1 00:00:02,520 --> 00:00:07,040 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,800 --> 00:00:10,879 Speaker 2: I'm joined by the US Treasury Secretary Scott Bessett this 3 00:00:10,880 --> 00:00:13,360 Speaker 2: morning on the heels of this agreement. The President announced 4 00:00:13,600 --> 00:00:17,439 Speaker 2: last night last week, you joined me, John and Lisa, 5 00:00:17,440 --> 00:00:19,040 Speaker 2: and you said you were going to Japan for the 6 00:00:19,040 --> 00:00:21,520 Speaker 2: World Expo, wasn't really going to be focused on trade. 7 00:00:21,600 --> 00:00:24,320 Speaker 2: You came back. The President had a seventy five minute 8 00:00:24,320 --> 00:00:26,759 Speaker 2: meeting as well last night with the trade negotiator. You 9 00:00:26,800 --> 00:00:29,200 Speaker 2: were in the room, and he got this deal with 10 00:00:29,240 --> 00:00:31,520 Speaker 2: you alongside him over the finish line. 11 00:00:31,600 --> 00:00:32,239 Speaker 1: Even though the. 12 00:00:32,240 --> 00:00:35,600 Speaker 2: Reporting at of Washington that actually the discussions with Japan 13 00:00:35,760 --> 00:00:38,920 Speaker 2: were quite difficult. What changed in the last twenty four hours. 14 00:00:39,400 --> 00:00:40,640 Speaker 1: Look, Anne, Marie. 15 00:00:40,680 --> 00:00:46,080 Speaker 3: We had some discussions about the overall US Japan relationship, 16 00:00:46,120 --> 00:00:48,360 Speaker 3: which was one of the strongest in the world when 17 00:00:48,360 --> 00:00:52,040 Speaker 3: I was in Tokyo and Osaka, and then we got back. 18 00:00:52,680 --> 00:00:58,480 Speaker 3: There were elections on Sunday. LDP did slightly better than 19 00:00:58,520 --> 00:01:02,520 Speaker 3: expected that they don't have a majority. Japanese government was 20 00:01:02,600 --> 00:01:07,600 Speaker 3: ready to deal, and as president, only President Trump could do. 21 00:01:07,680 --> 00:01:11,480 Speaker 3: He brought the Japanese trade delegation into the Oval and 22 00:01:11,600 --> 00:01:15,640 Speaker 3: had a very fulsome negotiation with them and I tell 23 00:01:15,680 --> 00:01:18,600 Speaker 3: you they're tough negotiators for President Trump's tougher. 24 00:01:18,920 --> 00:01:21,399 Speaker 2: Well, there is a photo circulating on Twitter from Dan 25 00:01:21,440 --> 00:01:25,319 Speaker 2: Scavino and you actually see a sharpie x out of 26 00:01:25,400 --> 00:01:28,959 Speaker 2: some what looks like preliminary deals for even more concessions 27 00:01:28,959 --> 00:01:31,800 Speaker 2: with Japan. I want to ask you about this fifteen 28 00:01:31,840 --> 00:01:34,720 Speaker 2: percent tariff free? Is that the new floor now for 29 00:01:34,840 --> 00:01:37,520 Speaker 2: trading partners when you're going into these negotiations. 30 00:01:37,680 --> 00:01:41,199 Speaker 3: Well, I think it's very important to note that fifteen 31 00:01:41,720 --> 00:01:47,240 Speaker 3: percent for Japan for reciprocal tariffs for autos, that is 32 00:01:47,400 --> 00:01:51,040 Speaker 3: a different kind of deal. But because the Japanese proposed 33 00:01:51,360 --> 00:01:55,800 Speaker 3: a very innovative solution, We've been working with them for months, 34 00:01:56,080 --> 00:02:02,080 Speaker 3: the trade team, myself, Ambassador Greer, Secretary Lutnik, and they 35 00:02:02,160 --> 00:02:05,720 Speaker 3: came to us with the idea of a Japan US 36 00:02:05,920 --> 00:02:10,160 Speaker 3: partnership where they are going to provide equity, credit guarantees 37 00:02:10,200 --> 00:02:13,760 Speaker 3: and funding for major projects. 38 00:02:13,160 --> 00:02:13,959 Speaker 1: In the US. 39 00:02:14,520 --> 00:02:17,840 Speaker 3: So they got the fifteen percent rate because they were 40 00:02:17,880 --> 00:02:21,600 Speaker 3: willing to provide this innovative financing. 41 00:02:22,520 --> 00:02:23,120 Speaker 1: Mechanism. 42 00:02:23,240 --> 00:02:26,440 Speaker 2: There's a lot of Japanese FDI into the United States already. 43 00:02:26,520 --> 00:02:27,440 Speaker 2: Is this new capital? 44 00:02:27,760 --> 00:02:29,639 Speaker 1: Oh no, this is all new capital. 