1 00:00:00,160 --> 00:00:03,360 Speaker 1: This is Bloomberg Wall Street Week. What's the state of 2 00:00:03,400 --> 00:00:06,360 Speaker 1: corporate governance? The deficit is a real issue. The US 3 00:00:06,400 --> 00:00:09,760 Speaker 1: economy continues to send mixed signals to the financial stories 4 00:00:09,800 --> 00:00:12,719 Speaker 1: that cheap our world fed action to con concerns over 5 00:00:12,760 --> 00:00:16,240 Speaker 1: dollar liquidity and encouraging China data. The five hundred wealthiest 6 00:00:16,239 --> 00:00:18,360 Speaker 1: people in the world Through the eyes of the most 7 00:00:18,480 --> 00:00:22,520 Speaker 1: influential voices, Larry Summers, the former Treasury Secretary, star Ward CEO, 8 00:00:22,640 --> 00:00:26,360 Speaker 1: Kevin Johnson, sec Chairman j Clayton, Bloomberg wool Street Week 9 00:00:26,480 --> 00:00:30,319 Speaker 1: with David Weston from Bloomberg Radio. Earlier this week, I 10 00:00:30,360 --> 00:00:33,519 Speaker 1: got to speak with Brian moynihan, Chairman and CEO of 11 00:00:33,600 --> 00:00:36,840 Speaker 1: Bank of America. His bank has a special vantage point 12 00:00:36,840 --> 00:00:38,880 Speaker 1: in the state of the U s economy with its 13 00:00:38,880 --> 00:00:42,000 Speaker 1: extensive connections with consumers as well as the full range 14 00:00:42,000 --> 00:00:45,280 Speaker 1: of businesses small and large. I asked Brian what he's 15 00:00:45,280 --> 00:00:48,240 Speaker 1: seeing commercial side to take that first, that the lending 16 00:00:48,280 --> 00:00:51,680 Speaker 1: demand is down because the final demand is still shoring up, 17 00:00:51,720 --> 00:00:54,240 Speaker 1: and so you had this panic borrowing. So if you 18 00:00:54,280 --> 00:00:56,160 Speaker 1: came in through March and had his panic borrowing where 19 00:00:56,160 --> 00:00:58,320 Speaker 1: everything went way up and had has come back down 20 00:00:58,360 --> 00:01:00,480 Speaker 1: to that level and it's it's base lee back to 21 00:01:00,720 --> 00:01:03,040 Speaker 1: you know, sort of back to where it was before 22 00:01:03,040 --> 00:01:05,200 Speaker 1: the crisis, and even a little bit lower. And that 23 00:01:05,360 --> 00:01:07,880 Speaker 1: that's a good news. That means companies, you know, are 24 00:01:07,959 --> 00:01:10,480 Speaker 1: ready to go as they start to see opportunities and 25 00:01:10,520 --> 00:01:12,760 Speaker 1: the supplies change, start to work and stuff like that. 26 00:01:13,680 --> 00:01:16,960 Speaker 1: On the consumer side has been interesting where our basically 27 00:01:17,400 --> 00:01:20,039 Speaker 1: our research team is at the United States will be 28 00:01:20,040 --> 00:01:22,759 Speaker 1: down four percent for the year, uh and then next 29 00:01:22,840 --> 00:01:25,200 Speaker 1: year we up five percent or so. But but the 30 00:01:25,280 --> 00:01:27,440 Speaker 1: key is to think about a quarter by quarter. You 31 00:01:27,520 --> 00:01:30,560 Speaker 1: had a deep drop in economy last quarter, you're back 32 00:01:30,640 --> 00:01:33,800 Speaker 1: up to where five percent of the economy is back 33 00:01:33,959 --> 00:01:36,400 Speaker 1: basically restored on a quarterly basis, and then we're gonna 34 00:01:36,440 --> 00:01:39,759 Speaker 1: work out from there. But under behind that was a 35 00:01:39,840 --> 00:01:41,880 Speaker 1: one to two percent grows economy. Is the idea of 36 00:01:41,880 --> 00:01:45,360 Speaker 1: it recovering that last five percentage points. You know, it's 37 00:01:45,400 --> 00:01:47,280 Speaker 1: going to take a while of grinding through that. Now, 38 00:01:47,360 --> 00:01:51,200 Speaker 1: the reality is every estimate, including you heard from chair Pal, 39 00:01:51,680 --> 00:01:55,120 Speaker 1: has gotten better rather than worse. And why is that? 40 00:01:55,120 --> 00:01:58,680 Speaker 1: That's because consumer activities stays strong. So the physical stimulus, 41 00:01:58,960 --> 00:02:04,000 Speaker 1: the monetary stimulus, the programs that fed had between the government, 42 00:02:04,200 --> 00:02:07,640 Speaker 1: the government and administration, Congress between what the Fed did. 43 00:02:07,840 --> 00:02:10,519 Speaker 1: They basically you know, filled the whole for lack of 44 00:02:10,560 --> 00:02:13,120 Speaker 1: better term, to bring the economy back up to level. 