Speaker 1: This is Bloomberg Wall st Week. What's the state of
Speaker 1: corporate governance? The deficit is a real issue. The use
Speaker 1: economy continues to send mixed signals. The financial stories that
Speaker 1: sheep our world fed action to con concerns over dollar
Speaker 1: liquidity and encouraging China data. The five hundred wealthiest people
Speaker 1: in the world. Through the eyes of the most influential
Speaker 1: voices Larry Summers, the former Treasury Secretary, Start CEO, Kevin
Speaker 1: Johnson sec Chairman j Clayton. Bloomberg wool Street Week with
Speaker 1: David Weston from Bloomberg Radio. The game stops, circus moves on,
Speaker 1: and investors turned to hopes of more help from Congress
Speaker 1: and of more vaccines on their way. This is Bloomberg
Speaker 1: Wall Street Week. I'm David Weston. It seems as if
Speaker 1: everyone in America with access to a microphone has been
Speaker 1: telling us this week with stunning hindsight, precisely why the
Speaker 1: Dow Jones industrials took a record five d eight point
Speaker 1: twenty two point six percent NOS dive. Monday time alone
Speaker 1: will tell whether Black Monday enters the history book as
Speaker 1: the day American confidence was so shaken that a premature
Speaker 1: recession resulted. That was Lewis Ruckiser on Wall Street week
Speaker 1: back in seven after Black Monday. Markets have been shaken
Speaker 1: again over the past two weeks as Reddit Day traders
Speaker 1: boosted shares of companies like game Stop and sent short
Speaker 1: selling hedge funds running, with long short funds losing six
Speaker 1: percent overall last month and Melvin Capital alone plummeting fifty
Speaker 1: But most hedge funds emerged unscathed, and Steve Cohen's point
Speaker 1: seventy two even attracted one point five billion dollars in
Speaker 1: new money. Here's SWIFEI Ramachandra, gam investment manager. I assume
Speaker 1: hedge funds are probably reluctant to short small cat stops
Speaker 1: right now the fear that the Reddit brigade might be
Speaker 1: behind those. But by early this week, Game Stops to
Speaker 1: the Moon rallies started to come back towards Earth and
Speaker 1: not even the Reddit flash mob or changes at the
Speaker 1: top of the company could get the irrational exuberance going again,
Speaker 1: reminding us why hedge funds and short sellers target companies
Speaker 1: like Hi Stop. The investor that gets caught in the
Speaker 1: updraft on that and doesn't understand that investing while it
Speaker 1: looks like it's all going up. Did the person who
Speaker 1: clicked the last by understand that could happen to them
Speaker 1: that quickly? That's former each read Financial CEO Carl Rossner.
Speaker 1: I asked counsel on Foreign Relations Senior Fellow Sebasha Malby,
Speaker 1: if anything will fundamentally change in the hedge fund world.
Speaker 1: I don't really. I mean, I think that hedge funds,
Speaker 1: which of course go back to the sixties at least,
Speaker 1: have proven to be an amazingly robust platform from which
Speaker 1: to think creatively about risk um and so they adapt,
Speaker 1: you know, they get new, stuff gets straight in their ways.
Speaker 1: When they began, there was no such thing as trading
Speaker 1: currencies because currencies world fixed together on markets hardly existed.
Speaker 1: You had to trade stocks by appointment. And they adapted
Speaker 1: all the way through that as everything changing, fintech um,
Speaker 1: the advent of Reddit, the advent of robin Hood. This
Speaker 1: is just the latest iteration in a long, long history
Speaker 1: of financial innovation. And every time hedge funds figure it out,
Speaker 1: you also have regulators trying to figure it out, as
Speaker 1: it were. After the fact, we have the Treasure Secretary
Speaker 1: Janet Yellen now saying she's meeting with regulators saying we
Speaker 1: need to take a hard look at this about the
Speaker 1: volatility and whether this might actually put in jeopardy some investors.
Speaker 1: We also have hearings in Congress coming up. Do you
Speaker 1: expect there might be some tweaking at least of the regulations.
Speaker 1: I think with respect to robin Hood and the fact
Speaker 1: that it had to close down access to trading on
Speaker 1: certain stocks, that's the kind of market interruption which regulators
Speaker 1: ought to take action on. Um. You need the infrastructure
Speaker 1: of trading to be reversed, you you know, you need
Speaker 1: to look at the plumbing, as some regulators put it.
