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Speaker 3: Our most read story on the Bloomberg at this hour
Speaker 3: has to do with the Trump administration telling Harvard University
Speaker 3: it cannot enroll international students, so no doubt about it
Speaker 3: delivering a major blow to the.
Speaker 4: School after the government, you might recall.
Speaker 3: Also had frozen billions of dollars of federal funding and
Speaker 3: really escalating a fight that we are seeing between the
Speaker 3: United States and Harvard and other elite colleges. Colleges, but
Speaker 3: really kind of taking this to a whole other level.
Speaker 5: Tip we got Kleimashinkska, team leader for DC Breaking News,
Speaker 5: joining us from our Washington DC bureau. Carol read the
Speaker 5: headlines at Kassia, But I'm wondering about sort of we
Speaker 5: were seeing the reaction, we're seeing the interest. Everybody's talking
Speaker 5: about this story, right now, is this the type of
Speaker 5: thing that is going to get legal pushback, our lawyers
Speaker 5: already working on this to try to prevent this from happening.
Speaker 5: Or can the administration actually make Harvard do this?
Speaker 6: Yeah? Great questions, Thank you for having me. Indeed just
Speaker 6: currently them all throughout the story on the terminal and
Speaker 6: really a surprising new development and major escalation where the
Speaker 6: Trump administration is basically telling Harvard they cannot all international students.
Speaker 6: Not only that, but also the current the currently erals
Speaker 6: foreign students have to transfer or they will lose their
Speaker 6: legal statute. Harvard has already responded on the saying that
Speaker 6: they will that they will fight it, that they obviously
Speaker 6: don't agree with this decision, So there will be definitely
Speaker 6: more to come.
Speaker 3: You know what's interesting, Casia Like, it's you know, we've
Speaker 3: been seeing all of this play out, and I feel
Speaker 3: like universities have been trying to figure out what's the
Speaker 3: right balance in terms of dealing with the administration over it.
Speaker 3: I feel like money trumps everything, and financially we are
Speaker 3: continuing to see.
Speaker 4: Impacts on universities.
Speaker 3: Because of what the administration is doing pulling federal funding.
Speaker 4: But I look at Harvard I mean, we.
Speaker 3: Keep reading the statistic, almost sixty eight hundred students at Harvard,
Speaker 3: twenty seven percent of the entire student body come from
Speaker 3: other countries. That's up from just under twenty percent back
Speaker 3: in two thousand and six. This is looking at the
Speaker 3: university's data. I mean, this becomes a bigger and bigger
Speaker 3: financial blow to the university. And you do wonder at
Speaker 3: this point do universities in general, Harvard included, you know,
Speaker 3: are going to fight back even harder because this is
Speaker 3: about money.
Speaker 4: It comes down to also in terms of principles.
Speaker 6: Yeah, exactly. So this is more than a quarter of
Speaker 6: all their students. I think it's also interesting that this
Speaker 6: is the Department of Homeland Security involved them. The statement
Speaker 6: your this hour came from the DHS, which was as
Speaker 6: citing right, the protests, the fact that they blamed the
Speaker 6: Harvard leadersh for not being able to keep its campus
Speaker 6: basically safe and putting some students at through it.
Speaker 5: Yeah, I'm thinking about all the Harvard alumni in Congress
Speaker 5: right now. Harvard Law actually has an article on their
Speaker 5: website post election touting the fact that all Harvard Law
Speaker 5: alumni running for reelection to Congress won their races. Well,
Speaker 5: five more alumni vied to join their ranks. They talked
Speaker 5: about incumbents in the US House of Representatives. They also
Speaker 5: talked about Republican Ted Cruz Tim Kaine who were re
Speaker 5: elected to the Senate, in addition to other alumni from
Speaker 5: Harvard Law School. Have we heard anything yet at this
Speaker 5: point from either Democrats or Republicans who were alums of
Speaker 5: Harvard University at least Stephonic for example, who's been very
Speaker 5: critical of the school. Republican member from New York House,
Speaker 5: have we heard anything from them since this came out.
Speaker 6: You know, it came out less than an hour ago,
Speaker 6: so I haven't seen anything here yet. On the breaking
Speaker 6: news desk, you might. You know, it's not only people
Speaker 6: in Congress, it's also major donors right on both sides.
Speaker 6: So I'm sure this story will continue to escalate.
Speaker 3: Talk a little bit more about this coming from the
Speaker 3: Department of Homeland Security, Like, it's just interesting, it's kind
Speaker 3: of playing into kind of the safety element, right, We've
Speaker 3: seen this kind of being used, I feel like in
Speaker 3: terms of security reasons. We've seen this with immigration in general.
Speaker 3: Like I just that thinking and philosophy that continues to
Speaker 3: come from the administration again that I guess will also
Speaker 3: be discussed in any kind of legal arguments.
Speaker 6: Yes, this timing is really interesting and really strange, you know,
Speaker 6: given what happened here in DC overnight as well, and
Speaker 6: the statement actually specifically sites Jewish students. It's also a
Speaker 6: kind of woo you that the statement landed just after
Speaker 6: online let it finish her briefing, so that kind of
Speaker 6: didn't allow us to ask her more questions, even though
Speaker 6: obviously must have been aware of it happening, because apparently
Speaker 6: there were some papers going back and forth between the
Speaker 6: Trauma administration and the school for several days or even
Speaker 6: weeks now. So Yes, this is definitely an interesting timing
Speaker 6: for this announcement.