45 00:02:13,440 --> 00:02:15,240 Speaker 1: And now we've got to let it work out from there, 46 00:02:15,320 --> 00:02:18,400 Speaker 1: and they probably need more stimulus for very defined places 47 00:02:18,440 --> 00:02:24,400 Speaker 1: that are still in difficulty restaurants, state, local governments, UH schools, 48 00:02:25,080 --> 00:02:28,520 Speaker 1: performing events, venues, some of the industries, airlines and other 49 00:02:28,600 --> 00:02:31,160 Speaker 1: things that you just can't have people do at the 50 00:02:31,200 --> 00:02:33,200 Speaker 1: rate we have before. But the rest of businesses, you know, 51 00:02:33,240 --> 00:02:36,079 Speaker 1: the dentist office is back busier than they've ever been. 52 00:02:36,160 --> 00:02:38,400 Speaker 1: So what do we see consumers spending us up year 53 00:02:38,440 --> 00:02:41,320 Speaker 1: every year? That's up yere over here, you know, and 54 00:02:41,320 --> 00:02:43,520 Speaker 1: and and then that's good news. And so we're seeing 55 00:02:43,560 --> 00:02:46,160 Speaker 1: it start to grow. Finally it was it was growing 56 00:02:46,200 --> 00:02:48,560 Speaker 1: a temper cent, it fell and it's worked us all 57 00:02:48,560 --> 00:02:50,440 Speaker 1: the ways back to even and we'll see it probably 58 00:02:50,440 --> 00:02:52,359 Speaker 1: start growing year every year. We're seeing a grow year 59 00:02:52,360 --> 00:02:53,920 Speaker 1: of year so far. In September we'll see how we 60 00:02:53,960 --> 00:02:55,920 Speaker 1: end up. So that's good news for the economy, meaning 61 00:02:55,919 --> 00:02:58,360 Speaker 1: that an amount of activity it goes on our economy 62 00:02:58,440 --> 00:03:01,959 Speaker 1: is restored. Brian, you said a chair pal said we're 63 00:03:02,000 --> 00:03:03,720 Speaker 1: better off right now that we thought we would be 64 00:03:03,760 --> 00:03:05,639 Speaker 1: at this point. But he also said, there's a lot 65 00:03:05,639 --> 00:03:07,400 Speaker 1: of uncertainty out there, and I'll name three of them. 66 00:03:07,400 --> 00:03:10,000 Speaker 1: You mentioned one fiscal stimulus. For the fiscal stimulus, how 67 00:03:10,040 --> 00:03:12,120 Speaker 1: badly do we need that? We have an election coming up? 68 00:03:12,240 --> 00:03:14,320 Speaker 1: And by the way, there's a coronavirus. We don't really 69 00:03:14,360 --> 00:03:18,400 Speaker 1: know about a vaccine. And I think we're effects this 70 00:03:18,440 --> 00:03:22,160 Speaker 1: is a healthcare crisis. And I set it back at Martin. 71 00:03:22,200 --> 00:03:25,000 Speaker 1: I said it even with you a few months ago 72 00:03:25,160 --> 00:03:28,120 Speaker 1: and our interview. People can't forget that this is a 73 00:03:28,120 --> 00:03:30,880 Speaker 1: healthcare crisis. And so what's happened to the less six 74 00:03:30,919 --> 00:03:33,240 Speaker 1: months in the healthcare crisis? Done on longer? That is, 75 00:03:33,480 --> 00:03:35,840 Speaker 1: you're seeing the potential for a vaccine, but importantly, you're 76 00:03:35,880 --> 00:03:39,080 Speaker 1: seeing better just behavior to keep the thing from spreading 77 00:03:39,120 --> 00:03:41,680 Speaker 1: us fast. So as we're seeing it in the Northeast, 78 00:03:41,680 --> 00:03:44,240 Speaker 1: for example, you've seen it crest over and its affection 79 00:03:44,320 --> 00:03:46,320 Speaker 1: rates are much much different than they were aling on. 80 00:03:46,440 --> 00:03:48,960 Speaker 1: And you're seeing that the affection rates fall off, that's 81 00:03:49,000 --> 00:03:51,360 Speaker 1: good news. And you're seeing the treatment regiments being different, 82 00:03:51,360 --> 00:03:54,400 Speaker 1: and you're also seeing because of the personal behavior people 83 00:03:54,480 --> 00:03:57,760 Speaker 1: higher risking staying even more careful that you know the 84 00:03:57,760 --> 00:04:01,200 Speaker 1: impact of the virus is still hugely hurtful to the 85 00:04:01,280 --> 00:04:04,080 Speaker 1: people get it, but not as bad outcomes. And so 86 00:04:04,160 --> 00:04:06,280 Speaker 1: that's all good news. As we wait for the for 87 00:04:06,320 --> 00:04:09,280 Speaker 1: the vaccine, which is sometime out there over the next 88 00:04:09,280 --> 00:04:12,000 Speaker 1: several months, and that would be good news too. But 89 00:04:12,080 --> 00:04:14,080 Speaker 1: until let's in everybody's arm, you're still going to have 90 00:04:14,120 --> 00:04:16,440 Speaker 1: the drag of, you know, will people to go back 91 00:04:16,440 --> 00:04:19,280 Speaker 1: to their behavior before. So that's that's the one thing 92 00:04:19,279 --> 00:04:22,159 Speaker 1: that's a healthcare crisis. And I saw what what we need, 93 00:04:22,200 --> 00:04:24,760 Speaker 1: I think is pretty straightforward. You need more stimulus for 94 00:04:24,800 --> 00:04:27,720 Speaker 1: the people. If you think about analogy, we're all on 95 00:04:27,720 --> 00:04:28,880 Speaker 1: one side of the the river, and we all had to 96 00:04:28,920 --> 00:04:31,760 Speaker 1: cross the river. We all needed a bridge, and so 97 00:04:32,000 --> 00:04:34,920 Speaker 1: a lot of people across the river. At certain segments economy, 98 00:04:35,320 --> 00:04:37,719 Speaker 1: you know, that are even doing better than they