Speaker 1: UM So, I think that part of the system will
Speaker 1: definitely deserve a fresh look. What about on the short
Speaker 1: selling side. There have been proposals, as you know well,
Speaker 1: for short sellers to have to disclose their positions individual positions,
Speaker 1: which is done as I understand in Europe. Do you
Speaker 1: think there might be a renewal of that call. And
Speaker 1: by the way, why do we have to disclose on
Speaker 1: the long side and not the short I'm not sure
Speaker 1: actually that hedge funds do disclose on the long side
Speaker 1: unless they buy more than that disclosable threshold. I believe
Speaker 1: it's five percent or something of the company, So you
Speaker 1: can get away with a lot without disclosing. Um. I
Speaker 1: think you know, when you are taking a really big position,
Speaker 1: probably there's a it becomes a systemic threat to you.
Speaker 1: You know, you might blow up if that position were
Speaker 1: to go very badly wrong. And so regulators who care
Speaker 1: about the sundus of the system everall have a legitimate interest.
Speaker 1: But I think, you know, small positions shouldn't have to
Speaker 1: be disclosed. But we certainly had some large hedge ones
Speaker 1: who took a big head, uh, And I wonder whether
Speaker 1: they did suggest it could be systemic risk here. Well,
Speaker 1: the beauty of hedge funds is that through their long
Speaker 1: history they've proven to be small enough to fail, not
Speaker 1: too big to fail. They actually can blow up, and
Speaker 1: people often cite long term capital management as the big
Speaker 1: except actually, if you go back and look at that incident,
Speaker 1: the New York Fed convened the banks to recapitalize it,
Speaker 1: but no taxpayer money zero went in. So free standing
Speaker 1: hedge funds I'm not counting here the subsidiary of bare
Speaker 1: stones that went wrong in oh It, But free standing
Speaker 1: hedge funds have never had a taxpayer bailout. Melvin Capital
Speaker 1: has not needed a taxpayer bailout. That's the good thing
Speaker 1: about hedge funds. That's one of the ironies you point
Speaker 1: out in your Wash and Post column. Actually that aunt
Speaker 1: Reddit people were saying, look at the government bailed out
Speaker 1: these hedge funds. In fact, they didn't get bailed out
Speaker 1: in two thousand eight, two thousand nine at all. Pretty
Speaker 1: much everybody did edgy and ensure all sorts of broker
Speaker 1: dealers like you know, Best Stands and Lehman Brothers went wrong.
Speaker 1: The money market sector, the whole thing went wrong, But
Speaker 1: there isn't an example of a free standing hedge fund
Speaker 1: that needed a bailout. You mentioned robin Hood and its
Speaker 1: role in all this, and the fact that it had
Speaker 1: to curtail trading at one point. Is there room for
Speaker 1: requiring larger reserves coming out of to those nature As
Speaker 1: a nine, I think it's fair to say the banks
Speaker 1: had to have larger reserves to protect the system overall.
Speaker 1: Did this suggest that, particularly when you come to things
Speaker 1: like sort of flash mob phenomenon in social media, maybe
Speaker 1: the broker deals have to have larger reserves. Yes, I
Speaker 1: do think that, and I think particularly the newer brokers
Speaker 1: like Robin Hood which have emerged on the West coast,
Speaker 1: or fintech. They're not a kind of traditional Wall Street firm.
Speaker 1: And those guys have often grown so quickly that the
Speaker 1: regulators are behind the curve. And so I think that
Speaker 1: is the legitimate, you know, focused for for the government.
Speaker 1: Thanks to Sebastian Maloby of the Council on Foreign Relations
Speaker 1: coming up. Big tech gets big earnings, but that doesn't
Speaker 1: keep Jeff Bezos at the helm of Amazon. Sam Pomisano
Speaker 1: ran IBM and he says it's understandable. That's next on
Speaker 1: Wall Street Week on Bloomberg. This is Bloomberg Wall Street Week.
Speaker 1: David Weston from Bloomberg Radio. The Everything Store is getting
Speaker 1: a new CEO. Amazon's founder Jeff Bezos is stepping down
Speaker 1: as CEO to become executive chairman later this year. Here's
Speaker 1: company's CFO, Brian Olsofski. I will reiterate that Jeff is
Speaker 1: not leaving, he is getting a new job. Over the
Speaker 1: last twenty five years under bezos leadership, an idea for
Speaker 1: an online bookstore evolved into a one point seven trillion
Speaker 1: dollar company that changed the face of retail. Like many
Speaker 1: Silicon Valley success stories. Amazon started in a garage after
Speaker 1: Jeff Bezos left his job as a vice president at
Speaker 1: df SHAW in in the late nineteen nineties. The startup
Speaker 1: expanded its offerings from books and music to include consumer goods.
