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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether you're at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg p m L

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Speaker 1: Podcast on Apple Podcasts, SoundCloud and Bloomberg dot com. Well

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Speaker 1: at the US International Trade Commission in Washington, that's E

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Speaker 1: Street just over near the Capitol within walking distance. Representatives

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Speaker 1: of US Steel are speaking before the Trade Commission looking

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Speaker 1: for a revival of an argument against an antitrust complaint

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Speaker 1: having to do with dumping of steel by rival Chinese manufacturers.

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Speaker 1: And here to tell us more is Gordon Johnson. He

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Speaker 1: is managing director and the head of Alternative Energy as

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Speaker 1: well as Metals and mining equipment research, and he joins

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Speaker 1: us on the phone. A great great to have you

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Speaker 1: with us, A Gordon at Action Capital Management. I beg

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Speaker 1: your pardon, um, you know, I was looking at the

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Speaker 1: at the price movement today of U S steal. We

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Speaker 1: got the stock up nearly four percent. Do they just

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Speaker 1: have to like wave a flag every now and again

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Speaker 1: and say, um dumping tariff and then you know, depending

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Speaker 1: upon whose in power it moves the stock. Yeah, I

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Speaker 1: mean that does indeed seem to be the case, and

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Speaker 1: it seems like the Trump administration is definitely focused on China.

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Speaker 1: But I think people need to look at, uh the

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Speaker 1: reality here. Uh the Obama administration h rained heavily down

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Speaker 1: on China. In fact, they hit China with a number

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Speaker 1: of very aggressive tariffs. And if you look at total

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Speaker 1: Chinese imports as a percent of US STILL imports UM

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Speaker 1: in six point one percent, seven point two percent, it

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Speaker 1: dropped all the way to two points. So the point is,

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Speaker 1: even if you basically completely closed China out from directly

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Speaker 1: importing still into the United States, is going to have

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Speaker 1: a very modest, if any impact on the overall steel backdrop.

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Speaker 1: And I think that the rhetoric are you know, comments

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Speaker 1: coming out of the Trump administration UH an impact on

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Speaker 1: the markets. Um. You know, people have this very aggressive

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Speaker 1: initial reaction, but it's just not the numbers just don't

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Speaker 1: pan out well, and let's get to what US deal

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Speaker 1: is actually doing. They filed a lawsuit against rival Chinese

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Speaker 1: manufacturing UH companies, saying that they colluded to keep prices

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Speaker 1: low to undercut American competitors. UH. They were filed this

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Speaker 1: though under a statute covering unfair trade practices, which usually

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Speaker 1: oversees domestic issues. I mean, does U S steal even

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Speaker 1: have standing? Is their international law that would bring Chinese

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Speaker 1: manufacturing companies into this? I mean, is this lawsuit a

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Speaker 1: no go basically? I mean it looks like it is.

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Speaker 1: I mean, a lot of the things they've done recently, UM.

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Speaker 1: I shouldn't say a lot of the things, but some

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Speaker 1: of the things they've done recently seemed to be UM,

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Speaker 1: pretty pretty aggressive UM and trying to benefit from uh

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Speaker 1: what appears to be a pro UH protectionists. UH, you

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Speaker 1: know US administration. Look, at the end of the day,

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Speaker 1: it seems like U S stills and this has been

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Speaker 1: the case for a while. It seems like their strategy

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Speaker 1: is effectively to benefit from protectionism, and that just doesn't work.

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Speaker 1: We saw this UM in late nineting in the late

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Speaker 1: nineties and the early two thousand's UH, when President George W.

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Speaker 1: Bush implemented a Section two A one tariff, which essentially

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Speaker 1: put taxes on every single still important for the United States.

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Speaker 1: Shortly thereafter, the European Union ruled this UM. UH that

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Speaker 1: that action unfair. Uh and and then shortly thereafter, you know,

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Speaker 1: there were some reactions by the European Union and the

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Speaker 1: US pulled that back. Look, protectionism does not work because

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Speaker 1: effectively the bulk of US still demand is in China,

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Speaker 1: not US. The global still demand is in China. The

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Speaker 1: US has just roughly seven percent of global still demand.

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Speaker 1: And more importantly, these still manufacturers sell the people like

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Speaker 1: automakers and you know, appliance makers, etcetera. And those guys

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Speaker 1: have to compete globally. So if you drive up the

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Speaker 1: cost of domestic still, it's going to kill their customers

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Speaker 1: and eventually kill them. So it just doesn't work. Well, Gordon,

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Speaker 1: I just want to put the put the production in

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Speaker 1: China in perspective, because China's steel capacity, global steel making capacity,

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Speaker 1: I believe, is bigger than the United States, European Union, Japan,

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Speaker 1: and Russia. Yeah yeah, I mean, I mean that they

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Speaker 1: account for sevent of all steel making growth as well.

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Speaker 1: That's right, and you know it looks crazy. Issue um.

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Speaker 1: In two thousand eight nine, China embarked upon a massive stimulus,

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Speaker 1: and that stimulus was targeted primarily at building essentially offices

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Speaker 1: and homes and that benefited the global steel community massively.

