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Speaker 1: This is Bloomberg Intelligence with Alex Steel and Paul'sweenye.

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Speaker 2: The real app performance has been the US corporate high yield.

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Speaker 3: Are the companies lean enough? Have they trimmed all the fats?

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Speaker 2: The semiconductor business is a really cyclical business.

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Speaker 1: Breaking market headlines and corporate news from across the globe.

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Speaker 3: Do investors like the M and A that we've seen?

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Speaker 2: These are two big time blue chip companies.

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Speaker 3: Window between the peak and cut changing super fast Bloomberg.

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Speaker 1: Intelligence with Alex Steel and Paul'sweenye on Bloomberg Radio.

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Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big

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Speaker 2: business stories impacting Wall Street and the global markets.

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Speaker 3: Each and every week we provide in depth research and

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Speaker 3: data on some of the two thousand companies and one

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Speaker 3: hundred and thirty industries our analysts cover worldwide.

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Speaker 2: Today we dive into the tech space as TikTok continues

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Speaker 2: its fight against investment in the US.

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Speaker 3: Plus, we take a look at new policy that could

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Speaker 3: create some purtals for future bank mergers.

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Speaker 2: But first we talked transportation and the outlook for an

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Speaker 2: airline acquisition that just got the green light from the DT.

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Speaker 3: For more on the Alaska Airlines Hawaiian deal. We spoke

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Speaker 3: with Bloomberg Intelligence and your Aerospace, Defense and Airlines analyst

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Speaker 3: George Ferguson.

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Speaker 4: I think it's a good deal for the US consumer

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Speaker 4: because I think there was a risk that potentially Hawaiian

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Speaker 4: could have gone out of business, and so I think,

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Speaker 4: really what this whole thing adds up to is Hawaiian was,

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Speaker 4: you know, was a bit distressed. They've had some problems

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Speaker 4: in their core businesses, especially from you know, wildfires, Japanese travel,

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Speaker 4: things like that. It just hurt their core business. Their

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Speaker 4: their balance sheet was stressed. And so Alaska coming in

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Speaker 4: and taking them over, you know, as sure as that

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Speaker 4: they continue to exist. The combined entity had you know,

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Speaker 4: has a footprint that looks like or route network that

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Speaker 4: looks like West Coast US into Alaska, and then Alaska

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Speaker 4: has some long haul into Asia. So it makes Alaska's

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Speaker 4: operations a little more complex with some long haul wide

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Speaker 4: body aircraft. For most US consumers, it's not They're not

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Speaker 4: going to really be able to tell. But I think

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Speaker 4: the US Department of Transportation, Department of Justice figured out that,

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Speaker 4: you know, like the spirit in the Spirit jet Blue

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Speaker 4: merger purchased by Jet Blue whatever you want to call it.

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Speaker 4: You know, I think letting that fail means it's Spirits

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Speaker 4: in difficult straits whining to have been similar place that

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Speaker 4: I think they've decided let's just let this go.

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Speaker 3: Does this mean that the Spirit deal could get another

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Speaker 3: look through or that's definitely dead.

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Speaker 4: I think that's definitely dead from a Jet Blue perspective.

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Speaker 4: I'm not sure if Justice would think differently about it now,

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Speaker 4: but I think it's dead.

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Speaker 2: George, what's the current status of just demand for air

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Speaker 2: travel these days?

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Speaker 4: I mean, you know, what we saw in two Q

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Speaker 4: was that budget travel definitely looked like it was taking

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Speaker 4: more of the demand. Although it looks like some of

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Speaker 4: those travelers are fading a little bit. And I say, although,

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Speaker 4: because we saw a bunch of capacity come to that marketplace, right,

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Speaker 4: I think, really, what we're starting to say see in

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Speaker 4: two Q this year was a fading of this bounce

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Speaker 4: back travel boom where people were paying anything it took

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Speaker 4: to go on vacation. And so I suspect we're going

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Speaker 4: to continue to see that as we get into three Q.

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Speaker 4: We're actually working through schedules right now for the US

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Speaker 4: airlines as we do kind of as we close the

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Speaker 4: quarters down, and you know, we're still seeing a decent

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Speaker 4: amount of capacity coming to the marketplace. So I say decent.

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Speaker 4: You know, we're looking at domestic the other day five

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Speaker 4: six percent growth in seat capacity, and you really can't

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Speaker 4: do that in a market that the US economies grow

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Speaker 4: in a couple percent and you don't have this bounce

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Speaker 4: back travel. So we still think three Q looks soft ish.

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Speaker 4: It's not as bad as two Q. Some of the

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Speaker 4: capacity growth isn't there. We're interestingly, we're seeing more capacity

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Speaker 4: growth come in from the big full service carriers than

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Speaker 4: we're seeing for the budget low cost and notable are

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Speaker 4: carriers like Southwestern, Jet Blue literally pulling back in capacity

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Speaker 4: as they go.

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Speaker 2: Into the end of the year.

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Speaker 3: Right, So you have the big guys are able to

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Speaker 3: compete a little more in capacity and then price, and

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Speaker 3: then the other guys can and that gets confusing. So

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Speaker 3: this is a dumb question. But if I take a

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Speaker 3: look at the big guys, like, can you rank these

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Speaker 3: for me?

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Speaker 5: Here?

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Speaker 3: So you get the Delta American United, They're gonna be

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Speaker 3: the top three, right, what comes after that?

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Speaker 6: Now?

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Speaker 4: Southwest Southwest is the number four. Okay, one of the

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Speaker 4: biggest carriers in the country, and then you go into

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Speaker 4: the Alaska's Jet Blues those folks, sorry, so.

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Speaker 3: Did Alaska and Hawaiian airlines like help them get a

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Speaker 3: big boost? Like are they in the top five now?

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Speaker 4: Well, Alaska is going to be four or five and

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Speaker 4: Jet Blue is going to be at four or five. Well,

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Speaker 4: Alaska Hawaiian combination probably jumps them a bit above jet Blue.

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Speaker 4: I haven't looked at this recently. Jet Blue is going

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Speaker 4: to be number five if they got spirit and those

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Speaker 4: two are kind of neck and necks, and I guess

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Speaker 4: is they're slightly ahead now Alaska.

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Speaker 2: All right, George, what we got in your phone? We

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Speaker 2: need our periodic update of Boeing. I know the most

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Speaker 2: recent news was Boeing freezing hiring to preserve cash, and

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Speaker 2: you know, what's the update on the strike and kind

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Speaker 2: of where we are with Boeing.

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Speaker 4: So it goes on obviously, you know, folks are talking

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Speaker 4: if it continues. I suspect that, you know, Boeing's draw

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Speaker 4: off suppliers, their off take of the components they're building

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Speaker 4: is going to have to slow to continue to preserve cash.

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Speaker 4: I just don't see hiring doing you know that much

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Speaker 4: for the cash flow of Boeing because again, as it

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Speaker 4: drags on, they have to start to really worry about

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Speaker 4: how much cash they're they're burning. They would prefer not

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Speaker 4: to go back to capital markets to show up their balances.

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Speaker 4: We think they're probably going to be close to nine

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Speaker 4: billion in balances as they end three Q and that's

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Speaker 4: going to be pretty tight because that's roughly around what

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Speaker 4: they say they need to run the company. I'm sure

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Speaker 4: everybody can tighten their belt, every company can tighten their

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Speaker 4: belt and get lower, but they need to be very

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Speaker 4: very mindful of cash burn here.

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Speaker 3: Yeah. I was like, oh, that's treading the line there.

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Speaker 3: We was talking to the guy over at Moody's who

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Speaker 3: is putting the company risk on downgrade. If they get

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Speaker 3: a downgrade from like fish S and P and Moody's,

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Speaker 3: what would that mean? That would be huge, a huge

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Speaker 3: fallen angel.