Speaker 1: I emailed a thousand randomly selected customers and asked them,
Speaker 1: besides the things we felt today, what would you like
Speaker 1: to see us? So remember one of the answers was
Speaker 1: I wish you sold Winshield wiper blades because I really
Speaker 1: need Winsfield wiper blades. And I thought to myself, we
Speaker 1: can sell anything this way. That's Jeff Bezos in two eighteen.
Speaker 1: Even after Amazon went public, it failed to turn a
Speaker 1: profit until two thousand one. Bezos business model of keeping
Speaker 1: inventory low and selling products for low prices save the
Speaker 1: company during the dot com bubble. Even his peers like
Speaker 1: pets dot Com went bust. Here's Scott Kessler from Third Bridge.
Speaker 1: He obviously is going to have huge influence still, but
Speaker 1: it's going to be more from a vision and strategic perspective.
Speaker 1: Bezos returned to his passion for books when Amazon released
Speaker 1: its first Kindle in two thousand seven, changing the way
Speaker 1: people read books while building an e commerce empire. Bezos
Speaker 1: also wears a couple of other hats, as the owner
Speaker 1: of The Washington Post and founder of the space company
Speaker 1: Blue Origin. So I think it leaves Jeff Bezos able
Speaker 1: to concentrate on building rockets and the things that he
Speaker 1: wants to do with someone at the helm that he
Speaker 1: can really trust. That's Melissa Burdick, the president of pack View.
Speaker 1: More recently, Amazon's profit and has been its cloud computing arm,
Speaker 1: Amazon Web Services, which launched in two thousand three, AWS
Speaker 1: accounted for six of Amazon's operating income in making Amazon
Speaker 1: the world leader in cloud computing. And so it should
Speaker 1: come as no surprise the Bezo successor will be the
Speaker 1: man who runs AWS, Andy Jesse. Here's estimized CEO Lee Droken.
Speaker 1: I think this makes total sense. I think it's underappreciated
Speaker 1: just how amazing and innovative and important to everything that
Speaker 1: goes on basically in technology today that AWS is and
Speaker 1: was Wall Street We contributor Sam Paul Maisano ran IBM,
Speaker 1: and he says it's understandable that Jeff Bezos has decided
Speaker 1: to make the transition. Well, it's not really a hard
Speaker 1: thing to do, I mean, especially when you've built the company.
Speaker 1: I mean one thing, I was nine to ten years
Speaker 1: of CEO and I grew up in IBM. I love
Speaker 1: IBM obviously, but it wasn't mine, it wasn't my creation.
Speaker 1: It was the Watson family. And so if you're the
Speaker 1: founder like Jeff, I can imagine it's a very very
Speaker 1: difficult decision to make. However, at the same time, he's
Speaker 1: really not leaving the company because he's still executive chairman,
Speaker 1: so he still has a role. But at the same time,
Speaker 1: his role the company is really different. The company is
Speaker 1: different at this point as well. It's not at this
Speaker 1: Mete York rise that it's had. It's now getting the
Speaker 1: siege by the government. Yeah, well that's exactly as quite
Speaker 1: interesting as you know. And the same thing has happened
Speaker 1: to other companies. We've talked about Microsoft, IBM, A, T
Speaker 1: and T, and it's I would I look back when
Speaker 1: it comes with success, I mean, when you're that successful,
Speaker 1: when you get that large, people are going to come
Speaker 1: after you, and usually it's your competition quite honestly. But
Speaker 1: then they lobbed me the various government entities, and then
Speaker 1: politics takes over and then you find yourself on these
Speaker 1: difficult situations. My experience, the founders have a very hard
Speaker 1: time with that. They can't understand how that could happen.
