WEBVTT - U.S. Needs to Move Fast and Appoint a Czar to Puerto Rico, Rhodes Says 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.199 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. I 0:00:32.320 --> 0:00:34.960 am very pleased to welcome to the eleven three oh 0:00:35.000 --> 0:00:38.360 Studios Banker to the World, Bill Rhodes, President, chief executive 0:00:38.360 --> 0:00:42.559 Officer of william Our Rhodes Global Advisors, also author of 0:00:42.760 --> 0:00:45.400 a book, Banker to the World's Leadership Lessons from the 0:00:45.400 --> 0:00:49.519 front Lines of Global Finance, with a forward by Paul Volker. 0:00:49.760 --> 0:00:53.800 Vocal Bill, I would love to get started with the 0:00:53.960 --> 0:00:56.760 big question about China and North Korea right now in 0:00:56.800 --> 0:01:01.520 markets UH, there is a perception that in general, traders 0:01:01.640 --> 0:01:08.000 are underestimating the degree of risk with respect to North Korea, 0:01:08.080 --> 0:01:10.679 the prospect of a conflict there, as well as with 0:01:10.840 --> 0:01:13.720 China its response to that, as well as its ability 0:01:13.720 --> 0:01:17.080 to rein in its own UH situation with an inflated 0:01:17.120 --> 0:01:20.959 credit market. From your perspective, how dire is this situation 0:01:21.000 --> 0:01:24.280 that's sort of developing in the region, and what's the 0:01:24.360 --> 0:01:26.600 what's the best path forward here? Well, I think it's 0:01:26.640 --> 0:01:30.400 the biggest single problem we face in the world today, UH, 0:01:30.440 --> 0:01:33.120 and the only one that really can can help us 0:01:33.160 --> 0:01:37.520 solve this UH is China, and China is right on 0:01:37.959 --> 0:01:43.280 the cusp of the biggest conference, the biggest political event 0:01:43.760 --> 0:01:47.000 in the last five years, which is their nineteenth Party Congress, 0:01:47.000 --> 0:01:52.080 which begins on the eighteenth of October. Because the President 0:01:52.280 --> 0:01:54.840 of China, Hi Jinping, who is as strong as leader 0:01:54.880 --> 0:02:00.560 of China since Dong Jo Ping, UH, is planning to 0:02:00.680 --> 0:02:03.480 make a number of announcements, including who is going to 0:02:03.560 --> 0:02:05.840 be on the Polar Bureau of the Standing Committee of 0:02:05.880 --> 0:02:08.919 the Polar Buro which runs the country, and there's a 0:02:09.000 --> 0:02:12.560 lot of speculation that he may make some changes there 0:02:12.960 --> 0:02:16.120 even to the premiership of Li Kao Chong, not clear 0:02:16.160 --> 0:02:19.320 the rumors to that effect. And the person that's closest 0:02:19.320 --> 0:02:21.919 to him is Once sh Shan, who I know well 0:02:22.000 --> 0:02:25.160 from over the years, who is now leading in a 0:02:25.200 --> 0:02:29.440 corruption campaign and people are watching that very closely. So 0:02:30.040 --> 0:02:33.320 she Jumping does not want any problems to disturb this, 0:02:33.440 --> 0:02:36.080 so he is very unhappy with what Kim jong un 0:02:36.200 --> 0:02:39.399 is doing in Korea because this is making it very 0:02:39.400 --> 0:02:43.960 difficult for China because people are leaning on China, mostly 0:02:44.000 --> 0:02:47.160 the United States and President Trump to do something about 0:02:47.200 --> 0:02:52.440 stopping Kim Jong un from continuing to conduct nuclear tests 0:02:52.919 --> 0:02:56.119 and ballistic missile test because what he wants to do 0:02:56.720 --> 0:03:00.640 is to marry the ballistic missile UH at the nuclear 0:03:00.639 --> 0:03:05.359 warhead and threatened the United States, Japan, whatever, And so 0:03:05.400 --> 0:03:07.960 the question is how do you stop them? And in 0:03:08.000 --> 0:03:10.640 my mind, the sanctions that have been agreed upon at 0:03:10.680 --> 0:03:14.160 the United Nations are helpful, but they're not a solution 0:03:14.240 --> 0:03:16.880 and they take time. We know that from what happened 0:03:16.880 --> 0:03:20.240 in Iran, South Africa, they don't happen overnight. So what 0:03:20.600 --> 0:03:23.799 is necessary and what can stop Kim Jong un from 0:03:23.800 --> 0:03:26.560 this