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Speaker 1: All these stocks went to the moon and it was

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Speaker 1: driven by China, and as a result, you had a

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Speaker 1: lot of capacity created in China, still capacity to meet

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Speaker 1: this boom in demand. Clearly there's a lot of empty

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Speaker 1: and ghost cities in China. It was inefficient capital, but

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Speaker 1: nonetheless that created a lot of capacity, and the problem

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Speaker 1: is that capacity is still existent, but the demand is

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Speaker 1: falling so um It's like, you know, when everything was

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Speaker 1: working in the favor of the U S still mills,

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Speaker 1: they weren't complaining about what China was doing, which was

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Speaker 1: creating a lot of this capacity. But now that things are,

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Speaker 1: you know, turning around, now they're starting to complain. The

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Speaker 1: reality is this, there's about eighty eight countries that ships

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Speaker 1: still into the United States without a section to a

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Speaker 1: one tariff going after one individual country. We've already killed China.

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Speaker 1: I mean again, there are imports have trapped from like

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Speaker 1: two million tons a year to roughly seven hundred and

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Speaker 1: eighty nine thousand tons of year two thousand, fifteen to sixteen,

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Speaker 1: six point one percent of US imports at two point

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Speaker 1: six We've already killed them. But they're just gonna ship

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Speaker 1: there still into another country. Uh, and eventually it will

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Speaker 1: probably find its way into the United States, and I

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Speaker 1: think that there's no way around that. And you know,

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Speaker 1: these U. S still mills continue to focus on China,

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Speaker 1: and I think China's already it's a dead horse. Well, Gordon,

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Speaker 1: I think it isn't interesting though, and it is telling

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Speaker 1: that U. S. Steal is reviving some of these complaints

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Speaker 1: at this point and asking the major steel trade organization,

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Speaker 1: the US International Trade Commission in Washington, to support its

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Speaker 1: claims about collusion by Chinese manufacturers. Do you think that

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Speaker 1: they are going to get a warm reception by politicians

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Speaker 1: in Washington currently, or do you think that the geopolitical backdrop,

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Speaker 1: including North Korea, has changed the calculus for President Trump

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Speaker 1: and his advisors and that they will not take this

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Speaker 1: attempt by U. S. Steal seriously. Look, there's two things

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Speaker 1: all highlight. I think there's no doubt that the issues

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Speaker 1: in North Korea have changed Trump's view um and stance

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Speaker 1: on China. Clearly, in his um while campaigning, he said

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Speaker 1: he was going to label them a currency manipulator. He's

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Speaker 1: pulled that back. But let's look at the second dynamic

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Speaker 1: we just had an O c TG oil Country tubular

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Speaker 1: good ruling UM, and that ruling came out with respect.

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Speaker 1: It wasn't Chinese, but it was on South Korean UM

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Speaker 1: essentially oil country tubular goods UH STILL producers UM that

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Speaker 1: service that sector rather and the overall result when the

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Speaker 1: result came out, the U. S Still stocks were battered

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Speaker 1: because the market was expecting a thirty to thirty five

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Speaker 1: percent tariff because Navarro essentially sent a letter to the

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Speaker 1: Department of Commerce and the tariff came out at roughly

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Speaker 1: for most guys, but the biggest guy was they dropped

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Speaker 1: the tariff from four percent to two percent. So the

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Speaker 1: reality is, if you look at the rhetoric, he's pulled

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Speaker 1: it back and if you look at the most recent decision,

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Speaker 1: it was not in favor of the U. S Still mills.

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Speaker 1: So you know, we would be shorting the stocks actually

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Speaker 1: on UH strength around UH you know, Trump protectionism, etcetera.

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Speaker 1: Because I think that his desire for China to help

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Speaker 1: solve the North Korean problem is much bigger than the

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Speaker 1: rhetoric given in the campaign season, and I think that

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Speaker 1: we're seeing that play out in reality. And just to

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Speaker 1: note right, I mean, you've got US steal down for

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Speaker 1: the year. Right, it's down about a little bit more

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Speaker 1: than ten percent, right, right, I mean it's up big

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Speaker 1: today on this rhetoric. But um, you know you just

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Speaker 1: had you just you are, I just reported earnings. You

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Speaker 1: are as a big equipment rental company here in the

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Speaker 1: US of their business in the US eight percent in Canada,

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Speaker 1: and they just dropped their expectation, uh for growth in

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Speaker 1: the U S. What was it. I think it was

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Speaker 1: two four before now they're getting to I think two

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Speaker 1: point four percent. And in in Canaday they were looking

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Speaker 1: for four percent. This is industrial growth and they took

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Speaker 1: it down the negative point three percent. So I think,

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Speaker 1: you know, the optimism on Trump, I think reality is

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Speaker 1: starting to set in and I think that you know,

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Speaker 1: as earnings come out, I think that two one earnings

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Speaker 1: for still guys are gonna be good. But I think

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Speaker 1: as some of the earnings come out for industrial guys,

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Speaker 1: I think there's just some disappointment ahead. Gordon Johnson, thank

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Speaker 1: you so much for joining us. Gorton Johnson as Managing

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Speaker 1: Director and head of Alternative Energy, Medals and Mining and

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Speaker 1: Equipment Research at Axiomic Capital Management in New York. This

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Speaker 1: is Bloombergh. We talk a lot about President Trump's infrastructure

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Speaker 1: spending plan. He talked about a one trillion dollar program

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Speaker 1: that he was going to implement to fix our roads

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Speaker 1: and bridges and tunnel. Somebody with pretty good insight into

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Speaker 1: what that plan might look like is David Compton. He's

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Speaker 1: chief executive officer of Old Dominion freight Line, which is

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Speaker 1: based in Thomasville, North Carolina, and it just celebrated its

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Speaker 1: twenty fifth year on the NASDACT. David, thank you so

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Speaker 1: much for joining us. Thank you for having me on

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Speaker 1: with you today. So I wanted to start with the

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Speaker 1: infrastructure spending plan because I know that you were co chair.