Speaker 1: I'm not saying that's the case for Jeff, but my
Speaker 1: experience with both talking with Bill Gates and spending a
Speaker 1: lot of time because I support Mr Watson Jr. As
Speaker 1: when I was executive assistant to the chairman and the
Speaker 1: CEO of IBM H and I had firsthand conversations with him,
Speaker 1: so you could see as a foundery that was a
Speaker 1: very hard thing for him to psychologically cope with. Well,
Speaker 1: I mean, you ran a big company that was under
Speaker 1: siege from the government. Is it possible not just for
Speaker 1: psychological reasons, is not not as much fun to defend?
Speaker 1: But also for the stake of the company. Is it
Speaker 1: better to have somebody a little more detached where it's
Speaker 1: not literally their child. I think that that is that's
Speaker 1: the way to think about it. I mean, basically what
Speaker 1: happened in IBM's example, UM and I spent a time
Speaker 1: with Tom Watson, and I was Frank Cary who became chairman,
Speaker 1: and then John ople who became CEO. But Mr Watson
Speaker 1: uh made a decision and he was still the founder
Speaker 1: in the majority shareholder, but made a decision that Kerry
Speaker 1: would become chairman and worked with the government and try
Speaker 1: to resolve the suit and John Wan around the company.
Speaker 1: So there really was kind of a division of responsibilities.
Speaker 1: I think that's really really important because it's really hard
Speaker 1: not think it distracted if you look what happens long
Speaker 1: term over these suits. IBM, we missed the thing called
Speaker 1: client server. Microsoft obviously did extremely well there. Microsoft missed
Speaker 1: the Internet, you know, And I think it's distraction. I
Speaker 1: really think a lot of that is because when you
Speaker 1: are the CEO and you're also dealing with the government suit,
Speaker 1: between the legal pressures and the advice you're getting from
Speaker 1: counsel and how you should proceed, how you should set strategy,
Speaker 1: the company gets distracted for a period of time. In
Speaker 1: our case that was almost ten years. Of Microsoft's case,
Speaker 1: I think it was more than ten, maybe twelve. A
Speaker 1: T and T you know, that happens, and then as
Speaker 1: a result of that, you missed these big technological shifts.
Speaker 1: One of the things that no one's been distracted from
Speaker 1: is the cloud. The dramatic rise in the cloud, including
Speaker 1: an Amazon not loomed Amazon. It's probably no coincidence that
Speaker 1: the person is succeeding Jeff Bezos really was running the
Speaker 1: cloud operation at Amazon. What do you make of that
Speaker 1: change in technology overall, that huge move into the cloud. Well,
Speaker 1: it's interesting because if you if you think about where
Speaker 1: Amazon began, there was an engine, apes and books on
Speaker 1: the internet. Basically right now they're the largest provider of
Speaker 1: cloud services to AWS, which you know, as you knew
Speaker 1: Andy was running UH at Amazon. Now having said all that, um,
Speaker 1: it's a huge transition of the infrastructure, I think I
Speaker 1: think you might find of interest is that if you
Speaker 1: look at the most recent CEO appointments over the past
Speaker 1: couple of years, they all have cloud experience. Amazon, Google, Microsoft, IVM, right,
Speaker 1: So that indicates that the the leadership of those companies
Speaker 1: have concluded that the skill set required for the future
Speaker 1: is someone who understands those technologies that are going to
Speaker 1: transition those companies and those business models into this cloud
Speaker 1: ear and put on top of that, artificial intelligence is
Speaker 1: the compounding of both of those things. But all those
Speaker 1: people have those backgrounds. So I think there's a it's
Speaker 1: an interesting pattern and emerging here becomes the leadership of
Speaker 1: these tech companies. We've already seen dramatic growth in the
Speaker 1: cloud business overall, just the business growing. How far along
Speaker 1: the curve are we, I mean, how far are they
Speaker 1: from it being a matur of business as it were.
Speaker 1: It's very early stage. I mean, it's been going on.
Speaker 1: I'm going to guess ten fifteen. If you get back
Speaker 1: to the early days of research and I was still
Speaker 1: working back then, a lot of this stuff was in
Speaker 1: researcher and academic institutions, and then it went from simple
Speaker 1: things like application development to actually doing production work, you know,
Speaker 1: real work the companies do in their core in a
Speaker 1: safe and resilient way. So now it's going to go
Speaker 1: beyond that. It's going to support all these advanced technologies
Speaker 1: as far as application I mean obviously artificial intelligence and
Speaker 1: those sorts of things. That was former IBM CEO Sam
Speaker 1: Pomisano coming up the prospects for another round of fiscal simulus.