and bring him to the table to negotiate, which 0:03:26.600 --> 0:03:29.960 is what we would like to do, is to cut 0:03:30.000 --> 0:03:33.480 off all his oil and gas supplies because the primary 0:03:33.600 --> 0:03:37.640 user of oil and gas in North Korea or the 0:03:37.760 --> 0:03:41.040 armed forces, and I think if we cut, if China 0:03:41.080 --> 0:03:44.920 cuts off, which is gives them eight of their oil 0:03:44.960 --> 0:03:49.080 and gas UH at any particular moment, they will come 0:03:49.120 --> 0:03:51.640 to the table within a couple of weeks. The only 0:03:51.680 --> 0:03:54.160 other oil and gas are getting is from Russia, maybe 0:03:54.160 --> 0:03:59.040 ten through brokers in Southeast Asia. Other than that, I 0:03:59.160 --> 0:04:03.520 do not think that the banking uh you know, the 0:04:03.560 --> 0:04:07.440 banking measures taken on sanctions or any of the others 0:04:07.480 --> 0:04:10.120 are going to work. I think the only thing that 0:04:10.160 --> 0:04:12.800 will work is to cut off the oil supplies, and 0:04:12.880 --> 0:04:16.720 China is the key to doing that. I think that 0:04:16.760 --> 0:04:19.159 if we don't badger them too much, and you know, 0:04:19.400 --> 0:04:22.360 do quiet diplomacy with him, I think, uh, you know, 0:04:22.400 --> 0:04:25.240 all these statements going back and forth are not helpful. 0:04:25.600 --> 0:04:28.760 I think some quiet diplomacy will do it because Shi 0:04:28.839 --> 0:04:32.160 Jin Pain does not want his great moment of glory 0:04:32.760 --> 0:04:35.960 to be affected by what's going on by Kim Jong oon. 0:04:36.080 --> 0:04:38.120 I've been with him at one occasion four or five 0:04:38.200 --> 0:04:40.000 years ago, and he made it very plain to me 0:04:40.480 --> 0:04:43.040 that and the Chinese think this in general, that Kim 0:04:43.120 --> 0:04:45.520 Jong un is a pain in the neck. But the 0:04:45.560 --> 0:04:48.600 reason they haven't intervened and done anything earlier is they 0:04:48.600 --> 0:04:52.120 do not want American influence on the Yellow That's why, uh, 0:04:52.160 --> 0:04:57.160 you know, the Chinese invaded North Korea to support uh 0:04:57.560 --> 0:05:01.880 the then government of Kim Il sung was because we 0:05:01.920 --> 0:05:04.040 had we had sent troops in the Korean War right 0:05:04.080 --> 0:05:06.919 to the Yallow River. It was one of McArthur's mistakes. 0:05:07.000 --> 0:05:09.599 He underestimated the Chinese would go in. And the other 0:05:09.680 --> 0:05:14.120 thing is if the regime collapses overnight, they're concerned about 0:05:14.160 --> 0:05:17.000 all the refugees that may go into Manchuria Northern China. 0:05:17.440 --> 0:05:20.800 But the Chinese do not like Kim jongun. They think 0:05:20.800 --> 0:05:24.719 he's difficult, he's causing a problem, and particularly at this 0:05:24.839 --> 0:05:28.000 great moment of importance for Shi Jin Pain. That's why 0:05:28.040 --> 0:05:30.400 he's gone along with the earlier sanctions. But the only 0:05:30.440 --> 0:05:34.640 one that will bring Uh Kim Jong un to the 0:05:34.720 --> 0:05:37.760 table is to cut off all oil and gas supplies 0:05:38.160 --> 0:05:43.000 to the country, and that will completely destabilize the military 0:05:43.040 --> 0:05:46.359 because they can't function without oil and gas. We're speaking 0:05:46.400 --> 0:05:48.720 with Bill Rhodes. He is the author of Banker to 0:05:48.760 --> 0:05:52.600 the World, Leadership Lessons from the front Lines of Global Finance. 0:05:53.000 --> 0:05:55.520 And Bill, I want to turn your attention now to 0:05:56.400 --> 0:05:59.479 the Caribbean and Venezuela and Puerto Rico, because I know 0:05:59.520 --> 0:06:02.280 that you are died your distinguished career at City Bank 0:06:02.680 --> 0:06:08.960 in Venezuela. You know the Caribbean region very well. You 0:06:09.040 --> 0:06:12.279 can vice Chairman of of City corps. What can you 0:06:12.360 --> 0:06:15.320 tell us about the region as a result of these hurricanes, 0:06:15.320 --> 0:06:19.560 and specifically what is necessary or what is possible rather 0:06:20.160 --> 0:06:25.320 to fix the