WEBVTT - Surveillance: Tariff Rollback Unlikely, Kudlow Says 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jai Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.320 Bloomberg dot Com, and of course on the Bloomberg. The 0:00:27.360 --> 0:00:30.040 fancy phrase for this would be shocked HISTORIESUS, and I 0:00:30.160 --> 0:00:33.239 say that in honor of Olivier Blanchard, who was with 0:00:33.400 --> 0:00:36.080 us earlier at this week. He and Laurence Summer with 0:00:36.159 --> 0:00:40.800 pathbreaking research on the effect of the duration of unemployment 0:00:40.840 --> 0:00:43.800 over time. But nowhere in the research, at least have 0:00:43.880 --> 0:00:46.240 I ever, would have could ever suggests that we've seen 0:00:46.240 --> 0:00:49.199 the abruptness that we see now. The abruptness is seen 0:00:49.280 --> 0:00:51.760 in the market. Await to the tape. The tape has 0:00:51.800 --> 0:00:54.000 been green, red, green, right now some red on the 0:00:54.440 --> 0:00:57.440 I scream with the vix forty nine point seven seven 0:00:57.440 --> 0:01:00.360 and yields come in and the tenant thirty years space 0:01:00.920 --> 0:01:03.960 with us that I really am pleased that Jeffrey Rosenberg 0:01:04.000 --> 0:01:06.000 could find time to join us today. He is with 0:01:06.080 --> 0:01:08.959 black Rock and he does a number of things over there, 0:01:09.000 --> 0:01:14.480 but mostly he writes acute summaries of the fixed income space. 0:01:14.560 --> 0:01:16.839 So we're gonna touch on jobs here a little bit, 0:01:17.319 --> 0:01:19.560 but and I really want to get to a discussion 0:01:19.560 --> 0:01:21.760 of what we've got and fixed income down we do this, 0:01:22.080 --> 0:01:24.560 We're thrilled to tell you without commercial interruption, to the 0:01:24.600 --> 0:01:27.200 top of the hour, Jeff, thank you so much for 0:01:27.280 --> 0:01:30.399 being with us. We are seeing an economists pull out 0:01:30.440 --> 0:01:35.560 their duration of this slowdown in the duration of slogging recovery. 0:01:36.200 --> 0:01:38.560 The V shaped recovery seems to have disappeared in the 0:01:38.640 --> 0:01:41.280 last forty eight hours. How do you fold that into 0:01:41.319 --> 0:01:43.640 fixed incomes? What does it mean, for example, for the 0:01:43.680 --> 0:01:49.800 benchmark tenure yield. Well, you know what we're debating is 0:01:49.800 --> 0:01:52.960 is you know, what is the pace? What is the 0:01:53.080 --> 0:01:57.240 shape of the recovery for the tenure yield? However, um 0:01:57.520 --> 0:02:00.360 it may be less about that. And what we seen 0:02:00.480 --> 0:02:04.920 here is just a historic structural change in the relationship 0:02:05.000 --> 0:02:08.760 between the federal reserve and fiscal policy. We are now 0:02:08.880 --> 0:02:13.680 operating in a different structural environment. Monetary policy is in 0:02:13.720 --> 0:02:17.440 the control of the fiscal authority. This is akin to 0:02:17.639 --> 0:02:20.440 wartime finance because we are fighting a war. We're fighting 0:02:20.440 --> 0:02:23.440 a war against the pandemic. And so when you think 0:02:23.440 --> 0:02:27.000 about how interest rates move, Um, you really have to 0:02:27.000 --> 0:02:29.720 stop thinking about, well, what is the shape of the 0:02:29.760 --> 0:02:32.960 economy and what is the outlook for inflation, because there's 0:02:33.000 --> 0:02:35.600 something much much more important that a lot of these 0:02:35.600 --> 0:02:39.160 headlines you've seen. The Fed, for example, this week, change 0:02:39.240 --> 0:02:43.880 the regular regulations around the supplementary leverage ratio. This is 0:02:43.960 --> 0:02:48.200 all about securing the interest rate that the government will 0:02:48.240 --> 0:02:53.040 pay to fund the massive fiscal policy response that we've 0:02:53.080 --> 0:02:56.880 seen to fight the pandemic. And so interest rates are 0:02:56.880 --> 0:02:59.280 going to be much more about fiscal policy than they 0:02:59.320 --> 0:03:02.600 are about monetary policy, the shape of the economic recovery, 0:03:02.600 --> 0:03:05.560 and the said reacting to the shape of the economic recovery, 0:03:05.600 --> 0:03:08.200 because