45 00:02:30,000 --> 00:02:32,880 Speaker 3: This is all new capital, and it is going to 46 00:02:32,919 --> 00:02:37,120 Speaker 3: be targeted at the strategic industries. The President Trump and 47 00:02:37,200 --> 00:02:41,160 Speaker 3: this administration belief that we have to de risk on 48 00:02:42,120 --> 00:02:46,200 Speaker 3: During COVID, we saw our vulnerabilities, whether it was in 49 00:02:46,320 --> 00:02:51,120 Speaker 3: medicine semiconductors. So we are going all in over the 50 00:02:51,160 --> 00:02:55,000 Speaker 3: next few years to de risk our supply chains and 51 00:02:55,160 --> 00:02:58,000 Speaker 3: this deal, thanks to President Trump, is going to be 52 00:02:58,040 --> 00:02:58,400 Speaker 3: part of that. 53 00:02:58,600 --> 00:03:00,960 Speaker 2: When it comes to the fifteen percent rate on autos, 54 00:03:01,200 --> 00:03:04,840 Speaker 2: this means that Toyota is basically paying a cheaper rate 55 00:03:04,960 --> 00:03:08,960 Speaker 2: than say GM if they have inputs from other countries. 56 00:03:08,960 --> 00:03:11,320 Speaker 2: Still they're still at the twenty five percent auto rate. 57 00:03:11,600 --> 00:03:14,120 Speaker 2: Do you see the auto rate leveling out to something 58 00:03:14,160 --> 00:03:15,280 Speaker 2: lower than twenty five percent. 59 00:03:16,000 --> 00:03:17,360 Speaker 1: We'll have to see. 60 00:03:17,440 --> 00:03:21,239 Speaker 3: And again those are just GM components. 61 00:03:21,320 --> 00:03:22,079 Speaker 1: There's also the. 62 00:03:22,120 --> 00:03:28,720 Speaker 3: USNCA, the portion of any autos assembled in the US, 63 00:03:28,760 --> 00:03:32,080 Speaker 3: and then of course GM and especially Ford. I think 64 00:03:32,200 --> 00:03:35,680 Speaker 3: Ford has the largest US production. You're building in the US, 65 00:03:35,760 --> 00:03:37,400 Speaker 3: there are no tariffs, so when. 66 00:03:37,240 --> 00:03:41,000 Speaker 2: It comes to what's next, we know the EU negotiators 67 00:03:41,000 --> 00:03:45,040 Speaker 2: are in town. This fifteen percent rate feels like potentially 68 00:03:45,080 --> 00:03:47,800 Speaker 2: a floor. Could anyone get below fifteen percent? Is the 69 00:03:47,800 --> 00:03:51,400 Speaker 2: European Union still trying for ten percent minimum baseline tariff. 70 00:03:51,640 --> 00:03:55,400 Speaker 3: Well, again, the fifteen percent is a result of this 71 00:03:55,680 --> 00:03:59,560 Speaker 3: very innovative package that the Japanese came with and your 72 00:03:59,600 --> 00:04:03,280 Speaker 3: present Trump being able to push them to do even 73 00:04:03,440 --> 00:04:04,360 Speaker 3: more so. 74 00:04:05,120 --> 00:04:06,960 Speaker 2: Has Russels come up with anything innovative? 75 00:04:07,960 --> 00:04:12,720 Speaker 3: Not yet, But again, talks are going better than they 76 00:04:12,760 --> 00:04:17,640 Speaker 3: had been. I think that we are making good progress 77 00:04:17,760 --> 00:04:21,080 Speaker 3: with the EU, but as I've said before, Emory and 78 00:04:21,320 --> 00:04:24,799 Speaker 3: the EU has a collective action problem twenty seven countries. 79 00:04:25,080 --> 00:04:27,640 Speaker 3: Great thing about dealing with the Japanese. I've been going 80 00:04:27,640 --> 00:04:31,440 Speaker 3: to Japan since nineteen ninety I think this weekend was 81 00:04:31,480 --> 00:04:35,680 Speaker 3: my fifty second trip. And the Japanese government moves of 82 00:04:35,839 --> 00:04:39,680 Speaker 3: one entity. They're highly organized across all level of government. 83 00:04:40,040 --> 00:04:42,039 Speaker 2: So you say that talks are going better, We just 84 00:04:42,080 --> 00:04:44,240 Speaker 2: have a story hitting the terminal this morning from our 85 00:04:44,279 --> 00:04:47,040 Speaker 2: colleagues in Europe that the European Union is readying one 86 00:04:47,120 --> 00:04:52,120 Speaker 2: hundred billion dollars euros. If there is no deal in place, 87 00:04:52,400 --> 00:04:54,960 Speaker 2: they will impose thirty percent tariffs on those one hundred 88 00:04:55,000 --> 00:04:56,960 Speaker 2: billion euros worth of goods. Do you think we're going 89 00:04:57,000 --> 00:04:57,800 Speaker 2: to get to that place? 