horrendous and catastrophic conditions that currently exist, 0:06:25.400 --> 0:06:27.279 not only in Puerto Rico, but in many of these 0:06:27.760 --> 0:06:30.560 live in Jamaica for a while also, so I remember it. 0:06:31.040 --> 0:06:34.679 But I think the situation Puerto Rico's is particularly dire. 0:06:34.800 --> 0:06:38.240 You have to remember that this is an island or 0:06:38.320 --> 0:06:41.719 country because it's part of the United States. Uh, that 0:06:42.240 --> 0:06:45.760 is basically in bankruptcy. That's a starter. When you take 0:06:45.760 --> 0:06:50.360 a look at Florida and Texas, say booming economies. Second 0:06:50.400 --> 0:06:52.719 of all, they're isolated because they're an island, so you 0:06:52.760 --> 0:06:55.440 can't take the railroads down like you were even in 0:06:55.520 --> 0:06:59.680 Katrina or or you know, or Texas or Florida. Everything 0:06:59.720 --> 0:07:03.040 has to be flown in or sent in by ship. Uh. 0:07:03.120 --> 0:07:06.800 They also have had a terrible zekea epidemic there, and 0:07:06.800 --> 0:07:09.320 of course with all this water laying down, the mesqu 0:07:09.520 --> 0:07:10.920 is going to go wild. A lot of people are 0:07:10.920 --> 0:07:13.560 concerned about Colra. I think it is a dire situation. 0:07:14.000 --> 0:07:16.040 I think to try and compare it to the earlier 0:07:16.120 --> 0:07:19.600 hurricanes is a big mistake. Uh, And we have to 0:07:19.680 --> 0:07:23.000 move fast, very fast there or I think it's going 0:07:23.040 --> 0:07:25.200 to be a complete debacle. In addition to all of this, 0:07:26.200 --> 0:07:29.400 some of the leading talent of Puerto Rico has migrated 0:07:29.760 --> 0:07:32.840 to Florida in the last seven or eight years because 0:07:32.840 --> 0:07:35.880 of the dire economic situation. You have four hundred thousand 0:07:36.640 --> 0:07:40.520 uh Puerto Ricans living in Florida, most of have come 0:07:40.560 --> 0:07:45.200 in the last decade. And what are the teachers? Uh, Doctors, lawyers, 0:07:45.400 --> 0:07:48.160 architects are the cream of the crop that have left. 0:07:48.680 --> 0:07:51.360 And so uh, you know, the island has been just 0:07:51.480 --> 0:07:54.480 neuted of all of these of all of this expertise. 0:07:55.200 --> 0:07:57.840 And so I think that what we need to do 0:07:57.920 --> 0:08:00.240 is put a czar down there, so like we did 0:08:00.320 --> 0:08:03.560 the general in in you know, in New Orleans, to 0:08:03.680 --> 0:08:06.400 make sure that the aid gets there and it gets 0:08:06.400 --> 0:08:09.840 there quickly. Who would you recommend to do that? And 0:08:09.880 --> 0:08:13.000 what's the likelihood that we get a person who then 0:08:13.080 --> 0:08:18.680 becomes responsible for making sure that these plans are carried 0:08:18.720 --> 0:08:20.480 out and that people get the healthy Well, you see 0:08:20.520 --> 0:08:22.240 the problem. You have a governor. But the problem with 0:08:22.280 --> 0:08:24.480 the governor is he doesn't control what's going in All 0:08:24.480 --> 0:08:26.360 he can do is control the island, so you need 0:08:26.440 --> 0:08:29.280 someone who's there for the supplies. We can do it. 0:08:29.320 --> 0:08:31.280 We should have learned that with Haiti. You gotta put 0:08:32.040 --> 0:08:34.080 you know, Bush may have screwed up at the beginning 0:08:34.640 --> 0:08:36.960 uh in New Orleans, but he least he put in 0:08:37.000 --> 0:08:39.280 a three star general got the thing moving well. I 0:08:39.320 --> 0:08:41.839 feel like you're talking about the flight of talent, and 0:08:41.840 --> 0:08:43.800 they're about three and a half million people who currently 0:08:43.800 --> 0:08:46.680 live on the island. The population has been shrinking rapidly. 