Speaker 5: Yeah, I'm also thinking, and i know you're covering breaking news,
Speaker 5: but I'm also thinking about just the educational impact of
Speaker 5: a move such as this. Given the numbers that Carol mentioned,
Speaker 5: thousands of students there, close to thirty percent of the
Speaker 5: entire student body, this is the type of thing that
Speaker 5: could potentially wreak havoc on a university's finances, but also
Speaker 5: in such a short period of time where ostensibly acceptance
Speaker 5: letters have already been mailed out we understand the yield
Speaker 5: of the class coming in the timing of this is
Speaker 5: pretty is pretty wild.
Speaker 6: Yes, it's really strength and difficult. It's not only about
Speaker 6: the new students but also existing students who will have
Speaker 6: to transfer or lose their legals tables that me insluding
Speaker 6: their visa, possibly being forced to go back home. Yes,
Speaker 6: and it's not only about the finances, right, but also
Speaker 6: about the diversity of the campus. I mean, we know
Speaker 6: that the school has been previously attacked for their diversity efforts,
Speaker 6: so there's also addresses that issue of the diversity of
Speaker 6: the student body.
Speaker 4: Cassie, one last question.
Speaker 3: You know, it's interesting that it feels like Harvard is
Speaker 3: being attacked big time. We've seen it also with Columbia
Speaker 3: and some other schools, but it does feel like makes
Speaker 3: me wonder like who didn't get into Harvard and the
Speaker 3: administration that's like so angry. But I know it's a bigger,
Speaker 3: broader story. Having said that, should we assume that other
Speaker 3: schools will be targeted in a similar way as hard
Speaker 3: as Harvard is.
Speaker 6: Being so I think this is what is very surprising
Speaker 6: about this news, right, that it singles out this one's
Speaker 6: school and goes after its leadership. So I think we
Speaker 6: have to see we have you to find out whether
Speaker 6: the DHS will go after other schools as well.
Speaker 3: Yeah, fascinating and uh, you know, just I think it's
Speaker 3: safe to say many would would characterize it that way.
Speaker 3: Cassia clemschinks she's team leader for DC Breaking News, joining
Speaker 3: us from our DC News bureau.
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Speaker 5: Well, let's talk a little bit about today's big take.
Speaker 5: Carol Masser, I couldn't get enough of this and the
Speaker 5: illustrations that are included in it. Max Abelson joins us
Speaker 5: now he's Bloomberg News, a finance reporter, whether it's geopolitics, trades, tariffs,
Speaker 5: or on more more personal level real estate, crypto corporate ventures.
Speaker 5: Some say this second term of President Donald Trump is
Speaker 5: all about the art of the deal. Some of the actions, though,
Speaker 5: have raised ethical questions that have been addressed by White
Speaker 5: House Press Secretary Caroline Lovitt, including earlier this month.
Speaker 7: The president is abiding by all conflict of interest laws.
Speaker 7: The President has been incredibly transparent with his own personal
Speaker 7: financial obligation throughout the years. The President is a successful businessman,
Speaker 7: and I think, frankly, it's one of the many reasons
Speaker 7: that people re elected him back to this office. Look,
Speaker 7: I can assure you the President acts with only the
Speaker 7: interests of the American public in mind, putting our country
Speaker 7: first and doing what's best for our country full stop.
Speaker 7: That's his intention, and that's what he's focused on.
Speaker 5: Well, today, the Bloomberg Big Take is focused on how
Speaker 5: since the early days of the reelection campaign, President Trump
Speaker 5: has more than doubled his net worth carol to about
Speaker 5: five point four billion dollars.
Speaker 3: All right, we want to get into this and with
Speaker 3: us to who has written this Bloomberg Big Take. It
Speaker 3: is one of the most read and it is a
Speaker 3: must read. It has been deemed so by our Bloomberg
Speaker 3: editorial team. Max Abelson and Andy Massa wrote the story.
Speaker 3: Joining us right now is Bloomberg News Finance reporter Max
Speaker 3: Abelson right here in studio. It's pretty incredible because you
Speaker 3: guys have really laid out all that's been going on
Speaker 3: in terms of business activity for the President. We should
Speaker 3: just you know, we just heard from Caroline Levitt, who
Speaker 3: has been asked about this at some of the press conferences,
Speaker 3: the daily White House press conferences, and she says, the
Speaker 3: president abiding by all conflicts of interest of laws, incredibly
Speaker 3: transparent and so on and so forth. But it does
Speaker 3: beg a lot of questions tell us about how you
Speaker 3: approach this, because.
Speaker 4: There's been a lot of stuff going on.
