WEBVTT - SCOTUS Trump Rulings Put Congressional Authority Into Question 0:00:01.360 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.200 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:09.239 we bring you interviews from CEOs, A, market pros, and 0:00:09.400 --> 0:00:12.800 Bloomberg experts, along with essential market moving news. Find the 0:00:12.800 --> 0:00:16.280 Bloomberg Markets Podcast on Apple podcast or wherever you listen 0:00:16.320 --> 0:00:20.520 to podcasts, and on Bloomberg dot com. Let's bring in 0:00:20.600 --> 0:00:23.160 somebody else into this conversation. Now, legal analysts and a 0:00:23.239 --> 0:00:26.880 course host of Bloomberg Law, which airs weeknights at ten 0:00:26.960 --> 0:00:30.960 pm Eastern. It's a mustless and June gar also joins us. Now, June, 0:00:31.000 --> 0:00:33.400 we have the decision then from the Supreme Court on 0:00:33.560 --> 0:00:38.120 the subpoenas to take us through the May arguments because 0:00:38.159 --> 0:00:39.880 there was a lot of questioning from many of the 0:00:39.960 --> 0:00:43.839 judges on both sides. So some of the Democratic appointees 0:00:43.880 --> 0:00:47.519 were asking questions that didn't make it obvious which way 0:00:47.520 --> 0:00:51.920 they would vote, and equally the Trump appointees, Right, Vonnie, 0:00:51.960 --> 0:00:55.200 it was really difficult to tell from those oral arguments 0:00:55.400 --> 0:00:57.640 where the justices are going to go. You know, sometimes 0:00:57.720 --> 0:00:59.600 you think you know, sometimes you don't. But there it 0:00:59.680 --> 0:01:03.080 was just confusion. But what was clear was that the 0:01:03.200 --> 0:01:07.240 justices were more on the same page, were more amenable 0:01:07.319 --> 0:01:12.000 to the argument by Vance the District Attorney's office in 0:01:12.040 --> 0:01:16.759 Manhattan because of several things. One, because this is grand 0:01:16.840 --> 0:01:19.560 jury secrecy. So remember, I don't know what Kimberly has 0:01:19.600 --> 0:01:23.560 already said, but this is a grand jury. So these documents, 0:01:23.680 --> 0:01:27.000 even when Vance gets them, when the District Attorney gets them, 0:01:27.000 --> 0:01:29.160 are not going to be made public. The only time 0:01:29.200 --> 0:01:32.000 they might be made public if there's an actual criminal 0:01:32.040 --> 0:01:36.200 indictment in that case. So the justices are sure that 0:01:36.240 --> 0:01:38.880 this is going to be kept secret, and they asked 0:01:38.880 --> 0:01:42.040 a lot of questions about grand jury secrecy. I remember 0:01:42.120 --> 0:01:46.360 Justice Alito questioning whether or not you could really count 0:01:46.560 --> 0:01:49.720 on grand jury secrecy or whether the newspapers and the 0:01:49.760 --> 0:01:52.680 media atlets would be able to get hints or be 0:01:52.680 --> 0:01:54.600 able to see the documents. So I think that was 0:01:54.680 --> 0:01:57.880 very important to them. Also, it was very it was limited, 0:01:58.280 --> 0:02:03.200 and the the attorney arguing for the District Attorney's office 0:02:03.600 --> 0:02:05.960 agreed that it was a very limited document. He said, 0:02:06.000 --> 0:02:08.400 they were, you know, there were boundaries to it, whereas 0:02:08.400 --> 0:02:11.200 with the congressional subpoena, which I'm still hitting my refresh 0:02:11.280 --> 0:02:15.400 button to see if it has come out second, perhaps 0:02:15.639 --> 0:02:20.440 maybe we may get with the congressional subpoena. The lawyer 0:02:20.480 --> 0:02:23.160 who argued wouldn't give any kind of limits on what 0:02:23.280 --> 0:02:26.560 the subpoena could be, so I think that made a difference. Also, 0:02:26.600 --> 0:02:28.240 I just want to point out that if you remember, 0:02:29.120 --> 0:02:34.000 Justice Tavanagh, who concurred here, was part of the Whitewater investigation, 0:02:34.120 --> 0:02:36.919 so it would be he'd have to be explaining somehow 0:02:37.120 --> 0:02:40.280 how he could rule against this but still take part 0:02:40.320 --> 0:02:44.560 in that broad investigations the Clintons. So true, and that 0:02:44.600 --> 0:02:46.320 kind of goes to where I wanted to go, which was, 0:02:46.880 --> 0:02:50.680 can will this data really remain uh private as it 0:02:50.720 --> 0:02:53.200 relates to the New York Court? I mean, it just 0:02:53.240 --> 0:02:57.880 seems like it's just you know, rife for potential leaks. 