Speaker 1: This is Bloomberg Wall Street Week. What's the state of
Speaker 1: corporate governance? The deficit is a real issue. To use
Speaker 1: economy continues to send mixed signals to the financial stories
Speaker 1: that cheap our world fed action to con concerns over
Speaker 1: dollar liquidity and encouraging China data the five hundred wealthiest
Speaker 1: people in the world. Through the eyes of the most
Speaker 1: influential voices Larry Summers, the former Treasury Secretary, star Ward CEO,
Speaker 1: Kevin Johnson sec Chairman J Clayton. Bloomberg Wall Street Week
Speaker 1: with David Weston from Bloomberg Radio. Another week of waiting
Speaker 1: for stimulus, for Brexit, and for COVID to peak. Welcome
Speaker 1: to Bloomberg Wall Street Week. I'm David Weston. Getting a
Speaker 1: vaccine that works in so short a time maybe nothing
Speaker 1: short of a miracle, but now that we're on the
Speaker 1: cusp of getting it, Katherine Baker, dean of the Harris
Speaker 1: School of Public Policy at the University of Chicago, says,
Speaker 1: we made in another miracle to get it distributed to
Speaker 1: those who need it. It would be a herculean task
Speaker 1: under any circumstances, but I think it's made all the
Speaker 1: more challenging by the fact that this is the same
Speaker 1: health care system that's going to have to be caring
Speaker 1: for lots and lots of people who still get COVID.
Speaker 1: We're gonna need to do all that we can to
Speaker 1: suppress transmission of the disease during this period and also
Speaker 1: to introduce new therapeutics. It's going to be months and
Speaker 1: months and months before everyone is vaccinated, and in that time, unfortunately,
Speaker 1: hundreds of thousands of people are going to be getting
Speaker 1: COVID at this point, two hundred thousand a day. What
Speaker 1: is that require of the system? I mean, is that money.
Speaker 1: There's talk about further money coming from Congress. Is it people?
Speaker 1: Do we have enough trained personnel to actually be administering
Speaker 1: this kind of system, As you say, it's vaccines plus
Speaker 1: your therapeutics plus dealing with people who have the disease. Yeah,
Speaker 1: I think it takes money, but I think you're right
Speaker 1: that people are probably going to be in the shortest
Speaker 1: supply right now. Our healthcare system is incredibly strained just
Speaker 1: caring for the people who have COVID, So adding on
Speaker 1: the layer of distribution of vaccine is going to be
Speaker 1: an added complication by unfortunately, the kind of trainting that's
Speaker 1: required to administer a vaccine is not nearly as intensive
Speaker 1: as the kind of training that's required to be qualified
Speaker 1: to care for somebody in the I see you. So
Speaker 1: the hope is that we're going to be reducing the
Speaker 1: number of people in the hospital at the same time
Speaker 1: that we're ramping up vaccine distribution. But we can't take
Speaker 1: our eyes off of suppressing transmission, the masking, the washing hands,
Speaker 1: and keeping distance. If we forget about those while we
Speaker 1: focus on vaccine administration, we're going to be in big problem.
Speaker 1: I also wonder whether, as happened last spring, frankly, some
Speaker 1: of the people who are most vulnerable, most hit, are
Speaker 1: the people with the least resources to deal with it.
Speaker 1: We're talking about low income people, we're talking about noority groups,
Speaker 1: particularly in urban centers, but also for that matter, Native Americans.
Speaker 1: We've had disproportionate problems. These people didn't have that great
Speaker 1: healthcare system supporting them to begin with, didn'y. This is
Speaker 1: compounding all sorts of disparities in our system. Of course,
Speaker 1: in healthcare, where the people with the most health vulnerabilities
Speaker 1: such as diet, abetes, high blood pressure, they're the most
Speaker 1: likely to get COVID and the least likely to have
Speaker 1: access to the healthcare resources. But that's only part of it.
Speaker 1: There are also the economic disparities that line up as well.