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Speaker 1: You are the co chair of the American Trucking Association's

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Speaker 1: Infrastructure Task Force, and you have met with President Trump.

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Speaker 1: Can you give us some insight into how feasible the

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Speaker 1: infrastructure spending plan that he was talking about is and

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Speaker 1: kind of where it is right now, well as we

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Speaker 1: understand it now, the the Trump administration is working on

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Speaker 1: their infrastructure plan and hope to have um something out

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Speaker 1: into Congress by the end of May. That's the latest

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Speaker 1: we hear. You know, as far as the total infrastructure

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Speaker 1: you know of one trillion. Uh. It's it's it's a

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Speaker 1: little bit hard for me to address all of it

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Speaker 1: because I honestly don't believe that that trucking and transportation

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Speaker 1: roads and bridges will will get uh um but perhaps

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Speaker 1: maybe a third of that um that excuse me, kind

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Speaker 1: of frog in my throat, But that's that's basically where

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Speaker 1: we where we are on that uh. But the uh,

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Speaker 1: you know, the cost of under investment in our highways

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Speaker 1: and bridges is absolutely huge. Congestion on the interstate systems

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Speaker 1: alone are costing the trucking industry nearly uh fifty billion dollars,

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Speaker 1: and it's estimated over one hundred billion for all motorists.

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Speaker 1: Automobile repairs due to potholes are costing the average motorists

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Speaker 1: over five hundred dollars per year per motorists, for a

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Speaker 1: grand total of a hundred and twelve billion. Roadside crashes

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Speaker 1: UM are causing due to you know, antiquated designs and

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Speaker 1: poor insurance and exit ramps or anyone who's been in

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Speaker 1: traffic understands how how it's sort of challenged US roads are.

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Speaker 1: But David, do you think that we really are going

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Speaker 1: to see uh material change or material construction in the

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Speaker 1: next three years that could potentially even support your business.

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Speaker 1: I certainly hope so. Our Infrastructure Task Force, which is

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Speaker 1: made up of eleven CEO s from from small truck

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Speaker 1: lines all the way with less than a hundred trucks

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Speaker 1: up to the nation's largest truck lines UH, is working

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Speaker 1: with the Trump administrate and UH leaders in Congress, both

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Speaker 1: the Senate and the House side UH to try to

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Speaker 1: shape an infrastructure bill that addresses the most critical problems

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Speaker 1: of the trucking industry and provides for the most immediate

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Speaker 1: and sustainable financing solutions. And we think we've got a

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Speaker 1: pretty good a pretty good plan or roadmap to be

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Speaker 1: able to come up with the money that's needed UH

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Speaker 1: to accomplish this. All right, Mr Congan, I'm wondering if

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Speaker 1: I could just attack this this topic in just a

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Speaker 1: slightly different way, because I every now and again I'm

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Speaker 1: on the road and I see one of your thirty

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Speaker 1: thousand tractor trailers all across the country, and they have

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Speaker 1: the Major League Baseball UH, you know logo on on

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Speaker 1: on the side. You move the teams of Major League Baseball.

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Speaker 1: It's like, uh, you know, moving chessboard or something. I mean,

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Speaker 1: because you know, you move them from spring training back

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Speaker 1: to the right. I mean, I'm this is something that

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Speaker 1: you're this is detail and I mean, my goodness moving

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Speaker 1: is it just such a stressful thing for anybody? Imagine

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Speaker 1: doing this to the level that you guys at old

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Speaker 1: Dominion Freight do that. What are do you feel that

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Speaker 1: you're being heard by the right people to fix some

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Speaker 1: of these I mean, no one is four potholes right.

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Speaker 1: No one says okay, no, no, no, we love pottle.

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Speaker 1: No one ever says that. So is there are there

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Speaker 1: some things that you feel that you're being heard by

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Speaker 1: the right people in the right place at the right time.