it's gonna be a long time, as as Diane 0:03:08.240 --> 0:03:10.320 was saying, it's gonna be a long time before, you know, 0:03:10.400 --> 0:03:13.320 consumer behavior and confidence comes back. But it's also going 0:03:13.360 --> 0:03:16.200 to be a long time before we get back to 0:03:16.520 --> 0:03:19.800 the pre crisis setting a monetary policy and interest rate. 0:03:20.800 --> 0:03:25.680 So let's talk about the monetary policy currently underway. It 0:03:25.919 --> 0:03:28.720 is uh off the charts. I'm looking right now at 0:03:28.720 --> 0:03:32.639 the balance sheet growth for the Federal Reserve and it 0:03:32.639 --> 0:03:35.440 blows me away. I mean, in one week, six hundred 0:03:35.480 --> 0:03:38.000 billion dollar expansion in the balance sheet. More than a 0:03:38.040 --> 0:03:41.880 trillion dollars added to the Federal reserves holdings of assets 0:03:42.040 --> 0:03:44.400 in two weeks, and I'm wondering, we're looking at a 0:03:44.400 --> 0:03:47.840 five point eight trillion dollar balance sheet on the other 0:03:47.920 --> 0:03:50.920 side of this, What will the Federal Reserve look like, 0:03:51.040 --> 0:03:54.320 considering that it is expanding its power and its scope 0:03:54.400 --> 0:04:00.280 well beyond its historical role into fiscal stimulus. Well, again, 0:04:00.360 --> 0:04:04.000 I think we've got to be careful about history here 0:04:04.200 --> 0:04:08.960 and which history we're comparing to, because the operative history 0:04:08.960 --> 0:04:12.320 to compare is not the one we experienced. That's the 0:04:12.400 --> 0:04:18.479 modern FED. The poste Fed Treasury Accord establishes the modern 0:04:18.560 --> 0:04:21.599 said the independence of monetary policy. But again, if we 0:04:21.680 --> 0:04:25.600 take the analogy two we're at war against the pandemic 0:04:25.640 --> 0:04:29.560 and we've just shifted the structure into wartime finance, then 0:04:29.600 --> 0:04:32.760 the better historical analog is what did the Fed, what 0:04:32.839 --> 0:04:35.560 did its balance she'd look like during World War Two? 0:04:35.600 --> 0:04:38.960 And what we saw during that time period was explicit 0:04:39.080 --> 0:04:42.280 pegging of interest rates three eighths on the bills, two 0:04:42.320 --> 0:04:45.960 and a half on the thirty year, and the subordination 0:04:46.160 --> 0:04:49.360 of the Federal reserve institutions to the needs of the 0:04:49.360 --> 0:04:51.880 fiscal policy in that case, of course, fighting the war 0:04:51.960 --> 0:04:55.160 effort here very similar fighting the war effort in terms 0:04:55.160 --> 0:04:59.920 of providing the funding for these massive amounts of stimul 0:05:00.320 --> 0:05:03.080 and the Balance Street expansion that you're talking about, that 0:05:03.080 --> 0:05:05.919 that that barely scratches the circles, because we have the 0:05:05.920 --> 0:05:09.799 main street business lending facilities still to come. The funding 0:05:09.839 --> 0:05:12.040 of it the four and fifty four billion, but you 0:05:12.120 --> 0:05:14.599 leverage that up up to ten times, and you're talking 0:05:14.640 --> 0:05:18.120 about nearly an additional expansion of five trillion, and the 0:05:18.120 --> 0:05:22.960 Federal Reserve providing that funding into the real economy. Beautifully 0:05:22.960 --> 0:05:26.000 explained Jeffrey Rosenberg with this black Rock, folks, And at 0:05:26.000 --> 0:05:28.040 this time with the jobs report, we have to turn 0:05:28.080 --> 0:05:31.120 a little bit too a discussion for Global Wall Street. 0:05:31.120 --> 0:05:33.320 Will try to keep it in English for all of 0:05:33.360 --> 0:05:35.960 you out there not familiar with some of these arcane phrases. 