90 00:04:58,480 --> 00:05:01,919 Speaker 3: I think it's a negotiating tactic, and it's what I 91 00:05:01,920 --> 00:05:04,799 Speaker 3: would do if I were in their place. But Amery, 92 00:05:05,080 --> 00:05:09,919 Speaker 3: Remember we are the deficit nation. They're the surplus nations, 93 00:05:09,960 --> 00:05:14,920 Speaker 3: so any kind of a escalation in trade problems will 94 00:05:14,920 --> 00:05:16,039 Speaker 3: always hit them worse. 95 00:05:16,320 --> 00:05:18,159 Speaker 2: I want to also talk about what's going on with China. 96 00:05:18,240 --> 00:05:20,880 Speaker 2: You're going to Stockholm Monday Tuesday to meet with your 97 00:05:20,920 --> 00:05:25,599 Speaker 2: Chinese counterparts. Are we going to continuously see the discussions 98 00:05:25,640 --> 00:05:29,000 Speaker 2: revolve around where Earth's and export controls or they're going 99 00:05:29,040 --> 00:05:30,560 Speaker 2: to be other items on the table. 100 00:05:31,000 --> 00:05:33,800 Speaker 3: I think we're in a very good place with China 101 00:05:33,839 --> 00:05:38,480 Speaker 3: now and we can start moving on to bigger discussions. 102 00:05:39,040 --> 00:05:42,680 Speaker 3: As I've said many times, there is the potential for 103 00:05:42,960 --> 00:05:47,000 Speaker 3: a big, beautiful rebalancing between the US and China. President 104 00:05:47,080 --> 00:05:52,040 Speaker 3: Trump is committed to bringing back precision manufacturing to the US, 105 00:05:52,080 --> 00:05:56,760 Speaker 3: and as we become more of a manufacturing economy, China 106 00:05:56,960 --> 00:06:00,599 Speaker 3: is highly imbalanced. They account for thirty percent of all 107 00:06:00,760 --> 00:06:06,440 Speaker 3: the manufacturing output in the world. That's not sustainable. We 108 00:06:06,520 --> 00:06:09,920 Speaker 3: believe they should become more of a consumption economy. If 109 00:06:09,920 --> 00:06:12,279 Speaker 3: they are willing to go down that route, then we 110 00:06:12,320 --> 00:06:14,680 Speaker 3: could actually do it together. And then there are lots 111 00:06:14,720 --> 00:06:17,960 Speaker 3: of other things we can talk about whether it's them 112 00:06:18,040 --> 00:06:23,040 Speaker 3: buying sanctioned Russian or Iranian oil, you know a number 113 00:06:23,240 --> 00:06:25,560 Speaker 3: of security things. 114 00:06:25,720 --> 00:06:30,320 Speaker 2: And so the purchasing agreement from Trump's first administration, he 115 00:06:30,400 --> 00:06:33,400 Speaker 2: had a deal with China on the Phase one purchasing 116 00:06:33,400 --> 00:06:34,640 Speaker 2: agreement on agriculture. 117 00:06:34,800 --> 00:06:37,960 Speaker 3: Well, again, that's another way that we could bring this 118 00:06:38,080 --> 00:06:42,360 Speaker 3: imbalance relationship into balance. So we will be talking about 119 00:06:43,000 --> 00:06:51,520 Speaker 3: purchasing agreements, especially ag and to refresh everyone's memory, we 120 00:06:51,560 --> 00:06:55,000 Speaker 3: had the purchase agreements. Chinese lived up to the purchase 121 00:06:55,080 --> 00:06:59,680 Speaker 3: agreements during President Trump's final year in office, and then 122 00:07:00,080 --> 00:07:03,560 Speaker 3: the Biden administration didn't enforce those purchase agreements. 123 00:07:03,640 --> 00:07:06,520 Speaker 1: So we're going to let bygones be bygones. We're going 124 00:07:06,560 --> 00:07:07,880 Speaker 1: to look forward. 125 00:07:07,839 --> 00:07:11,120 Speaker 3: And I think we can come up with some very 126 00:07:11,160 --> 00:07:15,360 Speaker 3: interesting purchasing agreements. As you know, President Trump is committed 127 00:07:15,400 --> 00:07:16,560 Speaker 3: to the American farmers. 128 00:07:16,680 --> 00:07:20,160 Speaker 2: Well, looking forward, you told me John and Lisa last week, 129 00:07:20,240 --> 00:07:23,280 Speaker 2: the market doesn't need to worry about August twelfth, that's 130 00:07:23,320 --> 00:07:27,000 Speaker 2: the deadline for this current dayton between Washington and Beijing. 