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Speaker 4: Right, Yeah, it's a big fallen angel. I mean it's

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Speaker 4: not the not the end of the world, right, Companies

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Speaker 4: managed through this. No, No, I mean it means you're

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Speaker 4: going to go to capital markets. If you go to

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Speaker 4: debt markets, it's just going to cost you more to

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Speaker 4: raise write your debt and a company like Bowing needs

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Speaker 4: this good mix of debt and equity to make the

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Speaker 4: returns work for the equity, and so you kind of

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Speaker 4: hate to be paying higher interest rates. You're going to

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Speaker 4: see you know, some funds that are debt funds can't

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Speaker 4: hold less investment grade paper. They'll end up having this discorged,

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Speaker 4: some of that Boeing paper. That means that you'll see

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Speaker 4: prices gap out in it. Again, it's not the end

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Speaker 4: of the world, but you prefer be prefer to be

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Speaker 4: raising money cheaper than what they will be in the

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Speaker 4: high yield markets. But you know, customers, I don't think

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Speaker 4: go away because of it. Nobody can break their commitments

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Speaker 4: for airplanes because of it. Suppliers don't really have other

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Speaker 4: places to go for aerospace. Yeah, business right. They could

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Speaker 4: go to Airbus, which is investment grade, and Boeing has

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Speaker 4: to continue to rebuild that balance sheet as they get

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Speaker 4: things like this strike past them.

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Speaker 2: Our thanks to Bloomberg Intelligence senior Aerospace, Defense and Airlines

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Speaker 2: analyst George Ferguson.

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Speaker 3: Staying with the transportation space, we moved to the automotive world,

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Speaker 3: where dealer sentiment is starting to wane.

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Speaker 2: For more on this, we spoke with Bloomberg Intelligence Global

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Speaker 2: Director of Credit Research Joel Livington.

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Speaker 7: The Cox Automotive folks put out as sentiment index and

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Speaker 7: it showed that it was the second lowest reading in

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Speaker 7: their history, which is probably not great news. So dealers

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Speaker 7: are thinking that there's going to be less demand for

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Speaker 7: used cars, and that really goes back to affordability of vehicles.

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Speaker 3: There wasn't didn't Carvana do like really well and is

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Speaker 3: like crushing on all cylinders, No pun intended.

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Speaker 7: Carvana is crushing it and they should crush it again

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Speaker 7: in the third quarter. But you have to remember like

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Speaker 7: they're starting from such a weak spot that you know it.

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Speaker 7: Sometimes it becomes a case of less worse is great,

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Speaker 7: and that's their case. For most of the other players,

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Speaker 7: it's the opposite of it's just overwhelming. The amount of

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Speaker 7: cost that's associated with a car. Insurance is up thirty percent.

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Speaker 7: Rates are ten to eleven percent for a used car,

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Speaker 7: So that's just weighing on consumer. So certainly recuts will

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Speaker 7: be a benefit for them in the future.

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Speaker 2: One of the things you should drive by a lot

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Speaker 2: pre pandemic and there'd be as cars as far as

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Speaker 2: I can see. They had a huge inventory and then

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Speaker 2: during the pandemic, they had like three cars on the lot. Yes,

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Speaker 2: literally nobody was building cars anymore. Where are we today

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Speaker 2: in that kind of scenario.

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Speaker 7: Yeah, Well, two years ago when nobody could build a

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Speaker 7: car because there were no semiconductor chips to put in

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Speaker 7: the cars, you had about twenty three days worth of inventory.

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Speaker 7: If you look today, that's up to about fifty six.

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Speaker 7: Now historically that's not bad. But I will tell you

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Speaker 7: depending on the auto company, Like if you go learn

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Speaker 7: no jeeparn no jeep out there in our area, you'll

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Speaker 7: see it's like outside the lot that you can't stuff

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Speaker 7: enough cars in there. Jeep Ram in particular. So the

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Speaker 7: Stilantas company has a huge amount of inventory ball and

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Speaker 7: so they have also the highest discounts going on. They're

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Speaker 7: discounting at about five and a half percent on your

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Speaker 7: average car, which is a huge amount for our company

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Speaker 7: where your profitability might be eight or nine percent.

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Speaker 2: Well, we used to have a top auto analyst of

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Speaker 2: Bloomberg Intelligence and he explained it to me. Pre pandemic,

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Speaker 2: they used to make like seventeen change million cars SAR

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Speaker 2: season only adjusted something really great. Then they went down

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Speaker 2: to the pandemic to way down fourteen to fifteen million,

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Speaker 2: but they were more profitable sales at that point because

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Speaker 2: they weren't they didn't have to offer incentives. Where are

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Speaker 2: we in that production It seems like to kind of

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Speaker 2: creeping back up in production.

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Speaker 7: Yeah, well, he's totally He was totally right in that

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Speaker 7: you can play that game as long as inventory is low. Unfortunately,

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Speaker 7: over the past year, all the like we were saying

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Speaker 7: it went from twenty three days and up to forty

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Speaker 7: six days. Now you're up to fifty six days, and

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Speaker 7: now you have too much inventory on the lots to

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Speaker 7: really play the game when your pricing is that high.

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Speaker 7: Average car in America costs forty seven thousand dollars and

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Speaker 7: your average American family makes sixty thousand dollars. So it's

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Speaker 7: the math just doesn't really work out. And then you

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Speaker 7: start hearing things like with ALI financial warning people. I

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Speaker 7: think their socks now about twenty percent on the news

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Speaker 7: that auto loans for them are starting to tick up

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Speaker 7: even higher than they expect it in terms of write offs.

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Speaker 7: So I think we're going to be seeing more of

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Speaker 7: that over the next couple of quarters.

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Speaker 3: I hate to say, you're painting a pretty grim picture

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Speaker 3: for me about some of these car dealerships and like

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Speaker 3: how they're going to kind of make it through all this.

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Speaker 7: Yeah, well, most of the dealers have enough financial flexibility

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Speaker 7: that I don't think it's a case of them making

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Speaker 7: it through, so at least the public companies, like that's

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Speaker 7: really not going to be an issue. But what I

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Speaker 7: do think you're going to see is resets and profitability

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Speaker 7: expectations that.

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Speaker 3: Hasn't happened yet.

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Speaker 7: That has not happened yet. I think you're going to

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Speaker 7: first see that at the dealers, and that's going to

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Speaker 7: eventually come back to both the suppliers and the OEM.

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Speaker 7: So I would suspect that in the second half of

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Speaker 7: this year you'll see a reset in the auto universe

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Speaker 7: for lower expectations for twenty twenty five.

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Speaker 2: You know, where are we Joel in the industry thinking

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Speaker 2: how to Detroit and other big auto companies about this

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Speaker 2: trend towards electric vehicles. It seems like we've hit a

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Speaker 2: bump in the road after the initial success of Tesla.

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Speaker 2: How do you think this is going to play out?

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Speaker 7: Yeah, I think it's gonna take a lot of time, Paul,

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Speaker 7: because even Tesla, you could say, if you strip out

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Speaker 7: the tax credits that they get for for selling electric credits,

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Speaker 7: they might not be profitable or at least on a

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Speaker 7: cashlowle basis this year, you know, out of the auto business.

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Speaker 7: So it's a very tough business to get in. Right now,

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Speaker 7: it seems like the market seems to be comfortable with hybrids,

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Speaker 7: which gives you the best of having an ice engine

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Speaker 7: but still giving you more green cars than up pure

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Speaker 7: ice engine. So the market's there. It's really that the

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Speaker 7: government has to either hugely change incentives or infrastructure, probably both.

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Speaker 7: And that's not like a quarter or two quarter fix.