0:02:57.919 --> 0:03:00.640 I think I actually think it will. I have a 0:03:00.680 --> 0:03:04.000 lot of faith in the grand jury system. This is 0:03:04.840 --> 0:03:08.240 this is such an important concept, the fact that when 0:03:08.240 --> 0:03:10.600 you go to a grand jury, it's secret, that everything 0:03:10.639 --> 0:03:13.280 that happens in a grand jury was secret. I can't 0:03:13.320 --> 0:03:18.120 imagine any prosecutor in that office breaking that rule. And 0:03:18.160 --> 0:03:21.320 I think that the grand jurors are you know, very 0:03:21.440 --> 0:03:26.320 very much follow their their secrecy oaths. So I'm just 0:03:26.639 --> 0:03:29.359 just see it would leak as well. June suggests that 0:03:29.360 --> 0:03:31.919 that would actually go to the main problem that the 0:03:32.280 --> 0:03:36.480 justices were having along electoral grounds. And actually we're getting 0:03:36.480 --> 0:03:38.920 another headline, High Court largely back in Trump and House 0:03:38.920 --> 0:03:41.760 financial record a bid. So this would actually back what 0:03:41.840 --> 0:03:44.760 I've just said as well, the idea that you know, 0:03:45.360 --> 0:03:47.440 the House was seeking a lot of information, some of 0:03:47.480 --> 0:03:49.760 that was pretty vague and the Supreme fourd seemed to 0:03:49.800 --> 0:03:52.920 be uncomfortable with that. Another headline, High Court orders tougher 0:03:52.960 --> 0:03:56.880 scrutiny of Houses Trump subpoenas. So maybe this isn't over yet. 0:03:57.160 --> 0:03:59.119 Let me give those two headlines again, the High Court. 0:03:59.200 --> 0:04:03.840 That's the Supreme four largely blocking, largely backing Trump in 0:04:03.840 --> 0:04:06.920 the House financial record bid. It's telling the lower courts 0:04:06.960 --> 0:04:10.160 to reconsider the Trump subpoenas. So let me ask both 0:04:10.200 --> 0:04:13.360 of you, Kimberly and June. The Supreme Court is actually 0:04:13.400 --> 0:04:15.960 sending this back down to the lower courts. It wants 0:04:15.960 --> 0:04:19.920 the lower courts to reconsider the Trump subpoenas. What does 0:04:19.960 --> 0:04:22.320 that mean? They were they were, they were very divided 0:04:22.440 --> 0:04:26.920 on the various subpoenas. Who wants to take that? June, well, 0:04:26.960 --> 0:04:29.000 I think what this means is the first thing it 0:04:29.040 --> 0:04:31.880 means is you're not going to see these records before 0:04:32.440 --> 0:04:37.240 the election campaign, before that, not before November, because you 0:04:37.320 --> 0:04:39.359 think about how long it takes that would have to 0:04:39.360 --> 0:04:42.560 be sending it back, they'd have to rebrief everything, and 0:04:42.560 --> 0:04:45.000 then a decision would have to come. So there's no 0:04:45.080 --> 0:04:48.520 way you're going to see these before the November elections. 0:04:49.600 --> 0:04:51.919 Then we'll see what happens as far as the elections, 0:04:51.960 --> 0:04:53.880 but it's going to be a long process. And this 0:04:53.920 --> 0:04:56.960 is what people were predicting that this is a way 0:04:57.000 --> 0:04:59.000 sort of a way out for the court. It's a 0:04:59.040 --> 0:05:01.640 middle ground for the courts send back to the lower courts. 0:05:01.640 --> 0:05:03.240 It's a way to sort of kick the can down 0:05:03.240 --> 0:05:06.320 the road. The Court does this a lot. They issue 0:05:06.320 --> 0:05:09.480 opinions and then they say, okay, take it lower courts, 0:05:09.480 --> 0:05:12.800 you decide. Then sometimes it comes back up, but it's 0:05:12.839 --> 0:05:15.599 going to take quite a long time. So Kim, I 0:05:15.600 --> 0:05:17.600 want to bring you back in here, Kimberly robertson um, 0:05:18.279 --> 0:05:20.480 how do you perceive kind of what the court is 0:05:20.480 --> 0:05:22.560 trying to do here? Is this kind of a win 0:05:22.880 --> 0:05:27.520 for President Trump at this point, well, at least in 0:05:27.560 --> 0:05:30.320 