131 00:07:27,320 --> 00:07:28,720 Speaker 2: What's the new deadline going to be? 132 00:07:29,200 --> 00:07:34,440 Speaker 3: Well, again, I think that we could roll it forward, 133 00:07:34,960 --> 00:07:39,240 Speaker 3: maybe in a ninety day increment and I think the 134 00:07:39,280 --> 00:07:42,480 Speaker 3: good news here is that we are back on track 135 00:07:42,840 --> 00:07:50,000 Speaker 3: with the Chinese negotiations. On April second, President Trump told countries, 136 00:07:50,600 --> 00:07:54,840 Speaker 3: here's your reciprocal rate. But that was the ceiling if 137 00:07:54,880 --> 00:07:58,040 Speaker 3: you do not escalate. If you don't escalate, this is 138 00:07:58,200 --> 00:08:02,160 Speaker 3: the max. The Chinese chose to escalate. But now we 139 00:08:02,520 --> 00:08:05,160 Speaker 3: both sides have de escalated, and I think we can 140 00:08:05,240 --> 00:08:08,760 Speaker 3: get into a very good cadence of regular meetings with them. 141 00:08:09,080 --> 00:08:11,720 Speaker 3: And look, we're the two largest economies. 142 00:08:11,120 --> 00:08:11,640 Speaker 1: In the world. 143 00:08:11,920 --> 00:08:14,640 Speaker 3: We do not want to decouple with the Chinese. We 144 00:08:14,760 --> 00:08:17,360 Speaker 3: just need to de risk part of our supply chain. 145 00:08:17,720 --> 00:08:21,720 Speaker 2: Does regular incremental meetings include a meeting between President Trump 146 00:08:21,760 --> 00:08:23,040 Speaker 2: and Shijipang this fall. 147 00:08:23,680 --> 00:08:27,400 Speaker 3: I do know that a party chair she has invited 148 00:08:27,440 --> 00:08:32,079 Speaker 3: President Trump to visit China. I don't know. I don't 149 00:08:32,080 --> 00:08:34,679 Speaker 3: have dates on that. I don't know if the President's accepted. 150 00:08:35,000 --> 00:08:39,240 Speaker 3: I know they have a fantastic relationship on a personal level, 151 00:08:39,600 --> 00:08:42,880 Speaker 3: which I think forms the basis of everything between the 152 00:08:43,000 --> 00:08:43,840 Speaker 3: US and China. 153 00:08:43,880 --> 00:08:46,800 Speaker 2: Local reports in China, we're talking about the two meeting 154 00:08:46,920 --> 00:08:49,520 Speaker 2: on the sidelines of the APEX summit in South Korea 155 00:08:49,559 --> 00:08:51,800 Speaker 2: this fall. At the end of October early November, or 156 00:08:51,840 --> 00:08:55,120 Speaker 2: maybe President Trump going to China first. Could we see 157 00:08:55,120 --> 00:08:57,040 Speaker 2: a meeting that soon? You think a meeting within this 158 00:08:57,160 --> 00:08:57,800 Speaker 2: year can happen. 159 00:08:58,360 --> 00:09:02,640 Speaker 3: Again, I'm not privy to the President's travel schedule beyond September, 160 00:09:03,000 --> 00:09:04,880 Speaker 3: so we'll see. 161 00:09:04,720 --> 00:09:08,240 Speaker 2: Nothing before a meeting with Chighing paid before September, nothing 162 00:09:08,280 --> 00:09:10,800 Speaker 2: before Labor Day. So in the last week I do 163 00:09:10,880 --> 00:09:12,680 Speaker 2: want to go through something that's going on with China. 164 00:09:12,720 --> 00:09:16,000 Speaker 2: They've imposed exit bands on a Wells Fargo banker, a 165 00:09:16,080 --> 00:09:19,280 Speaker 2: commerce department employee, and according to Microsoft, they hacked into 166 00:09:19,320 --> 00:09:23,040 Speaker 2: their software. Will you address these actions at the talks 167 00:09:23,040 --> 00:09:23,760 Speaker 2: in Stockholm. 168 00:09:24,080 --> 00:09:27,760 Speaker 3: We're going to address a whole host of things, and 169 00:09:28,200 --> 00:09:31,280 Speaker 3: you know, obviously things like that will be on the 170 00:09:31,720 --> 00:09:34,800 Speaker 3: agenda with my Chinese counterpart. 171 00:09:35,120 --> 00:09:38,120 Speaker 2: You had said to me last week that the Nvidia 172 00:09:38,400 --> 00:09:41,640 Speaker 2: H twenty chip was potentially a chip in negotiations, a 173 00:09:41,640 --> 00:09:44,040 Speaker 2: mosaic part of the deal. Do you think China's doing 174 00:09:44,080 --> 00:09:46,240 Speaker 2: this for leverage at the trade table? 175 00:09:46,760 --> 00:09:55,240 Speaker 3: Absolutely not, absolutely not, because again, the H twenty, while 176 00:09:55,360 --> 00:09:58,040 Speaker 3: it is an advanced chip, is not one of the 177 00:09:58,080 --> 00:10:00,760 Speaker 3: most advanced chip. I think if we were think about 178 00:10:00,840 --> 00:10:06,280 Speaker 3: the Nvidia stack, the HP would be something fourth fifth 179 00:10:06,440 --> 00:10:12,280 Speaker 3: down the stack, and my understanding is that Huawei can 180 00:10:12,400 --> 00:10:14,520 Speaker 3: produce something with similar applicacy. 