did 99 00:04:37,720 --> 00:04:40,560 Speaker 1: before the crisis. Other segments are doing just fine. Uh, 100 00:04:40,760 --> 00:04:43,760 Speaker 1: take the medical industries wholly back to normal now because 101 00:04:44,120 --> 00:04:46,120 Speaker 1: the hospital capacity doesn't need to be held aside for 102 00:04:46,160 --> 00:04:49,960 Speaker 1: the virus treatment. The housing industry is strong, the construction 103 00:04:50,000 --> 00:04:52,839 Speaker 1: industry is strong, so those are across the river. So 104 00:04:52,920 --> 00:04:55,320 Speaker 1: just let them go where you need help with restaurants 105 00:04:55,360 --> 00:04:58,080 Speaker 1: and things like that. And so the next round of 106 00:04:58,080 --> 00:05:00,760 Speaker 1: stimus how to be focused again on the areas that 107 00:05:00,839 --> 00:05:03,760 Speaker 1: need the most help. And so p PP the next round. 108 00:05:03,800 --> 00:05:05,760 Speaker 1: You know, it shouldn't be a second by the apple. 109 00:05:05,839 --> 00:05:07,880 Speaker 1: I think so for the certain companies because this went 110 00:05:07,920 --> 00:05:09,440 Speaker 1: on longer than we thought it was going to go on, 111 00:05:09,640 --> 00:05:11,040 Speaker 1: and so we need to help those companies. But I 112 00:05:11,080 --> 00:05:15,240 Speaker 1: think they need to look at small business unemployment benefits continue. 113 00:05:15,520 --> 00:05:18,200 Speaker 1: The three is just going in the system now, frankly 114 00:05:18,560 --> 00:05:20,360 Speaker 1: because it took it delay to get it through. They 115 00:05:20,640 --> 00:05:24,359 Speaker 1: continue some supplement to help people maintain their standing because 116 00:05:24,360 --> 00:05:26,520 Speaker 1: it's the right human thing to do. And then on 117 00:05:26,600 --> 00:05:29,720 Speaker 1: top of that, then focusing on these other industries are difficult. 118 00:05:30,520 --> 00:05:35,800 Speaker 1: STAN local government support, nonprofit performance venue support, you know, 119 00:05:35,880 --> 00:05:38,160 Speaker 1: things like that just need to be supported until we 120 00:05:38,200 --> 00:05:39,960 Speaker 1: get to the point where the usage of them can 121 00:05:40,000 --> 00:05:42,320 Speaker 1: come up, and they can and they can get back 122 00:05:42,320 --> 00:05:45,040 Speaker 1: to normal across that same bridge, the rest of many 123 00:05:45,040 --> 00:05:47,080 Speaker 1: people across that we got to help everyone else get 124 00:05:47,240 --> 00:05:49,560 Speaker 1: get across. So part of what it supported the economy 125 00:05:49,560 --> 00:05:51,719 Speaker 1: has been the Federal Reserve and particularly saying they're going 126 00:05:51,760 --> 00:05:53,720 Speaker 1: to keep the interest rates at zero or just over 127 00:05:53,839 --> 00:05:57,320 Speaker 1: zero until now we're told that's got effect Bank of 128 00:05:57,360 --> 00:06:00,599 Speaker 1: America and it's business, particularly lending business, is is really 129 00:06:00,600 --> 00:06:03,360 Speaker 1: affected by the yield curve. And so how is it 130 00:06:03,400 --> 00:06:05,359 Speaker 1: affecting you in terms of net interest income? Can you 131 00:06:05,400 --> 00:06:07,280 Speaker 1: make it up on volume or on fees or in 132 00:06:07,320 --> 00:06:09,920 Speaker 1: other pots of business? You can it just you just 133 00:06:10,000 --> 00:06:13,040 Speaker 1: have to grind through the down and to get to 134 00:06:13,080 --> 00:06:15,760 Speaker 1: the up. And right now this quarter, we we told 135 00:06:15,760 --> 00:06:18,080 Speaker 1: people to probably be at the low point, and it 136 00:06:18,160 --> 00:06:21,600 Speaker 1: seems to because that the interest rate environment accelerated and 137 00:06:21,880 --> 00:06:24,839 Speaker 1: defect pushed the interest rates down intentionally, and that's what 138 00:06:24,839 --> 00:06:26,960 Speaker 1: they're supposed to do, and they've done a good job. 139 00:06:27,040 --> 00:06:29,320 Speaker 1: So look at people always say, how are you going 140 00:06:29,360 --> 00:06:31,200 Speaker 1: to deal with this? I said, jeez, I've been CEO 141 00:06:31,320 --> 00:06:35,360 Speaker 1: since one since January first, two thousand and ten two now, 142 00:06:35,520 --> 00:06:37,560 Speaker 1: and we've only had a couple of years where rates 143 00:06:37,560 --> 00:06:39,400 Speaker 1: were above zero. So we know how to deal with 144 00:06:39,400 --> 00:06:41,440 Speaker 1: the Bank America. We'll go out and work on it. 145 00:06:41,800 --> 00:06:43,480 Speaker 1: That was part of my interview with Bank of America's 146 00:06:43,520 --> 00:06:45,840 Speaker 1: CEO of Brian Moynihan. Will have more on that next 147 00:06:45,880 --> 00:06:49,040 Speaker 1: week as part of the Bloomberg Equality Summit coming up. 148 00:06:49,279 --> 00:06:50,960 Speaker 1: Like all the rest of US, M and A has 149 00:06:51,000 --> 00:06:53,839 Speaker 1: been hit hard by the pandemic. You talked with ever 150 00:06:53,880 --> 00:06:57,520 Speaker 1: Corps founder and senior chairman Roger Altman about whether we 151 00:06:57,640 --> 00:07:00,680 Speaker 1: began to see a resurgence this week. This is Wall 152 00:07:00,680 --> 00:07:10,280 Speaker 1: Street Week on Bloomberg. This is Bloomberg Wall Street Week 153 00:07:10,520 --> 00:07:14,600 Speaker 1: with David Weston from Bloomberg Radio. The pandemic and the 154 00:07:14,680 --> 00:07:18,000 Speaker 1: economic shutdown it triggered have taken a toll on mergers 155 00:07:18,040 --> 00:07:21,480 Speaker 1: and acquisitions this year, with Bloomberg numbers showing them down 156 00:07:21,520 --> 00:07:24,600 Speaker 1: by more than a third. But this week we may 157 00:07:24,640 --> 00:07:27,760 Speaker 1: have seen some resurgence with a series of big deals 158 00:07:27,800 --> 00:07:32,120 Speaker 1: including Gilead and Video. Roger Altman, founder and senior chairman 159 00:07:32,120 --> 00:07:34,960 Speaker 1: of ever Corps, thinks this could mark the beginning of 160 00:07:35,000 --> 00:07:40,080 Speaker 1: a turnaround. I think we're seeing a recovery. Uh. In 161 00:07:40,360 --> 00:07:45,480 Speaker 1: M and A volume, as you say, on on any 162 00:07:45,560 --> 00:07:51,280 Speaker 1: trailing basis, six months, twelve months, it's down from levels 163 00:07:51,280 --> 00:07:54,480 Speaker 1: on a run rate basis. But now, as you can 164 00:07:54,520 --> 00:07:59,240 Speaker 1: see in recent days with the spade of announcements, UM, 165 00:07:59,280 --> 00:08:04,200 Speaker 1: I think a recovery is underway. Uh. I'm not smart 166 00:08:04,320 --> 00:08:11,760 Speaker 1: enough to know how fast this recovery will occur. But UM, 167 00:08:11,800 --> 00:08:18,280 Speaker 1: generally speaking, UM, the freeze that we saw after the 168 00:08:18,400 --> 00:08:23,119 Speaker 1: virus erupted the lockdowns took place beginning really in mid March. 169 00:08:24,000 --> 00:08:29,440 Speaker 1: Freeze on m and a activity which extended over about 170 00:08:29,480 --> 00:08:35,280 Speaker 1: three months, is now being succeeded by a real thought 171 00:08:36,440 --> 00:08:38,960 Speaker 1: and UM, I think it remains to be seen just 172 00:08:39,040 --> 00:08:42,800 Speaker 1: how robust this recovery will be. But we're definitely seeing 173 00:08:42,800 --> 00:08:46,640 Speaker 1: a recovery roger if it's fair to ask it this way, 174 00:08:46,760 --> 00:08:48,880 Speaker 1: to what extent? If there is a thought is it 175 00:08:49,080 --> 00:08:51,880 Speaker 1: offensive versus defensive? But then I mean, is this because 176 00:08:52,320 --> 00:08:56,280 Speaker 1: CEOs companies are seeing great new opportunities in growth that 177 00:08:56,320 --> 00:08:58,440 Speaker 1: they want to take advantage of, or is it because 178 00:08:58,480 --> 00:09:00,719 Speaker 1: some companies are under such stress us that they need 179 00:09:00,760 --> 00:09:07,360 Speaker 1: to consolidate. I think it's primarily offensive, at least when 180 00:09:07,440 --> 00:09:11,679 Speaker 1: it comes to large, large combinations. And if you look 181 00:09:11,679 --> 00:09:15,480 Speaker 1: at a series of big ones in recent days, Uh, 182 00:09:17,280 --> 00:09:21,600 Speaker 1: you know why is it Video interested in arm and 183 00:09:21,640 --> 00:09:25,680 Speaker 1: trying and doing that now or trying to subject regulatory approval? 184 00:09:26,280 --> 00:09:28,680 Speaker 1: And the answer is that soft Bank decided to sell 185 00:09:28,760 --> 00:09:33,360 Speaker 1: harm and Video sought opportunity. UM. I think the same 186 00:09:33,400 --> 00:09:40,120 Speaker 1: applies to H the group including oracle that is endeavoring 187 00:09:40,160 --> 00:09:44,440 Speaker 1: to buy TikTok or invest I should say in TikTok uh. 188 00:09:44,600 --> 00:09:47,560 Speaker 1: And I think the same applies to gill Lead in 189 00:09:47,640 --> 00:09:50,400 Speaker 1: this recent large announcement. So I think at least when 190 00:09:50,400 --> 00:09:53,480 Speaker 1: it comes to the really large ones, the more offensive 191 00:09:53,480 --> 00:09:56,880 Speaker 1: than they are defensive. To what extent is the Federal 192 00:09:56,960 --> 00:09:59,520 Speaker 1: Reserve helping this process or hurting it for that matter, 193 00:09:59,559 --> 00:10:01,920 Speaker 1: because we have money, that's if it's not free, it's 194 00:10:01,920 --> 00:10:07,000 Speaker 1: pretty darn close to free. Well, the Federal Reserve stepping 195 00:10:07,040 --> 00:10:12,080 Speaker 1: back a bit, the Federal Reserve deserves tremendous credit for 196 00:10:15,440 --> 00:10:20,760 Speaker 1: rescuing the financial system