Speaker 1: People who are least likely to be able to do
Speaker 1: their jobs from their homes are also and that's more
Speaker 1: likely to be exposed to the disease. Are also the
Speaker 1: ones with the biggest disease burden and then the fewest
Speaker 1: economic resources to weather a recession that's been generated by
Speaker 1: the pandemics. So people who are losing their jobs, maybe
Speaker 1: losing their health insurance. This is all exacerbating disparities that
Speaker 1: line up for the most vulnerable populations. They may also
Speaker 1: be the people least likely to take a vaccine. There
Speaker 1: is some longstanding distrust of the health care system that
Speaker 1: has been well justified by past inequities that I think
Speaker 1: will make people differentially likely to take up a vaccine
Speaker 1: that's offered. What do you make of the team that
Speaker 1: president elected is now announced? So for the people, even
Speaker 1: now he's announced, have clearly demonstrated that they take the
Speaker 1: pandemic very seriously and that they're very concerned with addressing
Speaker 1: the inequities in the system. I think the concerted attention
Speaker 1: to the message that people receive about how to prevent transmission,
Speaker 1: the efficacy of a vaccine, as well as the focus
Speaker 1: on the economic disparities that have been exacerbated by the disease,
Speaker 1: is bound to be helpful for addressing some of the
Speaker 1: challenges that vulnerable populations have based over the last months.
Speaker 1: How big a difference can they make at this point, Well,
Speaker 1: I wish that somebody had a magic wand to make
Speaker 1: all of this go away, but that is clearly just
Speaker 1: not possible, and so I think we're in under the
Speaker 1: best of circumstances for many months more of wrestling with
Speaker 1: the pandemic. My hope is that by spring things will
Speaker 1: start to look better on the disease front, and that
Speaker 1: that will enable war economic activity. I also think all
Speaker 1: along the way to maximize economic activity, to keep businesses open,
Speaker 1: to keep people at work, paying attention to the disease
Speaker 1: helps with that. And so if we had been more
Speaker 1: consistently reducing transmission by having people keep social distance and
Speaker 1: wearing masks, we could have had a lot more economic
Speaker 1: activity without the surge that we're wrestling with right now.
Speaker 1: As an expert in this area, what worries you the
Speaker 1: most over the next two to three months. You said
Speaker 1: until we get to the spring. People are talking to
Speaker 1: two or three months. It's going to get worse before
Speaker 1: it gets better. What is the thing that worries you
Speaker 1: the very most. I think it is the fatigue with
Speaker 1: the pandemic and with the restrictions that we've all been
Speaker 1: talking about so much. I think it's real, and I
Speaker 1: think that people are letting their guard down, especially around
Speaker 1: the holidays as people focus on the coming vaccine. I
Speaker 1: worry that the spike that we're seeing is going to
Speaker 1: overwhelm the healthcare system and we're gonna end up with
Speaker 1: much more loss of life and well being that we
Speaker 1: otherwise would have had. We also don't know what the
Speaker 1: long term consequences of COVID are there. We're learning more
Speaker 1: about the long haulers, people who wrestle with u symptoms
Speaker 1: of the disease, or downstream consequences for months afterwards. It's
Speaker 1: been around for less than a year, so we don't
Speaker 1: know what two, three, four years out looks like. So
Speaker 1: the more we can reduce the spread of the disease now,
Speaker 1: not only the more economic activity and well being can
Speaker 1: we have now, but perhaps health consequences in the future
Speaker 1: can be a birth thanks to Dean Katherine Baker of
Speaker 1: the Harris School of Public Policy at the University of Chicago.
Speaker 1: Coming up, SEC Chairman j Clayton on what he's accomplished
Speaker 1: during his tenure and what is left to be done
Speaker 1: That's next on Wall Street Weight on Bloomberg. This is
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: Jay Clayton is nearing the end of his four years
Speaker 1: as Chairman of the SEC, leaving behind a record number
Speaker 1: of new regulations and over fourteen billion dollars in monetary remedies.
