WEBVTT - Libby Cantrill, Managing Director: Public Policy at PIMCO Talks House And Senate

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>This is arguably the most important conversation of the day.

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<v Speaker 2>Libby Cantrell is with the Pacific Investment Management Company PIMCO,

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<v Speaker 2>and she is expert on Washington process, and she joins

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<v Speaker 2>us right now, the President elect's going to want to

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<v Speaker 2>run this from the White House with some form of

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<v Speaker 2>autocratic certitude. Who knows what it's going to be. Where

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<v Speaker 2>are the checks and balances if we presume a Republican

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<v Speaker 2>Senate fifty five senators back to two thousand and five,

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<v Speaker 2>maybe a House maybe Democrat, maybe a Republican. Where does

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<v Speaker 2>Libby Cantrell see the checks in the balances of our legislation?

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<v Speaker 3>Yes, well, good morning.

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<v Speaker 4>So so the Senate looks almost definite that Republicans will

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<v Speaker 4>have a fifty three forty seven majority, and then to

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<v Speaker 4>Nevada and Mission again depending on how those states are called.

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<v Speaker 4>So you know, fifty three forty seven a bit of

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<v Speaker 4>a check, right. You need sixty votes still in the

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<v Speaker 4>Senate to pass major legislation, except for tax bills, which

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<v Speaker 4>can be passed by a budget reconscillation, which only requires

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<v Speaker 4>fifty votes. People's eyes glaze over, understandably, but it's actually

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<v Speaker 4>quite yes, I know, but it's actually but it is

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<v Speaker 4>actually quite important. The House, however, looks like it's going

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<v Speaker 4>to be very close. It will likely be kept in

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<v Speaker 4>the kind of the Republican column, but maybe they only.

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<v Speaker 3>Have one two three seat majority with it.

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<v Speaker 2>That matters within American political punditry. Let's go like all

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<v Speaker 2>the TV networks in that is our legislation, our law

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<v Speaker 2>going to be run out of sixteen hundred Pennsylvania Avenue.

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<v Speaker 2>How do you respond to that?

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<v Speaker 4>Look, I think from an economic perspective, there are many

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<v Speaker 4>things that Trump can do unilatterly that he's already talked

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<v Speaker 4>about doing.

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<v Speaker 3>He will increase.

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<v Speaker 4>Tariffs, and I think our view is that this is

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<v Speaker 4>an ideology of his that has been you know, for

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<v Speaker 4>his entire public life. So we're expecting tariffs to go up.

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<v Speaker 4>Now you know how much they go up, and what

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<v Speaker 4>that exact policy looks like, I think reminds to be seen.

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<v Speaker 4>Immigration he can do unilaterally in terms of slowing the

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<v Speaker 4>flow and basically you know, stopping stopping the border. But

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<v Speaker 4>outside of that, I think this is really quite important

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<v Speaker 4>from uh, you need the you need the Congress. So

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<v Speaker 4>the big, bigger majority in the Senate is important he

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<v Speaker 4>can get all of his folks confirmed.

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<v Speaker 3>That's going to be very important for him.

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<v Speaker 4>But if he doesn't have a bigger majority in the House,

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<v Speaker 4>it's going he'll be able to pass things for sure,

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<v Speaker 4>but it's going to be a lot more of a

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<v Speaker 4>negotiation than I think what maybe the market expects right

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<v Speaker 4>now about.

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<v Speaker 1>The financial services industry. Talk about an industry that feels

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<v Speaker 1>that it's has with maybe it's fair share of regulations.

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<v Speaker 1>What do we know about the Trump administration and how

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<v Speaker 1>they view the financial services industry.

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<v Speaker 4>Yeah, so I think a couple of things, just to

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<v Speaker 4>you know, for folks listening, you know, there are a

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<v Speaker 4>few things that a few regulators that Trump can replace

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<v Speaker 4>basically date on one. That's the CFPB, the Consumer of

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<v Speaker 4>Financial Protection Bureau, the FHFA, which oversees Fanny and Freddie,

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<v Speaker 4>the OCC and then he can likely nominate the new

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<v Speaker 4>chairs of the SEC and the CFTC, but that will

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<v Speaker 4>take time.