181 00:10:14,600 --> 00:10:17,400 Speaker 2: So China's malicious behavior, even just in the past week, 182 00:10:17,640 --> 00:10:20,600 Speaker 2: even targeting a commerce department employee. Do you think they're 183 00:10:20,640 --> 00:10:24,440 Speaker 2: doing this to have leverage with the United States? 184 00:10:24,800 --> 00:10:27,679 Speaker 3: Well, I can tell you in Stockholm it's not going 185 00:10:27,720 --> 00:10:31,640 Speaker 3: to give them any leverage with me. And it's a big, 186 00:10:31,720 --> 00:10:37,680 Speaker 3: sprawling bureaucracy. And sometimes I think we may see the 187 00:10:37,840 --> 00:10:40,840 Speaker 3: arrests may have been in a province, the central government 188 00:10:40,880 --> 00:10:44,040 Speaker 3: may not be aware of it. So I would highly 189 00:10:44,160 --> 00:10:50,280 Speaker 3: doubt that something at that level that they have wanted 190 00:10:50,320 --> 00:10:54,080 Speaker 3: to engage with the US. We are engaging with them, 191 00:10:54,600 --> 00:10:56,760 Speaker 3: and I think both sides want to move forward in 192 00:10:56,800 --> 00:10:57,680 Speaker 3: a productive way. 193 00:10:57,760 --> 00:11:01,160 Speaker 2: But you'll raise these issues. Yes, So now that the 194 00:11:01,240 --> 00:11:06,400 Speaker 2: administration is getting trade deals across the finish line Japan, Indonesia, Philippines, 195 00:11:06,480 --> 00:11:09,240 Speaker 2: yesterday you said the European Union potentially in sight. Do 196 00:11:09,320 --> 00:11:12,280 Speaker 2: you think the Federal Reserve is gonna have enough clarity 197 00:11:12,320 --> 00:11:14,240 Speaker 2: by September to cut interest rates? 198 00:11:14,640 --> 00:11:14,960 Speaker 1: Uh? 199 00:11:15,000 --> 00:11:17,640 Speaker 3: Again, I I'm not really sure what the Federal Reserve 200 00:11:18,000 --> 00:11:22,680 Speaker 3: is looking at because, Uh, thus far we have not 201 00:11:23,120 --> 00:11:26,880 Speaker 3: seen or we've seen very little, if any uh price 202 00:11:26,920 --> 00:11:31,079 Speaker 3: pressures from the tariffs, and if we were to see those, uh, 203 00:11:31,120 --> 00:11:34,640 Speaker 3: they wouldn't be inflationary, be a one time price adjustment. 204 00:11:35,120 --> 00:11:38,880 Speaker 3: So I again, I I think that their analysis of 205 00:11:39,000 --> 00:11:41,520 Speaker 3: tariffs is a bit off. Well. 206 00:11:41,520 --> 00:11:45,160 Speaker 2: Governor Waller made this exact case to us on surveillance 207 00:11:45,480 --> 00:11:49,240 Speaker 2: on Friday, and it sounds like he might dissent at 208 00:11:49,280 --> 00:11:52,280 Speaker 2: this meeting. He also said the President hasn't called him yet. 209 00:11:52,320 --> 00:11:54,600 Speaker 2: He's one of these names that are circulating around. Could 210 00:11:54,640 --> 00:11:56,400 Speaker 2: he replace FED chair J? 211 00:11:56,600 --> 00:11:57,000 Speaker 1: Powell? 212 00:11:57,320 --> 00:11:59,400 Speaker 2: Is he a name you're looking at? Have you reached 213 00:11:59,400 --> 00:11:59,960 Speaker 2: out to him? 214 00:12:00,400 --> 00:12:02,960 Speaker 3: I think there are a lot of strong candidates, including 215 00:12:03,040 --> 00:12:08,560 Speaker 3: several who are on the main board and perhaps regional 216 00:12:08,600 --> 00:12:09,640 Speaker 3: bank presidents. 217 00:12:09,800 --> 00:12:13,760 Speaker 2: So are there other names outside of Kevin Hassett, Kevin Walsh, 218 00:12:14,360 --> 00:12:18,320 Speaker 2: Christopher Waller and you yourself has been circulating There's. 219 00:12:18,240 --> 00:12:22,400 Speaker 3: A long list, and like I said, there's some great candidates. 220 00:12:22,600 --> 00:12:25,480 Speaker 2: And have you reached out to everyone on both those lists. 221 00:12:25,880 --> 00:12:28,920 Speaker 3: I'm not going to talk about the process, but we 222 00:12:29,200 --> 00:12:32,440 Speaker 3: are getting the process underway. Obviously it's going to be 223 00:12:32,880 --> 00:12:37,400 Speaker 3: President Trump's decision and we're not in a rush. 224 00:12:37,920 --> 00:12:39,720 Speaker 2: So, oh, you're not in a rush. But the President 225 00:12:39,760 --> 00:12:41,560 Speaker 2: continuously says he wants to get rid of the FED 226 00:12:41,640 --> 00:12:42,440 Speaker 2: chair J. 227 00:12:42,600 --> 00:12:43,000 Speaker 1: Powell. 