and the the global economy really 197 00:10:21,920 --> 00:10:27,760 Speaker 1: from a series of very dangerous moments following the eruption 198 00:10:27,800 --> 00:10:29,679 Speaker 1: of the virus and the lockdown. There were a few 199 00:10:29,760 --> 00:10:36,160 Speaker 1: days there when financial markets really we're not working, people 200 00:10:36,200 --> 00:10:42,079 Speaker 1: even having difficulty financing positions and treasury securities, and that 201 00:10:42,160 --> 00:10:45,240 Speaker 1: was very a very dangerous moment, or most set of moments, 202 00:10:46,000 --> 00:10:53,600 Speaker 1: and the Fed acting swiftly, broadly, and powerfully like it 203 00:10:53,679 --> 00:10:56,480 Speaker 1: did in two thousand two nine, but in this case 204 00:10:56,520 --> 00:11:02,680 Speaker 1: on a much bigger scale, um really played the central role. 205 00:11:02,880 --> 00:11:07,080 Speaker 1: Although fiscal policy also was important. The three different or 206 00:11:07,200 --> 00:11:12,240 Speaker 1: three and a half really different COVID Economic Relief bills UM. 207 00:11:12,280 --> 00:11:17,560 Speaker 1: The FED played the central role in UM, allowing the 208 00:11:17,600 --> 00:11:22,440 Speaker 1: financial markets to ease, and of course they're in really 209 00:11:22,480 --> 00:11:26,040 Speaker 1: good shape now, very good shape, and the economy to 210 00:11:26,080 --> 00:11:28,280 Speaker 1: begin to recover. So I take my hat off to 211 00:11:28,280 --> 00:11:31,640 Speaker 1: the Fed Sunday. It's on a straighte a job, not not, 212 00:11:32,040 --> 00:11:34,959 Speaker 1: it's not hindering anything. Without the FED, we'd be in a 213 00:11:34,920 --> 00:11:37,880 Speaker 1: a bad place. And I'm not commenting on M and A. 214 00:11:37,920 --> 00:11:40,080 Speaker 1: I'm talking about America. But at the same time, it's 215 00:11:40,080 --> 00:11:42,600 Speaker 1: it driven prices up, asset prices up. If you're looking 216 00:11:42,600 --> 00:11:47,480 Speaker 1: to buy something, is it more expensive? Well, before the 217 00:11:48,240 --> 00:11:52,800 Speaker 1: virus erupted, interest rates were very low by historical standards, 218 00:11:52,960 --> 00:11:58,520 Speaker 1: very low. So the impact of ultra low interest rates 219 00:11:58,520 --> 00:12:03,840 Speaker 1: an abundant credit ability availability on valuations, that impact was 220 00:12:03,880 --> 00:12:09,200 Speaker 1: in place before the intervention. I'm talking about UH. And 221 00:12:09,240 --> 00:12:11,760 Speaker 1: there's a lot of reasons why interest rates are very low. 222 00:12:11,800 --> 00:12:15,480 Speaker 1: The ft is not the only reason. After all, the 223 00:12:15,600 --> 00:12:18,240 Speaker 1: long term end of the market is not primarily influenced 224 00:12:18,240 --> 00:12:20,600 Speaker 1: by the Federal Reserve, the long term end of the 225 00:12:20,640 --> 00:12:23,640 Speaker 1: fixed income markets. But anyway, I don't that's not a 226 00:12:23,640 --> 00:12:26,440 Speaker 1: new development, Roger, What may be a new development is 227 00:12:26,480 --> 00:12:28,560 Speaker 1: the outcome of the election. We have an election coming 228 00:12:28,640 --> 00:12:32,640 Speaker 1: up and under fifty days now and two, I think 229 00:12:32,880 --> 00:12:36,520 Speaker 1: very different economic approaches set forth by the candidates. President Trump, 230 00:12:36,559 --> 00:12:38,320 Speaker 1: on the one hand, tends to be in favor of 231 00:12:38,679 --> 00:12:43,000 Speaker 1: hunting taxes even further, hasn't made much progress on big 232 00:12:43,040 --> 00:12:46,360 Speaker 1: spending such as infrastructure for vice present button in your hand. 233 00:12:46,480 --> 00:12:49,200 Speaker 1: Very different from very specific saying I'm going to spend 234 00:12:49,200 --> 00:12:50,960 Speaker 1: a lot of money, invest a lot of money, and 235 00:12:51,000 --> 00:12:53,280 Speaker 1: I'm going to increase some taxes for some people. As 236 00:12:53,280 --> 00:12:56,760 Speaker 1: a result, very different approaches to fiscal as you look 237 00:12:56,800 --> 00:12:58,920 Speaker 1: out at those two possibilities. Is there a fork in 238 00:12:58,960 --> 00:13:01,280 Speaker 1: the road for the business community, for the M and 239 00:13:01,320 --> 00:13:04,079 Speaker 1: A business, Well, let's put the M and A business aside, 240 00:13:04,120 --> 00:13:07,760 Speaker 1: because that's, you know, that's a very small part of 241 00:13:07,800 --> 00:13:13,240 Speaker 1: the equation you're addressing. UM. You know, the answer to 242 00:13:13,320 --> 00:13:17,960 Speaker 1: that question depends really on UM, what do you think? 