the congressional cases. It seems like a temporary win and 0:05:30.400 --> 0:05:33.680 a win on the objective of not having those financial 0:05:33.720 --> 0:05:37.520 documents week before the election. But this is something that 0:05:37.560 --> 0:05:39.920 the Supreme Court does a lot. It kind of takes 0:05:39.920 --> 0:05:42.800 a middle of the approach, a road road that June 0:05:42.880 --> 0:05:45.080 was talking about, and kind of gives half of a 0:05:45.080 --> 0:05:48.080 win to one side and half of a win to another. So, um, 0:05:48.120 --> 0:05:51.680 this is not surprising from the Court. As you say, 0:05:51.760 --> 0:05:55.719 something that's interesting is that Chief Justice John Roberts wrote 0:05:55.839 --> 0:05:58.919 both majority opinions. And you know, as Kim and I 0:05:58.920 --> 0:06:03.159 have talked about, uh, chief Justice Roberts is in every 0:06:03.200 --> 0:06:05.560 five four decision this Court has come to this term, 0:06:05.839 --> 0:06:09.160 Chief Justice Roberts is the deciding vote, and here he vote. 0:06:09.160 --> 0:06:12.880 He wrote both of these opinions and anxious to read them. Yes, 0:06:13.360 --> 0:06:14.880 we're not gonna let you go read them just yet. 0:06:14.880 --> 0:06:18.000 Though even more questions. So Justice as Karence Thomas and 0:06:18.200 --> 0:06:22.240 Samuel Alito dissented in the Supreme Court grand jury ruling, 0:06:22.360 --> 0:06:25.480 So I guess they didn't want even the grand jury 0:06:25.560 --> 0:06:28.159 to get Tom's tax returns, assuming that that was sort 0:06:28.160 --> 0:06:31.240 of you know, an over right. There was a very 0:06:31.400 --> 0:06:34.480 during the the oral arguments. As I mentioned before, Justice 0:06:34.520 --> 0:06:37.800 Alito expressed, you know, concern that these would be leaked. 0:06:38.279 --> 0:06:40.960 But during the oral arguments, there was also you know, 0:06:41.040 --> 0:06:45.760 a very interesting uh questioning of the President's attorney, because 0:06:45.760 --> 0:06:50.240 the President's attorney, Jay Sekulo, went for this really broad immunity. 0:06:50.240 --> 0:06:54.960 He said, the president is absolutely immune from criminal investigation 0:06:55.120 --> 0:06:58.560 even while in office. So that was this broad broad 0:06:58.640 --> 0:07:02.160 stance he took. So I'm I'm anxious to see exactly 0:07:02.200 --> 0:07:06.040 where uh Thomas and Alito thinks the line should be 0:07:06.120 --> 0:07:09.680 if they say, but it just it shows you. And 0:07:09.760 --> 0:07:12.920 also the seven to two um A lot depends on 0:07:13.000 --> 0:07:16.840 what Justice Roberts actually wrote in his opinion to see, 0:07:17.080 --> 0:07:19.680 you know, you don't have the history I don't see 0:07:19.720 --> 0:07:22.640 at the beginning that you do in the heat during 0:07:22.680 --> 0:07:26.760 the In the other case, the the Manhattan District Attorney's case, 0:07:27.040 --> 0:07:29.440 there was this long history he gave that presidents from 0:07:29.440 --> 0:07:32.600 Monroe to Clinton have accepted this ruling that the chief 0:07:32.600 --> 0:07:36.280 executive is subject to subpoena and have uniformly agreed to 0:07:36.280 --> 0:07:41.080 testify when called in criminal proceedings. So maybe that's the difference, 0:07:41.160 --> 0:07:42.640 but this is going to be this is a huge 0:07:42.640 --> 0:07:45.360 separation of powers issue here is as I'm sure Kim 0:07:45.960 --> 0:07:50.040 Kimberly said before, because the question now is how much 0:07:50.080 --> 0:07:56.360 has congress is oversight authority been stripped away? So, Kimberly, 0:07:56.400 --> 0:07:59.000 what do you think the response is going to be from? 0:07:59.640 --> 0:08:01.640 I guess guess what? What do you think that are 0:08:01.680 --> 0:08:04.640 the next steps here? Well, the next steps is that 0:08:04.720 --> 0:08:07.480 these cases will go back down to the courts from 0:08:07.480 --> 0:08:11.600 which they came, Um, and they'll be some closer look 0:08:11.960 --> 0:08:16.440 at them at the House's reasoning for why it needed 0:08:16.800 --> 0:08:18.920 these cases. Again, think they're just coming out, but it 0:08:18.920 --> 0:08:21.920 looks like