0:05:36.000 --> 0:05:40.120 Jeff Rosenberg. I thought Ben Emmons was just brilliant yesterday 0:05:40.240 --> 0:05:44.800 writing a note on CMBs, the idea that millions can't 0:05:44.800 --> 0:05:48.840 pay their rent, landlords are left hanging, and all of 0:05:48.880 --> 0:05:52.800 a sudden it redounds over into commercial real estate and 0:05:52.880 --> 0:05:58.000 mortgage securitized ideas. Clos R and b s and stuff 0:05:58.040 --> 0:06:02.320 like that. How urgent is this on a Friday morning 0:06:02.360 --> 0:06:06.039 across America? Is there really going to be a collapsing 0:06:06.720 --> 0:06:10.840 in securitized instruments like we saw in two thousand eight, 0:06:11.200 --> 0:06:15.520 in two thousand nine. So so there's their differences in 0:06:15.680 --> 0:06:20.400 kind and and what we saw already, what we saw 0:06:20.400 --> 0:06:23.440 in the fixing markets in March is kind of the 0:06:23.480 --> 0:06:27.680 first wave of the impact of the pandemic. That was 0:06:27.720 --> 0:06:33.359 a liquidity orientation, that was a liquidity source of market 0:06:33.440 --> 0:06:36.840 drops in prices, and very simply quickly what happened was 0:06:36.880 --> 0:06:40.080 you had this massive demand for liquidity from the real 0:06:40.120 --> 0:06:43.440 economy into the financial economy as a result of the 0:06:43.440 --> 0:06:46.719 sudden stop in the economy at a size that the 0:06:46.720 --> 0:06:52.680 financial economy was never equipped to ever fulfill. The squeezing 0:06:52.839 --> 0:06:55.080 from the real economy of that liquidity out of the 0:06:55.080 --> 0:06:59.640 financial economy. That pivoted back and squeezed financial market liquidity, 0:06:59.680 --> 0:07:02.840 and you saw some large drops. Okay, So now the 0:07:02.880 --> 0:07:07.240 Federal Reserve intervenes, it plugs the whole of that liquidity 0:07:07.240 --> 0:07:09.360 with its balance sheet. That's where we are today. Your 0:07:09.400 --> 0:07:11.240 question is now, well, where do we go from here? 0:07:11.240 --> 0:07:14.600 When you look at the fundamentals of the daisy chain 0:07:15.320 --> 0:07:19.640 of the furbearances. Where does it stop right and where 0:07:19.680 --> 0:07:23.440 it stops is at the investor, at the holdings, at 0:07:23.440 --> 0:07:26.920 the bond level of the securitizations. And so this is 0:07:27.640 --> 0:07:32.000 now what we're considering. But it's about a temporary halt 0:07:32.680 --> 0:07:35.760 to payments as a result of this sudden stop. And 0:07:35.800 --> 0:07:39.920 so the difference in kind relative to nine is the 0:07:39.960 --> 0:07:44.160 two nine was about a fundamental collapse in the value 0:07:44.160 --> 0:07:48.800 of the underlying property. These properties might collapse fundamentally if 0:07:48.880 --> 0:07:53.920 there's a permanence to the halting of those payments, and 0:07:54.040 --> 0:07:57.440 certainly in some sectors of the economy, the structural changes 0:07:57.760 --> 0:08:01.200 that the pandemic brings change ages and how we behave 0:08:01.480 --> 0:08:05.920 may render some of those securities, valuations, and cash flows 0:08:05.960 --> 0:08:09.760 permanently impaired. But the larger broader issue here is this 0:08:09.840 --> 0:08:13.040 is a temporary stop at what we're trying to finance, 0:08:13.120 --> 0:08:16.480 and that earlier program that I just highlighted up the 0:08:16.520 --> 0:08:19.600 best four and a half five trillion dollars of lending 0:08:19.640 --> 0:08:22.920 capacity from the federal Reserve maybe needed to call to 0:08:22.960 --> 0:08:26.880 be called upon, or maybe even additional forms. There's legislation 0:08:26.920 --> 0:08:29.240 and discussion about how do you handle other areas of 0:08:29.240 --> 0:08:32.600 the securitization the mortgage market, How do we fund the 0:08:32.640 --> 0:08:37.000 temporary stop of these forbearances. It all leads to back 0:08:37.040 --> 0:08:40.440 on the federal fisk to provide that bridge. Jeff. Just 0:08:40.480 --> 0:08:42.520 by everything that I've read, the mortgage market is in 0:08:42.679 --> 0:08:44.840 much better shape heading into this, and it's not being 0:08:44.920 --> 0:08:47.480 fundamentally threatened as you're saying, in the same kind of 0:08:47.520 --> 0:08:50.280 way as it was in two thousand seven, two thousand eight, 0:08:50.320 --> 0:08:54.199 and two thousand nine. The corporate debt market, however, is 0:08:54.360 --> 0:08:58.320 and I would argue that the leverage ratios and companies 0:08:58.840 --> 0:09:02.520 have reached level that do exceed historical precedents. And we 0:09:02.559 --> 0:09:05.959 are currently seeing the fastest pace of downgrades by credit 0:09:06.040 --> 0:09:09.480 rating agencies in records going back to two thousand and two, 0:09:09.880 --> 0:09:13.400 and you're expecting default rates up to nine percent and beyond, 0:09:14.240 --> 0:09:17.880 with rating agencies downgrading their expectations going forward on a 0:09:18.000 --> 0:09:21.000 daily basis, how big of a hit is that going 0:09:21.040 --> 0:09:24.440 to be to the corporate credit sector, regardless of any 0:09:24.440 --> 0:09:31.160 fedback stop. Yeah, and and again let's a frame Mike answer. 