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Speaker 1: Considering that we that you have Donald Trump as president

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Speaker 1: that will help fix some of these very basic things

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Speaker 1: that you've just described, and that obviously you're in a

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Speaker 1: better position to tell to explain what's going on than

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Speaker 1: than you know, someone just reading a paper. I believe

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Speaker 1: we are in an excellent position to be heard. The

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Speaker 1: meeting that we had with President Trump Vice President Pence,

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Speaker 1: Just what's that like? Can you shed some can you

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Speaker 1: just us what's it like to even be there? What

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Speaker 1: does it feel like? Well? It was it was an

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Speaker 1: exciting day it was. It was actually monumental. It was

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Speaker 1: the first time in the history of the American Trucking

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Speaker 1: Association for a t A to have two trucks on

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Speaker 1: the lawn at the White House, represented by eleven UH

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Speaker 1: top CEOs from our industry and twelve of our top

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Speaker 1: truck drivers representing the America's road team, and the ability

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Speaker 1: to meet the President and Vice President opened the door

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Speaker 1: for further discussions. Obviously, the day that we were there

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Speaker 1: was the day that the Health health Care Repeal and

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Speaker 1: Replaced bill was supposed to be voted on, and and

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Speaker 1: that was the top of mind for the for President

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Speaker 1: Trump that particular day. But we have had subsequent we

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Speaker 1: being the truck the A t A, UH President Chris Spear, UH,

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Speaker 1: the Senior Vice President, Bill Sullivan, and others in leadership

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Speaker 1: at A t A have had some meaningful discussions with UH,

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Speaker 1: some of Trump's advisors and we are what specifically would

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Speaker 1: you like to have happened or do you believe would

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Speaker 1: be helpful to their mission to improve the infrastructure? What

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Speaker 1: what can people do? Who here you speak and UH,

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Speaker 1: well here's here and all the people that are into

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Speaker 1: baseball because you're you're you're moving those baseball teams. Well,

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Speaker 1: the baseball teams are are important for us, uh, but

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Speaker 1: but not as important as the uh ninety thousand shippers

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Speaker 1: that uh that we have UM giving us revenue. But right,

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Speaker 1: your customers, Yeah, our customers. Baseball is very small part

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Speaker 1: of it. But here's the deal. The annual cost of

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Speaker 1: under investment in in in our infrastructure is costing motors

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Speaker 1: over fourteen hundred dollars per year. And what we are

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Speaker 1: proposed using, UH, what we're proposing UH is a build

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Speaker 1: America infrastructure fee to be added at the to the

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Speaker 1: rack cost per gallon of just twenty cents and and

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Speaker 1: have this thing index to fuel economy and inflation. Twenty

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Speaker 1: cents a gallon is really not very much. You recall

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Speaker 1: when we were all paying uh four and five dollars

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Speaker 1: a gallon for gas. UH. Twenty cents a gallon only

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Speaker 1: represents an annual cost of roughly eighty dollars per motorists

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Speaker 1: to address a four hundred dollar per motorists problem. To me,

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Speaker 1: that is a good return on investment. And this infrastructure

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Speaker 1: fee at the rack. I don't know if you know

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Speaker 1: what I rack is, but there are thirteen hundred active

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Speaker 1: UH terminals fuel racks across the country owned by only

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Speaker 1: two fifty five owners, and they collect and pay the

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Speaker 1: thanks for we gotta leave it there, David Congdon, I'm sorry,

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Speaker 1: the chief executive of Old Dominion freight Line. We want

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Speaker 1: to take a moment to let you know about something

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Speaker 1: new from Bloomberg. Starting right now, you can use our

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Speaker 1: io s app or our new Google Chrome extension to

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Speaker 1: news and market data from Bloomberg and other sources related

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Speaker 1: to the companies and people you're reading about. So no

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Speaker 1: matter where you're reading the news, you can bring the

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Speaker 1: power of Bloomberg's news and data with you. It's pretty amazing.

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Speaker 1: more at Bloomberg dot com. Slash lens Well corrosion. Corrosion

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Speaker 1: is a two point two trillion dollar problem worldwide, and

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Speaker 1: our next guest is trying to solve it. Christina Lamancy

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Speaker 1: is the president and the chief executive and the co

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Speaker 1: founder and a physicist and just happens to be in

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Speaker 1: charge of Modu Metal, based in Seattle, but she joins

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Speaker 1: us here in our studio, Christina, thank you very much

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Speaker 1: for being here. Um. Corrosion, I guess we could say

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Speaker 1: rust is a problem that is never really going to

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Speaker 1: go away because of the just the nature of certain

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Speaker 1: types of chemical and metal reactions, unless, of course, I

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Speaker 1: guess we call modu metal. Tell us what you're doing

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Speaker 1: to fight this battle? Absolutely, so, we are UM, first

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Speaker 1: of all, trying to address this huge problem that today

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Speaker 1: represents about four point one percent of the gross domestic

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Speaker 1: product of the United States. So we spend a lot

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Speaker 1: of money and a lot of energy addressing this challenge

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Speaker 1: of corrosion, and we think we can reduce that impact

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Speaker 1: on our economy. We're doing it by introducing an entirely

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Speaker 1: new class of materials into the marketplace. That class of materials,

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Speaker 1: UH is what we call nano laminated alloys. They're basically

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Speaker 1: like metallic plywood, so they're layered materials, but in our case,

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Speaker 1: the layers are on the nanometer scale. UM, and maybe

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Speaker 1: even more profoundly impactful is that we're we're having in

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Speaker 1: order to bring these materials to market, to revolutionize the

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Speaker 1: manufacturing process for metals as well. So we have a

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Speaker 1: process that doesn't use heat anymore. We're actually using electricity

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Speaker 1: as the input form of energy to manufacture metals directly.

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Speaker 1: So before we get into the specifics I'm wondering so far.