Speaker 1: I would love to you I'm going to say something
Speaker 1: about our project, and I'm going to say something like
Speaker 1: this is basically the opposite of it. But you'll see
Speaker 1: what I mean. Our project is really about being able
Speaker 1: to step back and to say in concrete terms, factual terms,
Speaker 1: clear terms, what is happening here when a president is
Speaker 1: doing more than anyone in modern American history that we
Speaker 1: can tell any other president in modern America to position
Speaker 1: his family to make an astounding amount of money while
Speaker 1: in the White House. And when I say astounding, what
Speaker 1: we're talking about is not in the millions or in
Speaker 1: the hundred of millions. What we're talking about is deals
Speaker 1: that are in the billions. Whether we're talking about the
Speaker 1: Trump n empowering I think more than ten bills million
Speaker 1: dollars worth of real estate projects, the trump Na empowering
Speaker 1: billions of dollars of value for a social media company
Speaker 1: which which only went public last year, you know, hundreds
Speaker 1: of millions of dollars of crypto. And then and then
Speaker 1: I told her I was going to say something that
Speaker 1: was the opposite of this, that this is this is
Speaker 1: what I want to say. As I was walking here
Speaker 1: from my desk in the newsroom, just on the other
Speaker 1: side of this floor to our radio studio, I saw
Speaker 1: that the United States government, the Trumpet administration, told Harvard
Speaker 1: University right that that it can't enroll international students and
Speaker 1: that and that existing foreign students are going to have
Speaker 1: to transfer or lose their legal status. And you know,
Speaker 1: for me personally, news like that, which I find comes
Speaker 1: basically every week, maybe sometimes every day, just these really
Speaker 1: things that I had never contemplated or never heard of.
Speaker 1: That there has been so much tumult in the last
Speaker 1: few months, so many things going on, tariffs alone, the
Speaker 1: stock market alone, the economy alone, that it is so
Speaker 1: easy to forget that what is happening on the Trump
Speaker 1: business side is really important too.
Speaker 8: So what Ann and I we're trying to do.
Speaker 1: We try to just forget about politics, and forget about policy,
Speaker 1: forget about things like Harvard, and just really focus on
Speaker 1: the Trump money making machine.
Speaker 4: Can I say?
Speaker 3: There are folks that come in and say, you know,
Speaker 3: we're all kind of chasing the stuff that is coming
Speaker 3: out of the White House, and the question often arises
Speaker 3: of like, well, wait, what are we missing?
Speaker 4: What is going on that.
Speaker 3: Maybe isn't in the headline, or what the administration is
Speaker 3: talking about or the president's team. So take it away
Speaker 3: because you guys did some really deep reporting.
Speaker 1: That is what we tried to do, so Annie Massa
Speaker 1: and I with help from many editors. I want to
Speaker 1: mention David Shear, who really made this happen. What we
Speaker 1: tried to focus on is that compared to all that
Speaker 1: tumult that I just mentioned, all the Harvard news and
Speaker 1: the comings and goings, compared to that, there's something very
Speaker 1: clear about the Trump empire, which is that it's approach,
Speaker 1: and our timeline is since the reelection campaign began. Everything
Speaker 1: that we're talking about here is after he announced his reelection.
Speaker 8: The approach is clear.
Speaker 1: The Trumps are selling that family name, and they're doing
Speaker 1: it at a scale that I really do think could
Speaker 1: could very well be the story of the day, the
Speaker 1: story of the year, if it weren't for all these
Speaker 1: things happening. You know, we see, we see the Trumps
Speaker 1: going and doing things they simply did not do in
Speaker 1: the last term when they.
Speaker 8: Said no to no new foreign deals.
Speaker 1: In the first administration, we were not talking about new
Speaker 1: foreign deals and last of administration really because Trump essentially
Speaker 1: said that they wouldn't happen. Now, you know, you basically
Speaker 1: have to take out your globe because Annie and I traveled,
Speaker 1: you know, journalistically speaking to Cutter, India, Vietnam, the United
Speaker 1: Arab Emirates, the United States is involved too, and at
Speaker 1: each point they're doing really interesting things. They're built, they're
Speaker 1: they're they're licensing their name to really big projects, hundreds
Speaker 1: of millions of dollars if not billions of dollars worth
Speaker 1: worth of projects. And sometimes not all time, sometimes something
Speaker 1: very important is happening, which is that the deal includes
Speaker 1: arms of governments. I'm talking about you know, it may
Speaker 1: not be the Trump administration, it may not be the
Speaker 1: Trump family, I should say, signing a deal with a government,
Speaker 1: but governments are involved, and that rubs up against what
Speaker 1: Trump said would not happen this term. When Trump said
Speaker 1: there would not be new deals with foreign.
Speaker 4: Governments, governments involved, government money involved.
Speaker 1: What we're really talking about is things like let's say
Speaker 1: in Oman, for example, they announced when they when they
Speaker 1: announced that deal, they announced as a partner the Umran Group,
Speaker 1: and that is essentially as it's a think of it
Speaker 1: as a state owned tourism group and they're going to
Speaker 1: be involved in that deal. Listen, let me let me
Speaker 1: point out that the Vietnamese I believe he's a prime minister.
Speaker 1: He may be the president, but the head, one extremely
Speaker 1: important figure in Vietnam met with basically the financial representative
Speaker 1: representative on the Trump on the on the new Trump
Speaker 1: project in Vietnam.
Speaker 8: That is what we.
Speaker 1: Mean when we say that these things are very big,
Speaker 1: They're potentially very lucrative, and a lot are happening right now.
Speaker 5: Max real Estate is just one piece of the puzzle here.
Speaker 5: It's certainly a global piece of the puzzle. The crypto
Speaker 5: story is included in here as well. You talk about
Speaker 5: world liberty, financial the Trump and Millenia mean coins as well.