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Speaker 7: That's a many year fix. So my guess is they're

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Speaker 7: going to have to reset their views as to what

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Speaker 7: their goals are for the future.

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Speaker 3: Really quick, dumb question. Can you recycle hybrids?

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Speaker 2: Like?

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Speaker 3: And what's that shelf life?

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Speaker 8: You can?

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Speaker 7: You know, there was an interesting story out just the

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Speaker 7: other day on the battery technology that it goes down

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Speaker 7: about one or one and a half percent a year.

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Speaker 7: So the batteries at this point are good enough that

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Speaker 7: they could probably last the life cycle of a car.

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Speaker 7: But you can recycle all of the componentry of the car,

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Speaker 7: which it will be a benefit down the road.

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Speaker 2: Thanks to Bloomberg Intelligence Global Director of Credit Research Joel Lovington.

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Speaker 3: Coming out. We're going to break down Intel's boundary expansion

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Speaker 3: plans and it's win with Amazon.

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Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in

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Speaker 2: depth research and data on two thousand companies in one

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Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence via

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Speaker 2: b I go on the terminal, I'm Paul.

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Speaker 3: Swinging and amlex Steel and this is Bloomberg.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays in ten am Eastern on Apple Car playing Android

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Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 3: After a recent Fleuria bad news, slashing fifteen thousand workers,

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Speaker 3: spending the company's dividend, and shuttering the construction of pivotal

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Speaker 3: factories in Germany and Poland, Intel's luck is looking up.

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Speaker 3: Earlier this week, the company ounce plans to create a

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Speaker 3: custom chip for Amazon Web services.

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Speaker 2: For more on the deal and the longer term outlook

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Speaker 2: for the company, Normal Linda and I spoke with Bloomberg

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Speaker 2: Intelligence Senior technology analyst man Deep Singh.

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Speaker 9: Everyone knows their foundery business is burning a lot of cash.

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Speaker 9: It lost seven billion dollars last year, and there's no

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Speaker 9: signs of you know, the business turning around anytime soon.

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Speaker 9: So what they've done is created an independent subsidiary for

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Speaker 9: that business. Obviously, they need more funding to upgrade the

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Speaker 9: you know, the fabs to make sure it can compete

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Speaker 9: with TSMC, But at least there's more transparency around how

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Speaker 9: much money they're losing in that foundry business, what sort

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Speaker 9: of gross margin profile it has, and it just as

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Speaker 9: an investor, it gives me more comfort to see, Okay,

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Speaker 9: how is the core PC business doing versus what is

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Speaker 9: it that the foundry is losing? And you know, if

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Speaker 9: they have to raise capital then they can do that.

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Speaker 9: So more to do with transparency. I don't think execution

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Speaker 9: changes in a quarter. So it's a long story. But

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Speaker 9: at least they're doubling down in the US here, so

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Speaker 9: they're stopping their investments outside of US. And what it

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Speaker 9: suggests is with the geopolitical tensions that there are a

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Speaker 9: lot of these hyperscalers will pivot to using Intel as

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Speaker 9: a foundry at least here in the US.

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Speaker 10: And you know, really, what's the thought behind the play

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Speaker 10: for investors that are investing in Intel. I mean, when

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Speaker 10: you look at his competitors, We've got Envidio, I'm looking

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Speaker 10: your Nate up one hundred and thirty six percent, We've

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Speaker 10: got Intel down about fifty six percent. So what is

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Speaker 10: the play? What type of investor is still investing in

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Speaker 10: Intel at this point?

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Speaker 9: I mean, census is overly negative on Intel. Any hint

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Speaker 9: of positive news is good for the stock. And look,

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Speaker 9: they have to give incremental proof points as we go along.

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Speaker 9: So this is by no means or turn around and

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Speaker 9: the making. No, you have to look at the incremental

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Speaker 9: data points. Everyone thought hyperskillers are the ones who are

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Speaker 9: spending over one hundred billion dollars in capex, who are

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Speaker 9: raising their capex. Why is Intel not exposed to that?

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Speaker 9: So now they have given a hint that maybe Amazon

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Speaker 9: will give a small order. I don't think they're making

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Speaker 9: all their chips with Intel anytime soon, and they're still

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Speaker 9: going to TSMC for all the leading node manufacturing. But

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Speaker 9: the fact that Intel could get a few orders from Amazon,

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Speaker 9: it's a positive.

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Speaker 2: Is there a technical reason that Intel just doesn't have

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Speaker 2: it to compete or absolutely? I mean they just don't

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Speaker 2: have them. They just don't have the products that customers want.

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Speaker 9: It's about the processed node technology. So when TSMC says

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Speaker 9: they have a three nanometer at scale where they're making

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Speaker 9: chips for Apple, Nvidia, all the fabulous guys, Intel doesn't

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Speaker 9: have the equivalent of three nanometer. They're still trying to

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Speaker 9: perfect that. They've lost a lot of engineering talent. Plus

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Speaker 9: their cost of manufacturing is seventy percent higher than TSMC's,

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Speaker 9: so it makes it very hard to justify. Why would

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Speaker 9: any company give an order to Intel for a leading

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Speaker 9: note when the costs are higher and they're not even

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Speaker 9: at parody. The only reason I can think of is

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Speaker 9: the geopolitical tensions. What if something happens to Taiwan, that's

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Speaker 9: where in Apple or an Nvidia or an Amazon would

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Speaker 9: want to diversify their exposure.

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Speaker 10: I mean, and Intel, you really used to be a powerhouse,

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Speaker 10: So I mean, what do they What would they need

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Speaker 10: to do to release some sort of comeback. Do they

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Speaker 10: need to be a bit more innovative and start looking

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Speaker 10: for something that's a bit more competitive or does it

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Speaker 10: seem like it's pretty much a universal loss cause? Is

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Speaker 10: that how Wall Street is viewing it?

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Speaker 9: I mean, look, the government is completely behind Intel, so

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Speaker 9: they're very few sectors where the government really supports you

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Speaker 9: in such a big way. Intel definitely has that tailwind

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Speaker 9: in terms of government support eight point five billion and

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Speaker 9: Chipsack funding another three billion dollar announcement, So they have

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Speaker 9: all the support from the government. It's about making sure

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Speaker 9: that translates into good yields, making sure their chips are

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Speaker 9: equivalent to the likes of TSMC. And that's where the

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Speaker 9: execution comes in. Do they have the engineering talent to

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Speaker 9: turn around their fab manufacturing and you know, their chips

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Speaker 9: being competitive to do.

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Speaker 2: Does Taiwan Semi connector manufacture all the chips in Taiwan? Yes,

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Speaker 2: that's a problem, dude. I mean a Chinese and a

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Speaker 2: Taiwanese both bump into each other in the night, it

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Speaker 2: could be all over.

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Speaker 9: I mean, they have plans to expand in the US.

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Speaker 2: And if I'm Tim Cook, I'm saying here, Intel, here's

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Speaker 2: the chip, just manufacturing it. I mean, it's my best

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Speaker 2: interest if I'm Apple, if I'm all these chips they

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Speaker 2: have Intel doing great, right?

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Speaker 8: Yeah?

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Speaker 9: But then Intel also is a design vendor as well.

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Speaker 9: So Intel makes a chip that's competitive to Nvidia, So

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Speaker 9: why would an Nvidia have Intel manufactured their tip? Intel

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Speaker 9: could also compete, right, And that's a problem that Intel

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Speaker 9: has had in separating those businesses because Intel is also

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Speaker 9: a competitor to all these fabulist companies MT you know, Invidia,

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Speaker 9: And that's the akain.

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Speaker 2: If I'm a buyer, I want as many chip suppliers

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Speaker 2: as possible, particularly ones that are like in Kentucky, your.

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Speaker 9: Favor to divest. It's clear that the founder businesses run

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Speaker 9: completely separately.