Speaker 1: One of his goals was to reinforce the attractiveness of
Speaker 1: the public markets in raising capital. So it's only fitting
Speaker 1: that even as he counts down the days until his departure,
Speaker 1: he saw this week the remarkable I d os of
Speaker 1: door Dash and then Airbnb, something we asked about even
Speaker 1: as they were happening. Well, David, in this in this job,
Speaker 1: you always have to be active, because our markets are
Speaker 1: ever active. If we're not modifying, updating, modernizing, as I
Speaker 1: like to say, our regulations, we're falling behind. And so
Speaker 1: you have to be activists. And what we've what we've
Speaker 1: tried to do is be activists for the benefit of
Speaker 1: our main street investors, really getting main street investors better products, cheaper,
Speaker 1: making sure they have better protections, and in the event
Speaker 1: that our main street investors unfortunately fall victim UH to fosters,
Speaker 1: getting them their money back as quickly as we can UM.
Speaker 1: And in addition, trying to modernize our our framework around
Speaker 1: the functioning of markets so that markets function efficiently UM
Speaker 1: in a modern age. And you know, yeah, you have
Speaker 1: to be you have to be engaged to do those
Speaker 1: things you've put down as one of your principles. That
Speaker 1: really a protection of the main street investor as you
Speaker 1: call them. You also sometimes say long term main street investor.
Speaker 1: You add that in there. What can the SEC do
Speaker 1: to address the issue of long term versus short term?
Speaker 1: It's a terrific question. It's a it's a question not
Speaker 1: just for the SEC, but but across our economy. UM. Look,
Speaker 1: markets thirst for information, the thirst for information by the
Speaker 1: micro second. So markets are always going to be focusing
Speaker 1: on short term changes. The culture of investing for the
Speaker 1: long term is something that we need to foster across
Speaker 1: are regulatory infrastructure. The SEC is is here to help
Speaker 1: with the way that we try to talk about trends
Speaker 1: on certainties, opportunities, getting companies to disclose that kind of
Speaker 1: forward looking information. I think disclosure of that type of
Speaker 1: forward looking information helps foster a long term attitude. But David,
Speaker 1: one thing I've learned in Washington is that is that
Speaker 1: this needs to be sort of a whole of government
Speaker 1: approach to more long term ism. Uh. For for investment,
Speaker 1: are you concerned at all about the growth of private
Speaker 1: h private capital as opposed to public capital, because there's
Speaker 1: an awful lot that's being done on the private side
Speaker 1: now that used to be done in publicly. Well, let
Speaker 1: me say this. People talk about that as a dichotomy.
Speaker 1: It's not a dichotomy. If you're a company that say,
Speaker 1: under pick a number, David, a hundred million, two hundred million,
Speaker 1: the private markets are really your only viable source of
Speaker 1: growth capity. So we need to preserve that private market
Speaker 1: and foster that private market. It is part of the
Speaker 1: dynam ism of America. It's part of innovation. Then you
Speaker 1: get above that two hundred million dollar valuation level, you
Speaker 1: get up into the types of companies that you were
Speaker 1: just talking about there, you do want to encourage those
Speaker 1: companies to become public companies for the reasons we talked
Speaker 1: about greater participation UM from the American retail investor, and
Speaker 1: and that's how I look at it. You, but we
Speaker 1: need vibrant private markets up through and well above that
Speaker 1: two hundred million dollar level. It's so contributes to the
Speaker 1: nimble nature of American capitalism as you pursued your goal
Speaker 1: of really protecting the long term mainstream investor. One thing
Speaker 1: you talked about was I think you referred to as
Speaker 1: corporate hygiene, one aspect of which is insider trading. And
Speaker 1: I have a very specific question because you had to
Speaker 1: deal with a COVID uh pandemic which none of us
Speaker 1: ever thought we'd anticipate, and affects your business as well.
Speaker 1: Have you seen instances of questions at least being raised
Speaker 1: about insiders perhaps selling securities and some of the companies
Speaker 1: that could benefit from vaccine or treatment. Sure, David, Look,
Speaker 1: when you have any time you have UM a new
Speaker 1: information environment, and COVID has certainly created a new information
Speaker 1: environment across many companies, including UM, most notably pharmaceutical companies.