Speaker 5: I want to focus a little bit on the corporate
Speaker 5: side of things. I think that gets a lot I
Speaker 5: think that gets a lot less attention than everything else. Right,
Speaker 5: there was a lot in here that I had never
Speaker 5: even heard of when it came to Trump family connections.
Speaker 5: Grab a gun for example. Talk a little bit about
Speaker 5: the corporate connections and what you Annie and the team
Speaker 5: uncovered here.
Speaker 1: I really admire any Master's ability to put her finger
Speaker 1: on these on these corporate connections, the things that I
Speaker 1: hadn't heard of. I mean, you know, it's it's I
Speaker 1: think it's actually helpful to put crypto off to the
Speaker 1: side because it can it gets so much attention. I
Speaker 1: mean literally, tonight, Trump is scheduled to meet with the
Speaker 1: top holders right of one of his one of his
Speaker 1: crypto projects. I think it's the mean coin. But then
Speaker 1: you know, so that that gets all the attention. But
Speaker 1: then you see something like seventeen eighty nine Capital Donald
Speaker 1: Trump Junior join. I think he became a partner at
Speaker 1: seventeen eighty nine, like a matter of days after the election.
Speaker 1: I think it was less than a week after the election.
Speaker 1: And that's that's a group that you know, Rebecca Mercer,
Speaker 1: if you remember the Mercer name, it was a really
Speaker 1: that is a really important Republican mega mega donor, and
Speaker 1: what they're basically doing. The way to think about it
Speaker 1: is they're essentially monetizing the kind of Trumpian vision for
Speaker 1: US culture by taking stakes in you know, things like
Speaker 1: the Enhanced Games. I don't know if you've heard of that.
Speaker 1: Basically it's been nicknamed the steroid Olympics.
Speaker 5: Yeah, I've heard of these, you know. But you can
Speaker 5: athletes who can sort of they're not drug tested. You
Speaker 5: can do whatever you want.
Speaker 8: And then that's right, that's right, listener.
Speaker 1: Listeners can't really see me right now, but I'm like
Speaker 1: extremely jacked and steroidal.
Speaker 5: You know, lanning, that's exact purpose.
Speaker 8: I'm going to fight in the inn assterial Olympics.
Speaker 2: That's right, you know.
Speaker 1: But the list goes on and on there. It's almost
Speaker 1: much to mention on just one interview. I want to
Speaker 1: give a shout out to Unusual Machines, which is such
Speaker 1: a drone component maker.
Speaker 8: You know. When this is how powerful the Trump name is.
Speaker 1: When Donald Trump Junior's role was announced in by the way,
Speaker 1: in November November twenty twenty four, right again on the money,
Speaker 1: the stock popped basically two hundred and fifty percent, maybe
Speaker 1: just shy of two hundred and fifty percent in like
Speaker 1: the two days, two trading days that followed.
Speaker 8: That is power.
Speaker 1: I tell people that my beat here is money and power.
Speaker 1: That is money and power, and it just keeps going.
Speaker 1: There's you know, have you ever heard of PSQ Holdings?
Speaker 1: Do you a public square?
Speaker 9: Now I have?
Speaker 5: This is the anti woke ye. This is the anti
Speaker 5: woke marketplace where you can go and buy items such
Speaker 5: as these pro life diapers that you guys highlight in
Speaker 5: the piece.
Speaker 8: YEP.
Speaker 1: I want to thank Michael Seffert, the CEO who gave
Speaker 1: us a comment. He said that Trump Junior is an
Speaker 1: incredible businessman, GJI partner and marketing expert and in other words,
Speaker 1: in other words, what he's saying is that we want
Speaker 1: Trump Junior for his mind, not necessarily for anything else.
Speaker 1: But that's a good example of like, you know what,
Speaker 1: three million dollars more. That was Trump Junior's twenty twenty
Speaker 1: four compensation we found for PSQ and his board role
Speaker 1: was announced once again December December of twenty twenty four.
Speaker 8: It keeps on going.
Speaker 1: There's Dominari, which listeners should should read any mass a separate.
Speaker 8: Story on Donor.
Speaker 1: We talked and We're fascinating, have you you know, do
Speaker 1: you know the the idea of like basically events contract.
Speaker 5: Yeah, we interviewed the call She founders when they launched
Speaker 5: years ago.
Speaker 8: Kyle She.
Speaker 1: I mean that role was announced January January, and that's
Speaker 1: Donald Trump junior again Eric Trump. I don't want to
Speaker 1: overshadow Eric Trump. Eric Trump is also involved in some
Speaker 1: of these stuff. But it's but when you're talking about
Speaker 1: grab a gun, for example, that's yet again, Donald Trump Junior.
Speaker 8: It's yet again.
Speaker 1: It's's essentially the last few weeks, it's yet again at
Speaker 1: least three million dollars. And it's you know, for for
Speaker 1: listeners who I think that I'm especially interested in talking
Speaker 1: to listeners who sort of their minds aren't made up.
Speaker 1: You know.
Speaker 8: I don't think there's much.
Speaker 1: To do as a journalist for readers and listeners who
Speaker 1: just know that they despise Donald Trump, or that they
Speaker 1: know that they adore Donald Trump. I'm interested not in
Speaker 1: pandering to like this someone who has their mind made
Speaker 1: up already. I'm really interested in just like focusing on
Speaker 1: the numbers and focusing on just like what's actually happening.