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Speaker 2: Our thanks to Bloomberg Intelligence senior technology jannalist Man Deep Singh,

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Speaker 2: sticking with.

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Speaker 3: Tech Let's move do to TikTok as a social media

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Speaker 3: company continues to face scrutiny from the US government.

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Speaker 2: The video sharing app went to court Monday, arguing that

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Speaker 2: a potential divest or ban request violates the company's free

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Speaker 2: speech rights. From more on the outcome of the hearing

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Speaker 2: and a potential path for TikTok normally, lind and I

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Speaker 2: spoke with Bloomberg Intelligence media litigation analysts Matt Sheltenham.

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Speaker 5: If TikTok wasn't concerned about a potential ban, should be concerned.

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Speaker 5: After that hearing did not go well for the company.

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Speaker 5: What's an issue here is in April, Congress passed a

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Speaker 5: law that said, unless TikTok is divested to a company

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Speaker 5: that doesn't have its parent in China, that companies in

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Speaker 5: the US can no longer carry the app in app stores,

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Speaker 5: companies can no longer host it in a way that

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Speaker 5: the app can be distributed, updated, or maintained in the

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Speaker 5: United States. All of as of January nineteenth, and TikTok

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Speaker 5: has said, look, we can't do a divestiture. It's certainly

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Speaker 5: not on that timeline. And so TikTok's only chance to

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Speaker 5: survive in the United States after January nineteenth is to

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Speaker 5: win this legal case. And the three judges on the case,

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Speaker 5: in my view, were not very sympathetic to the company's

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Speaker 5: First Amendment case.

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Speaker 10: And so is this isolated to the United States? Are

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Speaker 10: there any other countries that are also trying to crack

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Speaker 10: down on TikTok of its influence.

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Speaker 5: I think different countries are taking different approaches. The EU

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Speaker 5: has taken a harder approach to tech regulation generally, and

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Speaker 5: likely would apply that to TikTok without a specific ban

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Speaker 5: in the same way. According to our analyst Hamlin Basin,

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Speaker 5: there so This law is US specific It was passed

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Speaker 5: by Congress specifically to target the company, and so it's

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Speaker 5: a different remedy here in the US. But there's a

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Speaker 5: tendency I think, to think, you know, nothing's going to

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Speaker 5: happen in Congress. Nothing ever gets done there, just a

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Speaker 5: lot of talk. Well here, Congress did it. It's done.

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Speaker 5: It's law, and TikTok's only chance to overcome it is

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Speaker 5: to win this legal case.

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Speaker 2: So the parent company for TikTok is Byte Dance, a

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Speaker 2: Chinese controlled company. If I misstated that, let me know

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Speaker 2: what has Bite Dance said about theirs, what they plan

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Speaker 2: to do scenarios.

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Speaker 5: Yeah, so that's right that Byte Dance is the parent

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Speaker 5: company of TikTok. Now, TikTok is a is a US subsidiary,

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Speaker 5: it's a US company. TikTok is a privately owned company,

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Speaker 5: but it happens to have its headquarters in China, and

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Speaker 5: that's the concern. And you know, TikTok and Byte Dance

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Speaker 5: in this legal case have basically said, look, a divestiture

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Speaker 5: is just not technically or legally feasible. And so there's

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Speaker 5: really no indication that they're pursuing a divestiture at this point,

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Speaker 5: and at least that's their indication to the court. In fact,

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Speaker 5: the law allows a ninety day extension if the president

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Speaker 5: sees their making progress on a sale. But the company

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Speaker 5: they've made no indication they're pursuing that route. They say

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Speaker 5: this is a blatant violation of the Constitution, and so

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Speaker 5: they think they can win in court. But I'm not

438
00:21:54,440 --> 00:21:55,919
Speaker 5: so sure after that hearing.

439
00:21:56,560 --> 00:21:59,120
Speaker 10: I mean, so what do analysts think are the brought

440
00:21:59,200 --> 00:22:01,760
Speaker 10: would be the broader out for the corporate side of things.

441
00:22:01,800 --> 00:22:03,960
Speaker 10: I mean, of course, we know so many companies actually

442
00:22:04,200 --> 00:22:07,359
Speaker 10: promote their products and their companies on TikTok. I mean,

443
00:22:07,359 --> 00:22:09,840
Speaker 10: when I'm scrolling through, I'm always seeing a new pitch.

444
00:22:09,880 --> 00:22:12,040
Speaker 10: So what does that look like in terms of advertisement

445
00:22:12,080 --> 00:22:13,200
Speaker 10: and the ripple effects there?

446
00:22:14,000 --> 00:22:17,000
Speaker 5: Yeah, that's right. And part of the litigation yesterday was

447
00:22:17,040 --> 00:22:20,280
Speaker 5: brought by users of TikTok that say, look, there isn't

448
00:22:20,320 --> 00:22:23,280
Speaker 5: a good substitute. Yeah, there are other social media companies,

449
00:22:23,280 --> 00:22:26,680
Speaker 5: but we've built our businesses here. We are we are

450
00:22:26,720 --> 00:22:30,080
Speaker 5: expressing ourselves as a First Amendment matter on TikTok and

451
00:22:30,119 --> 00:22:34,080
Speaker 5: the government can't take that away. And and there's also

452
00:22:34,160 --> 00:22:38,920
Speaker 5: a big business impact in terms of TikTok's competitors. TikTok

453
00:22:39,000 --> 00:22:41,359
Speaker 5: is is, you know, one of the leading social media

454
00:22:41,400 --> 00:22:44,440
Speaker 5: apps in the country. So if it goes away, it's

455
00:22:44,440 --> 00:22:48,439
Speaker 5: a it's a great opportunity for the competitors, for Google,

456
00:22:48,520 --> 00:22:53,400
Speaker 5: for Meta and so there are serious business implications by

457
00:22:53,440 --> 00:22:56,399
Speaker 5: by forcing a divestiture that isn't going to happen and

458
00:22:56,440 --> 00:22:57,640
Speaker 5: effectively forcing a ban.

459
00:22:58,800 --> 00:23:00,840
Speaker 2: Is this something that could get to the Supreme Court.

460
00:23:02,080 --> 00:23:06,040
Speaker 5: Yes, So if TikTok loses in the DC Circuit, I

461
00:23:06,119 --> 00:23:10,000
Speaker 5: expect we'll see a decision by early December from the

462
00:23:10,080 --> 00:23:13,000
Speaker 5: DC Circuit. As I said, the key deadline is January

463
00:23:13,080 --> 00:23:15,640
Speaker 5: nineteenth here, so there's not a lot of time. If

464
00:23:15,640 --> 00:23:18,080
Speaker 5: we see a decision in December from the DC Circuit,

465
00:23:18,600 --> 00:23:22,679
Speaker 5: TikTok's realistic only chance at that point is going to

466
00:23:22,680 --> 00:23:25,320
Speaker 5: be a last ditch plea to the Supreme Court to

467
00:23:25,400 --> 00:23:28,280
Speaker 5: hit pause on this, to say, look, nothing should move

468
00:23:28,320 --> 00:23:31,640
Speaker 5: this fast when you have such a major restriction under

469
00:23:31,680 --> 00:23:34,560
Speaker 5: the First Amendment. The Supreme Court should issue a stay

470
00:23:34,800 --> 00:23:37,119
Speaker 5: and take up this case. That's going to be the

471
00:23:37,440 --> 00:23:40,760
Speaker 5: TikTok's last chance to dodge a man by January nineteenth.