Speaker 1: You have the much greater risk that there's an asymmetry
Speaker 1: of information between the company's insiders and the market more generally,
Speaker 1: and in those circumstances, you know, companies need to up
Speaker 1: their game. They need to up up their controls to
Speaker 1: ensure that no one is taking advantage of or I
Speaker 1: would say, even be perceived to be taking advantage of
Speaker 1: that kind of information asymmetry. And now we've been very
Speaker 1: vocal about this. Follow your internal procedures, you know, have
Speaker 1: your have your checks with your general counsel's office on
Speaker 1: whether it's appropriate to be selling stock. And then just
Speaker 1: ask yourself, does this look right or not? I mean, look,
Speaker 1: we're going to get through this, I believe, um, you know,
Speaker 1: and if you're in it for the long term. Um.
Speaker 1: Now I'm not telling people you have to, but think
Speaker 1: about stay for the long term. M John. I want
Speaker 1: to look forward here just a little bit and some
Speaker 1: things that will actually come up after you've left office,
Speaker 1: and one of them is in the area of E.
Speaker 1: S G. You've spoken out about that quite a few times, environmental, social,
Speaker 1: and government, saying they're not all the same sort of thing.
Speaker 1: You refer to Kevin Kenneth Arrow, your favorite economist in
Speaker 1: that connection. But I want to talk actually about governance,
Speaker 1: not the environmental part. There's a proposal now from Nasdaq
Speaker 1: basically to impose some diversity requirements on board. That's not
Speaker 1: gonna come up in your tenure. But if you were
Speaker 1: giving some private advice to your successor, would you be
Speaker 1: inclined to say that's a good idea. It would be
Speaker 1: inappropriate for me to comment on it order to bind
Speaker 1: in any way, UM, about my successor. But what I
Speaker 1: do want to say is, UM, this is this is
Speaker 1: an area that we we have decided at the Commission.
Speaker 1: We are focused on this, and we've actually focused on
Speaker 1: here at the Commission diversity, inclusion and opportunity and making
Speaker 1: sure that we're cognizant of it through all of our
Speaker 1: hiring decisions, UM, and the way we approached the marketplace. UM.
Speaker 1: And I believe that we've done a good job of
Speaker 1: shining a spotlight on the fact that in the asset
Speaker 1: management industry, UM. You know, uh, it's not as inclusive
Speaker 1: as it should be. Actually, the numbers are stock and
Speaker 1: we need to do a better job of having our
Speaker 1: asset management industry reflect UM. Uh, the diversity in our society.
Speaker 1: You sort of mentioned this obliquely just the moment, is
Speaker 1: it equally important for the leadership of the SEC, whoever
Speaker 1: it is, to also reflect America more broadly. Look, I
Speaker 1: think I think these types of things, uh, you you
Speaker 1: have to have them in your mind as you're making
Speaker 1: decisions that no one who's been in a in a
Speaker 1: diverse board room or a diverse decision making body um
Speaker 1: comes away with it without understanding that it adds um,
Speaker 1: it enhances decision making, it makes for better decisions, and
Speaker 1: so of course anybody who's forming that kind of body
Speaker 1: wants a diversity of experience and perspective. Mr Sherman, I'm
Speaker 1: gonna save the toughest one for last, I suspect, and
Speaker 1: that's money market underformed. Because we've heard a lot about
Speaker 1: short term funding. There's been various attempts to try to
Speaker 1: address it. We had it as a crisis. Really, I
Speaker 1: think it's fair to say this spring again with a
Speaker 1: FETE had to step in. We don't seem to have
Speaker 1: arms arms right. I talked with Dan to Roll, a
Speaker 1: former fit UH member, recently, and he said he thinks
Speaker 1: it's up to the SEC in the next round to
Speaker 1: do that. What could be done on the short term
Speaker 1: funding front, Well, you know, you as usual you you
Speaker 1: frame this in the right way, which is, you know,
Speaker 1: the short term funding markets and the money markets are
Speaker 1: inexplicably length. The short term funding markets um are different
Speaker 1: depending on the underlying instrument. So our our treasury market
Speaker 1: and there are money market treasury funds, is far different
Speaker 1: from the short term municipal paper market, which also has
Speaker 1: money money market funds. That was Jake Layton, Chairman of
Speaker 1: the SEC. Coming up, former House Majority Leader Eric Canter
Speaker 1: on how prospects of our recovery are affecting his business
Speaker 1: at Molis and Company. That's next on Wall Street Week
Speaker 1: on Bloomberg. This is Bloomberg Wall Street Week with David
Speaker 1: Weston from Bloomberg Radio. Those who thought that if anything
Speaker 1: so horrible as the election of a Democrat should occur,
Speaker 1: the bond market would panic and gold would soar turned
Speaker 1: out to be suffering from just another superstition. That was
Speaker 1: Lewis Ruckheiser on Wall Street Week back in just after
Speaker 1: Bill Clinton was elected president. Now we have a different
Speaker 1: Democrat elected to the presidency in a very different time.