Speaker 1: And you know, whether or not you dislike this or
Speaker 1: admire it. I think it's really helpful to take a
Speaker 1: step back and to look at a family empire that
Speaker 1: is poised to make money while while the father is
Speaker 1: in the White House in a way that's you know,
Speaker 1: I don't know what to compare it to.
Speaker 8: Obviously, obviously the.
Speaker 1: Biden family, the Obama family, the Clinton family, the Bushes.
Speaker 1: I can add, all of these people are capitalists. All
Speaker 1: of these families were familiar with their reporting around their
Speaker 1: money making, for sure, But as a financial reporter, I've
Speaker 1: never seen I think the keyword here is the scale
Speaker 1: billions of dollars just for Trump Media and Technology Group,
Speaker 1: which you know of because it's the true social parent, right,
Speaker 1: that went public last year he was on.
Speaker 8: The campaign trail.
Speaker 1: This scale is what appeals to me as a finance
Speaker 1: reporter because it feels so new.
Speaker 3: Listen to be fair, right, like you say, other presidents
Speaker 3: in their families make money, whether it's.
Speaker 4: At they write books, they are consultants. There's a lot
Speaker 4: of things.
Speaker 3: And just by right by being associated with a family
Speaker 3: that was in the White House, right, it definitely opens doors.
Speaker 3: But the point is, I think also is so much
Speaker 3: of this is happening before going into the White House,
Speaker 3: and now that he's.
Speaker 1: In the White House, that is that's a really good
Speaker 1: way of saying it. You know, one of my favorite
Speaker 1: early scoops. I think it was like in the first
Speaker 1: five years that I was at Bloomberg, Yeah, was about
Speaker 1: Barack Obama getting paid. I believe my memory is hundreds
Speaker 1: of thousands of dollars, maybe three hundred thousand, maye four
Speaker 1: hundred thousand, maybe it was less for speeches at finance firms,
Speaker 1: including Canter Fitzgerald, which is ironic, Candorvidgel just across the
Speaker 1: street from us here in our Bloomberg headquarters. Yeah, Canter Friitgherald.
Speaker 1: Of course, the family that's in control is the Lutnik family.
Speaker 1: Howard Lutnick, of course is our Commerce secretary now.
Speaker 8: And I bring that up.
Speaker 1: It's relatively random and relatively stale, But I bring that
Speaker 1: up first of all because it goes to show that
Speaker 1: the Obamas, just like many other political figures, are interested
Speaker 1: in money making.
Speaker 8: But I just want to bring up the difference in
Speaker 8: scale that as far as I.
Speaker 1: As my reporting showed that that was a guy making
Speaker 1: a few hundred thousand dollars, I know that this book
Speaker 1: deal he made it.
Speaker 8: What was that like sixty million dollars?
Speaker 1: I think, yeah, but what I would But what I
Speaker 1: really tried to wrap my mind around, and I know
Speaker 1: Annie felt this way too. Is that what we're talking
Speaker 1: about now for the family since the re election campaign began?
Speaker 5: Right is in the billions, Max Abelson, this is a
Speaker 5: great story. It's today's big Take. It's one of the
Speaker 5: most read stories on the Bloomberg terminal. You got to
Speaker 5: read it online because the illustrations in there are perfect
Speaker 5: as well. Max, Thanks so much for joining us.
Speaker 8: This is the.
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Speaker 2: station Just Say Alexa played Bloomberg eleven thirty.
Speaker 4: There's a lot that is once again coming out of DC.
Speaker 3: We have actually seen shares of Fannie Mae and Freddie
Speaker 3: Mack surged to sixteen years sixteen year highs after President
Speaker 3: Trump said late last night that he was giving very
Speaker 3: serious consideration to bring the firms public after more than
Speaker 3: a decade of being under government oversight.
Speaker 4: So let's get to what you need to know.
Speaker 3: Bloomberg Intelligence Consumer finance analyst be Elliott is with us
Speaker 3: once again from our DC Bureau. Back to our DC
Speaker 3: Bureau week. Go Hey, Ben, good to have you here.
Speaker 3: First up, Fanny Freddie been around for a long time,
Speaker 3: storied history, quasi government publicly traded endities. What do we
Speaker 3: first need to know kind of about that history?
Speaker 10: Yeah, so they were founded many decades ago. Fanny May
Speaker 10: first in the thirties, Freddie Maclear in the seventies. Actually,
Speaker 10: they were privatized in the past, in the late sixties
Speaker 10: by previous piece of legislation which sort of has some
Speaker 10: echoes of what's happening today. And the company is basically
Speaker 10: guaranteed seventy percent of US mortgages. You know, their existence
Speaker 10: is unique globally and it makes the US home ownership
Speaker 10: model possible. It's the reason that we have a thirty
Speaker 10: year fixed rate mortgage available to homeowners today.
Speaker 5: So what do we need to know about what happened
Speaker 5: potentially during the financial crisis and the government oversight that
Speaker 5: we've seen over the last few years, and what could
Speaker 5: change given what we heard from the President.
Speaker 10: Yeah, so the companies are fundamentally changed since the financial crisis.