0:08:47.400 --> 0:08:50.080 How much more do you expect the population to shrink 0:08:50.120 --> 0:08:53.120 in light of this humanitarian disaster? And how will that 0:08:53.200 --> 0:08:56.520 affect the current negotiations of over the seventy four billion 0:08:56.559 --> 0:08:59.280 dollars of death. The latest senses down there says three 0:08:59.280 --> 0:09:02.320 point four million. I think it's less than that because 0:09:02.360 --> 0:09:04.760 they're not taking into account the number of people that 0:09:04.840 --> 0:09:07.240 already left gone to Florida, you know, the talent pool. 0:09:07.280 --> 0:09:10.679 I said, so, uh, I think that you're going to 0:09:10.760 --> 0:09:12.959 have additional people leave, and you have all these small 0:09:13.840 --> 0:09:17.840 towns through the mountains that that are cut off. I've 0:09:17.840 --> 0:09:21.280 been talking to people down there, and really it's it's terrible. 0:09:21.360 --> 0:09:26.800 Hospitals don't have electricity to function. Um, and so we 0:09:26.880 --> 0:09:29.600 have to make a much more massive effort I think 0:09:29.600 --> 0:09:31.600 that we've ever had to before in any of these 0:09:31.679 --> 0:09:34.480 hurricanes because of the situation of the island. It would 0:09:34.480 --> 0:09:37.520 be great if they were a booming economy. Uh and 0:09:37.720 --> 0:09:40.320 uh uh you know they have been able to plan 0:09:40.480 --> 0:09:43.720 for this, etcetera. So I think it's a very dire situation. 0:09:43.800 --> 0:09:47.080 And I think everything uh that can be done on 0:09:47.160 --> 0:09:49.840 a federal level by the United States, but also on 0:09:49.600 --> 0:09:54.000 a private level of companies that operate there, do whatever. 0:09:55.040 --> 0:09:58.960 Because people have to remember these are United States citizens. 0:10:00.120 --> 0:10:03.280 Their their soldiers for in World War One, World War two, 0:10:03.280 --> 0:10:07.080 the Korean War, in Vietnam, and you know some of 0:10:07.120 --> 0:10:10.560 them also fighting in Iraq Afghanistan. So we owe it 0:10:10.600 --> 0:10:14.200 to these people. And it's not like some far off place, 0:10:14.559 --> 0:10:17.640 you know. And and sometimes I get upset with some 0:10:17.760 --> 0:10:20.520 members of depressed obviously not Bloomberg because you know the 0:10:20.559 --> 0:10:23.800 importance of this, but others who kind of don't make 0:10:23.840 --> 0:10:25.760 a big thing of this. They say, well, it's just 0:10:25.800 --> 0:10:28.600 another hurricane, and you know, that's some island off there, 0:10:28.640 --> 0:10:31.080 and they're not a state and all of this, which 0:10:31.120 --> 0:10:33.600 is one of the ultimate solutions. I think statehood at 0:10:33.600 --> 0:10:36.200 some point in time has to come there so they 0:10:36.240 --> 0:10:41.320 can basically integrate themselves more and get more in, you know, 0:10:41.480 --> 0:10:44.880 in the way of help that the states are able 0:10:44.920 --> 0:10:50.000 to get. Uh. So uh, hopefully these issues will be forced. 0:10:50.200 --> 0:10:53.960 Hopefully we will do what's necessary here because otherwise, you know, 0:10:54.160 --> 0:10:56.640 when we talk about all of these problems around the 0:10:56.679 --> 0:10:58.560 world and stuff, we've got to think that we have 0:10:58.600 --> 0:11:01.680 a tremendous problem on our front door with Puerto Rico. 0:11:01.920 --> 0:11:04.520 I was gonna say, what what about would would Jeb Bush? 0:11:04.640 --> 0:11:06.560 Do you think would he be a good person to 0:11:06.679 --> 0:11:10.120 lead the reconstruction and revitalization of of Puerto Rico? I mean, 0:11:10.240 --> 0:11:16.760 former governor of Florida, speaks fluent Spanish. I mean you 0:11:16.800 --> 0:11:19.200 need somebody like that who's getting to get down there. 0:11:19.200 --> 0:11:21.520 I had mentioned a military man just because we had 0:11:21.559 --> 0:11:25.240 that in in New Orleans. But someone who can mobilize 0:11:25.600 --> 0:11:29.040 the administration and mobilize the whole government on the federal level, 0:11:29.400 --> 0:11:32.240 but also you know, work closely with the governor on 0:11:32.400 --> 0:11:35.360 domestic side, and also get the private sector, you know, 0:11:35.760 --> 0:11:39.920 to be involved there. I think it's a critical must. 0:11:39.960 --> 0:11:43.880 And hopefully when the President gets down there, he's gonna 0:11:43.960 --> 0:11:47.200 see this. But you know time is passing. Bill Rhodes, 0:11:47.240 --> 0:11:49.679 thank you so much for joining us. Really a pleasure 0:11:49.720 --> 0:11:52.360 to hear your thoughts, very insightful. Bill Rhodes is President, 0:11:52.480 --> 0:11:56.079 chief executive officer of William R. Rhodes Global Advisors, also 0:11:56.400 --> 0:11:59.560 author of Banker to the World's Leadership Lessons from the 0:11:59.600 --> 0:12:15.120 front Lines of Global finance. As the Federal Reserve talks 0:12:15.160 --> 0:12:18.840 about reducing its balance sheet and as people look around markets, 0:12:19.280 --> 0:12:23.440 some are getting increasingly concerned about financial stability, saying that 0:12:23.520 --> 0:12:26.559 all of the extra liquidity in markets set it up 0:12:26.880 --> 0:12:29.080 for a massive fall. Here to weigh in on that, 0:12:29.120 --> 0:12:32.719 as Sheila Bear, former chairman of the Federal Deposit Insurance Corporation. 0:12:33.400 --> 0:12:37.320 Also currently she is the president of Washington College, and 0:12:37.320 --> 0:12:40.600 she joined us from our Washington, d C studio. Sheila, 0:12:40.720 --> 0:12:43.640 thank you so much for joining us. I'd love to 0:12:43.679 --> 0:12:47.200 get your take on the state of financial stability right 0:12:47.280 --> 0:12:51.400 now and how concerned you are about the excessive liquidity 0:12:51.640 --> 0:12:55.360 and what can be done about that. Well, yes, it's 0:12:55.400 --> 0:12:59.560 it's it's a global problem. I mean financial assets. I 0:12:59.600 --> 0:13:04.640 think about now of global GDP. There's a lot of 0:13:04.679 --> 0:13:07.960 stocks and bonds out there, many multiples of what real 0:13:08.120 --> 0:13:12.000 the real economy would represent and it is de stabilizing it. 0:13:12.080 --> 0:13:16.079 It's looking for return, it's looking for a place to invest, 0:13:16.320 --> 0:13:20.400 and that creates asset bubbles. Uh and UH. The very 0:13:20.400 --> 0:13:23.600 low interest rates also create obviously incentives to to borrow 0:13:23.760 --> 0:13:25.480 and taking a lot of leverage. That's one of the 0:13:25.520 --> 0:13:28.280 reasons why we have so many financial assets now. So 0:13:29.040 --> 0:13:31.720 it's the globe eclonomy really is a washing investment dollars 0:13:32.040 --> 0:13:36.960 far greater than the opportunity for real economic investments. And 0:13:37.000 --> 0:13:41.199 that's why I'm so amused by this tax reform I think, 0:13:41.200 --> 0:13:45.400 I hope it's tax reform uh debate, because the suggestion 0:13:45.440 --> 0:13:47.959 that we need to incentivize even more investment dollars by 0:13:47.960 --> 0:13:51.600 giving investor at tax breaks is something that I really 0:13:51.600 --> 0:13:54.719 just think is is counterintuitive, given as you say, we're 0:13:54.760 --> 0:13:57.760 a washing liquidity right now already. Well, maybe you could 0:13:57.760 --> 0:14:00.520 just give us your thoughts on at least this specifics 0:14:00.559 --> 0:14:02.800 as we know them. That the rate on corporations would 0:14:02.800 --> 0:14:06.600 be set at that's down from the current thirty five, 0:14:07.160 --> 0:14:11.440 and that corporations would be allowed to immediately right off 0:14:11.679 --> 0:14:16.000 their capital spending for at least five years. Yeah. Yeah, Well, 0:14:16.040 --> 0:14:19.560 I think there is some basis in terms of competitiveness 0:14:19.640 --> 0:14:22.200 of doing the business in the US, our corporate rates 0:14:22.240 --> 0:14:25.040 are are not competitive, so I and I think there's 0:14:25.080 --> 0:14:28.960 bipartisan support for that. So that doesn't bother me so much. 0:14:29.000 --> 0:14:31.560 What really does bother me is the discussion of reducing 0:14:31.560 --> 0:14:35.960 the past through rate. That would be a huge well 0:14:35.960 --> 0:14:37.840 we haven't seen the details. That would be a huge 0:14:37.840 --> 0:14:41.680 benefit to private equity funds and hedge funds, which have 0:14:41.760 --> 0:14:45.120 already uh, you know, really been able to cash in 0:14:45.120 --> 0:14:48.280 in uh this uh so called recovery that's been heavily 0:14:48.320 --> 0:14:51.560 driven by monetary