the Supreme Court wants the lower courts to 0:08:22.040 --> 0:08:25.840 take a better account of the separation of powers problems 0:08:26.480 --> 0:08:29.680 that the Trump that Trump is asserting here and kind 0:08:29.680 --> 0:08:32.840 of do more work on that issue. It's a win 0:08:33.160 --> 0:08:36.199 for cs IR response for the New York District Attorney 0:08:36.559 --> 0:08:40.880 June on precedent, What can the District attorney do beyond 0:08:41.280 --> 0:08:44.960 just serving these subpoenas and serving these documents to the 0:08:44.960 --> 0:08:48.240 grand jury? Is there anything that he can use this 0:08:48.320 --> 0:08:52.640 as a precedent for Well, um would have to see 0:08:52.720 --> 0:08:54.880 what happens. I think what was going to happen. He's 0:08:54.920 --> 0:08:58.800 already served the subpoenas, and these subpoenas as you mentioned, 0:08:58.800 --> 0:09:02.880 after third parties there to his subpoena actually is is 0:09:03.000 --> 0:09:08.319 just to the accounting firm um and so he's so 0:09:08.480 --> 0:09:11.160 the question is, you know, they'll turn it over right away. 0:09:11.200 --> 0:09:13.440 They've said before that they're going to turn it over, 0:09:13.480 --> 0:09:16.800 so there'll be that turnover. They'll look at the information 0:09:16.840 --> 0:09:19.600 there and then they'll start investigating, and they have investigators. 0:09:19.760 --> 0:09:24.080 They'll start investigating what's behind if they find anything that 0:09:24.360 --> 0:09:26.480 and as you've mentioned, this is a huge amount of 0:09:26.520 --> 0:09:28.400 material that's going to come in. So they'll look at 0:09:28.440 --> 0:09:30.959 it and they'll see if there are any other questions 0:09:31.400 --> 0:09:34.480 what they might decide to do. I mean, grand jury 0:09:34.520 --> 0:09:38.959 has broad powers to look in directions that a normal 0:09:39.040 --> 0:09:42.880 jury wouldn't be doing. And so as you probably heard 0:09:42.880 --> 0:09:45.439 the expression that you know a prosecutor, you can get 0:09:45.520 --> 0:09:48.720 a grand jury to indict a ham sandwich. And so 0:09:48.760 --> 0:09:51.199 the a lot depends on how much you know and 0:09:51.200 --> 0:09:53.960 advance is politically motivated, So a lot depends on how 0:09:54.040 --> 0:09:56.800 much he wants to push this grand jury what they're 0:09:56.840 --> 0:10:00.000 going to do with those with that information. But you've 0:10:00.040 --> 0:10:03.200 gotta know it's it's going there's gonna be a lot 0:10:03.240 --> 0:10:05.920 of pressure on his office now since he is the 0:10:05.960 --> 0:10:09.439 only office in the country that's going to have those. 0:10:09.559 --> 0:10:17.800 Um uh, there's that information. A very interesting conversation coming 0:10:17.880 --> 0:10:20.480 up next now because it is time for Bloomberg opinion 0:10:20.520 --> 0:10:23.040 and a great opinion piece by the former chair of 0:10:23.080 --> 0:10:25.840 the f d i C during the Great Financial Crisis 0:10:25.840 --> 0:10:28.160 that should be noted. She La Bet. She is on 0:10:28.200 --> 0:10:31.960 everybody's lips. She's a household name. Really. She's also founding 0:10:31.960 --> 0:10:34.720 director of the Local Alliance, which aims to build trust 0:10:34.800 --> 0:10:37.520 in government, and she is the founding chair of the 0:10:37.559 --> 0:10:40.599 Systemic Risk Council now after her at the f d 0:10:40.679 --> 0:10:42.640 i C, the vice chairman was Tom Hunig, who is 0:10:42.679 --> 0:10:45.280 also of course of Kansas City Fed President. And they 0:10:45.360 --> 0:10:48.360 have a great opinion piece out on the Bloomberg today 0:10:49.240 --> 0:10:52.960 or in recent days. Banks risks during the pandemic aren't clear. 