Speaker 10: It's important to note that they were doing all kinds
Speaker 10: of ancillary businesses. They were basically operating the world's biggest
Speaker 10: hedge fund, as Warren Buffett once said, and they got
Speaker 10: over their skis taking on a bunch of additional risk
Speaker 10: beyond just guaranteeing vanilla mortgages. So the majority of the
Speaker 10: losses they suffered from two thousand and twenty eleven we're
Speaker 10: from those activities, right, So they don't do any of
Speaker 10: that anymore. But you know, they exist in this sort
Speaker 10: of quasi governmental state where the FHFA and the Treasury
Speaker 10: own and are in charge of the companies, and by
Speaker 10: and large they function very well. They provide a huge
Speaker 10: amount of liquidity to US housing markets. Every year, they
Speaker 10: make the thirty year mortgage possible, and they earn about
Speaker 10: thirty billion dollars a year for the Treasury Department. So
Speaker 10: the status quo is arguably working. But they're in sort
Speaker 10: of a bankruptcy like process that was never meant to
Speaker 10: be permanent, and so there are a lot of observers
Speaker 10: who think that that process should now come to an end, all.
Speaker 3: Right, So you've got Fanny May up forty percent in
Speaker 3: today's session. Freddie mac is up just about thirty nine percent.
Speaker 3: So if they do go public officially and they're publicly
Speaker 3: held entities, what does it mean for them, What does
Speaker 3: it mean for their role in housing?
Speaker 4: How might that change things from what they've been.
Speaker 10: Well, it's it's really important to note that there are
Speaker 10: very few details on this right. So the President has
Speaker 10: been has been sort of saying what he said last
Speaker 10: night since twenty seventeen, so we don't have anything new.
Speaker 10: And the really important detail will be how, if at all,
Speaker 10: the US government continues to back these companies after the
Speaker 10: exit conservatorship potentially and and start to be to trade
Speaker 10: like normal public companies. And and everyone by large degrees
Speaker 10: that there will be some form of federal government guarantee.
Speaker 10: They hope it will be explicit, they hope it will
Speaker 10: be defined at a certain value, and they hope that
Speaker 10: it will be paid for. But by and large, the
Speaker 10: companies get a huge amount of benefits from being quasi governmental.
Speaker 10: You know, their their credit rating is tied to the sovereign,
Speaker 10: for instance, so they get very they get they get
Speaker 10: financing on par with the with the risk free rate essentially,
Speaker 10: which allows their business model to function at the price
Speaker 10: as it does today. So if the companies were to
Speaker 10: exit conservatorship, you know, it's not necessarily true that mortgage
Speaker 10: rates will arise, but there are plenty of ways in
Speaker 10: which they could. One is that the companies choose to
Speaker 10: or need to earn more profits to attract third party
Speaker 10: private capital to replace the government's current stake. And the
Speaker 10: other way is that agency NBS investors lose faith in
Speaker 10: their backing and they start to see credit risk returning
Speaker 10: to the securities, and therefore they demand a larger premium
Speaker 10: over treasuries and that translates into higher mortgage rates.
Speaker 5: What does it mean exactly when you say that the
Speaker 5: US has a stake in these companies, Because you know,
Speaker 5: I go to HDS in the Bloomberg terminal to look
Speaker 5: at these equities to see who the holders are, it
Speaker 5: doesn't say the US government owns x percentage of these firms.
Speaker 1: Yeah.
Speaker 10: So, actually, at Bloomberg we do an interesting thing, which
Speaker 10: is that we display the share count as though the
Speaker 10: Treasury had already executed its warrants. It holds warrens to
Speaker 10: buy seer of the common stuff. But they're not actually
Speaker 10: exercised yet, so the federal government is not reflected as
Speaker 10: an owner of the common shares. What they do own
Speaker 10: is something called the senior preferred shares, which obviously as
Speaker 10: the name implies, or senior to the common shares and
Speaker 10: the valuation. There is something called the liquidation preference, which
Speaker 10: is growing each quarter equal to the amount that the
Speaker 10: companies earn, and it's approaching four hundred billion dollars. So
Speaker 10: that's kind of the biggest impediment to this recap and
Speaker 10: release process that you hear about is what does the
Speaker 10: federal government do with this gigantic stake in the companies
Speaker 10: and how does it get paid back?
Speaker 3: Yeah, because I wonder if the government is still somehow involved,
Speaker 3: is it kind of a sure thing for investors?
Speaker 4: Maybe not a high flyer, but a sure thing. And
Speaker 4: I also do think about.
Speaker 3: Like moral hazard, like if something goes astraight, like do
Speaker 3: we just assume the government's going to be there to
Speaker 3: protect things?
Speaker 6: Yeah?
Speaker 10: I think there's the biggest risk is obviously moral hazard, right, right,
Speaker 10: if they leave conservatorship and there's a defined dollar amount
Speaker 10: that the Treasury agrees to backstop the companies and they
Speaker 10: pay for it. I think even then bond markets will
Speaker 10: assume that if worst comes to worst, the federal government
Speaker 10: is going to write a blank check. The companies are
Speaker 10: absolutely fundamental to the US economy, and you know, if
Speaker 10: they were private enterprises, there's just no way that they could,
Speaker 10: you know, go into bankruptcy and be resolved simply. And
Speaker 10: the evidence of that is two thousand and eight, right's
Speaker 10: staring us right in the face. So it does seem
Speaker 10: as though there's some circular logic here, like we'd be
Speaker 10: going right back to.
Speaker 3: Where we were, Ben, fifteen seconds. How important is Fanny
Speaker 3: and Freddy in terms of the housing market? They'll liquidity
Speaker 3: just very quickly.