policy, which has made it very cheap 0:14:51.600 --> 0:14:54.880 for them to borrow and invest. It's also because safe 0:14:54.920 --> 0:14:59.400 assets return provide such a low return. A lot of 0:14:59.600 --> 0:15:03.520 people and and funds have endowment, college endowments, pensions, what 0:15:03.680 --> 0:15:06.840 have you have piled into alternative investments the kind that 0:15:07.080 --> 0:15:12.200 p funds and hedge funds offer, which is also benefited them. 0:15:12.360 --> 0:15:15.280 So this idea that somehow we need to give them 0:15:15.320 --> 0:15:19.760 more breaks, I don't I really don't understand that. And 0:15:19.960 --> 0:15:22.520 uh to the extent we're talking about, you know, I 0:15:22.800 --> 0:15:24.400 think people are saying, well, we don't want to give 0:15:24.440 --> 0:15:26.320 more tax picts to the rich, but the rich seemed 0:15:26.360 --> 0:15:29.480 to be defined as wage earners, not those who make 0:15:29.520 --> 0:15:32.480 their money from investment income. And that's really where the 0:15:32.560 --> 0:15:36.400 super wealthy reside. That that top point one percent that's 0:15:36.440 --> 0:15:39.480 done so well and this more been the recovery is 0:15:40.240 --> 0:15:43.080 in that sweet spot. And to to give them this idea, 0:15:43.200 --> 0:15:44.960 you know, reducing the pass through rate is going to 0:15:45.080 --> 0:15:47.600 benefit small business. Yes, there will be some small businesses 0:15:47.600 --> 0:15:49.600 that benefit, and we haven't seen the numbers yet, but 0:15:49.640 --> 0:15:51.440 my guess as a line share, the benefit will go 0:15:51.480 --> 0:15:54.480 to the hedge funds and p funds, and that's just counterintuitive. 0:15:54.680 --> 0:15:57.280 So she from from what it sounds like to me, 0:15:57.560 --> 0:16:00.720 you don't think that any kind of tax reformer, tax 0:16:00.720 --> 0:16:06.680 plan that's currently being proposed will substantially boost economic growth 0:16:06.760 --> 0:16:09.360 in a way that will help the entire economy. Well, 0:16:09.560 --> 0:16:11.280 I think I think there's an argument for lowering the 0:16:11.280 --> 0:16:14.080 corporate rate. We need to pay for it. We are 0:16:14.120 --> 0:16:17.520 not overtaxed as a country. I get, Actually, the percentage 0:16:17.520 --> 0:16:22.480 of taxes as are you know, all in federal, state, 0:16:22.520 --> 0:16:24.800 local tax as a percentage of GDP is actually pretty 0:16:24.840 --> 0:16:28.040 low compared to other developed countries. The problem here is 0:16:28.040 --> 0:16:31.960 the distribution and UH and UH the you know, the 0:16:32.160 --> 0:16:36.200 highly inefficient favoritism and tax breaks and loopholes that the 0:16:36.240 --> 0:16:39.160 code provides. So I think anything should be revenue neutral. 0:16:39.200 --> 0:16:42.480 I think taking the top rate down, which typically for corporations, 0:16:42.480 --> 0:16:44.880 which typically is paid by the smaller companies. They don't 0:16:44.880 --> 0:16:47.760 have the you know, the ability to move stuff overseas 0:16:47.960 --> 0:16:51.040 or or have armies of tax lawyers to write special 0:16:51.080 --> 0:16:53.840 breaks for them the tax code. That makes sense, but 0:16:53.880 --> 0:16:56.920 you should broaden the base by paying for it. And yeah, 0:16:56.960 --> 0:16:59.240 I absolutely think that makes sense. Going to a territorial 0:16:59.280 --> 0:17:02.720 system makes the tax code. The corporate code does give 0:17:02.760 --> 0:17:07.080 affirmative obligations to move to move business and rep income overseas. 