243 00:13:18,040 --> 00:13:21,240 Speaker 1: What what condition you think this country is in today, 244 00:13:21,520 --> 00:13:25,679 Speaker 1: both economically and more broadly than that, and what do 245 00:13:25,720 --> 00:13:29,800 Speaker 1: you think it needs? UM? If you think the country 246 00:13:29,880 --> 00:13:33,080 Speaker 1: is doing great, and by the way, very few people 247 00:13:33,120 --> 00:13:38,880 Speaker 1: and surveys think that between seventy of Americans are saying 248 00:13:39,280 --> 00:13:42,000 Speaker 1: in survey after survey that the country is on the 249 00:13:42,080 --> 00:13:44,680 Speaker 1: quote wrong track unquote. But if you think the country 250 00:13:44,679 --> 00:13:49,240 Speaker 1: is doing great, then you presumably think that a continuation 251 00:13:49,320 --> 00:13:52,600 Speaker 1: of the past four years and all the policies of 252 00:13:52,640 --> 00:13:58,840 Speaker 1: all kinds, it's what it's what's called for. If you 253 00:13:58,840 --> 00:14:02,440 Speaker 1: think the country needs a different an approach, then you 254 00:14:02,520 --> 00:14:05,680 Speaker 1: don't think that that continuation that's what's called for, and 255 00:14:05,760 --> 00:14:08,240 Speaker 1: you think we need to change. So I think you 256 00:14:08,280 --> 00:14:10,680 Speaker 1: have to start from that. I don't think the country 257 00:14:10,760 --> 00:14:14,520 Speaker 1: is doing very well. I mean, there are eleven and 258 00:14:14,520 --> 00:14:16,560 Speaker 1: a half million people that had a job in February 259 00:14:16,559 --> 00:14:20,720 Speaker 1: that don't have a job today. Um. And if you 260 00:14:20,760 --> 00:14:25,600 Speaker 1: look at measures of socioeconomic health like the number of 261 00:14:25,680 --> 00:14:30,320 Speaker 1: Americans that are reporting food insecurity, uh, the number of 262 00:14:30,320 --> 00:14:36,720 Speaker 1: Americans that are at risk now of eviction or being evicted, uh, 263 00:14:36,800 --> 00:14:39,240 Speaker 1: and go on down through a series of metrics like that, 264 00:14:39,960 --> 00:14:42,600 Speaker 1: I don't think the country is doing very well. That 265 00:14:42,680 --> 00:14:45,920 Speaker 1: was Roger Altman, founder and senior chairman of ever COREPS, 266 00:14:46,520 --> 00:14:51,400 Speaker 1: coming up as climate change brings conflagration to California and Oregon, 267 00:14:51,640 --> 00:14:54,920 Speaker 1: one of Wall Street's most respected leaders says that there 268 00:14:54,960 --> 00:14:57,280 Speaker 1: are ways to use the markets to address one of 269 00:14:57,280 --> 00:15:00,200 Speaker 1: the most pressing issues of our time. For were a 270 00:15:00,240 --> 00:15:03,440 Speaker 1: head of Golden Sacks and Secretary of Treasury, Hank Folson. 271 00:15:04,120 --> 00:15:12,920 Speaker 1: That's next on Wall Street Week on Bloomberg. This is 272 00:15:12,960 --> 00:15:17,360 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 273 00:15:17,720 --> 00:15:21,360 Speaker 1: But let us not forget one fundamental issue which lies 274 00:15:21,520 --> 00:15:25,760 Speaker 1: at the heart of our problems over a period of years, 275 00:15:26,000 --> 00:15:31,680 Speaker 1: persistent in growing global imbalances fueled the dramatic increasing capital flows, 276 00:15:31,880 --> 00:15:36,000 Speaker 1: low interest rates, excessive risk taking in the global search 277 00:15:36,080 --> 00:15:41,320 Speaker 1: for return. These excesses cannot be attributed to any single nation. 278 00:15:42,000 --> 00:15:44,800 Speaker 1: That was Hank Poulson speaking as Treasury Secretary back at 279 00:15:44,800 --> 00:15:46,880 Speaker 1: the height of the financial crisis in two thousand eight. 280 00:15:47,360 --> 00:15:50,040 Speaker 1: Hank has now moved on to another crisis, one that 281 00:15:50,120 --> 00:15:53,200 Speaker 1: he sees his potentially much much greater than the downturn 282 00:15:53,280 --> 00:15:56,880 Speaker 1: twelve years ago. It's what he calls the dramatic extinction 283 00:15:56,960 --> 00:16:00,480 Speaker 1: episode we are experiencing and the threat to biot versity 284 00:16:00,680 --> 00:16:03,840 Speaker 1: on the planet. But given his experience, it's no surprise 285 00:16:03,920 --> 00:16:06,640 Speaker 1: that he thinks that the markets themselves can and should 286 00:16:06,880 --> 00:16:09,080 Speaker 1: be brought to bear and with the help of government 287 00:16:09,480 --> 00:16:14,240 Speaker 1: turn things around by making bio diversity itself investable. There's 288 00:16:14,240 --> 00:16:21,720 Speaker 1: an alarming destruction of biodiversity forests, wetlands, prairies around the world, 289 00:16:22,240 --> 00:16:27,400 Speaker 1: and as you said, a staggering extinction extinction episode which 290 00:16:27,480 --> 00:16:33,480 Speaker 1: I think has really grave, uh, you know, implications for 291 00:16:33,680 --> 00:16:37,200 Speaker 1: humanity in terms of prosperity and the