Speaker 10: Absolutely crucial. They backed seventy percent of all US mortgages,
Speaker 10: and without them, the fixed year, the fixt R eight
Speaker 10: thirty year note just just wouldn't be available the way
Speaker 10: it is today.
Speaker 4: This is what you call an interview.
Speaker 3: Why you should care, Ben Ellie, thank you so much,
Speaker 3: Really appreciate b leotom me intelligence consumer finance analyst, Ben
Speaker 3: la You know the.
Speaker 5: Top holding is Pershing Square at two percent.
Speaker 4: Love this stuff. This is Bloomberg.
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Speaker 2: Me Efe Well, Drin Don on Bloomberg Radio.
Speaker 3: All right, everybody, we're just about eighteen minutes away from
Speaker 3: the closing bell on this Thursday. Carol Master along with
Speaker 3: Tim Stanovik live here at our Bloomberg Interactive Broker studio,
Speaker 3: Charlie and Bill Maloney breaking down the trade, talking about
Speaker 3: the equity trade, we're pretty much hovering o our best
Speaker 3: levels of the set. But what we really want to
Speaker 3: get into is what we've been talking so much on
Speaker 3: the fixed income side of things, in particular US treasuries.
Speaker 5: Sometimes you have the perfect guests for the moment we
Speaker 5: really had, and this is one of those times. We
Speaker 5: got Kathy Jones with us. She's chief fixed income strategist
Speaker 5: at the SHWUB Center for Financial Research, and she's here
Speaker 5: in our Bloomberg Interactive Broker Studios. Thanks for coming in.
Speaker 5: It is always great to see you, especially in a
Speaker 5: week where we're talking about over five percent on the
Speaker 5: thirty year.
Speaker 9: Well, thanks for having me. It's a fun time to
Speaker 9: be to be talking about it.
Speaker 5: So what would you say is the underlying root cause
Speaker 5: of what we saw happen yesterday?
Speaker 9: I think there are a number of things have come together.
Speaker 9: So it didn't just happen overnight, obviously, But the initial catalyst,
Speaker 9: or the immediate catalyst, was the budget bill, which was
Speaker 9: kind of a final straw for the market saying Okay,
Speaker 9: there's really no meaningful progress going to be made anytime
Speaker 9: soon on reducing the deficit. And this comes after we've
Speaker 9: seen glow yields rise, after the dollar has fallen, and
Speaker 9: we've made all these policy changes on trade that actually
Speaker 9: would discourage capital inflows. And so we're this policy mix
Speaker 9: combined with the budget said Okay, if I'm going to
Speaker 9: hold long term paper, I'm going to need a higher
Speaker 9: yield to compensate me.
Speaker 5: But that bill is now closer or that bill is
Speaker 5: now closer to becoming law, and we're seeing yields actually
Speaker 5: pull back a little bit. So in my view, and
Speaker 5: correct me if I'm wrong. Nothing is really shifted on
Speaker 5: that front. Yet we're not seeing as much excitement or
Speaker 5: in the words of the President, maybe yippiness in the
Speaker 5: bond market. Yeah.
Speaker 9: Well, I think a lot of the yippiness happened when
Speaker 9: we hit five percent, right, and so now we're settling
Speaker 9: down and kind of dealing with when what's so.
Speaker 5: We don't stay yippy even though we're above five percent,
Speaker 5: just the fact that we hit it is yippy.
Speaker 9: Well, yes, but we have a one day reprieve, so
Speaker 9: we don't know what's coming. But I would have to
Speaker 9: say that if nothing changes on the policy front, the
Speaker 9: likelihood is that yields will continue to rise at the
Speaker 9: long end, just because investors want more compensation for all
Speaker 9: the risks that have been put together.
Speaker 1: Here.
Speaker 4: One thing I want to get into is, and what
Speaker 4: I'm finding interesting, is this just isn't a US thing.
Speaker 4: It's a global thing.
Speaker 3: And we talked about this with our John Authors, who
Speaker 3: has a column out. He said, the bon vigilantes vigilantes
Speaker 3: excuse me, may need a lot of rope and so,
Speaker 3: but getting into he said, even some bigger things, not
Speaker 3: just governments, fiscal houses, longevity costs to society and just
Speaker 3: a different way of thinking of it, And I'm just
Speaker 3: curious how that plays into your thinking as well, Kathy.
Speaker 9: Yeah, absolutely, demographics are important here because we do have
Speaker 9: aging populations and that means the burden on government will
Speaker 9: be higher, presumably than it has been in the past,
Speaker 9: as a larger proportion of the population requires government services,
Speaker 9: and we haven't done anything to kind of address that
Speaker 9: in balance longer term. So that combined with you know,
Speaker 9: we've come off twenty years of slow growth, low inflation,
Speaker 9: and ramped up our spending, and now we're ramping it
Speaker 9: up more at a time when the economy is actually
Speaker 9: doing well and inflation's not low and interest rates aren't low.
Speaker 9: We're kind of having the policy impulse, the fiscal impulse
Speaker 9: is going in the wrong direction at this stage of
Speaker 9: the business cycle. Usually it should be countercyclical, and this
Speaker 9: is pro cyclical.
Speaker 3: Are you worried about these spending programs ultimately will lead
Speaker 3: in some ways maybe to stackflation. And I'm just thinking
Speaker 3: about if we're living in a higher rate environment, that's
Speaker 3: going to have a cost right across the board everybody everything.
