jewish people are not new, and so law
Speaker 13: enforcement in my communities across my district have always done
Speaker 13: a phenomenal job working with leaders in the Jewish community,
Speaker 13: working with municipal officials to really ramp up police presence
Speaker 13: at synagogues or you know, Jewish institutions to ensure that
Speaker 13: we don't have acts of violence. Just a few years ago,
Speaker 13: we had an attack in my district in Munsey during Hanukkah,
Speaker 13: killing an individual. And you know, we want to avoid
Speaker 13: any such incidents across this country. But you know, certainly
Speaker 13: in areas where like mine, where you have large Jewish populations,
Speaker 13: so law enforcement always does a great job. I know
Speaker 13: they will step up.
Speaker 9: A Congressman, thanks for being with us today.
Speaker 7: Hopefully we can catch up again soon, Sir, Congressman Mike
Speaker 7: Laud of the Republican on the latest dysfunction in Washington.
Speaker 3: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and
Speaker 3: anywhere else you get your podcasts. Listen live every weekday
Speaker 3: starting at seven am Eastern on Bloomberg dot com, the
Speaker 3: iHeartRadio app, tune In, and.
Speaker 2: The Bloomberg Business app.
Speaker 3: You can watch us live on Bloomberg Television and always
Speaker 3: on the Bloomberg Terminal. Thanks for listening. I'm Lisa Abramowitz,
Speaker 3: and this is Bloomberg