Speaker 1: Senator Shelley Moore, Capital of West Virginia, says Democrats are
Speaker 1: committed to getting it done one way or the other.
Speaker 1: That next on Wall Street Week on Bloomberg. This is
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg. Rady
Speaker 1: President Biden pressed his case for another one point nine
Speaker 1: trillion dollars in stimulus money to support the U. S economy,
Speaker 1: including meeting at the White House with ten Republican senators
Speaker 1: who have proposed a compromise package that would get bipartisan support.
Speaker 1: We talked with one of those who met with the President,
Speaker 1: Senator Shelley Moore, Capital of West Virginia, for her take
Speaker 1: on that meeting. He didn't make any promises, He listened intently,
Speaker 1: is very well prepared, and he seemed to be interested
Speaker 1: in particularly in the targeting numbers on individual checks in
Speaker 1: terms of do we really want to be sending checks
Speaker 1: to families that are making three thousand dollars a years
Speaker 1: whose life really have not changed. And so I think
Speaker 1: that was the biggest area that he signaled that he
Speaker 1: might make some make some adjustments, but that's yet to
Speaker 1: be seen. There are some reports on the Bloomberg actually
Speaker 1: about the very point you just made that if you
Speaker 1: really look at the upper end before it really phases out,
Speaker 1: there are some people who are making a fair amount
Speaker 1: of money and as you say, maybe didn't lose their jobs.
Speaker 1: Do you have an approach in euro compromise proposal to
Speaker 1: deal with that, and did the President indicate maybe that
Speaker 1: made sense that sort of approach. Well, what we did
Speaker 1: was we lowered the the income level of which you
Speaker 1: would be available to get a stimulus check to about
Speaker 1: a hundred and fifty thousand per couple, and we felt
Speaker 1: like in the statistics bear out that you're using this
Speaker 1: a stimulus, this is money. We went back into the
Speaker 1: economy and at those income levels where people really are hurting,
Speaker 1: maybe can't pay their rent, by their food, Uh, they
Speaker 1: are spending their stimulus checks. If you get up into
Speaker 1: over two hundred or three hundred thousand dollars, people are
Speaker 1: saving it or they're not using it to provide that
Speaker 1: stimulus that we really need to keep this economy moving.
Speaker 1: And and also I think do we want, really want
Speaker 1: to be sending two expayer dollars to people who have
Speaker 1: had really little or no effects during this pandemic. Talk
Speaker 1: about climate for a second, because President Biden has been
Speaker 1: fairly aggressive and executive orders so far, and your home
Speaker 1: state of West Virginia, do you envision a world in
Speaker 1: which you can redirect your economy into clean energy and
Speaker 1: actually keep the jobs or even increase the jobs. Well,
Speaker 1: let's look at what a state like West Virginia has
Speaker 1: provided and provides for the nation. We have natural resources
Speaker 1: of coal and natural gas that we've powered this nation
Speaker 1: for over a century, and and we have a lot
Speaker 1: of great, hard working people. We're looking for stability and
Speaker 1: we're looking for easier transitions. We did not get that
Speaker 1: in the Obama administration. The troubling thing to me is
Speaker 1: it's the same faces and the Biden administration, and that
Speaker 1: signals to me that they have no interest in taking
Speaker 1: into consideration the ravage that the policies reek on places
Speaker 1: like West Virginia. But we are transitioning in West Virginia
Speaker 1: to a more high tech economy. We're working as hard
Speaker 1: as we can to work with research and development to
Speaker 1: keep those energy processes moving. But we cannot just drop
Speaker 1: certain people off of the ledge like that like we
Speaker 1: were dropped off over the last eight years of the
Speaker 1: Obama administration and think it's okay. Because joblessness, depression, rise
Speaker 1: in opioid and drug addiction, it's been really devastating for
Speaker 1: our state and tough for me to watch as a
Speaker 1: native West Virginia. The Senate has other business it has
Speaker 1: to attend to with a trial of former President Trump
Speaker 1: coming up on impeachment charges, is there any prospect of
Speaker 1: his being convicted? And specifically, as I understand it, you
Speaker 1: were one of the Republican senators who voted to say, actually,
Speaker 1: it shouldn't even going forward because he's no longer in office.