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<v Speaker 3>The FED, however, it's.

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<v Speaker 4>Pretty clear that he cannot do anything with Chairman Powell.

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<v Speaker 4>So Powell's here here to stay at least until twenty

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<v Speaker 4>twenty six when his termo's chair is over. So in

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<v Speaker 4>terms of like putting fingerprints on financial regulation. There are

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<v Speaker 4>areas where he absolutely can do this sort of day one,

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<v Speaker 4>but basically everything else in terms of you're talking about

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<v Speaker 4>Basil three end game, that will take some time.

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<v Speaker 3>But to be clear here, the direction of travel is clear.

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<v Speaker 4>There's going to be a softer touch on financial regulation,

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<v Speaker 4>and that's why financials are.

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<v Speaker 2>I guess it's bipartisan. I mean, you know this Libby viscerally,

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<v Speaker 2>there's got to be a collegiality. Howard Baker talking to

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<v Speaker 2>Sam Irvin. Is it gone?

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<v Speaker 3>Is it gone?

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<v Speaker 2>I don't.

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<v Speaker 4>I mean I think Look, I think that that people

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<v Speaker 4>come to Washington in order to get things done. And

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<v Speaker 4>given that President Trump is coming to the presidency with

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<v Speaker 4>a very strong mandate and a pretty nice majority at

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<v Speaker 4>least in the Senate. I mean, the folks on the

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<v Speaker 4>Democratic side, if they want to see anything get done,

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<v Speaker 4>they're going to have to work with, you know, with

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<v Speaker 4>President Trump.

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<v Speaker 3>Now, I may they may have to hold their nose just.

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<v Speaker 4>Based on kind of the Twitter reaction, but I think that, yeah,

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<v Speaker 4>people come to Washington and in order to govern and

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<v Speaker 4>to govern, you know, it's a compromise.

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<v Speaker 2>It's a great insight the Truman and Dewey didn't have

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<v Speaker 2>to worry about Twitter as well. And my all night

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<v Speaker 2>are gir again forcing me to have an all nighter.

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<v Speaker 2>I neglected to say for Governor need Lamont that his

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<v Speaker 2>wife Annie Lamont is on the board of Bloomberg LP.

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<v Speaker 2>That was my folks, my major folks this morning.

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<v Speaker 3>Hey Lebby.

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<v Speaker 1>If I'm an M and a banker, if I'm an

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<v Speaker 1>M and a attorney, I think I'm pretty happy here

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<v Speaker 1>because the concern here of the last number of years

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<v Speaker 1>has been, boy, it's tough to get deals through the

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<v Speaker 1>regulatory particularly the Federal Trade Commission. There's been some calls

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<v Speaker 1>some change in leadership there. How do you think we

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<v Speaker 1>may see that reflected in the Federal Trade Commission, maybe

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<v Speaker 1>the Department of Justice.

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<v Speaker 4>Yeah, so I think that An important thing to keep

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<v Speaker 4>in mind is actually that Lena Kahn's term was actually

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<v Speaker 4>expired the third week of September, so effectively she is

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<v Speaker 4>a lamed duck. If Harris had been elected, she would

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<v Speaker 4>have had to either renominate her or nominate somebody else. Now,

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<v Speaker 4>of course Trump will not. He will he will choose

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<v Speaker 4>somebody else. So that is another regulatory change that he

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<v Speaker 4>is going to be able to bring about you.

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<v Speaker 3>Know, pretty much in short order.

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<v Speaker 4>Now he's going to course have to get that person

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<v Speaker 4>confirmed by the US Senate and what have you.

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<v Speaker 3>But to your point, I mean, this is.

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<v Speaker 4>Absolutely kind of risk positive in terms of well, folks.

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<v Speaker 2>I need some drama the day after an election. Is

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<v Speaker 2>Libby Cantra willing to say MEGS seven regulation by Washington

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<v Speaker 2>goes away?

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<v Speaker 4>No, And I think this is actually quite important. So

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<v Speaker 4>executive orders will go away. But actually deregulation takes a

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<v Speaker 4>lot of time. Usually it takes years. What I think

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<v Speaker 4>that the market is understandably and rightfully responding to is

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<v Speaker 4>the absence of new regulation and just a more you know,

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<v Speaker 4>just more clarity in terms of the regulatory landscape.