472
00:23:40,760 --> 00:23:43,240
Speaker 5: If this ruling goes against it, and I'm not sure

473
00:23:43,280 --> 00:23:45,760
Speaker 5: the Supreme Court will necessarily take it. Yes, it's a

474
00:23:45,880 --> 00:23:49,600
Speaker 5: major question that they might be interested in. But if

475
00:23:50,040 --> 00:23:53,240
Speaker 5: TikTok gets a major loss at the d C Circuit,

476
00:23:53,240 --> 00:23:55,400
Speaker 5: the Supreme Court could say, look, you know they got

477
00:23:55,400 --> 00:23:57,320
Speaker 5: it right. We don't need to step in here. So

478
00:23:57,400 --> 00:23:59,400
Speaker 5: it's not even a sure thing that the Supreme Court

479
00:23:59,400 --> 00:24:02,000
Speaker 5: will take it. We'll have to watch that in after

480
00:24:02,040 --> 00:24:03,240
Speaker 5: the DC Circuit rules.

481
00:24:03,680 --> 00:24:07,240
Speaker 2: Our thanks to Bloomberg Intelligence media litigation analyst Matt Scheltenham.

482
00:24:07,480 --> 00:24:08,960
Speaker 3: Coming up on the program, we take a look at

483
00:24:09,000 --> 00:24:11,600
Speaker 3: commercial real estate and one side in Brooklyn that's working

484
00:24:11,640 --> 00:24:14,120
Speaker 3: to perfect the foot traffic floor plan.

485
00:24:14,359 --> 00:24:17,760
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing inp

486
00:24:17,880 --> 00:24:20,200
Speaker 2: research and data on two thousand companies and one hundred

487
00:24:20,200 --> 00:24:23,159
Speaker 2: and thirty industries. You can access Bloomberg Intelligence via Bigo

488
00:24:23,240 --> 00:24:23,840
Speaker 2: on the terminal.

489
00:24:23,920 --> 00:24:26,600
Speaker 3: I'm Paul Sweeney and am Alex Deel, and this is Bloomberg.

490
00:24:31,359 --> 00:24:35,240
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

491
00:24:35,320 --> 00:24:38,840
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

492
00:24:38,880 --> 00:24:41,639
Speaker 1: Auto with the Bloomberg Business app. You can also listen

493
00:24:41,760 --> 00:24:44,840
Speaker 1: live on Amazon Alexa from our flagship New York station,

494
00:24:45,200 --> 00:24:48,000
Speaker 1: Just say Alexa play Bloomberg eleven thirty.

495
00:24:49,960 --> 00:24:52,320
Speaker 3: We move now to commercial real estate and one side

496
00:24:52,359 --> 00:24:54,639
Speaker 3: in Brooklyn that's making their way in the tough New

497
00:24:54,760 --> 00:24:55,560
Speaker 3: York City market.

498
00:24:55,800 --> 00:24:58,920
Speaker 2: Jim Simosa is the managing director of Industry City and

499
00:24:59,040 --> 00:25:04,000
Speaker 2: Multifaceted sh warehousing and Production space on New York's Bay Waterfront.

500
00:25:04,280 --> 00:25:06,080
Speaker 2: We spoke with them about the space's success.

501
00:25:06,440 --> 00:25:09,400
Speaker 6: You know, we have a lot of history doing adaptive

502
00:25:09,400 --> 00:25:12,920
Speaker 6: reuse projects like this, like in Inser City, like Chelsea Market,

503
00:25:12,960 --> 00:25:16,760
Speaker 6: which at one time, just like this project was you know,

504
00:25:17,040 --> 00:25:20,280
Speaker 6: a number of older buildings that were past their prime.

505
00:25:20,320 --> 00:25:24,440
Speaker 6: But people really like classic old buildings that you take

506
00:25:24,680 --> 00:25:29,400
Speaker 6: and redevelop into offices and retail and things that are fun.

507
00:25:29,520 --> 00:25:32,960
Speaker 6: So we've seen this before and we've done at other locations.

508
00:25:33,000 --> 00:25:37,040
Speaker 6: So look, I'm surprised we took on something as large

509
00:25:37,080 --> 00:25:39,320
Speaker 6: if you really want to know, that's six million square feet.

510
00:25:39,320 --> 00:25:41,000
Speaker 6: But we've been able to do it so as far.

511
00:25:41,080 --> 00:25:43,680
Speaker 6: But from a success standpoint, I'm not surprised.

512
00:25:44,400 --> 00:25:47,159
Speaker 2: Jim, talk to us about how you're thinking about real estate,

513
00:25:47,960 --> 00:25:51,160
Speaker 2: mixed use, real estate, office, real estate in the context

514
00:25:51,160 --> 00:25:53,520
Speaker 2: of what appears to be a post pandemic, you know,

515
00:25:53,760 --> 00:25:56,159
Speaker 2: different way people work and live and go to the

516
00:25:56,200 --> 00:25:57,359
Speaker 2: office and all that kind of stuff.

517
00:25:58,160 --> 00:26:01,399
Speaker 6: We've been at this since doing exactly what we do,

518
00:26:01,480 --> 00:26:06,639
Speaker 6: which is adaptive reuse and activation and fun place, you know,

519
00:26:07,440 --> 00:26:09,640
Speaker 6: creating a fun place to work. For a long time,

520
00:26:09,720 --> 00:26:13,879
Speaker 6: we didn't know a pandemic was coming. It just so

521
00:26:14,000 --> 00:26:17,240
Speaker 6: happens that it came and what we do was more

522
00:26:17,720 --> 00:26:21,119
Speaker 6: attractive to people. So what we do here is create

523
00:26:21,200 --> 00:26:24,280
Speaker 6: a place that people like to come and work. And

524
00:26:24,320 --> 00:26:29,160
Speaker 6: so we've actually been at eighty percent of the employees

525
00:26:29,200 --> 00:26:31,959
Speaker 6: that work I see have been back in the office

526
00:26:32,000 --> 00:26:36,480
Speaker 6: regularly for several years now, and so you know, that's

527
00:26:36,800 --> 00:26:40,000
Speaker 6: that's kind of what we do is create fun places

528
00:26:40,040 --> 00:26:43,840
Speaker 6: to work that are not commodity real estate. I worked

529
00:26:43,880 --> 00:26:45,919
Speaker 6: and by the way, I worked in many glass and

530
00:26:45,920 --> 00:26:49,760
Speaker 6: steel office buildings in my career, and these are just

531
00:26:49,880 --> 00:26:53,159
Speaker 6: more fun places to work, and people like coming to

532
00:26:53,240 --> 00:26:55,000
Speaker 6: work when they come to places like this.

533
00:26:56,000 --> 00:26:58,240
Speaker 3: How do you know when a project's going to work? Right?

534
00:26:58,320 --> 00:27:01,439
Speaker 3: Like you mentioned Chelsea Market in city, Like, what's the

535
00:27:01,520 --> 00:27:02,520
Speaker 3: secret sauce?

536
00:27:03,359 --> 00:27:06,480
Speaker 6: I will tell you the secret sauce is, So what

537
00:27:06,520 --> 00:27:08,920
Speaker 6: you first do is you start with the ground floor

538
00:27:09,119 --> 00:27:13,719
Speaker 6: and the placemaking. And for us, when you do something

539
00:27:13,760 --> 00:27:16,920
Speaker 6: like this, when you have a project, you need retail.

540
00:27:17,040 --> 00:27:20,480
Speaker 6: You need food and beverage, you need shopping, you need

541
00:27:20,520 --> 00:27:22,800
Speaker 6: things like that. But how do you do that without

542
00:27:22,800 --> 00:27:25,720
Speaker 6: any foot traffic? Nobody wants to come and do retail

543
00:27:25,760 --> 00:27:28,200
Speaker 6: with you when you do that. So what we did

544
00:27:28,200 --> 00:27:30,359
Speaker 6: at Chelsea Market and did the same thing here is

545
00:27:30,400 --> 00:27:34,560
Speaker 6: we went to wholesalers and commissaries and bakeries and things

546
00:27:34,560 --> 00:27:38,400
Speaker 6: like that. People that really were interested in the production

547
00:27:38,560 --> 00:27:40,000
Speaker 6: space more than retail.