Speaker 1: So those people who voted that way, there's no way
Speaker 1: you're gonna convict him, and haven't said you shouldn't be
Speaker 1: having a trial, right, And doesn't that take care of
Speaker 1: the two thirds requirement? You know, I am charged as
Speaker 1: being a jour and I'm going to listen to what
Speaker 1: comes through on the appeachment trial. But I do believe,
Speaker 1: as I voted, that the Constitution says that you would
Speaker 1: remove and uh and prevent the president from running again. Well,
Speaker 1: we can't remove an impeachment because he's not the president.
Speaker 1: So that sort of nullifies, in my view, the vision
Speaker 1: that the founders had and making it I think a
Speaker 1: strong constitutional argument that you can impeach a president who's
Speaker 1: already out of office. So I think a lot of
Speaker 1: us felt that way. I think it's gonna be difficult
Speaker 1: to convict, but we haven't heard the evidence yet, and
Speaker 1: I think I would reserve judgment on that the center.
Speaker 1: I want to wrap this up by letting you brag
Speaker 1: on your state here a little bit, because your vaccination
Speaker 1: Rachel West Virginia are pretty impressive. What are you doing
Speaker 1: in West Virginia? What can you teach the rest of us?
Speaker 1: You know, what we're doing in West Virginia is we're
Speaker 1: utilizing all of our local assets. Uh. The governor has
Speaker 1: done a great job along with the National Guard, our
Speaker 1: local pharmacies, our city mayors and counties, our county health
Speaker 1: departments have been fantastic. The federal government laid out a
Speaker 1: plan for vaccination delivery and and dispensing. We went away
Speaker 1: from that and created our own plan because we know
Speaker 1: each other best and so we have the best vaccine
Speaker 1: vaccine distribution in the country. We're proud of it. We
Speaker 1: have I think a a a away, a way forward
Speaker 1: for states to get more shots in the arms quicker,
Speaker 1: and that's what we're doing in West Virginia. We have
Speaker 1: a vulnerable population. It is really important that we get
Speaker 1: those nursing home and assisted living folks taking care of First.
Speaker 1: We knew where they all were because we've been testing them.
Speaker 1: So it's just really been a logistical win for us.
Speaker 1: And we're really proud of it. What's I can to
Speaker 1: do for your economy because a lot of people are
Speaker 1: can Sara. If you can't get in vaccinaty, you can't
Speaker 1: get people back out to restaurants and things like that. Well,
Speaker 1: our schools reopened about two weeks ago and uh, and
Speaker 1: you know, there's been some pushback like we see across
Speaker 1: the nation, but by and large they're reopened and that's big.
Speaker 1: Our restaurants are reopening. Uh. And as we get this
Speaker 1: back distribution, we get those double shots for the ones
Speaker 1: that need the two shots. I think by the time
Speaker 1: are a great tourism um season comes along in the spring.
Speaker 1: We have a great winter one two in the spring.
Speaker 1: It's going to be great. We have a new National
Speaker 1: park in West Virginia. We were able to get at
Speaker 1: the end of the year, so we got lots to see.
Speaker 1: That was Senator Shelley Wore, Capital of West Virginia. Coming up,
Speaker 1: we wrap up the week with special contributor Larry Summers
Speaker 1: of Harvard. This is Wall Street Week on Bloomberg. This
Speaker 1: is Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: We're gonna wrap up the week as always with our
Speaker 1: special contributed Larry Summers of Harvard. So, Larry, I guess
Speaker 1: the big news this week is about the stimulus bill
Speaker 1: at one point nine trillion dollars President Biden is proposing.
Speaker 1: It was thought it might be bipartisan. Now it looks
Speaker 1: like he's going to really push it through, no matter
Speaker 1: whether Republicans coming aboard or not. You were in the
Speaker 1: Obama administration when you went for a big stimulus package,
Speaker 1: and some people think you didn't go far and fast enough.
Speaker 1: Do you agree with President Biden's approach that he's got
Speaker 1: to get this thing through. Let me just first say
Speaker 1: David that I don't think there's any question that in
Speaker 1: retrospect it would have been better if we'd done larger
Speaker 1: stimulus during the Obama administration. I think we understood that
Speaker 1: at the time the constraint read President Obama's memoirs, was
Speaker 1: not an economic judgment. It was a political judgment about
Speaker 1: what could pass through the Congress, given the consensus that
Speaker 1: existed at that time, given where Republicans were, and given
Speaker 1: where Democrats like Senator Kemp Conrad and Iron Oregon and
Speaker 1: Nelson uh from Nebraska were at that time. So I
Speaker 1: think the lesson that we need more stimulus, um, we
Speaker 1: wish we'd had more stimulus, is really a valid lesson.