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Speaker 1: I mean, the company has been around for a couple

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Speaker 1: of years and this technology has been around for a

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Speaker 1: couple of years. How has the demand grown by industrial companies? Well,

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Speaker 1: we when we first started out with mode metal, it

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Speaker 1: was just a concept, so we were really just trying

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Speaker 1: to figure out how to bring this this technology from

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Speaker 1: a science into really a manufacturing process. Now we're working

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Speaker 1: with with major oil and gas companies to bring it

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Speaker 1: into very large scale market applications. So the market has

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Speaker 1: really embraced the technology. And we talk about the cost

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Speaker 1: of corrosion. It's something that impacts a number of major industries.

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Speaker 1: So oil and gas is just one example. Infrastructure construction,

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Speaker 1: I mean, transportation, you name it. The pain is there

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Speaker 1: for a lot of major industries. So it's been it

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Speaker 1: has been embraced across the board. Uh, in terms of

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Speaker 1: its applications. Well, I also just want to congratulate you,

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Speaker 1: Christina lamos Ny. Uh. You are a finalist for the

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Speaker 1: Edison Awards, So good luck with that, I know you're

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Speaker 1: here in New York. You've been named the finalist for

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Speaker 1: for that. Can you use let's say the Coastguard as

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Speaker 1: an example. Obviously they must deal as most ship owners

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Speaker 1: must deal with corrosion and rust. Tell us about using

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Speaker 1: modu metal technology for the Coastguard. That's such a great example.

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Speaker 1: In fact, we've done some work with the Coastguard. We've

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Speaker 1: deployed technology with them. As as you mentioned, the Coast

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Speaker 1: Guard operates in a very corrosive environment. So they they're

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Speaker 1: typically operating in marine environments where they're salt water, oftentimes

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Speaker 1: high temperature. So on the coast of of let's say

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Speaker 1: North Carolina, Florida, things like that, um or you have

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Speaker 1: accelerated corrosion because of heat and um and so corrosion

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Speaker 1: is degrading the fleet. Even even as they're operating and

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Speaker 1: building new structures, they're having to deal with the degradation

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Speaker 1: of the old. We've actually done some work with the

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Speaker 1: Coast Guard on something as simple as connectors fasteners like

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Speaker 1: you know, bolts. It turns out that's a that's a

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Speaker 1: critical point of a failure for for some of these

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Speaker 1: these structures. And so basically what we've done in in

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Speaker 1: some cases we actually just coat conventional steals with our

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Speaker 1: nano layered alloys and we can extend the life as

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Speaker 1: much as tend to. We've demonstrated thirty times increase in

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Speaker 1: performance at an equivalent cost to like a conventional zinc.

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Speaker 1: So it's a dramatic difference in terms of the longevity

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Speaker 1: of that product in a field, the safety factor associated

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Speaker 1: with that connector, and we basically are keeping cost at parity.

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Speaker 1: So talking about that cost, I mean, how much would

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Speaker 1: it cost to nano laminate say, all the bolts in

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Speaker 1: a ship, and uh, how how do you how exactly

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Speaker 1: do you nano laminate something? Yeah, the way to think

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Speaker 1: about it, I think is it we're introducing a new structure,

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Speaker 1: so it's the nano lamination. It's um to kind of

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Speaker 1: geek out on the science a little bit. We're kind

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Speaker 1: of we're galvanically coupling to similar metals when we make

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Speaker 1: these layered alloys, and we're controlling that galvanic couple and

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Speaker 1: that's what's extending the life of the product in a

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Speaker 1: corrosive environment. We're doing it though with the same basic

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Speaker 1: raw materials, So from a cost driver standpoint, we really

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Speaker 1: have the same basic costs as a conventional let's say,

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Speaker 1: hot dip galvanized process. We're just fundamentally changing the structure

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Speaker 1: and that's resulting in a huge impact in terms of performance.

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Speaker 1: Are planning on taking the public company public right now

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Speaker 1: we're private and UH and we're really growing the business

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Speaker 1: to try to bring the product into the market in

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Speaker 1: a very very big way. But where are you getting

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Speaker 1: financing from? So we do UM. We do a lot

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Speaker 1: of work with within the oil and gas sector, as

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Speaker 1: I mentioned, And the fun part for us is that

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Speaker 1: a lot of our customers have actually joined us as

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Speaker 1: partners UM. So today we're jointly owned by Chevron, Conico,

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Speaker 1: Phillips BP, all of whom were customers and then they

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Speaker 1: became partners in the venture. We're also jointly owned by

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Speaker 1: the founders FUN out of Silicon Valley, and so we

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Speaker 1: just have a great team of partners that have joined

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Speaker 1: us in this venture. Christina Lamosney, thank you so much

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Speaker 1: for joining us. Really a fascinating developments president and chief

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Speaker 1: executive officer and co founder of Madu Metal, which is

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Speaker 1: based in Seattle, but she is here with us in

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Speaker 1: our Bloomberg eleven three oh studio, and she gave us

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Speaker 1: business cards that are made out of nano laminated metal.

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Speaker 1: Pretty cool him, I think I think I need some metal.