228 00:12:43,360 --> 00:12:45,800 Speaker 2: Mahmade Larian yesterday said he should resign. 229 00:12:46,360 --> 00:12:46,880 Speaker 1: Do you think J. 230 00:12:47,000 --> 00:12:48,920 Speaker 2: Powell should step down to protect the institution? 231 00:12:49,280 --> 00:12:51,240 Speaker 1: The couple of things. 232 00:12:51,840 --> 00:12:55,640 Speaker 3: One, the President said he is not going to Firechair Palell. 233 00:12:56,400 --> 00:13:00,760 Speaker 3: I was somewhat surprised that Muhammad al Area came out 234 00:13:00,840 --> 00:13:01,640 Speaker 3: and said that. 235 00:13:02,120 --> 00:13:03,360 Speaker 1: And what I've come. 236 00:13:03,160 --> 00:13:06,600 Speaker 3: Out and said is that I believe that it would 237 00:13:06,640 --> 00:13:09,679 Speaker 3: do Chair Pale a favor, and he would be doing 238 00:13:09,720 --> 00:13:16,240 Speaker 3: the institution of favor if he did an internal review 239 00:13:16,400 --> 00:13:20,839 Speaker 3: separate monetary policy from everything else. And this is something 240 00:13:20,880 --> 00:13:24,000 Speaker 3: that Larry Summers and I agree on, is this mission 241 00:13:24,080 --> 00:13:29,720 Speaker 3: creep from the FED is endangering their independence of monetary policy. 242 00:13:29,840 --> 00:13:33,960 Speaker 3: So all these other things that they're engaging in could 243 00:13:34,000 --> 00:13:38,480 Speaker 3: threaten monetary policy. So it is a big, sprawling institution. 244 00:13:39,440 --> 00:13:45,600 Speaker 3: The central budget for the Board is up four x 245 00:13:45,760 --> 00:13:51,640 Speaker 3: since two thousand and four, and every institution needs to 246 00:13:51,760 --> 00:13:52,480 Speaker 3: examine themselves. 247 00:13:52,480 --> 00:13:53,280 Speaker 1: But you want the. 248 00:13:53,160 --> 00:13:55,360 Speaker 2: Man that you guys don't think is doing a good 249 00:13:55,480 --> 00:13:57,360 Speaker 2: job to run that review. 250 00:13:58,280 --> 00:13:59,400 Speaker 1: What's that you want? 251 00:13:59,400 --> 00:14:01,640 Speaker 2: The man Powell, which you and a president don't think 252 00:14:01,760 --> 00:14:04,120 Speaker 2: is doing a very good job to run the review 253 00:14:04,160 --> 00:14:04,959 Speaker 2: of the institution. 254 00:14:05,240 --> 00:14:09,240 Speaker 3: Well, I think that it could be a committee, it 255 00:14:09,280 --> 00:14:13,719 Speaker 3: could be a group. They could invite outside experts. In 256 00:14:14,600 --> 00:14:19,920 Speaker 3: the Bank of England after the twenty twenty two a 257 00:14:20,280 --> 00:14:25,360 Speaker 3: great hike shock went back and did a very good 258 00:14:25,480 --> 00:14:28,760 Speaker 3: examination of what went wrong with monetary policy. That brought 259 00:14:28,760 --> 00:14:32,960 Speaker 3: in outside experts. So, you know, I think an internal 260 00:14:32,960 --> 00:14:35,760 Speaker 3: review would be a good start, and if the internal 261 00:14:35,800 --> 00:14:39,000 Speaker 3: review didn't look like it was serious, then maybe they 262 00:14:39,040 --> 00:14:40,520 Speaker 3: could be an external review. 263 00:14:40,800 --> 00:14:44,000 Speaker 2: Have you communicated this directly with J Powell? Do you 264 00:14:44,040 --> 00:14:49,240 Speaker 2: guys continuously have your once a week breakfast lunches either 265 00:14:49,240 --> 00:14:50,320 Speaker 2: at the FED or the Treasury. 266 00:14:50,880 --> 00:14:54,840 Speaker 3: I gave a speech on Monday night on bank deregulation, 267 00:14:55,000 --> 00:14:58,400 Speaker 3: bank regulation, the future of regulation, which is, you know, 268 00:14:58,560 --> 00:15:02,080 Speaker 3: aside from monetary pol see, I think the most important 269 00:15:02,120 --> 00:15:03,720 Speaker 3: thing for the economy. 270 00:15:04,160 --> 00:15:06,320 Speaker 1: The FED is one of three regulators. 271 00:15:06,360 --> 00:15:08,720 Speaker 3: There's the FED, the Office and Control of the Currency 272 00:15:08,760 --> 00:15:10,600 Speaker 3: which sits under Treasury. 