0:10:53.080 --> 0:10:55.400 There is a lot to unpack here. So she Labert, welcome, 0:10:56.400 --> 0:10:59.959 thank you for having me talk to us about how 0:11:00.080 --> 0:11:02.600 risky banks are these days, because right now we're seeing 0:11:02.640 --> 0:11:05.480 headlines about you know, employees being laid off and so on, 0:11:05.520 --> 0:11:09.400 and we're not actually thinking too much. I think about how, 0:11:10.160 --> 0:11:14.160 you know, how strong fundamentally banks are didn't we fix 0:11:14.280 --> 0:11:18.320 that post Financial park crisis? Well, we did. I mean, 0:11:18.320 --> 0:11:21.160 there was certainly much better capitalized going into this crisis 0:11:21.200 --> 0:11:24.040 than they were during the Great Financial Crisis back in 0:11:24.080 --> 0:11:27.080 two two nine, But that's not saying much because they 0:11:27.120 --> 0:11:31.120 were really very highly leveraged back then. So we started 0:11:31.120 --> 0:11:34.640 from the low baseline. Yes, lots more capital, which was 0:11:34.679 --> 0:11:36.920 good because they were in a much better position going 0:11:36.960 --> 0:11:40.439 into this and and that's that's in in in large 0:11:40.480 --> 0:11:43.560 part due to the reforms we put in place after 0:11:43.600 --> 0:11:47.280 the Great Financial Crisis. So we shouldn't be overly confident, 0:11:47.320 --> 0:11:50.680 though this is a very severe crisis and h capital 0:11:50.760 --> 0:11:53.760 levels have been declining actually leading into this crisis. The 0:11:53.840 --> 0:11:55.960 FED over the last few years have been letting banks 0:11:56.720 --> 0:11:59.760 on average distribute more in capital than they were earning, 0:11:59.800 --> 0:12:03.720 a which depletes their capital levels and so on an 0:12:03.720 --> 0:12:07.000 anonymous weighted basis, we actually saw capital ratio's declining for 0:12:07.040 --> 0:12:10.520 the last two years, So we shouldn't We shouldn't be overconfident. 0:12:10.600 --> 0:12:13.000 There was a bad friend going into this, which is 0:12:13.080 --> 0:12:16.960 unfortunate because usually when you're in a good economic times 0:12:17.000 --> 0:12:19.160 for discycle, the smart thing to do is to raise 0:12:19.240 --> 0:12:22.360 capital not not to lower it. So she'll give us 0:12:22.400 --> 0:12:24.600 a sense of kind of what your your takeaways were 0:12:24.760 --> 0:12:30.600 from the recently released stress tests, right. So I think 0:12:30.600 --> 0:12:32.840 the problem is they just were So we had as 0:12:32.880 --> 0:12:35.360 sensitivity analysis this testament and then we had this to 0:12:35.440 --> 0:12:37.560 stress test, but the stress test really didn't tell us 0:12:37.640 --> 0:12:41.200 much of anything because they were based on economic stress 0:12:41.200 --> 0:12:45.040 scenarios pre pandemic and what we're what we're experiencing now 0:12:45.120 --> 0:12:48.880 is more severe than what even the most severe assumptions 0:12:48.920 --> 0:12:53.640 of the stress tests that we're announced very pre pandemic were. 0:12:53.679 --> 0:12:55.800 And also you were looking at bank balance sheets as 0:12:55.840 --> 0:12:58.480 at the end of the year last year, those have 0:12:58.559 --> 0:13:02.880 grown significantly because of the crisis. And ironically, the FED, 0:13:03.480 --> 0:13:05.600 this is something I supported back when I was chair 0:13:05.600 --> 0:13:07.120 of the f c I s T and later as 0:13:07.160 --> 0:13:10.839 an advocate at the s RC Systemic Risk Council, to 0:13:10.960 --> 0:13:12.880 require as part of the stress tests to show that 0:13:13.000 --> 0:13:15.600 banks can't expand their balance sheets and still have adequate 0:13:15.720 --> 0:13:18.600 levels of capital. Ironically, they fed a down away from 0:13:18.640 --> 0:13:20.520 that they'd weakened to stress test. That was one of 0:13:20.559 --> 0:13:23.280 the many ways they'd weaken going into this. So I 0:13:23.360 --> 0:13:25.920 don't the stress test results, which were firms specific. I 0:13:25.960 --> 0:13:28.520 don't have a lot of confidence in them. There were 0:13:28.640 --> 0:13:31.480 there were some numbers that were frightening, even though they 0:13:31.520 --> 0:13:34.880 were you know, uh were stressed under much more benign 0:13:34.920 --> 0:13:39.160 economic circumstances. As I said in my piece of Tom Hanig, 0:13:39.600 --> 0:13:43.120 the leverage ratios were still quite low, which is a 0:13:43.240 --> 0:13:47.040 non risquaited measure of financial strength of the bank. That 0:13:47.240 --> 0:13:49.640 one went down of Goldman Sacks actually dipped down a 0:13:49.679 --> 0:13:53.640 three point five perc. That was under pre pandemic conditions. 