548
00:27:41,000 --> 00:27:43,160
Speaker 1: But they had to do retail with us.

549
00:27:43,240 --> 00:27:44,879
Speaker 6: That was part of the deal, you know, And we

550
00:27:45,280 --> 00:27:48,200
Speaker 6: gave them a favorable rate in the beginning to do that.

551
00:27:48,240 --> 00:27:51,080
Speaker 6: But they need they needed ground floor space, they needed

552
00:27:51,119 --> 00:27:54,040
Speaker 6: space that had plenty of loading. Getting priced out of

553
00:27:54,280 --> 00:27:56,240
Speaker 6: New York City was something that they didn't want. They

554
00:27:56,280 --> 00:27:58,439
Speaker 6: wanted to be near their customers. So we would go

555
00:27:58,600 --> 00:28:02,480
Speaker 6: to those and you go back to Chelsea Market. Lobster

556
00:28:02,560 --> 00:28:06,960
Speaker 6: Place was a classic example wholesale fish a seafood place.

557
00:28:07,000 --> 00:28:11,600
Speaker 6: For us. It was bakeries such as Coulson's and Lilac

558
00:28:11,680 --> 00:28:14,720
Speaker 6: Chocolates and things like that. Companies that really were interested

559
00:28:14,760 --> 00:28:17,840
Speaker 6: in production space, but we wanted them to do retail.

560
00:28:17,920 --> 00:28:21,000
Speaker 6: So that way there are two businesses. You don't have

561
00:28:21,080 --> 00:28:24,560
Speaker 6: to worry about the foot traffic in the beginning while

562
00:28:24,560 --> 00:28:28,400
Speaker 6: you're getting this going, but you're starting to get retail

563
00:28:28,840 --> 00:28:31,960
Speaker 6: and amenity type tenants on the ground floor and placemaking,

564
00:28:32,200 --> 00:28:34,679
Speaker 6: and that's how you start to lease the upper floors.

565
00:28:34,720 --> 00:28:37,280
Speaker 6: Once you start to do that, then you have tenants

566
00:28:37,320 --> 00:28:40,240
Speaker 6: in the building that are just happened to be right

567
00:28:40,280 --> 00:28:43,920
Speaker 6: next door to those retailers, and then the retail takes off.

568
00:28:44,120 --> 00:28:47,920
Speaker 6: And if to answer your specific question, how do you know?

569
00:28:48,680 --> 00:28:51,680
Speaker 6: You know when those folks who, by the way, didn't

570
00:28:51,680 --> 00:28:53,560
Speaker 6: really want to do retail with you in the beginning

571
00:28:53,560 --> 00:28:55,880
Speaker 6: because you didn't have foot traffic. You know when those

572
00:28:55,920 --> 00:28:58,760
Speaker 6: folks come to you and say, how can you do

573
00:28:58,840 --> 00:29:01,520
Speaker 6: more marketing for me and can you get me more

574
00:29:01,520 --> 00:29:03,920
Speaker 6: foot traffic? This is fantastic because they're doing, you know,

575
00:29:04,000 --> 00:29:07,880
Speaker 6: retail margins instead of wholesale margins in their space. As

576
00:29:07,880 --> 00:29:11,280
Speaker 6: soon as that happens, that's when you know you got something.

577
00:29:11,680 --> 00:29:14,280
Speaker 2: So Jim, how about on on like the corporate tenant side,

578
00:29:14,280 --> 00:29:16,840
Speaker 2: what type of companies want to be in a space

579
00:29:16,880 --> 00:29:17,320
Speaker 2: like yours.

580
00:29:17,920 --> 00:29:23,440
Speaker 6: So we tend to have more creative type companies, lots

581
00:29:23,440 --> 00:29:30,120
Speaker 6: of designers, architects, marketing firms, things like that. You know

582
00:29:30,200 --> 00:29:33,560
Speaker 6: that that's kind of very consistent with the Brooklyn market.

583
00:29:34,000 --> 00:29:35,200
Speaker 8: We have a lot of that.

584
00:29:35,520 --> 00:29:39,160
Speaker 6: We are starting to see some more traditional type of

585
00:29:39,760 --> 00:29:42,640
Speaker 6: companies like finance firms and law firms and things like that,

586
00:29:42,680 --> 00:29:45,360
Speaker 6: which we did not see in the beginning. But we

587
00:29:45,480 --> 00:29:47,360
Speaker 6: have a lot of that. We have a lot of industrial.

588
00:29:47,480 --> 00:29:49,720
Speaker 6: We're six million square feet first of all, so that's

589
00:29:49,760 --> 00:29:52,200
Speaker 6: a lot of space to fill up with, you know,

590
00:29:52,280 --> 00:29:54,920
Speaker 6: with just one or two types of industries. So we

591
00:29:55,080 --> 00:29:58,520
Speaker 6: have a lot of distribution and warehouse still, but our

592
00:29:58,640 --> 00:30:02,200
Speaker 6: office itself focuses more on creative companies. And then we

593
00:30:02,280 --> 00:30:04,760
Speaker 6: have people like the Brooklyn Nets, you know, so the

594
00:30:05,040 --> 00:30:08,800
Speaker 6: Brooklyn Nets they're headquarters and players, player, personnel, and back

595
00:30:08,840 --> 00:30:12,960
Speaker 6: office are all here. So it's really it's a much

596
00:30:13,040 --> 00:30:15,600
Speaker 6: wider range of types of companies than you would normally

597
00:30:15,640 --> 00:30:18,800
Speaker 6: see in a project, partially because we are six million

598
00:30:18,840 --> 00:30:21,560
Speaker 6: square feet and sixteen buildings, so we have the ability

599
00:30:21,600 --> 00:30:25,360
Speaker 6: to do things differently building by building that you may

600
00:30:25,400 --> 00:30:27,920
Speaker 6: not be able to do. I fewer one or two buildings.

601
00:30:28,240 --> 00:30:31,000
Speaker 3: All right, thanks to Industry City Managing Director Jim Simosa.

602
00:30:31,320 --> 00:30:34,600
Speaker 2: Return now to banking, where a new FDIC policy could

603
00:30:34,640 --> 00:30:36,840
Speaker 2: be heightening the hurdles for future bank mergers.

604
00:30:37,000 --> 00:30:39,760
Speaker 3: For more, we're doing by Bloomberg Intelligence Senior policy analyst

605
00:30:39,800 --> 00:30:40,360
Speaker 3: Nathan Dean.

606
00:30:40,880 --> 00:30:41,120
Speaker 1: Yeah.

607
00:30:41,160 --> 00:30:43,520
Speaker 11: So, essentially, what it says is that it's going to

608
00:30:43,560 --> 00:30:46,480
Speaker 11: place more emphasis on certain aspects of bank M and A,

609
00:30:46,680 --> 00:30:50,160
Speaker 11: like the impact on communities, competition, and so forth like that,

610
00:30:50,480 --> 00:30:54,240
Speaker 11: And it changed the parameters that the FDIC in particular.

611
00:30:54,000 --> 00:30:56,320
Speaker 8: Is going to look at when going forward with approval.

612
00:30:56,480 --> 00:30:58,600
Speaker 11: So if I'm Bank A and I'm trying to merge

613
00:30:58,640 --> 00:31:01,880
Speaker 11: with Bank B, and as part of that merger, the FDIC,

614
00:31:02,040 --> 00:31:04,600
Speaker 11: for example, decides that the South side of Chicago is

615
00:31:04,640 --> 00:31:07,560
Speaker 11: going to be harmed either dude, you you know, branch

616
00:31:07,640 --> 00:31:09,440
Speaker 11: closures or lack of competition.