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<v Speaker 3>I mean the thing about President Biden.

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<v Speaker 4>Even though he ran more as a centrist Democrat back

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<v Speaker 4>in tw twenty twenty, you know, he really nominated and

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<v Speaker 4>was able to get confirmed some pretty ideological folks on

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<v Speaker 4>the regulatory side, and that is going to be a

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<v Speaker 4>big chef. But again we shouldn't expect necessarily deregulation. We

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<v Speaker 4>will see some executive orders unwound that will help traditional energy,

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<v Speaker 4>in particular the LG export pause, for instance, is likely

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<v Speaker 4>to go away kind of day one.

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<v Speaker 3>But outside of that, deregulation is it takes all? It

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<v Speaker 3>takes much.

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<v Speaker 1>A mental Arguably the biggest issue for corporate Wall Street

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<v Speaker 1>is taxation. What's your call on taxation under Trump?

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<v Speaker 4>Yes, so this is actually where again sort of my

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<v Speaker 4>nummy as it may be, where the.

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<v Speaker 3>Majority of the Chamber of majorities actually do matter.

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<v Speaker 1>Yeah.

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<v Speaker 4>So you know, assuming that the Republicans keep the House,

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<v Speaker 4>they will likely be able to get through an extension

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<v Speaker 4>of all of the Trump task cuts on the individual side. Now,

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<v Speaker 4>remember there are no no expiration on the corporate tax side,

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<v Speaker 4>so that is likely not going to change. I would

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<v Speaker 4>sort of fade the idea that it's going to decrease

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<v Speaker 4>significantly the deficits of six and a half percent. Unlikely that,

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<v Speaker 4>you know, republic He's gonna be able to get Republican

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<v Speaker 4>unanimity to do something that actually you know, costs you know,

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<v Speaker 4>billions hundred billion.

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<v Speaker 2>Live me thirty eight seconds. John from New Jersey emails

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<v Speaker 2>in and says all I care about is assault text.

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<v Speaker 2>No Trump did it.

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<v Speaker 3>He should have to prep.

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<v Speaker 2>Then, right, But the salt text stays the.

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<v Speaker 4>Salt, So the salt cap, which ten thousand. Yeah, so

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<v Speaker 4>if that expires and if Converse doesn't do anything that's

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<v Speaker 4>fully reinstated, that is very unlikely. It cost about a

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<v Speaker 4>trillion dollars over ten years. I do think that Trump

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<v Speaker 4>will have pressure to increase the cap. Maybe it's to

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<v Speaker 4>twenty thousand, maybe it's even higher, maybe it's to forty thousand.

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<v Speaker 3>So maybe you're called from New Jersey will be happy

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<v Speaker 3>with that.

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<v Speaker 4>But in terms of the reinstatement of the salt deduction,

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<v Speaker 4>that is very unlikely. It is very expensive. It's about again,

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<v Speaker 4>about trillion dollars over ten years.

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<v Speaker 2>What a yields do in your space? Are yields inflation yields?

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<v Speaker 2>Worry about the fiscal deficit? Is that a constraint for

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<v Speaker 2>this political revelution?

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<v Speaker 3>That a constraint from Washington. I'm not sure that they

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<v Speaker 3>understand what a curf steepner is. For instance, I kind

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<v Speaker 3>of doubt it.

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<v Speaker 4>But obviously the bond market is reacting right, and that's

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<v Speaker 4>you know, the sting. Now again, we would have made,

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<v Speaker 4>I think, made the argument that regardless of whether it's

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<v Speaker 4>Harris or Trump, both would.

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<v Speaker 3>Have been bad for the deficit.

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<v Speaker 4>We were looking at high deficits regardless of who won,

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<v Speaker 4>so we would have said that the curse hast even regardless.

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<v Speaker 2>Lily comeback the next time, the Denver Broncos win. Let

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<v Speaker 2>me cantrol a clinical there, wishing Laway would return at

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<v Speaker 2>some point