Speaker 3: And I'm just curious as we continue to see, we're
Speaker 3: probably going to still be in a higher tariff environment.
Speaker 3: Things are going to cost more, and I know we'll
Speaker 3: settle into it that everybody has just so much in
Speaker 3: terms of funds to play around with.
Speaker 4: So do you worry about stackflation? What do you worry
Speaker 4: about in terms of the economic scenario.
Speaker 9: I do worry about stagflation because it's probably one of
Speaker 9: the most difficult things to get out of, and that's
Speaker 9: without a lot of pain being inflicted on someone somewhere.
Speaker 9: So policy wise, what does the FED do with stagflation?
Speaker 9: They probably can't lower rates, right, because that will just
Speaker 9: send inflation higher. On the other hand, if the economy
Speaker 9: is weakening and unemployment is rising, they really should be
Speaker 9: easing policy because that's part of their dual mandate. It's
Speaker 9: not an easy process to work out. If we had
Speaker 9: it in the seventies, you know, Arthur Berns and Nixon
Speaker 9: and all that, We've talked about a lot, and it
Speaker 9: was it was a long painful process to get out
Speaker 9: of it. And so if we go back to an
Speaker 9: environment like that, and particularly if we do it globally,
Speaker 9: that is going to be a very difficult process.
Speaker 5: Is the risk now of that greater than at any
Speaker 5: point you've seen before in the last let's say, since
Speaker 5: the Great enter Crisis.
Speaker 9: Yeah, I think it's on a global perspective, or just
Speaker 9: for the US globally as well. Now we're encouraging Germany
Speaker 9: and Europe to spend more on defense. I don't know
Speaker 9: that that's going to create for Europe, you know, this boom,
Speaker 9: this fiscal boom, but it's more than we have asked
Speaker 9: of them before, and it's more spending than they've done before.
Speaker 9: So we have that in Europe. Japan has its own
Speaker 9: unique set of problems, and you've seen those yields move
Speaker 9: up very quickly. So it could become a global phenomenon.
Speaker 4: All right, So there's that backdrop. Keep hitting my mic,
Speaker 4: they're gonna yell at me, but we have that backdrop.
Speaker 3: The other thing is, nothing is as deep and liquid
Speaker 3: as the US treasury market. So how does that insulate
Speaker 3: us from some of what might come?
Speaker 9: Yeah? I think the one thing, the thing that gives
Speaker 9: me the most comfort is that there's no real replacement
Speaker 9: for the US treasury market.
Speaker 4: And the other thing is not likely to be anytime now, right,
Speaker 4: you know, you.
Speaker 9: Can't really see it on the horizon. And the other
Speaker 9: thing is we are well healthy country with tremendous assets,
Speaker 9: so we have the capability of funding our debt, of
Speaker 9: spending you know where we need to spend. We have
Speaker 9: the capability to reduce our debt and to service our debt,
Speaker 9: even at higher interest rates. We don't seem to have
Speaker 9: the willingness to deal with it.
Speaker 8: That's more of the issue.
Speaker 9: But we're not like an emerging market country, our poor
Speaker 9: country that builds up so much debt it can't service
Speaker 9: the debt. We have the ability to do it.
Speaker 5: Just a minute left. I've been asking everybody this question
Speaker 5: today when it comes to fixed income, how do you
Speaker 5: see corporates competing with fixed income right now?
Speaker 9: For money, there's been a lot of interest in investment
Speaker 9: grade corporates. I think they're a little expensive right now, Okay,
Speaker 9: and we like them, but you know, the spreads are
Speaker 9: pretty tight, so i'd say up in credit quality, but
Speaker 9: I think they look pretty good.
Speaker 5: Yeah, because we spoke to Sandy Villary yesterday who mentioned
Speaker 5: he's not interested on the fixed income side when it
Speaker 5: comes to US debt. He's looking at corporates. That's what's interesting.
Speaker 9: A lot of issuance in Euro now from US corporate?
Speaker 3: Is that where you would look overseas? Like where would
Speaker 3: you in the fixed income commit some new money right now?
Speaker 4: Got about forty.
Speaker 9: Yeah, we like from the municipal bonds look very attractive.
Speaker 9: We do like investment grade corporates, and some of the
Speaker 9: Euro denominated issues could be very attractive even though the
Speaker 9: yield's a bit lower. If you think the dollar is
Speaker 9: going to go down as we do.
Speaker 3: You're someone who's seen market cycles, does this kind of
Speaker 3: feel odd?
Speaker 8: Weird?
Speaker 1: Like?
Speaker 4: How do you see it? Forgive me just got about
Speaker 4: twenty five seconds.
Speaker 9: Yes, it feels weirder than anything. And I've been in
Speaker 9: this business for almost forty years. Yeah, this feels weirder
Speaker 9: than anything that I've seen.
Speaker 4: And that includes GFC COVID.
Speaker 9: Yeah either you got it.
Speaker 3: Yeah, thank you, which is why we really look forward
Speaker 3: to talking with you today as always, Kathy, Thank you.
Speaker 3: Kathy Jones, she fixed and comes strategist over at Schwab
Speaker 3: Center for Financial Research, joining us right here in our
Speaker 3: Bloomberg Interactive Broker Studio.
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