273 00:15:10,520 --> 00:15:11,800 Speaker 1: And the FDIC. 274 00:15:12,600 --> 00:15:17,920 Speaker 3: And I believe that all three of those should have 275 00:15:18,000 --> 00:15:22,000 Speaker 3: important voices. And I believe that the regulation has been 276 00:15:22,120 --> 00:15:25,200 Speaker 3: much too stringent since the Great Financial Crisis. 277 00:15:25,480 --> 00:15:26,960 Speaker 1: We are seeing this big. 278 00:15:26,720 --> 00:15:30,840 Speaker 3: Build up outside the regulated financial system. I think I 279 00:15:30,880 --> 00:15:33,560 Speaker 3: saw something two days ago. The private credit is up 280 00:15:33,600 --> 00:15:38,800 Speaker 3: ten x. Not saying it's a financial stability problem, but 281 00:15:39,000 --> 00:15:42,800 Speaker 3: I am saying that there's a regulatory arbitrage going on. 282 00:15:43,160 --> 00:15:45,440 Speaker 3: But that was a long way of saying I saw 283 00:15:45,520 --> 00:15:47,200 Speaker 3: a chair Palel at that speech. 284 00:15:47,720 --> 00:15:50,880 Speaker 2: And your launches in breakfast continue always, so you have 285 00:15:50,960 --> 00:15:52,000 Speaker 2: a good relationship. 286 00:15:51,600 --> 00:15:54,480 Speaker 3: With him at the moment, we have continuing communication. 287 00:15:54,840 --> 00:15:57,000 Speaker 2: Last time you were on, you also talked about the 288 00:15:57,040 --> 00:16:00,600 Speaker 2: potential next FED chair. You said his or her nomination 289 00:16:01,280 --> 00:16:03,320 Speaker 2: is Governor Bowman also in the running. 290 00:16:03,760 --> 00:16:06,360 Speaker 1: Again I'm not going to name names, but. 291 00:16:07,840 --> 00:16:11,880 Speaker 3: There are good candidates. As I said on the board 292 00:16:12,200 --> 00:16:17,080 Speaker 3: that there's several female regional bank presidents, and then there 293 00:16:17,240 --> 00:16:20,800 Speaker 3: are some fantastic women outside the FED. 294 00:16:21,040 --> 00:16:26,600 Speaker 2: There's also Governor Kugler's chair that is open in January. 295 00:16:26,680 --> 00:16:29,560 Speaker 2: Have you started that process. 296 00:16:29,600 --> 00:16:32,560 Speaker 1: It's a simultaneous process. 297 00:16:33,080 --> 00:16:38,239 Speaker 3: The Coogler chair is a fourteen year seat, so we'll 298 00:16:38,280 --> 00:16:41,920 Speaker 3: be looking at that also. And again I think we 299 00:16:42,040 --> 00:16:43,479 Speaker 3: have some very good candidates. 300 00:16:43,560 --> 00:16:46,240 Speaker 2: Given you just saw J Powell. Has he yet to 301 00:16:46,320 --> 00:16:49,560 Speaker 2: tell you whether or not he is going to leave 302 00:16:49,640 --> 00:16:53,400 Speaker 2: the board his governor seat by twenty before twenty twenty eight. 303 00:16:54,000 --> 00:16:55,320 Speaker 1: He hasn't yet. 304 00:16:56,400 --> 00:16:59,440 Speaker 3: My belief is that he will, and I think that 305 00:16:59,480 --> 00:17:02,360 Speaker 3: it would be very good for the institution for him 306 00:17:02,360 --> 00:17:03,880 Speaker 3: to do it, and I think it'd be very good 307 00:17:03,920 --> 00:17:05,120 Speaker 3: for him personally. 308 00:17:04,680 --> 00:17:05,080 Speaker 1: To do it. 309 00:17:05,280 --> 00:17:07,840 Speaker 2: The President once said that he goes out and ryle's 310 00:17:07,920 --> 00:17:11,439 Speaker 2: financial markets, and then he sends you, his Treasury secretary 311 00:17:11,480 --> 00:17:14,720 Speaker 2: out to calm things. Things are pretty calm today, but 312 00:17:14,760 --> 00:17:16,800 Speaker 2: when it comes to the FED chair, I know you 313 00:17:16,840 --> 00:17:19,240 Speaker 2: love college basketball, and you talk about the President being 314 00:17:19,280 --> 00:17:23,280 Speaker 2: Bobby Knight, and I know you love Dean Smith. Are 315 00:17:23,280 --> 00:17:25,679 Speaker 2: you guys playing this good cop bad cop when it 316 00:17:25,680 --> 00:17:28,960 Speaker 2: comes to talking about the FED talking about Jay Powell? 317 00:17:30,040 --> 00:17:30,560 Speaker 1: Not at all? 318 00:17:31,240 --> 00:17:34,760 Speaker 3: And Marie, the reason I think that I'm to the 319 00:17:34,800 --> 00:17:38,159 Speaker 3: extent I'm able to calm the markets, and that doesn't 320 00:17:38,200 --> 00:17:41,600 Speaker 3: always happen. I was in the investment business for thirty 321 00:17:41,760 --> 00:17:45,160 Speaker 3: five forty years, But I think more importantly than that, 322 00:17:45,640 --> 00:17:50,120 Speaker 3: I understand what President Trump is doing, and a lot 323 00:17:50,160 --> 00:17:54,400 Speaker 3: of times he's won two three steps ahead of the market. 