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Speaker 1: There you go. That was the sound of it. Well,

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Speaker 1: Republicans have come up with a replacement to the Dad

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Speaker 1: Frank Act of two thousand and ten. It is going

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Speaker 1: to be aired in a hearing later this month. I

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Speaker 1: want to bringing Nathan Dean, who's a government an analyst

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Speaker 1: for Bloomberg Intelligence, is going to tell us what's in

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Speaker 1: this replacement to the Dodd Frank Act before we get there, Nathan,

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Speaker 1: is this thing dead on arrival or does this thing

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Speaker 1: have legs? So it's dead arrival? When when you think

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Speaker 1: about it, when it's becoming law, it will pass the House,

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Speaker 1: It should pass the House. It should pass the House

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Speaker 1: by August. You will see a lot of headlines of

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Speaker 1: talking about this will pass. But it's dead on arrival

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Speaker 1: in the Senate. This this is the Republican kitchen sink bill.

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Speaker 1: There are just too many provisions in here to get

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Speaker 1: bipartisans support in the Senate. And because the filibuster still exists,

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Speaker 1: you know, there's there's the this bill really doesn't have

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Speaker 1: any chance over there in this Senate. Okay, So given

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Speaker 1: the fact that it's probably did on arrival in the Senate,

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Speaker 1: should we care about it? There are provisions in this

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Speaker 1: thing that we should care about. It's a starting point,

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Speaker 1: it's a negotiations so uh, leaving. A lot of this

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Speaker 1: bill is designed about this teen percent leverage ratio banks

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Speaker 1: need to go from you know, around six and a

431
00:25:19,080 --> 00:25:21,200
Speaker 1: half to ten percent for the big banks. That could

432
00:25:21,200 --> 00:25:23,840
Speaker 1: cost him around four hundred twenty billion for the eight largest.

433
00:25:24,119 --> 00:25:25,880
Speaker 1: But there are other provisions in this bill that i'd

434
00:25:25,920 --> 00:25:27,560
Speaker 1: look at, you know, look at how they're going to

435
00:25:27,680 --> 00:25:30,880
Speaker 1: change the stress testing process. Uh, look how they're going

436
00:25:30,920 --> 00:25:33,879
Speaker 1: to make relief for smaller and community sized banks. But

437
00:25:33,960 --> 00:25:36,280
Speaker 1: a lot of the controversial provisions in here, repealing the

438
00:25:36,320 --> 00:25:41,159
Speaker 1: vocal rule, changing the CFBB, uh, repealing the Durban Amendment,

439
00:25:41,160 --> 00:25:43,080
Speaker 1: which would cost the banks. You know, it did cost

440
00:25:43,119 --> 00:25:46,320
Speaker 1: the banks billions of dollars and interchange fees. You know,

441
00:25:46,400 --> 00:25:48,600
Speaker 1: those things are just too controversial. They're not going to

442
00:25:48,640 --> 00:25:50,359
Speaker 1: pass Elizabeth More and they're not going to pass the

443
00:25:50,440 --> 00:25:53,119
Speaker 1: other Democrats, and so I think it's more importantly to

444
00:25:53,160 --> 00:25:55,000
Speaker 1: see what's going to come out of the Senate in

445
00:25:55,040 --> 00:25:57,320
Speaker 1: their review, and we're expecting that sometime the next couple

446
00:25:57,320 --> 00:26:02,200
Speaker 1: of months. The Senate has a of course, the Banking Committee,

447
00:26:02,200 --> 00:26:06,280
Speaker 1: and Senator Mike Creepo, he's the Republican from Idaho, is

448
00:26:06,320 --> 00:26:09,159
Speaker 1: the chairman. Can you give us some insight into his

449
00:26:09,359 --> 00:26:13,560
Speaker 1: thinking and then maybe kind of reference a previous bill

450
00:26:13,640 --> 00:26:17,000
Speaker 1: that was introduced by the former Banking chairman, UH, Senator

451
00:26:17,119 --> 00:26:21,119
Speaker 1: Richard Shelby, a Republican from Alabama. Yeah, so you know,

452
00:26:21,160 --> 00:26:23,440
Speaker 1: the Senate right now is conducting a review of dot Frank.

453
00:26:23,480 --> 00:26:25,480
Speaker 1: They actually went out to the industry and he said,

454
00:26:25,680 --> 00:26:28,320
Speaker 1: send us comments. And this was bipartisan effort, both Mike

455
00:26:28,320 --> 00:26:31,360
Speaker 1: Creepo and Senator Sherried Brown, the ranking member from Ohio,

456
00:26:31,720 --> 00:26:33,719
Speaker 1: and the bank comments and the industry comments have been

457
00:26:33,760 --> 00:26:36,520
Speaker 1: piling in. Goldman Sachs, for example, just submitted their comments.

458
00:26:37,000 --> 00:26:39,200
Speaker 1: Bloomberg News did an article on it, and it talked

459
00:26:39,240 --> 00:26:42,000
Speaker 1: about changing the stress test, changing the calculation of a

460
00:26:42,080 --> 00:26:44,400
Speaker 1: leverage ratio. So a lot of this stuff I think

461
00:26:44,520 --> 00:26:48,480
Speaker 1: could generate bipartisans support, But really what happens in the

462
00:26:48,520 --> 00:26:50,720
Speaker 1: Senate we expect them to put together their own bill.