0:09:31.320 --> 0:09:35.040 In those two phases. The first phase of what we've 0:09:35.040 --> 0:09:38.160 seen has been primarily liquidity phase. And you've seen the 0:09:39.160 --> 0:09:43.199 primary market credit facility, the secondary market credit facility helped 0:09:43.240 --> 0:09:46.920 to stabilize the market. But then you move from liquidity 0:09:46.960 --> 0:09:51.440 to solvency, from liquidity concerns to fundamental credit concerns. And 0:09:51.480 --> 0:09:55.199 so as we roll through to the earlier questions to Diane, 0:09:55.559 --> 0:09:57.880 what is the recession look like? What is the depth 0:09:57.960 --> 0:10:00.280 in the duration? Is it be? Is it you is 0:10:00.320 --> 0:10:04.080 at flat bottom? Now you're talking about real fundamental economic 0:10:04.360 --> 0:10:09.400 impact to which the Federal Reserve is not really designed 0:10:09.559 --> 0:10:13.040 and intended to solve those issues. And you came in 0:10:13.520 --> 0:10:17.080 as your highlighting. You came into this crisis with greater 0:10:17.160 --> 0:10:21.760 vulnerability because the debt stocks not so much historically unprecedented, 0:10:21.800 --> 0:10:25.000 but we're running at kind of very late cycle extended 0:10:25.080 --> 0:10:29.319 level of indebtedness, primarily because the burden of that debt, 0:10:29.320 --> 0:10:32.080 the interest rate burden was so low, but the interest 0:10:32.200 --> 0:10:34.480 rate burden is high when you have an environment of 0:10:34.640 --> 0:10:37.800 zero cash flow. So it's really about how quickly do 0:10:38.200 --> 0:10:42.360 the cashless the economy come back online. And certainly there's 0:10:42.360 --> 0:10:46.440 gonna be an elevated level where the most vulnerable, smaller 0:10:46.480 --> 0:10:50.560 companies less financial flexibility or the areas in the sectors 0:10:50.559 --> 0:10:53.560 of the market that are structurally impaired. Uh, see those 0:10:53.600 --> 0:10:57.079 restructurings in default. Jeffrey Rosenberg, thank you so much to 0:10:57.160 --> 0:11:03.840 black Reck. Greatly appreciate it today and fixed income Ellen 0:11:04.800 --> 0:11:08.120 too was for Morgan Standard today. Ellen, what did you 0:11:08.160 --> 0:11:10.360 glean from the report? The report is so much more 0:11:10.400 --> 0:11:13.320 than five or six numbers. Clearly a shock with seven 0:11:13.360 --> 0:11:16.880 hundred thousand uh non farm payroll loss. But what was 0:11:16.920 --> 0:11:21.000 the other data but that you saw beneath the headline data? Yeah, 0:11:21.040 --> 0:11:23.920 so I think, uh, you know, this is a time Tom, 0:11:23.920 --> 0:11:25.640 when you get these numbers right, that you want a 0:11:25.640 --> 0:11:27.480 grand stand and if ever there was a time that 0:11:27.559 --> 0:11:29.920 it's inappropriate the grand standards. Now, so we had an 0:11:30.040 --> 0:11:33.840 estimate of minus seven hundred thousand uh. And the underlying 0:11:33.960 --> 0:11:36.199 details here that this this had I know, I was 0:11:36.240 --> 0:11:40.760 one thousand off um Uh. The underlying details are that 0:11:40.840 --> 0:11:44.920 this this does not even capture the jobless claims that 0:11:45.080 --> 0:11:48.120 began jumping by the millions, right, that is for the 0:11:48.200 --> 0:11:51.560 April survey periods for the April reports. So how did 0:11:51.600 --> 0:11:54.200 we get this number right and and think that it 0:11:54.280 --> 0:11:57.720 was still going to be so deeply negative? It's about hiring, 0:11:57.840 --> 0:12:01.600 so we always uh we alluson forget the other side 0:12:01.720 --> 0:12:04.440 of this. It's net job games. How many were separated 0:12:04.480 --> 0:12:08.000 