Speaker 1: But once again reports of possible adverse effects on business
Speaker 1: or the markets appear to have been greatly exaggerated, as
Speaker 1: reported by a Republican former House Majority Leader Eric Canter,
Speaker 1: now vice chairman of Molus and Company. We had seen
Speaker 1: a dramatic resurgence of M ANDEG globally and has been
Speaker 1: across sectors. Uh, it is in our view and which
Speaker 1: has been dominant about what we're calling the power middle.
Speaker 1: You know, these are the mid marketing companies, the seven
Speaker 1: eight hundred million dollars to four or five billion dollar companies.
Speaker 1: Things are just very active. Obviously, there's a lot of
Speaker 1: activity amongst the sponsors, product equity community, and really the
Speaker 1: breadth of participation has been, as you suggest, beyond just
Speaker 1: the COVID winners, beyond just the digital and the tech arena.
Speaker 1: We're seeing it in the chemical arena. We're seeing in
Speaker 1: the energy utility arena, we're seeing in TMT. So it
Speaker 1: is broad participation. And I think the striking thing about
Speaker 1: what we're seeing is the timing um has been a
Speaker 1: huge factor in terms of the process, and what we're
Speaker 1: seeing is deals get to exclusivity a lot faster than
Speaker 1: what was otherwise the case. A lot of it is
Speaker 1: sort of brought about by the digital infusion of communications
Speaker 1: and the way people are interacting right now and I
Speaker 1: also think you can attribute some of the resurgence back
Speaker 1: to the cost of cattle and the cost of capital
Speaker 1: is extremely low. We saw the federal reserves step in
Speaker 1: immediately after the pandemic really hit UM. That's can that
Speaker 1: effect has continued to benefit. I think some of this activity.
Speaker 1: We are seeing a shift to U from stock back
Speaker 1: to cash because of this and many of the deals
Speaker 1: that we're involved with, and and on the upside for
Speaker 1: investors and certainly for our clients UM, what we're seeing
Speaker 1: is evaluations continue to go up, and evaluations that we're
Speaker 1: seeing are even exceeding those from pre COVID level. So
Speaker 1: all of this is sort of it's it's very interesting
Speaker 1: given the fact that we are in this unpressed and
Speaker 1: in one under year pandemic. And I don't I don't
Speaker 1: say this likely, but I do think that for many
Speaker 1: UM times seem to be very promising as people are
Speaker 1: looking beyond the pandemic, but there is a reality here.
Speaker 1: There are many small businesses that are really suffering. And
Speaker 1: I do think that the sort of aftermath of all
Speaker 1: this and maybe UM continued sort of collapse in certain
Speaker 1: sectors UH and the ability to go and restructure to
Speaker 1: try and allow folks to get back on their feet.
Speaker 1: Do you see any frothiness? I mean, as you say,
Speaker 1: the cost of capital is approaching zero's breaco matter, that's
Speaker 1: really great if you own an asset, if you want
Speaker 1: to buy an asset. Is there any sticker shock? There's
Speaker 1: no question valuations. And when I speak to my partners
Speaker 1: at Molis and Company who have been in the market's
Speaker 1: a lot longer than I have, and in these sectors
Speaker 1: that are surgeon um, you know, they do say, look,
Speaker 1: things are definitely very competitive in these deals out there.
Speaker 1: I think a lot of that has to do with
Speaker 1: the supply of capital. That they reduced costs of capital um.