Speaker 1: I'm not in a position to judge the tactics. It's
Speaker 1: certainly better to do things on a bipartisan basis, but
Speaker 1: negotiation is about leverage, and if the Democrats have no
Speaker 1: capacity to act on their own, they don't have much
Speaker 1: leverage in a bipartisan negotiation, and so if it's come
Speaker 1: to the point where they need to do it unilaterally,
Speaker 1: then that's where it's come to. So I'm not prepared
Speaker 1: at all to second guess UH that UH political judgment.
Speaker 1: It's a political judgment, not an economic UH judgment, and
Speaker 1: it may well be necessary given the intransigence of today's
Speaker 1: Republican party. I think the really important issues, David Uh
Speaker 1: go to how we think about fiscal policy over the
Speaker 1: course of the whole year. And we need to make
Speaker 1: sure we're supporting demand, we need to make sure that
Speaker 1: we're helping people who are in need. We need to
Speaker 1: take the kind of different perspective on fiscal policy that
Speaker 1: recent economic thinking about secular stagnation, about low rates has
Speaker 1: driven us to. But that's not a reason for blank checks.
Speaker 1: And that's not a reason why any amount of fiscal
Speaker 1: policy organized in any way UM is appropriate. And I
Speaker 1: look at the fiscal stimulus under discussion, and with the
Speaker 1: one point nine trillion dollars, you're talking about something that,
Speaker 1: relative to the GDP APP is six times as large
Speaker 1: as what we did in two thousand and eight. And
Speaker 1: if that's what we're gonna do, we need to make
Speaker 1: sure we've got a contingency plan in case we get
Speaker 1: a perfect combination of good news. The one point six
Speaker 1: trillion dollars and pent up savings gets spent, this fiscal
Speaker 1: stimulus gets delivered, COVID gets behind us, and people feel
Speaker 1: free UH to spend, and we have an economy that
Speaker 1: is literally on fire. And if that happens, we're gonna
Speaker 1: need a framework for UH containing things. And there may
Speaker 1: well be such a framework, but we're gonna need to
Speaker 1: hear about it from the Treasury Secretary. We're gonna need
Speaker 1: to hear about it from the Federal Reserve chairman. The
Speaker 1: other question than I have is our economy had fundamental
Speaker 1: issues before COVID, the need for green investment, the need
Speaker 1: for investment in a totally decaying infrastructure, the need for
Speaker 1: investment and opportunity for every child in UH the country
Speaker 1: and the Build Back Better agenda that President Biden spoke
Speaker 1: about so eloquently in the campaign. And if we've got
Speaker 1: fifteen percent of GDP and stimulus being delivered this year
Speaker 1: with nothing really that's in the Build Back Better agenda,
Speaker 1: the question arises, how are we going to fund that vital,
Speaker 1: build back Better agenda? And maybe the answer is will
Speaker 1: find a way to legislate it and find a way
Speaker 1: to pay for it through tax increases, and that could
Speaker 1: be a very very positive strategy. But if not, we're
Speaker 1: using up an enormous amount of fiscal space, an enormous
Speaker 1: amount of political and economic energy on measures that are
Speaker 1: not building back better. And as I hear people starting
Speaker 1: to talk about making checks for most Americans into not
Speaker 1: just a one off but a regular fiscal policy, I
Speaker 1: become uh concerned. And so those are I think the
Speaker 1: questions that are going to need to be debated and
Speaker 1: discussed as we come to a conclusion on fiscal stimulus. So, Larry,
Speaker 1: let's take a look at one point nine trillion dollar package.
Speaker 1: As you look at it, give me something you think
Speaker 1: is absolutely essential must go forward with. Give me something
Speaker 1: that's sort of nice optional, or maybe we even shouldn't do.