well being of 292 00:16:37,240 --> 00:16:43,320 Speaker 1: people on Earth. Now, we're just in to put some 293 00:16:43,440 --> 00:16:49,360 Speaker 1: parameters around this extinction episode that it's playing out in 294 00:16:49,400 --> 00:16:54,160 Speaker 1: a thousand times the normal level, which means that rather 295 00:16:54,240 --> 00:16:57,480 Speaker 1: than losing one to five species a year, we're losing 296 00:16:57,520 --> 00:17:01,560 Speaker 1: a lot. And you know, if this cantinues unabated, we 297 00:17:01,760 --> 00:17:05,159 Speaker 1: lose half of the animals and plants on Earth by 298 00:17:05,240 --> 00:17:09,320 Speaker 1: mid century. And you know, this would have an enormous 299 00:17:09,840 --> 00:17:14,480 Speaker 1: economic impact. Now we're just in the early stage, and 300 00:17:14,880 --> 00:17:17,440 Speaker 1: you know, scientists and economists are on the very early 301 00:17:17,520 --> 00:17:21,640 Speaker 1: stage of being able to quantify and measure the magnitude 302 00:17:22,440 --> 00:17:27,399 Speaker 1: of what this means economically. But one thing we know 303 00:17:27,600 --> 00:17:30,800 Speaker 1: for sure, the best way to hedge against these risks 304 00:17:31,600 --> 00:17:35,680 Speaker 1: is to invest in nature. And the problem we've had 305 00:17:35,800 --> 00:17:42,720 Speaker 1: for some time is our economic systems don't really measure nature. 306 00:17:42,800 --> 00:17:47,879 Speaker 1: They don't account for the value of the services provided 307 00:17:47,920 --> 00:17:51,320 Speaker 1: by the natural world. And that's because we have market failures, 308 00:17:52,000 --> 00:17:55,640 Speaker 1: uh these services and nature is treated as a free 309 00:17:55,720 --> 00:18:01,719 Speaker 1: good and and so that means that that those who 310 00:18:01,800 --> 00:18:06,320 Speaker 1: invest in it aren't to conserve it, aren't appropriately rewarded, 311 00:18:06,760 --> 00:18:11,600 Speaker 1: those who destroy it aren't appropriately penalized. And you know, 312 00:18:11,760 --> 00:18:15,080 Speaker 1: so what what we have done here with with this study, 313 00:18:15,160 --> 00:18:19,560 Speaker 1: and this study was done in support of an advanced 314 00:18:19,600 --> 00:18:24,399 Speaker 1: to a Big U n Convention on Biodiversity, something that 315 00:18:24,480 --> 00:18:26,920 Speaker 1: takes place every ten years. This will be taking place 316 00:18:27,000 --> 00:18:30,919 Speaker 1: in China. And what we did, which I really believe, 317 00:18:31,960 --> 00:18:36,880 Speaker 1: you know, breaks new ground as we really drilled down 318 00:18:37,600 --> 00:18:43,960 Speaker 1: on the capital flows into conservation globally, really focused on 319 00:18:44,160 --> 00:18:48,800 Speaker 1: making the economic case for investing in nature, and then 320 00:18:49,600 --> 00:18:54,879 Speaker 1: we analyzed in great detail all of the different mechanisms 321 00:18:54,960 --> 00:18:59,000 Speaker 1: and policies that in tools that could be used to 322 00:19:00,119 --> 00:19:04,560 Speaker 1: to to close this scamp and to just lay it 323 00:19:04,640 --> 00:19:08,360 Speaker 1: out very quickly. There's some good news and some bad news. 324 00:19:08,520 --> 00:19:12,959 Speaker 1: The bad news is, as I said, we're losing biodiversity 325 00:19:13,000 --> 00:19:16,639 Speaker 1: an alarming rate, and the funds that need to be 326 00:19:16,760 --> 00:19:22,800 Speaker 1: put in too globally, need to be invested in conserving 327 00:19:23,080 --> 00:19:27,040 Speaker 1: nature are massive amounts. I'm sorry, just to be clear 328 00:19:27,040 --> 00:19:28,760 Speaker 1: for our audience. There's a report that's out from the 329 00:19:28,800 --> 00:19:31,359 Speaker 1: Pulse and Institutres along with the Nature Conservancy and the 330 00:19:31,400 --> 00:19:34,639 Speaker 1: Cornell Atkinson Center for Sustainability. It's called Financing Nature and 331 00:19:34,680 --> 00:19:37,399 Speaker 1: this is all laid out very clearly in that that report, 332 00:19:37,440 --> 00:19:39,560 Speaker 1: which I commend to everybody, comes up with that roughly 333 00:19:39,600 --> 00:19:42,679 Speaker 1: seven billion dollars a year. You talk about a hedge 334 00:19:42,760 --> 00:19:44,879 Speaker 1: as a practical matter, Can the markets take care of 335 00:19:45,000 --> 00:19:46,760 Speaker 1: this on their own? We now have a lot of 336 00:19:46,840 --> 00:19:48,679 Speaker 1: E s G funds. Black Rock's got a big one. 337 00:19:48,760 --> 00:19:51,320 Speaker 1: Various people have big golden sacks. By the way, you 338 00:19:51,359 --> 00:19:53,040 Speaker 1: may have heard of them, they have one as well. 339 00:19:53,440 --> 00:19:56,320 Speaker 1: Could the private sector by itself take care of this? No, 340 00:19:57,040 --> 00:19:59,480 Speaker 