Speaker 1: That's fueling the fact that money has got to go somewhere,
Speaker 1: and there's plenty of potential. I think that people see
Speaker 1: beyond just this pandemic you indicated earlier in the economy,
Speaker 1: the fact that vaccines, you know, are here, and I
Speaker 1: do think that light is going to be at the
Speaker 1: end of the tunnel. Let's hope that we can minimize
Speaker 1: the actual human casualty and focus on the act that
Speaker 1: we can see an economy going again, and hopefully the
Speaker 1: policymakers in Washington will be able to wrestle with this
Speaker 1: notion of getting some of those who have been laid
Speaker 1: off from work back into the workforce. I do think
Speaker 1: that that's gonna be a big challenge given the transformation
Speaker 1: that this pandemic has brought about economically. And finally, Eric,
Speaker 1: are you picking up in any concern in the c
Speaker 1: suite about what might happen with regulation or with taxation
Speaker 1: in a Biden administration with David, I think that's thought
Speaker 1: on and a lot of our conversations with our client
Speaker 1: have to do with the fact and what to expect
Speaker 1: in this next congress. Uh. Clearly there's been a side
Speaker 1: of relief on the taxation issue. Again, assuming the Republicans
Speaker 1: maintain control of the Senate, we'll see, I think, for
Speaker 1: the rest of the two years, no significant changes in
Speaker 1: taxes when most people expect them to go up. But
Speaker 1: there will be some regulatory actions undertaken by the Biden
Speaker 1: administration immediately, very analogous to those moves made by the
Speaker 1: Trump administration in seventeen the Obio administration nine, which basically
Speaker 1: will undo the prior administration's regulations. And we'll see a
Speaker 1: real shift left word in terms of things like the environment,
Speaker 1: the labor laws, financial institution oversight, and the rest. Very briefly,
Speaker 1: and do you have hopes for that that unicorn we've
Speaker 1: been searching for, which is of course infrastructure. Well, you know,
Speaker 1: I would hope that we could probably have some some
Speaker 1: effort to try and promote more public private partnerships because
Speaker 1: there's so much capital and sidelines waiting to invest in
Speaker 1: in some of the infrastructure that's needed just so desperately
Speaker 1: across our country. Again, I'll have to see whether there's
Speaker 1: going to be some agreement. Real questionnaire is whether the
Speaker 1: Congress will reinstate earmarks. If the Congress reinstates earmarks, I
Speaker 1: think that the potential for an infrastructure bill will go
Speaker 1: up pretty dramatically. That was Eric Cantor, vice chairman of
Speaker 1: Mullus in Company. Coming up, we wrap up the week
Speaker 1: as we always do, with our special contributor Larry Summers
Speaker 1: of Harvard. This is wal Free Week on Bloomberg. This
Speaker 1: is Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: We're gonna wrap up the week as we do every week,
Speaker 1: with our special contributor Larry Summers of Harvard. So, Larry,
Speaker 1: maybe the biggest story on Wall Street this week were
Speaker 1: these I p o S. We had door Dash first,
Speaker 1: then we have Airbnb come out. Airbnb ends up with
Speaker 1: a market kevil like a hundred billion dollars, just astronomical numbers.
Speaker 1: What is that telling us about our economy as well
Speaker 1: as our financial system. Look, the fact that we're creating
Speaker 1: these very valuable, terrific companies says something very special about
Speaker 1: American capitalism, and that's a strength. The process coveted shares
Speaker 1: of I p o S popping by seventy dollars to share,
Speaker 1: people getting rich very quick, flipping the stock. That's a travesty.
Speaker 1: That's why people don't like the morality of our financial
Speaker 1: services industry, and this kind of gilded age stuff in
Speaker 1: the midst of COVID. When children in our country are
Speaker 1: going hungry, when mothers aren't able to take care of
Speaker 1: their kids and support uh their families, this is a
Speaker 1: symptom of terrible excess. And I hope that those who
Speaker 1: support entrepreneurship will want to have a much better process
Speaker 1: than the process we have today. It's a very unseemly
Speaker 1: and ugly spectacle what we're watching, even if it is
Speaker 1: surrounding really impressive achievements in the form of companies like
Speaker 1: Airbnb and DoorDash. So so you make a really powerful point.