Speaker 1: Expending every dollar we can productively effectively spend is very
Speaker 1: very important, and we should certainly do it on COVID,
Speaker 1: on COVID cure, on vaccination, on testing, on contact tracing,
Speaker 1: on epidemiological and biological research. Every dollar that can usefully
Speaker 1: be spent on something that's costing US tens of billions
Speaker 1: of dollars a week is an investment we absolutely should
Speaker 1: make as a country. Do we need to be providing
Speaker 1: my children with two thousand dollar tax credits? Do we
Speaker 1: need to be providing families in the upper ten percent
Speaker 1: of the income distribution with UH families of four with
Speaker 1: eight thousand dollars in government cash? Should that be an
Speaker 1: urgent priority UM that comes before fixing the pot holes
Speaker 1: in the highways, that comes before green investment? I'm not sure,
Speaker 1: And especially since the political window is short, especially since
Speaker 1: the time to start implementing the programs is long, I
Speaker 1: would rather see US pivot much more quickly to building
Speaker 1: back better than see us UH in a position of
Speaker 1: using up all the energy and having the huge big
Speaker 1: thing be UM. The provision of funding UM in a
Speaker 1: very general way, especially if that's a precedent setting thing
Speaker 1: that we're then going to feel pressure to continue going forward.
Speaker 1: So let's conclude with a rapid fire around him, Summer says,
Speaker 1: and pick up on something you just said, number one
Speaker 1: you referred to game stop if we end up with
Speaker 1: Robin Hood against the regulators in Washington, because the regulators
Speaker 1: are certainly going after this thing, who's gonna win regulators?
Speaker 1: I think you're going to see a lot of attention
Speaker 1: two issues around manipulation and retail protection. I don't yet,
Speaker 1: I don't feel I know what the right public policy
Speaker 1: answers are, but I think there's a pretty pervasive and
Speaker 1: pretty valid sense that the spectacle of the last two
Speaker 1: weeks and the possible systemic risk that could have happened
Speaker 1: of another LTCM type situation in the last two weeks,
Speaker 1: that public policy should be working to avoid that. And
Speaker 1: I suspect that we'll see new rules and regulations. We
Speaker 1: heard this week from the Bank of England UH and
Speaker 1: they didn't change any of their decision making, but they
Speaker 1: once again sort of had both ways on negative interest rates.
Speaker 1: We're not doing it now, We're not saying we're gonna
Speaker 1: do it, but don't be surprised we do it. At
Speaker 1: some point down the out when history is written, well,
Speaker 1: negative interest rates proved to have been a success or
Speaker 1: a failure. I don't think they're going to be remembered
Speaker 1: as a great success. I think they're gonna be remembered
Speaker 1: more as a sign of desperation in a very difficult time.
Speaker 1: And people are gonna wish that we had used fiscal
Speaker 1: policy more actively, and so there have been less neat
Speaker 1: for monetary policy. Okay, Larry, thank you so very much
Speaker 1: for concluding the week for us, as you always do.
Speaker 1: That's Larry Summers, our special Wall Street. We contribute from Harvard. Finally,
Speaker 1: one more thought. Everybody's doing it now. I'm not talking
Speaker 1: about buying call options on highly shorted stocks, or planning
Speaker 1: vacations for whenever they let us out of this cage
Speaker 1: that is our home, or even buying a COVID puppy. No,
Speaker 1: the craze that has truly taken over the country is
Speaker 1: this back that special purpose acquisition company. But going back
Speaker 1: in is a last resort for companies they couldn't manage.
Speaker 1: An I p O. SPACs have become all the rage
Speaker 1: in this world of cheap money, low returns and volata
Speaker 1: markets that make it really hard to price a traditional
Speaker 1: I p O. If you're a private company on the rise,
Speaker 1: just raise the money without telling anyone what you want
Speaker 1: to buy, make a deal, and presto, change out. You
Speaker 1: have a public company where there was a private one.
Speaker 1: So if you're a former senior member the Trump administration,
Speaker 1: what do you do next? Well, for former Commerce Secretary
Speaker 1: Wilbur Ross, you create a spack and whom you bring
Speaker 1: in to help you run it? Former Director of the
Speaker 1: National Economic Council Larry Cudlow. They've announced plans to raise
Speaker 1: three forty five million dollars for their news back. They
Speaker 1: haven't said what sectors they'll be looking at, although Mr
Speaker 1: Ross has always expressed interest in the privatization of space,
Speaker 1: and Mr Cudlow or Mr Cutler, as we know, knows
Speaker 1: the media rather well. But in the end, maybe the
Speaker 1: price is right for a big private leisure and hospitality group,
Speaker 1: something like maybe the Trump organization. It would be one
Speaker 1: way to turn the table on your old boss. That
Speaker 1: does it. For this episode of Wall Street Week, I'm
Speaker 1: David Western, This is Bloomberg. See you next week. M