0:17:07.160 --> 0:17:09.920 So going to a territorial system, getting the top right 0:17:09.920 --> 0:17:11.680 down to be more competitive, and finding a way to 0:17:11.720 --> 0:17:13.800 pay for that through broadening the brace, I think that 0:17:13.880 --> 0:17:16.720 could help the economy. Won't you won't take it up 0:17:16.720 --> 0:17:18.359 to six percent, probably wouldn't even take it up with 0:17:18.359 --> 0:17:21.520 a three percent, but it certainly could help. And then 0:17:21.520 --> 0:17:23.800 a middle a true middle class tax cut would make 0:17:23.800 --> 0:17:26.399 a lot of sense. Again, there's so much investment dollars, 0:17:26.440 --> 0:17:29.240 somebody investment dollars slashing around already, the problems on the 0:17:29.240 --> 0:17:32.760 demand side. This hasn't trickled down middle income and lower 0:17:32.800 --> 0:17:36.040 income families, which growth has been very sluggish, and the 0:17:36.080 --> 0:17:38.879 bottom tier they're still losing ground. You see that, particularly 0:17:39.200 --> 0:17:42.760 with minority families, And you know, it's the right thing 0:17:42.800 --> 0:17:45.200 to do, but it's also the economically smart thing to do, 0:17:45.280 --> 0:17:49.680 because that's you know, they spend their income and they've 0:17:49.680 --> 0:17:53.080 been struggling, and that hurts the broader economy too. So 0:17:53.480 --> 0:17:56.240 providing real relief and additional spending power for the true 0:17:56.240 --> 0:17:58.679 middle class and lower middle class makes a lot of sense. 0:17:59.240 --> 0:18:01.680 But giving more tax breaks to very wealthy people that 0:18:01.720 --> 0:18:05.239 already paying rates already through cured interest or what have you, 0:18:05.680 --> 0:18:08.399 this makes no sense at all. Thanks very much. Sheila 0:18:08.440 --> 0:18:23.720 Bear is the former chairman of the Federal Deposit Insurance Corporation. Well, 0:18:23.760 --> 0:18:27.760 if you're an investor in Bombardier, the Canadian maker of 0:18:27.800 --> 0:18:31.000 aircraft and trains, you're having a very bad day because 0:18:31.040 --> 0:18:32.880 the stock is down more than eight and a half 0:18:32.960 --> 0:18:36.760 percented open down more than six and this has to 0:18:36.840 --> 0:18:40.560 do with its C series jet and a tariff of 0:18:40.640 --> 0:18:43.160 two hundred and twenty percent that the United States has 0:18:43.240 --> 0:18:48.040 leveled against Bombardier to sell those planes into the United States. 0:18:48.040 --> 0:18:50.719 Here to tell us more is Andrew Mayetta. He's our 0:18:50.720 --> 0:18:54.160 Bloomberg trade reporter. He joins US from Washington, and joining 0:18:54.240 --> 0:18:57.959 us from Edinburgh, Scotland is George Ferguson. He's our senior Aerospace, 0:18:58.000 --> 0:19:02.080 Defense and Airlines analyst for Bloomberg Intelligence. Andrew, let's begin 0:19:02.160 --> 0:19:04.399 with you if you could just lay out exactly what 0:19:04.680 --> 0:19:10.119 happened and why. Sure, So, Boeing brought a complaint in 0:19:10.160 --> 0:19:14.399 the US against the Bardier on two fronts. Basically, they 0:19:14.480 --> 0:19:20.280 alleged that the Bardier has been receiving unfair government subsidies 0:19:20.320 --> 0:19:23.920 for years from the Canadian government, from the Quebec government, 0:19:24.720 --> 0:19:28.240 and also that they've been trying to sell their C 0:19:28.560 --> 0:19:34.840 series small passenger jet into the US at less than 0:19:35.480 --> 0:19:38.959 fair market value. And so this was the first ruling 0:19:39.720 --> 0:19:44.240 by the Commerce Department. It's preliminary, as you said, it's 0:19:44.359 --> 0:19:48.840 levi dad or rate of two UH. Customs will will 0:19:48.880 --> 0:19:54.320 begin to collect those um. The final ruling will probably 0:19:54.400 --> 0:19:58.119 come from the International Trade Commission next year when it 0:19:58.160 --> 0:20:03.520 determines how much harm Boeing suffered. So, George, come on 0:20:03.600 --> 0:20:07.320 in here. We see the Bombardier shares are down massively today, 0:20:07.359 --> 0:20:13.080 nearly ten. How long lasting could this potential hit be 0:20:13.320 --> 0:20:17.720 four Bombardier, So I think it could last quite a while. 0:20:17.840 --> 0:20:20.199 So that I think the challenge here really is that 0:20:21.359 --> 0:20:23.639 Delta was a good portion of the order book, and 0:20:23.680 --> 0:20:27.040 I think a very important order because along with Left 0:20:27.080 --> 0:20:31.640 Hans and there's two large, well respected airlines operating the airplane. 