617
00:31:09,800 --> 00:31:11,560
Speaker 8: You know, the FDIC is going to come in and say, no,

618
00:31:11,600 --> 00:31:12,160
Speaker 8: you can't do this.

619
00:31:12,440 --> 00:31:14,320
Speaker 11: It shall also be noted the Office of the Control

620
00:31:14,400 --> 00:31:18,160
Speaker 11: or the Currency finalized something very similar, not exactly the same,

621
00:31:18,520 --> 00:31:21,920
Speaker 11: but essentially what we've been telling our clients is this one.

622
00:31:22,160 --> 00:31:25,080
Speaker 11: You've probably anticipated that bank mergers was difficult under the

623
00:31:25,120 --> 00:31:28,600
Speaker 11: Biden Air regulators, that's going to continue. And two, you know,

624
00:31:28,680 --> 00:31:31,640
Speaker 11: this is easily reversible. So if President Trump wins in November,

625
00:31:31,840 --> 00:31:34,400
Speaker 11: new leadership at the FDIC and the UCC next year

626
00:31:34,440 --> 00:31:36,440
Speaker 11: could walk some of this back if they so choose.

627
00:31:37,280 --> 00:31:39,240
Speaker 2: Is this a solution in search of a problem here?

628
00:31:39,520 --> 00:31:42,000
Speaker 2: I mean, if we had a swath of bank m

629
00:31:42,000 --> 00:31:43,760
Speaker 2: and A that's disadvantaged people, have I missed that?

630
00:31:44,200 --> 00:31:46,160
Speaker 11: So you know, there's really two sides to this story.

631
00:31:46,200 --> 00:31:47,600
Speaker 11: The first site is is that a lot of this

632
00:31:47,640 --> 00:31:50,280
Speaker 11: hasn't been updated since nineteen ninety five. In two thousand

633
00:31:50,320 --> 00:31:54,120
Speaker 11: and eight, so the bidenarraw regulators in the FDIC particular, say, look,

634
00:31:54,160 --> 00:31:56,320
Speaker 11: this is what we're just doing is codifying already what

635
00:31:56,360 --> 00:31:58,680
Speaker 11: we're looking at. We're just making sure that it's now,

636
00:31:59,040 --> 00:32:01,280
Speaker 11: you know, on paper, so that banks are at least

637
00:32:01,280 --> 00:32:03,360
Speaker 11: more transparent or at least get a little bit more

638
00:32:03,360 --> 00:32:05,360
Speaker 11: transparency in terms of that process.

639
00:32:05,520 --> 00:32:06,160
Speaker 8: If you talk to the.

640
00:32:06,160 --> 00:32:09,440
Speaker 11: Bankers, they're like, look, it's been difficult to begin with,

641
00:32:09,560 --> 00:32:12,280
Speaker 11: and you know, going to let's say the Capitol One

642
00:32:12,280 --> 00:32:15,440
Speaker 11: Discover merger, you know, this may not be so much

643
00:32:15,480 --> 00:32:18,120
Speaker 11: of an anti competitive issue, or there's not going to

644
00:32:18,160 --> 00:32:20,680
Speaker 11: be much of a community impact. So it's really which

645
00:32:20,680 --> 00:32:22,160
Speaker 11: side of the story do you believe in? In which

646
00:32:22,200 --> 00:32:25,480
Speaker 11: side of the story you are talking to. But you know, again,

647
00:32:25,600 --> 00:32:30,080
Speaker 11: this is a codification of already existing I think theory

648
00:32:30,120 --> 00:32:33,480
Speaker 11: and already existing behavior, and again something that could change

649
00:32:33,520 --> 00:32:34,800
Speaker 11: under a Republican administration.

650
00:32:35,000 --> 00:32:37,200
Speaker 3: I mean, that was totally one of my questions that

651
00:32:37,280 --> 00:32:40,400
Speaker 3: Paul took was like, what problem is this actually trying

652
00:32:40,400 --> 00:32:43,240
Speaker 3: to address? And at the same point that recently we've

653
00:32:43,280 --> 00:32:46,000
Speaker 3: had bank issues, just Jamie Diamond winds up buying the

654
00:32:46,000 --> 00:32:48,520
Speaker 3: bank on a discount help by the governments, Like, is

655
00:32:48,520 --> 00:32:50,200
Speaker 3: that helping any of those problems?

656
00:32:50,880 --> 00:32:52,640
Speaker 8: No, And you bring up a great point.

657
00:32:52,680 --> 00:32:55,720
Speaker 11: There were several comment letters to that exactly saying like, look,

658
00:32:55,960 --> 00:32:57,640
Speaker 11: you put these and these are some of the bank

659
00:32:57,640 --> 00:33:00,000
Speaker 11: comment letters saying, you know, look, you put these processes,

660
00:33:00,400 --> 00:33:03,280
Speaker 11: these procedures in place, but then when the market goes down,

661
00:33:03,560 --> 00:33:05,800
Speaker 11: you know, we buy a bank over the weekend and

662
00:33:05,840 --> 00:33:07,480
Speaker 11: you throw the playbook out and you say, let's just

663
00:33:07,480 --> 00:33:10,560
Speaker 11: save the system. And so the bank's response is somewhat

664
00:33:10,600 --> 00:33:14,640
Speaker 11: frustrating here because you know, they're frustrated because in their eyes,

665
00:33:15,360 --> 00:33:18,280
Speaker 11: the regulators put out these procedures, these processes to put

666
00:33:18,320 --> 00:33:20,720
Speaker 11: it everything on paper, and then you know, when the

667
00:33:20,720 --> 00:33:22,840
Speaker 11: market goes down and as solution needs to be found

668
00:33:22,880 --> 00:33:25,440
Speaker 11: on the fixed or on the fast, they just you know,

669
00:33:25,480 --> 00:33:27,480
Speaker 11: throw that all to the wey side and go forth.

670
00:33:27,640 --> 00:33:27,840
Speaker 1: You know.

671
00:33:27,960 --> 00:33:29,200
Speaker 8: Ultimately, though, this is a.

672
00:33:29,120 --> 00:33:31,320
Speaker 11: Little bit more of what we're seeing though with just

673
00:33:31,400 --> 00:33:35,440
Speaker 11: democratic financial regulation in general, placing more emphasis on the

674
00:33:35,480 --> 00:33:40,120
Speaker 11: community and the individual. Because before when these bank mergers

675
00:33:40,120 --> 00:33:43,240
Speaker 11: would have happened, you look at like capital levels, management,

676
00:33:43,360 --> 00:33:45,120
Speaker 11: risk to the system, and so forth like that.

677
00:33:45,440 --> 00:33:47,600
Speaker 8: But now they're looking at the individual impact.

678
00:33:47,800 --> 00:33:49,720
Speaker 11: Are people on the South side of Chicago going to

679
00:33:49,720 --> 00:33:52,160
Speaker 11: be harmed by this? Our price is going to go up?

680
00:33:52,320 --> 00:33:54,680
Speaker 11: So it's more of this economic populism side of the

681
00:33:54,720 --> 00:33:58,080
Speaker 11: Elizabeth Warren side of the Democratic Party that's now making

682
00:33:58,160 --> 00:34:00,880
Speaker 11: its way into these policy statements in the rules at

683
00:34:00,880 --> 00:34:01,920
Speaker 11: the banking regulators.