463
00:26:51,080 --> 00:26:54,320
Speaker 1: You know, you mentioned Senator Richard Shelby, his big push

464
00:26:54,400 --> 00:26:56,720
Speaker 1: last year was changing the city threshold. He wanted the

465
00:26:56,720 --> 00:26:59,800
Speaker 1: city threshold to go from fifty billion to five billion.

466
00:27:00,040 --> 00:27:03,159
Speaker 1: Senator Mike Crepo he wants that changed as well. Is

467
00:27:03,200 --> 00:27:06,160
Speaker 1: probably too high. You know that five billion would would

468
00:27:06,160 --> 00:27:08,280
Speaker 1: allow P and C and US Bank, for example, to

469
00:27:08,720 --> 00:27:11,719
Speaker 1: should their shed their Ciffy designation. To be clear, Siffy

470
00:27:11,920 --> 00:27:16,399
Speaker 1: is significantly important financial institution, correct, and if you're labeled

471
00:27:16,400 --> 00:27:18,399
Speaker 1: to Ciffy means you get a lot more capital in

472
00:27:18,440 --> 00:27:20,359
Speaker 1: liquidity requirements and then you have to go through the

473
00:27:20,400 --> 00:27:25,280
Speaker 1: stress test. So you know, whether that that threshold ends

474
00:27:25,320 --> 00:27:27,080
Speaker 1: up a tune in fifty billion or it moves to

475
00:27:27,119 --> 00:27:30,199
Speaker 1: a case by case designation. You know, we do expect

476
00:27:30,200 --> 00:27:33,320
Speaker 1: the Senate because this is one of Senator Creepo's key

477
00:27:33,480 --> 00:27:35,200
Speaker 1: things that he wants to work on. We do think

478
00:27:35,200 --> 00:27:37,639
Speaker 1: that Ciffy threshold is going to be in there. So, Nathan,

479
00:27:37,680 --> 00:27:39,359
Speaker 1: as you were saying, this is sort of a kitchen

480
00:27:39,400 --> 00:27:43,760
Speaker 1: sink effort by Republican Congressman h. But the interesting thing

481
00:27:43,840 --> 00:27:46,719
Speaker 1: is banks are not too excited about this bill. It's

482
00:27:46,760 --> 00:27:49,680
Speaker 1: called the Financial Choice Act. It would replace the Dodd

483
00:27:49,680 --> 00:27:53,960
Speaker 1: Frank Act, which set out to prevent another bank driven

484
00:27:54,040 --> 00:27:56,600
Speaker 1: financial crisis like the one that we saw in two

485
00:27:56,600 --> 00:28:01,080
Speaker 1: thousand and eight. Why aren't big banks excitedly for two reasons. One,

486
00:28:01,200 --> 00:28:02,960
Speaker 1: you know, like we mentioned going to the ten percent

487
00:28:03,040 --> 00:28:05,760
Speaker 1: leverage ratio, that's gonna increase capital requirements for large spanks.

488
00:28:06,040 --> 00:28:08,800
Speaker 1: You know, Bi's credited Animal Sternal Cocuna did analysis where

489
00:28:08,840 --> 00:28:12,119
Speaker 1: it's four and twenty billion for JP Morgan. That's billion alone.

490
00:28:12,160 --> 00:28:14,600
Speaker 1: It's probably not something they want to do. Secondly, they

491
00:28:14,680 --> 00:28:17,000
Speaker 1: probably understand that this bill is dead on arrival, and

492
00:28:17,119 --> 00:28:20,600
Speaker 1: so why waste the political capital fighting for full repeal

493
00:28:20,640 --> 00:28:22,639
Speaker 1: of the vocal rule when you know it's not gonna happen.

494
00:28:22,960 --> 00:28:24,520
Speaker 1: You know, you hear a lot of comments coming from

495
00:28:24,600 --> 00:28:26,960
Speaker 1: Jamie Diamond and other bankers saying, you know, we just

496
00:28:27,040 --> 00:28:28,560
Speaker 1: need to tweak the vocal rule and we need to

497
00:28:28,920 --> 00:28:31,680
Speaker 1: play around with the market making exemption. You know, but

498
00:28:31,840 --> 00:28:34,639
Speaker 1: in spirit, you know, they say they're okay with it.

499
00:28:34,800 --> 00:28:37,440
Speaker 1: So I think the banks are waiting to see what

500
00:28:37,560 --> 00:28:40,040
Speaker 1: comes from the Senate. You know. One thing to keep

501
00:28:40,080 --> 00:28:42,840
Speaker 1: in mind, you know, Chairman Henseling he's term limited at

502
00:28:42,840 --> 00:28:44,640
Speaker 1: the end of this term, so he's got two years

503
00:28:44,720 --> 00:28:46,960
Speaker 1: to essentially put something out there, and if not he's

504
00:28:46,960 --> 00:28:50,240
Speaker 1: gonna have to move off of the chairmanship. So, you know,

505
00:28:50,400 --> 00:28:52,080
Speaker 1: we still don't think dot frank is gonna be a

506
00:28:52,160 --> 00:28:54,280
Speaker 1: year one issue. I think you'll see something come out

507
00:28:54,320 --> 00:28:56,520
Speaker 1: from the Senate later this year, but I still think