0:13:54.120 --> 0:13:57.880 And we had the sensitivity analysis that tried to incorporate 0:13:58.520 --> 0:14:02.000 pandemic conditions, but they didn't give us the leverage ratios. 0:14:02.000 --> 0:14:05.160 They didn't give this firm specific results. So that's a 0:14:05.240 --> 0:14:07.439 long way of answering your question. We really don't know 0:14:08.000 --> 0:14:10.800 how safe these banks are, and if anything, I think 0:14:10.840 --> 0:14:13.839 they Fed well intentioned but just created more confusion and 0:14:14.160 --> 0:14:17.640 angst about this and it was not reassuring exercise. Has 0:14:17.679 --> 0:14:20.360 the President been set now, Sheila that the FED will 0:14:20.400 --> 0:14:23.280 sort of back stop everything? I mean, the financial crisis 0:14:23.360 --> 0:14:25.680 back stops were supposed to be a one off thing, 0:14:25.880 --> 0:14:28.120 but it does seem like if the FED will back 0:14:28.160 --> 0:14:32.040 stop anything these days, well they are they kind of 0:14:32.560 --> 0:14:36.160 you know, I I supported intervention in the corporate debt markets. 0:14:36.240 --> 0:14:39.360 We had so many companies that were just barely investment grade. 0:14:39.400 --> 0:14:41.640 I was worried if they dropped in a junk territory, 0:14:41.760 --> 0:14:45.120 they wouldn't be able to access credit markets anymore, debt 0:14:45.160 --> 0:14:47.880 markets anymore, and so you would have that would exacerbate 0:14:47.960 --> 0:14:51.680 the layoffs. So I thought, you know, there's a lot 0:14:51.760 --> 0:14:53.840 of problems with how we got to all those overlabored 0:14:53.920 --> 0:14:57.160 corporations to begin with, and some of them were took 0:14:57.200 --> 0:14:59.880 on far too much debt. But be dead as it may, 0:15:00.040 --> 0:15:02.440 I think it was the wise thing to do to intervene, 0:15:02.560 --> 0:15:04.360 but I was guess I was thinking more that they 0:15:04.360 --> 0:15:09.520 would do primary market interventions to help the companies as employers. 0:15:10.440 --> 0:15:13.840 The line's share of the intervention has been in the 0:15:13.880 --> 0:15:16.840 secondary market, which which also helps them issue new debt, 0:15:16.920 --> 0:15:20.800 but it really is more beneficial to investors. So it 0:15:21.000 --> 0:15:23.240 is concerning. And then they're not. I guess they just 0:15:23.400 --> 0:15:26.080 recently said maybe they're gonna taper off a bit now. 0:15:26.200 --> 0:15:28.600 But yeah, I just the last thing we wanted for 0:15:28.640 --> 0:15:31.240 everybody in the country to make too big to fail 0:15:31.720 --> 0:15:35.120 because Jpal pretty much said we're going to backstop these markets, 0:15:35.800 --> 0:15:39.920 and that had a tremendously a beneficial impact for opening 0:15:40.000 --> 0:15:43.480 up corporate debt markets. But again, some of these some 0:15:43.600 --> 0:15:46.480 of these companies probably do need to be restructured. They 0:15:46.520 --> 0:15:48.720 should be having a higher cost of capital, and to 0:15:49.120 --> 0:15:51.200 let this be, we should be trying to figure out 0:15:51.200 --> 0:15:53.080 a way to access this. Now, that was a temporary 0:15:53.920 --> 0:15:56.360 um jolt that we needed to provide to the corporate 0:15:56.400 --> 0:15:58.320 debt markets, but really they should be thinking about the 0:15:58.360 --> 0:16:01.800 excess strategy now case. She also bottom line, how concerned 0:16:01.880 --> 0:16:04.840 are you or how concerned should we be about our 0:16:04.920 --> 0:16:09.880 nation's banks right here? Well, I think we should be 0:16:10.040 --> 0:16:14.200 very worry. I think I think the leadership in Congress, 0:16:14.280 --> 0:16:18.080 instead of trying to you know, have election your deregulatory 0:16:18.160 --> 0:16:20.200 giveaways and pressure the FED to do that, I think 0:16:20.240 --> 0:16:23.280 the pressure should be on the regulators to hold firm 0:16:23.840 --> 0:16:27.080 suspend dividends. That's one good way to bolster bank balance sheets. 