from employment? How many were hired? Uh, And it's the 0:12:08.120 --> 0:12:11.560 drop in hiring that drove this number. So think about it. 0:12:11.760 --> 0:12:14.800 March comes around, things are highly uncertain. You have a 0:12:14.840 --> 0:12:17.320 hundred open positions at your company, and you say let's 0:12:17.320 --> 0:12:19.960 hold off on filling those positions. That gets counted in 0:12:20.040 --> 0:12:23.199 these numbers. And you can imagine that that no one 0:12:23.280 --> 0:12:26.959 would have been hiring given the back drop in March 0:12:27.040 --> 0:12:30.000 and how uncertain it was. So that's I think an 0:12:30.000 --> 0:12:33.080 important point because it means in April we'll start drawing 0:12:33.080 --> 0:12:36.120 in not just the drop and hiring, but the firings. 0:12:36.200 --> 0:12:38.640 And so that's how you're going to get expectations for 0:12:39.000 --> 0:12:40.839 the job lost to be in the millions. It will 0:12:40.840 --> 0:12:44.400 make this minus seven hundred thousand look like small potatoes. 0:12:44.800 --> 0:12:48.120 It's gonna be on average out go ahead. Well, it's 0:12:48.120 --> 0:12:50.120 gonna be it's gonna be brutal going forward. And we 0:12:50.160 --> 0:12:52.640 know this by all by all accounts, And I just 0:12:52.679 --> 0:12:54.440 want to focus on the other side of this. And 0:12:54.480 --> 0:12:56.840 you were saying you do expect the recovery to take 0:12:56.920 --> 0:12:59.839 less time than back following the two thousand and eight 0:13:00.040 --> 0:13:04.640 thousand and nine crisis. How how realistic is that given 0:13:04.679 --> 0:13:08.480 the hit to this consumer psychology, to the idea of 0:13:08.600 --> 0:13:12.080 feeling like your reality has been ripped out from under you. 0:13:12.720 --> 0:13:16.080 I mean, could that prolonged things to the same type 0:13:16.120 --> 0:13:20.040 of length that we saw heading out of the last crisis. Yeah, 0:13:20.120 --> 0:13:23.160 So it's a it's a it's a really fair question. 0:13:23.400 --> 0:13:26.840 And uh, the answer is that we really don't know. 0:13:27.120 --> 0:13:30.720 And so from here the modeling takes over um and 0:13:30.760 --> 0:13:34.200 tells you that that as the economy gets back on track, um, 0:13:34.280 --> 0:13:36.800 we're gonna have millions in businesses that are just lost, 0:13:36.840 --> 0:13:39.600 that go under. But to the extent that we do 0:13:39.760 --> 0:13:43.000 start to poke our heads outdoors and activity does very 0:13:43.080 --> 0:13:45.360 slowly begin to pick up, that we slowly start to 0:13:45.360 --> 0:13:49.160 bring that unemployment rate down. How slowly it comes down 0:13:49.280 --> 0:13:52.240 will be the question of how slowing has demand. So 0:13:52.440 --> 0:13:57.240 one question is maybe households are out there spending again, Um, 0:13:57.320 --> 0:13:59.640 but the patterns have shifted, and that's where I think 0:13:59.679 --> 0:14:03.040 they're a significant amount of behavioral economics that will that 0:14:03.080 --> 0:14:06.120 will go into the study of this. I totally get it, 0:14:06.120 --> 0:14:08.440 and you know, I frankly I'm optimistic Ellen that we 0:14:08.480 --> 0:14:11.480 could see a redounding rebound when we're done with this virus. 0:14:11.520 --> 0:14:14.320 And let's be sure, folks, in the tragedy that we 0:14:14.360 --> 0:14:16.160 see here in New York City, we're gonna be done 0:14:16.200 --> 0:14:19.240 with this virus at some point. Ellen, you're completely wired 0:14:19.240 --> 0:14:22.720 in um Morgan Stanley, including with James Gorman, on the 0:14:22.800 --> 0:14:26.360 policy prescriptions right now. You know, John Farrell is going 0:14:26.400 --> 0:14:29.080 to talk to Lawrence Cudlow here in thirty forty minutes 0:14:29.160 --> 0:14:32.000 or whatever, and you know he's gonna say the usual drill. 