Speaker 1: I mean, there's a moral point, to be sure, but
Speaker 1: is there also an economic point? Because even as we're
Speaker 1: watching Congress take us up to something about fiscal cliff,
Speaker 1: here with millions of Americans potentially losing on one and
Speaker 1: other benefits, you have those people were worried about putting
Speaker 1: food in the table, brook on their heads, and then
Speaker 1: you have this enormous wealth being created. You reported the
Speaker 1: guilded age. What is that? To the sure there is David.
Speaker 1: I have enormous respect for uh Hank Paulson, and I
Speaker 1: think he served the country in really great ways. But
Speaker 1: when on the very day this was happening, he called
Speaker 1: for making strengthening America's financial services sector some kind of
Speaker 1: major priority, and he implicitly advocated cutting back people's social
Speaker 1: security benefits in the name of fiscal discipline and calling
Speaker 1: for entitlement UH controls and the rhetoric of long term
Speaker 1: fiscal discipline. I thought to myself, there, I cannot uh
Speaker 1: go that what we are witnessing is a kind of
Speaker 1: financial sector hyper trophy that I think is very dangerous
Speaker 1: and that really demands a lot of soul searching. Um Again,
Speaker 1: I have all four venture capital I have all four
Speaker 1: of the entrepreneurial companies. But selling something for seventy dollars
Speaker 1: and enabling people to flip it at a hundred and
Speaker 1: forty dollars, that I think is appalling. How much of
Speaker 1: this is a result of the federal reserves practic matter,
Speaker 1: because there's so much liquidity in the marketplace. I mean,
Speaker 1: certainly that's sustaining an awful lot of these evaluations. I
Speaker 1: think the questions you can ask about the long term valuations.
Speaker 1: But the fact that the stock was sold at sixty
Speaker 1: eight dollars and then immediately jumped to a hundred and
Speaker 1: forty dollars, making those who were lucky enough to get
Speaker 1: access billions of dollars. That error has nothing to do
Speaker 1: with liquidit. That has to do with the way our
Speaker 1: Wall Street is organized, and that ought to be a
Speaker 1: priority for somebody to clean up. Larry referred to the
Speaker 1: guilded age. One of the phenomenon guilded ages I recalled
Speaker 1: there was no income tax effect. They had to have
Speaker 1: been the constitution. I think, in order to have an
Speaker 1: income tax, we have an income tax now, but you
Speaker 1: actually have written about and now you've tweeted about the
Speaker 1: fact that we don't collect the taxes that were owed.
Speaker 1: Seven three dollars that is owed won't be collected over
Speaker 1: the next decade. It will be disproportionately among people at
Speaker 1: the high end. And I have to say it's a
Speaker 1: warped set of social values that lead us to wander
Speaker 1: at higher rates in African American areas of Mississippi where
Speaker 1: people get the e I T C, then in the
Speaker 1: richest zip codes on Park Avenue. The idea that you're
Speaker 1: more likely to get audited if you're collecting the earned
Speaker 1: income tax Credit then if you're collecting carried interest has
Speaker 1: something very badly wrong with it. My hope would be
Speaker 1: that the new administration will immediately reallocate resources within the
Speaker 1: i r S, which is its prerogative, that over time
Speaker 1: we will get the i r S back to some
Speaker 1: level of effort like the one it had a generation ago,
Speaker 1: so that we can keep up with these inequities. Look,
Speaker 1: this is not some kind of partisan progressive to uh.