324 00:17:54,760 --> 00:17:58,679 Speaker 3: And as you know better than anyone, the market wants 325 00:17:58,840 --> 00:18:03,440 Speaker 3: instant explanation, they want clarity, they want. 326 00:18:05,080 --> 00:18:06,480 Speaker 1: Immediate gratification. 327 00:18:06,840 --> 00:18:09,639 Speaker 3: So I think that I am able to As a 328 00:18:09,720 --> 00:18:13,840 Speaker 3: former practitioner, I think about when President Trump tells me 329 00:18:14,040 --> 00:18:16,840 Speaker 3: what his goals are, I think about, what is the 330 00:18:16,840 --> 00:18:20,840 Speaker 3: best way for me to give good framing to market 331 00:18:20,920 --> 00:18:25,919 Speaker 3: participants for them to understand what he's doing. Because he 332 00:18:26,000 --> 00:18:30,320 Speaker 3: always has a plan, it's not always obvious, So you. 333 00:18:30,400 --> 00:18:35,320 Speaker 2: Are communicating almost a strategic ambiguity that he likes to 334 00:18:35,359 --> 00:18:36,200 Speaker 2: operate from. 335 00:18:36,320 --> 00:18:42,119 Speaker 3: Well, and I'm also trying to explain that there is 336 00:18:42,200 --> 00:18:48,040 Speaker 3: a plan because look, these letters went out, everyone was, 337 00:18:48,520 --> 00:18:52,560 Speaker 3: oh my gosh, these are high rates. And I think 338 00:18:52,600 --> 00:18:58,800 Speaker 3: the president created maximum negotiating leverage and the market actually 339 00:18:58,800 --> 00:19:01,800 Speaker 3: took it pretty well, took it pretty well. 340 00:19:02,160 --> 00:19:03,720 Speaker 2: Just to finish on that final point, then, do you 341 00:19:03,720 --> 00:19:06,760 Speaker 2: think he's more in boldened to go for higher rates 342 00:19:06,760 --> 00:19:10,480 Speaker 2: with trading partners now given the market is not pushing back. 343 00:19:10,560 --> 00:19:15,680 Speaker 3: Well, I think he's created a lot of leverage because 344 00:19:16,000 --> 00:19:20,239 Speaker 3: he's created an ab situation. He is able to go 345 00:19:20,280 --> 00:19:23,520 Speaker 3: to the trading partners and say, look, I am happy 346 00:19:23,560 --> 00:19:26,000 Speaker 3: to take in this tariff income if you don't want 347 00:19:26,040 --> 00:19:26,760 Speaker 3: to negotiate. 348 00:19:27,119 --> 00:19:28,160 Speaker 1: This is a high rate. 349 00:19:28,359 --> 00:19:32,200 Speaker 3: But the US is taking a massive amounts of tariff income. 350 00:19:32,560 --> 00:19:39,439 Speaker 3: We had the first June budget surplus since twenty fifteen 351 00:19:40,920 --> 00:19:44,879 Speaker 3: last month. We reported it this month, and so we 352 00:19:44,960 --> 00:19:48,360 Speaker 3: are taking in substantial income. So President Trump is creating 353 00:19:48,400 --> 00:19:51,440 Speaker 3: this leverage by saying, if you don't want to negotiate 354 00:19:51,520 --> 00:19:54,720 Speaker 3: with me, I've sent you a letter with a high rate. 355 00:19:55,119 --> 00:19:58,960 Speaker 3: You have at the high rate, or come and negotiate 356 00:19:59,080 --> 00:19:59,800 Speaker 3: in better. 357 00:19:59,640 --> 00:20:01,640 Speaker 1: Fashion, because I'll tell you. 358 00:20:01,400 --> 00:20:04,639 Speaker 3: What was fascinating for me, and this was President Trump 359 00:20:04,720 --> 00:20:08,880 Speaker 3: at his best, at his best was the Indonesians came 360 00:20:09,280 --> 00:20:13,640 Speaker 3: with what I thought was a very good offer out 361 00:20:13,680 --> 00:20:17,840 Speaker 3: of the Blox. President Trump kept pushing them. He raised 362 00:20:17,880 --> 00:20:21,280 Speaker 3: the reciprocal rate when he sent them the letter, and 363 00:20:21,560 --> 00:20:26,920 Speaker 3: five iterations later, the Indonesian trade deal was greatly improved, 364 00:20:27,080 --> 00:20:29,240 Speaker 3: turned into a great deal for both sides. 365 00:20:29,680 --> 00:20:31,920 Speaker 2: Secretary Scott Besson, thank you so much for your time 366 00:20:31,960 --> 00:20:32,480 Speaker 2: this morning.