0:14:32.520 --> 0:14:37.400 How urgent is it for Washington to shift from the 0:14:37.600 --> 0:14:41.840 institutionalized response to they get the money in their hands 0:14:42.080 --> 0:14:46.760 now response? Or even say there's a national rent for 0:14:46.880 --> 0:14:50.520 bearance mortgage for barns. Everybody's just gonna wait for X 0:14:50.640 --> 0:14:55.280 number of weeks or months. So Tom, I think that's 0:14:55.280 --> 0:14:57.680 where we're headed. I mean, I think those conversations are 0:14:57.720 --> 0:15:02.160 already being had in terms of you know, monetary and 0:15:02.320 --> 0:15:06.080 fiscal policy acting in concert. We've never seen this before, 0:15:06.520 --> 0:15:09.360 so acting in tandem, supporting each other. You know, this 0:15:09.520 --> 0:15:12.080 main street lending program from the said that we're waiting 0:15:12.120 --> 0:15:15.520 for details from that has meant to complement the Small 0:15:15.560 --> 0:15:20.400 Business Administration loan program. UH. You know, don't be surprised 0:15:20.520 --> 0:15:22.440 if the said also goes for something like a loan 0:15:22.520 --> 0:15:25.440 holiday program. You know, these are things that can be 0:15:25.560 --> 0:15:29.320 broadly UH. Have brought buy in from small businesses and 0:15:29.360 --> 0:15:32.520 from households in order to help be sure that when 0:15:32.520 --> 0:15:35.760 we come out of this, that those that went into 0:15:35.800 --> 0:15:38.760 this with good credit don't then have their credit ruined 0:15:38.840 --> 0:15:43.000 during this time, which would then linked in the recovery 0:15:43.000 --> 0:15:44.840 and it would start to look like something of a 0:15:44.880 --> 0:15:48.640 de leveraging cycle. I do believe that in the future 0:15:48.800 --> 0:15:51.680 that what we've learned from this is that in the future, 0:15:51.720 --> 0:15:54.960 monetary policy and fiscal policy acting in concert will now 0:15:55.200 --> 0:15:58.400 most likely be woven into the fabric of of response 0:15:58.600 --> 0:16:01.800 crisis response. And so I do think that this does 0:16:01.840 --> 0:16:05.600 set a precedent, uh for future downturn turns, and that's important. 0:16:06.080 --> 0:16:09.240 We're speaking with Ellen Zentner, Managing Director, chief US Economist 0:16:09.320 --> 0:16:12.920 and Morgan Stanley, who has nailed the jobless claims calls 0:16:13.000 --> 0:16:15.720 and nailed what we were expecting to see today, one 0:16:15.720 --> 0:16:18.240 of the very few who has consistently gotten it right. 0:16:18.280 --> 0:16:20.400 And Ellen, I want to continue with the idea that 0:16:20.440 --> 0:16:23.480 you were talking about that the economy coming out of 0:16:23.520 --> 0:16:26.280 this will look different than the one coming in, and 0:16:26.360 --> 0:16:29.440 that behavioral economics will play a role in this. Can 0:16:29.440 --> 0:16:32.080 you just humor us and give us a sense of 0:16:32.120 --> 0:16:35.800 how you expect certain industries to shift? What some of 0:16:35.840 --> 0:16:39.760 the beneficiaries maybe of this? Well? I think some of 0:16:39.760 --> 0:16:42.760 the things that we've been um thinking about is, you know, 0:16:42.800 --> 0:16:46.240 work from home arrangements. So businesses are probably going to 0:16:46.280 --> 0:16:49.920 have to revisit their business continuity plans and have some 0:16:50.000 --> 0:16:53.280 sort of rolling work from home arrangements or will be 0:16:53.400 --> 0:16:56.640 very slow to brain work work from home back into 0:16:56.680 --> 0:16:59.680 the office and have a greater share of permanent work 0:16:59.680 --> 0:17:03.000 from Now what does that mean for business centers? Uh? 0:17:03.120 --> 0:17:06.200 Do we get uh you know, a glove of office 0:17:06.240 --> 0:17:10.600 space uh in say a midtown Manhattan uh and other 0:17:11.040 --> 0:17:15.000 business concentration centers? Will we have enough services in more 0:17:15.040 --> 0:17:18.720 residential areas if more people are working from home going forward? 0:17:18.760 --> 0:17:20.600 So I think those are just some of the just 0:17:20.680 --> 0:17:23.080 a few of the ships that we're thinking about. What 0:17:23.200 --> 0:17:27.119 happens when people that never ordered delivery services uh, and 0:17:27.160 --> 0:17:32.120 particularly for food from full service restaurants before until now, uh, 0:17:32.160 --> 0:17:34.400 and now that they've tried it, they want to keep 0:17:34.400 --> 0:17:37.720 doing that or they used to go into the grocery store. 