684
00:34:02,560 --> 00:34:04,920
Speaker 2: So have we heard anything from the industry per se,

685
00:34:04,920 --> 00:34:06,720
Speaker 2: Because one of the things I guess we at least

686
00:34:06,760 --> 00:34:10,719
Speaker 2: I learned during the recent round of weakness and failures

687
00:34:10,719 --> 00:34:12,560
Speaker 2: of some of these small banks in the last couple

688
00:34:12,600 --> 00:34:16,640
Speaker 2: of years was there's like five thousand small and community

689
00:34:16,640 --> 00:34:19,440
Speaker 2: and regional banks out there. That's a lot you know,

690
00:34:19,520 --> 00:34:22,279
Speaker 2: relative to like Europe, for example, which doesn't employ that

691
00:34:22,400 --> 00:34:25,040
Speaker 2: branch system as much. A lot of peopeople were saying,

692
00:34:25,080 --> 00:34:27,200
Speaker 2: aren't there too many branches anyway? Aren't there too many

693
00:34:27,239 --> 00:34:28,240
Speaker 2: banks out there anyway?

694
00:34:28,880 --> 00:34:29,600
Speaker 8: You know, it's funny.

695
00:34:29,600 --> 00:34:31,279
Speaker 11: I was actually looking at the number of banks on

696
00:34:31,320 --> 00:34:34,359
Speaker 11: the terminal, and you know, since nineteen eighty it's gone

697
00:34:34,400 --> 00:34:38,080
Speaker 11: down fairly significantly to that five thousand, you know, so level.

698
00:34:38,280 --> 00:34:41,160
Speaker 11: But to your point, yes, that is somewhat larger compared

699
00:34:41,200 --> 00:34:43,760
Speaker 11: to other countries. And there are a lot of small

700
00:34:43,840 --> 00:34:47,440
Speaker 11: community banks. But I would also just remember small community banks,

701
00:34:47,440 --> 00:34:49,680
Speaker 11: and you know, just we usually use the term community

702
00:34:49,719 --> 00:34:52,840
Speaker 11: banks for ten billion in assets in below. These community

703
00:34:52,880 --> 00:34:56,400
Speaker 11: banks usually have broad political support amongst both sides of

704
00:34:56,440 --> 00:34:59,320
Speaker 11: the aisle. Here in Washington, nobody wants to be seen

705
00:34:59,680 --> 00:35:03,360
Speaker 11: throwing capital requirements or heavy regulation on a small community

706
00:35:03,400 --> 00:35:05,560
Speaker 11: bank because there are a lot of aspects of this

707
00:35:05,640 --> 00:35:09,680
Speaker 11: country where they're the only places that offer credit to farms, small.

708
00:35:09,400 --> 00:35:10,919
Speaker 8: Businesses and so forth like that.

709
00:35:11,200 --> 00:35:12,719
Speaker 11: You know, a lot of the big banks are you know,

710
00:35:12,760 --> 00:35:15,759
Speaker 11: centralized in these cities. So you know, it's just a

711
00:35:15,800 --> 00:35:19,239
Speaker 11: debate that both sides pay attention to. But what we're again,

712
00:35:19,320 --> 00:35:22,000
Speaker 11: what we're telling our clients is this is that this

713
00:35:22,080 --> 00:35:24,279
Speaker 11: is Bank M and A is hard today, it will

714
00:35:24,280 --> 00:35:26,960
Speaker 11: be hard tomorrow because of this. It'll be hard tomorrow

715
00:35:26,960 --> 00:35:30,200
Speaker 11: if Kamala Harris wins the presidency. But if President Trump

716
00:35:30,200 --> 00:35:33,640
Speaker 11: wins the presidency, the onion, the you know, the layers

717
00:35:33,640 --> 00:35:35,719
Speaker 11: of the onion could begin to peel off, and Bank

718
00:35:35,719 --> 00:35:37,480
Speaker 11: and M and A could be a little bit easier,

719
00:35:37,840 --> 00:35:40,000
Speaker 11: say two, three, four years from now as a result

720
00:35:40,000 --> 00:35:40,400
Speaker 11: of that.

721
00:35:40,400 --> 00:35:42,840
Speaker 3: That's just so it must be so confusing as a

722
00:35:42,880 --> 00:35:45,239
Speaker 3: CEO or CFO of a company because you have to

723
00:35:45,280 --> 00:35:48,200
Speaker 3: make a business plan today that may or may not

724
00:35:48,320 --> 00:35:50,480
Speaker 3: have the same rules in play in eighteen months.

725
00:35:51,239 --> 00:35:51,680
Speaker 8: Yeah.

726
00:35:51,719 --> 00:35:53,680
Speaker 11: Absolutely, I mean just look at the Capitol and Discover

727
00:35:53,760 --> 00:35:55,520
Speaker 11: Card Discover Financial merger.

728
00:35:55,760 --> 00:35:57,959
Speaker 8: You know when then it came out, you know.

729
00:35:57,920 --> 00:35:59,759
Speaker 11: The CEO of Capitol one came out and said, look,

730
00:35:59,760 --> 00:36:02,040
Speaker 11: we it's going to be resolved by the tail end

731
00:36:02,040 --> 00:36:04,400
Speaker 11: of twenty twenty three. Here we are sitting in September,

732
00:36:04,440 --> 00:36:06,680
Speaker 11: and I'm not sure many people believe that, you know.

733
00:36:06,760 --> 00:36:08,840
Speaker 11: So the idea here is is that you know a

734
00:36:08,920 --> 00:36:11,760
Speaker 11: lot of companies want to have these speedy access to mergers.

735
00:36:12,000 --> 00:36:13,200
Speaker 8: They want to be able to get it done.

736
00:36:13,239 --> 00:36:16,640
Speaker 11: And from a you know, paper perspective of looking at it,

737
00:36:16,640 --> 00:36:19,919
Speaker 11: from the size a combined Capital one Discover card size

738
00:36:20,000 --> 00:36:21,799
Speaker 11: is still going to be below P and C. You're

739
00:36:21,800 --> 00:36:23,360
Speaker 11: not gonna have what's called the g SIP, you know,

740
00:36:23,400 --> 00:36:24,800
Speaker 11: one of the biggest banks of results.

741
00:36:24,840 --> 00:36:25,880
Speaker 8: So that should be fine.

742
00:36:26,080 --> 00:36:28,600
Speaker 11: But ultimately what the regulators are doing now is they're

743
00:36:28,640 --> 00:36:31,839
Speaker 11: looking at, you know, certain areas of the country saying,

744
00:36:31,880 --> 00:36:33,880
Speaker 11: and I pick on Chicago because I'm from Chicago.

745
00:36:34,360 --> 00:36:36,040
Speaker 8: Is the South side of Chicago going to be harmed

746
00:36:36,080 --> 00:36:36,279
Speaker 8: by this?

747
00:36:36,320 --> 00:36:38,880
Speaker 11: And they're going by postcode and if they think that

748
00:36:38,920 --> 00:36:41,480
Speaker 11: there's issues there, they're going to slow the process down,

749
00:36:41,880 --> 00:36:44,680
Speaker 11: investigate it even more. And it's much to the frustration

750
00:36:44,760 --> 00:36:46,319
Speaker 11: of the banking industry where they just want to get

751
00:36:46,320 --> 00:36:47,319
Speaker 11: these deals done and move on.

752
00:36:47,719 --> 00:36:50,600
Speaker 3: Are thanks to Bloomberg Intelligence and your policy analyst Nathan Dean.

753
00:36:50,920 --> 00:36:53,680
Speaker 2: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio,

754
00:36:53,760 --> 00:36:56,280
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755
00:36:56,280 --> 00:36:57,760
Speaker 2: and one hundred and thirty industries.

756
00:36:57,880 --> 00:37:01,080
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757
00:37:01,160 --> 00:37:01,720
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758
00:37:01,920 --> 00:37:06,440
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759
00:37:06,640 --> 00:37:10,280
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760
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761
00:37:13,520 --> 00:37:16,920
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762
00:37:16,960 --> 00:37:20,160
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763
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