0:20:32.160 --> 0:20:33.760 I think given this ruling, I think it's going to 0:20:33.840 --> 0:20:36.119 be hard to sell to any other US airlines. I 0:20:36.119 --> 0:20:37.960 think it's gonna be hard to deliver to Delta and 0:20:38.000 --> 0:20:41.320 pay the pay the duty um. And I think that 0:20:41.400 --> 0:20:43.879 really puts a big portion of the order book in 0:20:44.040 --> 0:20:47.880 question here. So I think without Bombardier bringing more orders 0:20:47.920 --> 0:20:50.520 to the table in the near term, I think it's 0:20:50.520 --> 0:20:53.679 going to hurt the hurt the stocks and significantly here George, 0:20:53.720 --> 0:20:56.960 that's the seventy five jet order for Delta, right, Yeah, 0:20:57.000 --> 0:21:00.680 they have a seventy order with a fifty option. Uh 0:21:00.720 --> 0:21:02.359 you know, so so they could be up to a 0:21:03.160 --> 0:21:08.480 five about three fifty orders. But there's other challenges in 0:21:08.480 --> 0:21:10.159 the order book as well that we could talk to, 0:21:10.320 --> 0:21:13.320 but maybe not enough time in this car. Well, I well, 0:21:13.359 --> 0:21:14.719 I was just gonna go on and say that, you know, 0:21:14.760 --> 0:21:18.200 it's not only workers in Canada that may suffer as 0:21:18.200 --> 0:21:22.000 a result of this. Bombardier has a plan to Northern Ireland, correct, 0:21:22.359 --> 0:21:24.920 but they do, they do. You Know. The thing is, though, 0:21:24.960 --> 0:21:28.240 if I think if we start getting into the ripple 0:21:28.359 --> 0:21:31.080 ramifications here, you're going to find that Boeing has plenty 0:21:31.080 --> 0:21:34.199 of plants around the world, and they're definitely suppliers in 0:21:34.200 --> 0:21:37.119 the UK that they could point to as well to 0:21:37.200 --> 0:21:39.119 say that there'd be a ripple effect on them. So 0:21:39.160 --> 0:21:41.800 I think that that's not going to go as far 0:21:42.680 --> 0:21:46.760 as Bombardier may may may want. Canada probably has more 0:21:46.840 --> 0:21:49.280 pulled given their you know, they purchased defense U S 0:21:49.320 --> 0:21:53.159 Defense equipment as well, so the Canadian discussion might be 0:21:53.200 --> 0:21:55.400 a little bit better. But I think the global global 0:21:56.400 --> 0:21:58.800 parts supply stream is not going to help them that 0:21:58.880 --> 0:22:02.520 much here. Andrew, how long has this action by the 0:22:02.640 --> 0:22:06.200 U S. Commerce Department been in the works and was 0:22:06.240 --> 0:22:11.760 this expected? Yeah, they brought the complaint in April, and 0:22:11.800 --> 0:22:15.040 I would say that this is h This was expected 0:22:15.480 --> 0:22:21.119 generally speaking, when the International Trade Commission finds on a 0:22:21.160 --> 0:22:26.880 preliminary basis that a company probably suffered injury, UH Commerce 0:22:26.960 --> 0:22:29.919 usually just applies a formula to determine what the preliminary 0:22:29.960 --> 0:22:32.159 duties are going to be. Again, the key decision is 0:22:32.200 --> 0:22:36.920 going to come next year when the International Trade Commission. 0:22:37.560 --> 0:22:40.720 Besides whether Boeing is really injured here and you know 0:22:40.840 --> 0:22:43.800 they're gonna way Bombardi's argument, a Bartier's argument is that 0:22:44.560 --> 0:22:47.600 Boeing wasn't even really competing for these for these uh 0:22:47.960 --> 0:22:51.080 for this this uh this delta order. They're saying that, 0:22:51.200 --> 0:22:54.080 you know, Boeing kind of the facto excited that segment, 0:22:54.200 --> 0:22:57.240 So how could they have suffered harm? So here's my question. 0:22:57.280 --> 0:23:00.119 I mean, just on the surface, it seems like is 0:23:00.520 --> 0:23:03.359 connected or will be connected to some of the NAFTA 0:23:03.480 --> 0:23:08.359 renegotiations and just the ongoing tension between the US and 0:23:08.480 --> 0:23:12.280 Canada and the trade partnership. There is that a misreading 0:23:12.280 --> 0:23:15.679 of this. No, I think that that's bang on. Actually, 0:23:15.680 --> 0:23:17.760 you mentioned that I was in d C. I'm actually 0:23:17.800 --> 0:23:21.040 an Ottawa Act the NAFTA talks now, so this is 0:23:21.119 --> 0:23:23.359