0:17:37.760 --> 0:17:40.119 Now they're having their groceries delivered and decide that they 0:17:40.160 --> 0:17:42.720 actually really like that. So in some ways it would 0:17:42.880 --> 0:17:46.919 accelerate some of those trends that have already been in place. Ellen, 0:17:47.000 --> 0:17:50.240 we look forward to your weekend report. Ellen Sentner with 0:17:50.280 --> 0:17:54.160 Morgan Stanley just extraordinary. Erica can't convey folks how difficult 0:17:54.240 --> 0:18:01.840 it is to game any non farm payroll statistic for 0:18:01.920 --> 0:18:03.879 the White House? Is you on the jobs report? Were 0:18:03.960 --> 0:18:07.119 joined live on bloom Blow TV and on Bloomberg Radio 0:18:07.240 --> 0:18:11.960 from the White House. National Economic Counsel Director Larry Cuddlo Larry, 0:18:11.960 --> 0:18:13.760 fantastic to have you with us. I just want to 0:18:13.760 --> 0:18:15.920 set the stage for our audience so they and understand 0:18:15.920 --> 0:18:17.359 where you and I are going in the next couple 0:18:17.400 --> 0:18:19.960 of minutes. We do have some technical difficulties which means 0:18:20.000 --> 0:18:21.520 there will be a little bit of a delay that 0:18:21.560 --> 0:18:22.760 so that you and I need to be a little 0:18:22.760 --> 0:18:25.720 bit careful about treading on each other. Let's start with 0:18:25.760 --> 0:18:29.119 the payrolls report and reflect on the huge plan that 0:18:29.160 --> 0:18:32.680 Washington pushed through last week. Larry, the numbers are dreadful, 0:18:32.880 --> 0:18:36.200 but this is a mandated stay at home government push, 0:18:36.240 --> 0:18:39.400 and we're trying to offset that with some big, big initiatives, 0:18:39.560 --> 0:18:41.760 and one of them is some help for small businesses 0:18:41.760 --> 0:18:44.280 with small business loans, and they're set to go forward 0:18:44.600 --> 0:18:48.480 be activated today for our audience, Larry, some much needed 0:18:48.480 --> 0:18:51.840 clarity is needed because it's unclear to us which banks 0:18:51.960 --> 0:18:55.520 are ready to deliver those loans today. Larry, do you 0:18:55.600 --> 0:18:57.520 have some clarity on that. Do you have a list 0:18:57.600 --> 0:18:59.600 of banks that are ready to do those loans as 0:18:59.600 --> 0:19:02.800 soon as a night? Well? I do my best, Jonathan, 0:19:02.880 --> 0:19:05.800 thank you, by the way, Um, in terms of the banks, 0:19:05.800 --> 0:19:08.240 I want to get to the broader subject also. But 0:19:08.440 --> 0:19:11.560 on the bank point, uh, today is the first day 0:19:11.560 --> 0:19:18.160 for applications, and any federally deposits, any federally insured depository 0:19:18.200 --> 0:19:21.800 institution is eligible. Now there's also a whole group of 0:19:21.920 --> 0:19:25.960 very significant group of s b A certified lenders. But 0:19:26.440 --> 0:19:31.000 any f D I C bank, any federally insured credit union, 0:19:31.680 --> 0:19:37.760 farm credit institution, all those are participating in this program, which, 0:19:37.840 --> 0:19:41.480 as you know, our loans to keep payrolls all right, 0:19:41.960 --> 0:19:44.520 payroll protection. I think this is one of the essential 0:19:44.560 --> 0:19:48.600 points of the economic assistance plans so we can get 0:19:48.640 --> 0:19:52.199 through this very difficult period. Regarding the impact of the 0:19:52.320 --> 0:19:56.199 of the virus. So any bank and it will be guaranteed, 0:19:56.320 --> 0:19:58.160 so the bank will have no problem. Is at one 0:19:58.200 --> 0:20:03.240 percent interest rate, h it will be payable, um in 0:20:03.320 --> 0:20:06.000 several months. Actually we've got quite a us at least 0:20:06.040 --> 0:20:09.520 six months. Um. Yeah, six months. Loan payments will be 0:20:09.560 --> 0:20:15.160 deferred for six months. No collateral or personal guarantees are required. Um. 0:20:15.240 --> 0:20:19.240 It should be very effective. But the thrust of it, Jonathan, 0:20:19.359 --> 0:20:22.560 is to deal with the issue of unemployment, which of 0:20:22.600 --> 0:20:27.359 course the surfaced today as we all expected, and payroll protection. 