508
00:28:56,600 --> 00:28:58,560
Speaker 1: dot frank will be a two year issue. So if

509
00:28:58,760 --> 00:29:00,479
Speaker 1: this is not a year one she I mean, are

510
00:29:00,520 --> 00:29:03,520
Speaker 1: there specific deadlines that they have to meet in order

511
00:29:03,640 --> 00:29:06,760
Speaker 1: to get the ball rolling on this? So no, there's

512
00:29:06,800 --> 00:29:09,680
Speaker 1: no specific deadlines. I think that, you know, one thing

513
00:29:09,720 --> 00:29:11,600
Speaker 1: that we are telling our clients is watch out for

514
00:29:11,680 --> 00:29:14,560
Speaker 1: the debt ceiling debates and the government shutdown debates later

515
00:29:14,680 --> 00:29:16,760
Speaker 1: this year, not the April one, but maybe in September,

516
00:29:17,240 --> 00:29:19,760
Speaker 1: because that's the time that's ripe for amendments. You know,

517
00:29:19,880 --> 00:29:23,360
Speaker 1: back in two thousand fourteen, Republicans inserted this amendment that

518
00:29:23,520 --> 00:29:26,320
Speaker 1: repealed the swaps pushout provision. They did it three days

519
00:29:26,400 --> 00:29:28,480
Speaker 1: before government shut down. They sent it up to the

520
00:29:28,480 --> 00:29:31,080
Speaker 1: White House, and they told President Barack Obama sign it

521
00:29:31,240 --> 00:29:33,200
Speaker 1: or the government's going to be shut down. And President

522
00:29:33,200 --> 00:29:36,120
Speaker 1: Obama did sign it. So this is this tactic of

523
00:29:36,200 --> 00:29:38,520
Speaker 1: putting an amendment out there. You know, if I wanted

524
00:29:38,520 --> 00:29:40,640
Speaker 1: to repeal the vocal rule for example, maybe I submit

525
00:29:40,680 --> 00:29:42,959
Speaker 1: it right before the debt ceiling is about to hit

526
00:29:43,120 --> 00:29:45,680
Speaker 1: and see what happens. So we're just telling clients to

527
00:29:45,720 --> 00:29:48,680
Speaker 1: be very careful about those deadlines, probably in September August

528
00:29:48,760 --> 00:29:51,160
Speaker 1: time frame. But in terms of just repealing dot frank,

529
00:29:51,240 --> 00:29:53,280
Speaker 1: this can go on to two thou eighteen. There's no

530
00:29:53,400 --> 00:29:55,480
Speaker 1: really no no deadline there, all right. So if there

531
00:29:55,600 --> 00:29:58,240
Speaker 1: if there's no deadline, just quickly, Nathan Um, why are

532
00:29:58,280 --> 00:30:01,040
Speaker 1: the Republicans even bothering to do this to keep it

533
00:30:01,080 --> 00:30:02,920
Speaker 1: in the new cycle. I think that, you know, they

534
00:30:03,000 --> 00:30:04,800
Speaker 1: need to show that they're doing something. You know, this

535
00:30:04,920 --> 00:30:07,320
Speaker 1: is there's been a lot of work done on repealing

536
00:30:07,400 --> 00:30:09,360
Speaker 1: dot frank. They've this has been going back to two

537
00:30:09,400 --> 00:30:12,000
Speaker 1: thousand ten. There's been over two fifty bills that have

538
00:30:12,080 --> 00:30:14,200
Speaker 1: passed the House that have said something. So I think

539
00:30:14,240 --> 00:30:16,040
Speaker 1: this is to keep the ball rolling. And you know,

540
00:30:16,160 --> 00:30:18,560
Speaker 1: if they can move on with infrastructure and tax reform

541
00:30:18,600 --> 00:30:20,800
Speaker 1: and healthcare, then you know, I think you'll have the

542
00:30:21,200 --> 00:30:23,040
Speaker 1: pieces in place. All right. I want to thank you

543
00:30:23,200 --> 00:30:25,680
Speaker 1: very much for giving us all the information. Nathan Dean

544
00:30:25,840 --> 00:30:29,200
Speaker 1: is government analysts for Bloomberg Intelligence. You're joining us from

545
00:30:29,200 --> 00:30:34,280
Speaker 1: our Bloomberg Studios in Washington, and you can follow Nathan

546
00:30:34,400 --> 00:30:40,120
Speaker 1: Dean on Twitter at Nathan Dean d C. Thanks for

547
00:30:40,240 --> 00:30:42,880
Speaker 1: listening to the Bloomberg P and L podcast. You can

548
00:30:42,920 --> 00:30:46,680
Speaker 1: subscribe and listen to interviews at Apple Podcasts, SoundCloud, or

549
00:30:46,800 --> 00:30:50,200
Speaker 1: whatever podcast platform you prefer. I'm Pim Fox. I'm on

550
00:30:50,320 --> 00:30:54,440
Speaker 1: Twitter at Pam Fox. I'm on Twitter at Lisa abramowits

551
00:30:54,520 --> 00:30:57,480
Speaker 1: one before the podcast. You can always catch us worldwide

552
00:30:57,560 --> 00:30:58,440
Speaker 1: on Bloomberg Radio