0:16:27.160 --> 0:16:30.320 Thirty billion dollars left after I insured banks in the 0:16:30.400 --> 0:16:33.160 first quarter that thirty billion dollars to take on their 0:16:33.200 --> 0:16:35.160 balance sheets. That would have supported about a half a 0:16:35.240 --> 0:16:39.440 three in dollars of expanding capacity and resiliency. So we 0:16:39.440 --> 0:16:42.480 should suspend dividends. We should be bolstering bank balance sheets, 0:16:43.240 --> 0:16:46.640 requiring new equity issue and if necessary, I mean, why 0:16:46.800 --> 0:16:49.760 take a chance. Nobody's going to criticize you for having 0:16:49.840 --> 0:16:52.800 ho much capital in the banking system, but there's going 0:16:52.840 --> 0:16:56.360 to be a lot of adverse fallout for politically and 0:16:56.440 --> 0:16:59.280 more importantly for the real economy if this pandemic crisis 0:16:59.360 --> 0:17:02.720 turned into a financial crisis because banks start failing. So 0:17:03.560 --> 0:17:06.280 suspend those dividends, look at maybe requiring that the issue 0:17:06.320 --> 0:17:10.439 equity um the weaker ones. And that's that's the direction 0:17:10.560 --> 0:17:12.760 I think that the FED should be going. And hopefully 0:17:13.040 --> 0:17:16.359 Congress and the Trump administration will stand down and let 0:17:16.400 --> 0:17:19.720 them do those hard decisions, or or even better, support 0:17:19.800 --> 0:17:22.359 them and encourage them to do so. Sheila, thanks so 0:17:22.440 --> 0:17:25.320 much for joining us. We really appreciate your perspective. Sheilla Bear, 0:17:25.720 --> 0:17:29.800 former chairman of the Federal Deposit Insurance Corporation, giving us 0:17:30.000 --> 0:17:34.560 her thoughts on the banks. All right, So COVID nineteen 0:17:34.600 --> 0:17:38.480 bankrupting American companies at a relentless pace. On boy is 0:17:38.560 --> 0:17:41.040 a hundred and eleven companies right now and expect to 0:17:41.080 --> 0:17:44.119 see more on and I b c Y today a 0:17:44.240 --> 0:17:47.040 great story with fantastic graphics. Let's bring in the author 0:17:47.200 --> 0:17:52.879 David Chilioso, who joins us now to talk about these retailers, airlines, restaurants, 0:17:53.040 --> 0:17:57.000 but also sports leagues and even an arch diocese or more. 0:17:57.400 --> 0:17:59.760 David just first of all gives rundown of the sort 0:17:59.800 --> 0:18:04.880 of variety of companies and entities that are declaring good morning, 0:18:05.040 --> 0:18:08.560 UM funny. It's it's really a cross section of corporate America. 0:18:08.720 --> 0:18:12.160 That's was the interesting part of this exercises their names 0:18:12.280 --> 0:18:15.840 like Hurts and J. C. Penney, even Brooks Brothers recently 0:18:16.000 --> 0:18:19.200 that you know, nearly everyone is familiar with. But in 0:18:19.480 --> 0:18:21.600 the research that we did for this story, we also 0:18:21.680 --> 0:18:25.440 found a lot of smaller companies whose stories have gone 0:18:25.560 --> 0:18:28.160 largely unnoticed. And as you said, there is a lot 0:18:28.240 --> 0:18:32.800 of retail restaurants um in there a lot of energy 0:18:33.320 --> 0:18:36.600 companies with the fall in order prices and entertainment spectors 0:18:36.640 --> 0:18:39.800 that are directly impacted by COVID. But then you find 0:18:39.840 --> 0:18:43.440 also a lot of companies that had financial issues from 0:18:43.520 --> 0:18:46.920 before UM and for for whom COVID was just like 0:18:47.040 --> 0:18:50.359 you know, the last the last drop UM. The archdiocese 0:18:50.440 --> 0:18:53.400 case that you that you brought about, you know, it's 0:18:53.440 --> 0:18:56.240 the New Orleans archdioceses. It's one of over twenty that 0:18:56.760 --> 0:18:59.280 you know, over the past several years of used bankruptcy 0:18:59.400 --> 0:19:02.639 as a way to settle sexual abuse allegations. UM. So 0:19:02.760 --> 0:19:06.280 they obviously had issues before, but COVID is just one 0:19:06.400 --> 0:19:10.080 more challenge that they faced. And in their core papers 0:19:10.160 --> 0:19:13.000 they said, you know, a drop in collections and offerings 0:19:13.520 --> 0:19:17.760 added to an already strained budget. So, David, you know, 0:19:17.920 --> 0:19:20.520 it's interesting. I think what we've heard just anecdotally about 0:19:20.520 --> 0:19:23.000 some of these bankruptcies in certain industries is that the 0:19:23.040 --> 0:19:25.639 ones that went in to this pandemic, the companies that 0:19:25.680 --> 0:19:29.639 went into this pandemic with a over LEVELALERGYT obviously the 0:19:29.720 --> 0:19:32.240 most at risk here. Are you finding that's still the 0:19:32.320 --> 0:19:36.000 case or are we finding companies that are relatively healthy 0:19:36.160 --> 0:19:39.320 in terms of capitalization they're also being pushed to the brink. 