Speaker 1: Charlie Rosatti, who was the commissioner of the i r S,
Speaker 1: who's a lifelong Republican. Uh. He is right there that
Speaker 1: it is scandalous the things we are not doing that
Speaker 1: could collect substantial uh taxes. I really hope this is
Speaker 1: something that Secretary yell At and her colleagues will move
Speaker 1: uh very aggressively on because it's a real injustice and
Speaker 1: it's a symbol of deeper and more profound injustices in
Speaker 1: our society. Well, and the piece that you wrote with
Speaker 1: in Society actually pointed out that it would be a
Speaker 1: smart investment. For a relatively modest increase in the U
Speaker 1: in the resources AVAILB of the I R S, we
Speaker 1: would get something like tenfolds. This is this is this
Speaker 1: is easy. If you have one more auditing hour directed
Speaker 1: at high income people, that will raise four thousand, five
Speaker 1: hundred dollars according to the I R S as estimates
Speaker 1: without taking account of deterrenth effects. And I can assure
Speaker 1: you that no I R S agent is paid anything
Speaker 1: and like four thousand, five hundred dollars an hour. Frankly,
Speaker 1: they're not paid anything like four hundred and fifty dollars
Speaker 1: um an hour. So this is a terrific investment. It
Speaker 1: is standing up for the law, the rule of law,
Speaker 1: and I hope some of the voices in our country
Speaker 1: that are concerned with getting tough on crime could think
Speaker 1: about these crimes among the others. Why haven't we done
Speaker 1: it already? Is this is this political? I mean, you
Speaker 1: were Secretary Treasury and then you were in the Obama
Speaker 1: White House. Was this a problem, Bann or is this
Speaker 1: a reasonably recent phenomenon? This is a longstanding This is
Speaker 1: a longstanding problem, and one that in my Treasury we
Speaker 1: worked very hard on our a whole variety of things,
Speaker 1: strengthening the I R S UH computer systems UH in particular,
Speaker 1: and that President Obama and his team pushed while I
Speaker 1: was in the White House. Part of it is a
Speaker 1: myopia on the part of the way we calculate budgets,
Speaker 1: where you don't get any credit for the revenue benefit
Speaker 1: from the investment, and so it looks just like a cost,
Speaker 1: even though it's a major revenue item. It's like trying
Speaker 1: to run McDonald's and not giving yourself any credit for
Speaker 1: revenue from selling UH milkshakes. Well, it'll cause you to
Speaker 1: stop selling milkshakes, but it doesn't really make any sense.
Speaker 1: It's that kind of score keeping error, And let's be honest, Uh,
Speaker 1: there's some people who don't want the tax law enforced
Speaker 1: because they don't want to pay what they owe and
Speaker 1: they don't want to face the possibility of being audited.
Speaker 1: And we've got too many congress people who see their
Speaker 1: job as working for those scoff laws. So it's wrap
Speaker 1: it up with a rapid fire around a summer, says,
Speaker 1: Let's start where it's beginning to see the economic team
Speaker 1: around president like Biden. You know, these people pick one
Speaker 1: that will turn out to be a real star. It's
Speaker 1: a great team. It's a great team across the board.
Speaker 1: I think my old colleague Briandese is gonna be much
Speaker 1: better known the year from now than he is today,
Speaker 1: and that he's going to be a driving force behind
Speaker 1: much more effective and much more green economic policies in
Speaker 1: our country. Okay, Brian Days will keep her eyes on him. Okay,
Speaker 1: give us a number now for us GDP growth. What
Speaker 1: do you think what the percentage growth will have, because
Speaker 1: right now it kind of things it's gonna be a
Speaker 1: rough first half of the year, then we'll come back,
Speaker 1: and all likely because of the vaccine. I think between
Speaker 1: the vaccine and between the fact that there's a lot
Speaker 1: of pent up savings from the money people couldn't spend.
Speaker 1: I'm an optimist. I think we're gonna have a good
Speaker 1: year in the five percent range. Oh good, that's that
Speaker 1: is good news. Okay, And bring it back to New
Speaker 1: York City right here or we are right now. When
Speaker 1: will be the date that the New York City economy
Speaker 1: returns to where it was before the pandemic. I'm not
Speaker 1: sure it's ever going to be quite the same, Between
Speaker 1: the blow to theater and restaurants, between the far larger
Speaker 1: number of employers who are going to have people working
Speaker 1: at home, between the risks people are going to attach
Speaker 1: to the subway system. I didn't the arcle be a
Speaker 1: great city, but maybe not with quite the same sense
Speaker 1: of dense energy that it had before. So I'm not
Speaker 1: sure we're gonna see anytime in the foreseeable future a
Speaker 1: return to life as it was, not as happy enough.
Speaker 1: But thank you so much that, as Summer says from
Speaker 1: the man himself, are especially when trimity Larry Summers, oh Harvard,
Speaker 1: thank you so much. Thanks David. That does it for
Speaker 1: this episode of Wall Street Week. I'm David Weston. This
Speaker 1: is Bloomberg. See you next week.