0:20:27.520 --> 0:20:31.960 Sev of the loan has to go to maintaining payrolls, 0:20:32.320 --> 0:20:34.800 and then the remainder of the loan will go to 0:20:34.960 --> 0:20:40.160 helping business meet their various expenses, rent leases, mortgage payments 0:20:40.200 --> 0:20:43.240 and so forth. It's on Larry, you're talking about eligibility. 0:20:43.359 --> 0:20:45.359 I'm talking about whether these banks are actually ready to 0:20:45.440 --> 0:20:47.800 deploy the cash. Are they ready as soon as today, 0:20:47.800 --> 0:20:49.680 because the reports that we're seeing is the money banks 0:20:49.680 --> 0:20:52.359 are not and perhaps won't be for several weeks. Do 0:20:52.440 --> 0:20:54.399 you have a list of banks that are ready to 0:20:54.480 --> 0:20:56.840 lend out this money today? I know who's eligible to 0:20:56.880 --> 0:21:01.160 do the work, but who's actually doing it today. Well, look, 0:21:01.359 --> 0:21:05.520 uh we I guess we have a different perspective. I'm 0:21:05.520 --> 0:21:06.960 not going to read you a list of banks. The 0:21:07.000 --> 0:21:10.959 list is gigantic, but they're ready to go. U banks 0:21:10.960 --> 0:21:14.080 have been talking to the Treasury Department, uh, the s 0:21:14.119 --> 0:21:17.480 b A, and Congress as this program was rolled out. 0:21:17.560 --> 0:21:21.680 So I I don't see any barriers and roadblocks, Jonathan. 0:21:21.720 --> 0:21:24.679 There may be some you know, small glitches as this 0:21:24.760 --> 0:21:27.720 thing goes out, but but they are ready. Secretary Manution, 0:21:27.920 --> 0:21:30.800 you know, had a big presser yesterday on this very point. 0:21:31.200 --> 0:21:34.000 So I don't think that's gonna be a problem. I mean, 0:21:34.040 --> 0:21:37.560 what matters here is that we've set aside three hundred 0:21:37.640 --> 0:21:43.040 and fifty billion dollars for paycheck protection. That's absolutely the 0:21:43.160 --> 0:21:47.480 key point, and the hope is that most folks, or 0:21:47.520 --> 0:21:53.119 at least many folks will stay affiliated, stay linked to 0:21:53.200 --> 0:21:58.280 their businesses during this very very difficult business interruptions and 0:21:58.359 --> 0:22:02.040 the economic contraction period and the virus. You want people now, 0:22:02.080 --> 0:22:04.600 you can have a good job without a good business. 0:22:04.640 --> 0:22:08.040 So we've also given a payroll tax holiday to the 0:22:08.080 --> 0:22:10.919 business side, and a number of other assistance plans. But 0:22:11.040 --> 0:22:15.000 on this one in particular, I think the key is 0:22:15.200 --> 0:22:18.200 trying to keep the workforce connected to the small business 0:22:18.280 --> 0:22:21.440 to the extent we can. And I think I think 0:22:21.480 --> 0:22:24.920 the bankers just look leading bankers. I'm not going to 0:22:25.080 --> 0:22:29.600 name names, but leading bankers. We're talking to Secretary Minution 0:22:29.760 --> 0:22:34.080 and others of us right up to the deadline yesterday, 0:22:34.359 --> 0:22:37.200 So I think they are ready to go. Larry, let's 0:22:37.200 --> 0:22:39.359 talk about the poll of lines that's available three in 0:22:39.680 --> 0:22:42.880 fifty billion dollars. I understand that it's first come, first served. 0:22:43.200 --> 0:22:45.960 How easy will it be to go ahead and top 0:22:46.040 --> 0:22:48.560 up that program if we drain the three inchin of 0:22:48.600 --> 0:22:51.000 fifty billion really quite quickly. There's gonna be massive demand 0:22:51.040 --> 0:22:53.040 for this. We know that people are gonna be working really, 0:22:53.080 --> 0:22:55.240 really hard. We have to understand there's going to be 0:22:55.240 --> 0:22:57.639 some technical difficulties along the way to deploy that cash. 0:22:57.880 --> 0:23:00.040 But as it drops down, Larry, are you confidently and 0:23:00.119 --> 0:23:03.360 pop it up very quickly? You know? I would say so, Jonathan, 0:23:03.400 --> 0:23:05.800 I don't want to get ahead of the story. Uh, 0:23:05.840 --> 0:23:08.600 I think there will be a very significant demand for it. 0:23:08.800 --> 0:23:13.160 I agree with your point, Um, but right now the trick, 0:23:13.200 --> 0:23:15.919 and this is true for all the assistance programs that 0:23:15.960 --> 0:23:19.439