0:19:40.760 --> 0:19:44.240 I think we've found both. UM. There are definitely companies 0:19:44.320 --> 0:19:48.760 that were struggling with like heavy debt loads from before UM, 0:19:49.119 --> 0:19:52.280 and in some cases those were the results of leverage 0:19:52.320 --> 0:19:56.000 buyout UM. But in other cases, and especially with some 0:19:56.119 --> 0:19:59.760 of the smaller companies UM, the companies were doing fine. 0:20:00.000 --> 0:20:02.520 They weren't over levered. Uh and they just happened to 0:20:02.600 --> 0:20:07.080 be inspectors that are directly impacted by COVID. So, for example, 0:20:07.480 --> 0:20:10.680 UM and interviewed the owner of Bounce for Fund, which 0:20:10.720 --> 0:20:14.120 is a small company outside of Dallas that rents out 0:20:14.280 --> 0:20:18.240 water slides and and bounce houses. UM the company was 0:20:18.400 --> 0:20:22.119 on track for the record year um and business was 0:20:22.400 --> 0:20:27.960 was going exceptionally well. The problem is they had cancelations 0:20:28.160 --> 0:20:31.879 as soon as shutdown orders came in. UH and the owner, 0:20:32.440 --> 0:20:34.200 you know, he said he got a p P P 0:20:34.400 --> 0:20:36.119 loan that lasted for a couple of months, but he 0:20:36.280 --> 0:20:40.400 just didn't see a way for the business to continue. Uh, 0:20:40.600 --> 0:20:43.040 not over the next few months, but probably not even 0:20:43.119 --> 0:20:46.359 the next season. So the one I found particularly sad 0:20:46.880 --> 0:20:49.359 is the XFL. I mean, whether or not you're a 0:20:49.359 --> 0:20:52.040 fan of Vince Mygmahan and all that he's done, this 0:20:52.320 --> 0:20:55.600 was a way for football players who maybe weren't fully 0:20:55.640 --> 0:20:58.479 able to continue at the highest levels or didn't make 0:20:58.520 --> 0:21:00.639 it the highest levels to play right. It was a 0:21:00.760 --> 0:21:05.280 pro football league. It declared bankruptcy and fired about five 0:21:05.720 --> 0:21:10.159 football players. Alpha Entertainment was the company. There is there 0:21:10.200 --> 0:21:12.159 any chance that companies like this will come out of 0:21:12.200 --> 0:21:17.159 this maybe small or more streamlined, but still an entity absolutely. 0:21:17.240 --> 0:21:19.399 I mean, I guess it depends on the sector and 0:21:19.520 --> 0:21:23.240 whether there are you know, willing buyers for the company 0:21:23.480 --> 0:21:27.400 or it slim down version of the company or its assets. UM. 0:21:27.600 --> 0:21:30.720 But you know, filing for bankruptcy doesn't necessarily mean you're 0:21:30.800 --> 0:21:33.360 going out of business for good, So some of these 0:21:33.400 --> 0:21:36.879 companies may re emerge in a different forms. They may 0:21:36.960 --> 0:21:40.960 be bought by a competitor or an organization UM that 0:21:41.160 --> 0:21:44.280 is active in that in that space. UM. We have 0:21:44.520 --> 0:21:48.840 come across a few cases where the company is actually liquidating, 0:21:48.920 --> 0:21:52.359 so they're selling off all of their assets and shutting 0:21:52.400 --> 0:21:54.879 down for good. But I would say that's not the 0:21:55.000 --> 0:21:57.320 majority of cases that we have come across the farm. 0:21:57.680 --> 0:21:59.680 So that how bad is this going to get? Or 0:21:59.760 --> 0:22:02.640 how it could this get? Uh? Do you expect to see, 0:22:03.000 --> 0:22:05.679 you know, an acceleration of these bankruptcies over the next 0:22:05.720 --> 0:22:09.679 several months. It remains to be seen. And you if 0:22:09.720 --> 0:22:12.360 you look at the timeline, we definitely see a few 0:22:12.440 --> 0:22:15.120