1: no way. A matter of fact, one of their findings, 341 00:20:00,480 --> 00:20:03,679 Speaker 1: you know, which is very clearly, was that the private 342 00:20:03,760 --> 00:20:09,159 Speaker 1: sector can do its part, but without change in government policies, 343 00:20:09,680 --> 00:20:12,040 Speaker 1: the private sector is not going to be able to 344 00:20:12,080 --> 00:20:14,680 Speaker 1: take care of it. And you know, one of the 345 00:20:14,800 --> 00:20:17,639 Speaker 1: things that's been clear to me over many years in 346 00:20:17,800 --> 00:20:22,240 Speaker 1: terms of advocating for conservation, you need to get government 347 00:20:22,280 --> 00:20:26,040 Speaker 1: to act, and government's not going to act without broad 348 00:20:26,160 --> 00:20:29,720 Speaker 1: public support, broad business support, and to do that, you 349 00:20:29,840 --> 00:20:33,960 Speaker 1: need to make the economic case. And the private sector 350 00:20:34,119 --> 00:20:36,800 Speaker 1: has a lot of money that can flow into this area. 351 00:20:37,280 --> 00:20:40,040 Speaker 1: What the government has to create the conditions for that 352 00:20:40,280 --> 00:20:43,520 Speaker 1: capital to come in as to create the proper incentives 353 00:20:43,640 --> 00:20:46,840 Speaker 1: and financing mechanisms that we lay out a number of 354 00:20:46,920 --> 00:20:51,200 Speaker 1: those mechanisms or change the subsidies. That was former Treasury 355 00:20:51,200 --> 00:20:54,960 Speaker 1: Secretary Tank Poulson coming up. We wrap up the week 356 00:20:55,040 --> 00:20:58,800 Speaker 1: with our special contributor Larry Summers. This is Wall Street 357 00:20:58,840 --> 00:21:08,600 Speaker 1: Week on Bloomberg. This is Bloomberg Wall Street Week with 358 00:21:08,800 --> 00:21:12,320 Speaker 1: David Weston from Bloomberg Radio. We now have our virtual 359 00:21:12,400 --> 00:21:14,679 Speaker 1: round table, if not one, but two contributors from Harvard, 360 00:21:14,760 --> 00:21:17,800 Speaker 1: former Treasury Secretary of the Treasury he is Larry Summers 361 00:21:17,880 --> 00:21:21,359 Speaker 1: and former Federal Reserve Board governor Dan Trillo. So, Larry, 362 00:21:21,440 --> 00:21:23,600 Speaker 1: let's start with you. Where the Fed was the big 363 00:21:23,680 --> 00:21:25,680 Speaker 1: news I guess of this week. They came out with 364 00:21:25,720 --> 00:21:27,880 Speaker 1: their decision. It sounded pretty much like what they said 365 00:21:27,920 --> 00:21:29,879 Speaker 1: they were going to do back in August with their 366 00:21:29,920 --> 00:21:32,440 Speaker 1: new strategic strategy, and yet the markets didn't like it 367 00:21:32,480 --> 00:21:34,120 Speaker 1: at all. What went wrong? It felt like a little 368 00:21:34,119 --> 00:21:36,879 Speaker 1: bit of temper tantrum. Markets liked it for a while, 369 00:21:37,040 --> 00:21:39,959 Speaker 1: then the markets didn't like it. Look, I don't think 370 00:21:40,040 --> 00:21:42,760 Speaker 1: this is that complicated. The FEDS got his foot on 371 00:21:42,880 --> 00:21:47,840 Speaker 1: the accelerator to the floor. The car's not going that fast. 372 00:21:48,840 --> 00:21:50,920 Speaker 1: The FED says it's gonna keep its foot on the 373 00:21:51,000 --> 00:21:55,840 Speaker 1: accelerator to the floor, but it also says that it's 374 00:21:55,880 --> 00:21:57,720 Speaker 1: going to be looking around in case there are any 375 00:21:57,760 --> 00:22:01,760 Speaker 1: accidents and be willing to change that. So people don't 376 00:22:01,800 --> 00:22:05,520 Speaker 1: feel that great about the situation when things are going 377 00:22:05,680 --> 00:22:09,720 Speaker 1: slowly with the accelerator to the floor. And that's kind 378 00:22:09,760 --> 00:22:14,840 Speaker 1: of the reality, uh that we're we're dealing with. I 379 00:22:14,920 --> 00:22:18,040 Speaker 1: don't think it's within the gift of the FED to 380 00:22:18,240 --> 00:22:22,000 Speaker 1: cause our nation to be competent in testing people to 381 00:22:22,160 --> 00:22:26,720 Speaker 1: control or control COVID. It's not within the gift of 382 00:22:26,840 --> 00:22:30,640 Speaker 1: the FED for people to find it in uh their 383 00:22:30,760 --> 00:22:37,280 Speaker 1: hearts to respect their fellow citizens regardless of race. And 384 00:22:37,480 --> 00:22:41,760 Speaker 1: it's not within the capacity of the FED to provide 385 00:22:41,840 --> 00:22:46,240 Speaker 1: the fiscal stimulus that the economy needs. So the FEDS 386 00:22:46,320 --> 00:22:51,720 Speaker 1: doing the best it can. But unfortunately we live in 387 00:22:51,800 --> 00:22:54,800 Speaker 1: a world where if it was ever true, it's not 388 00:22:55,119 --> 00:22:57,359 Speaker 1: right now that the Chairman of the FED is the 389 00:22:57,400 --> 00:23:01,120 Speaker 1: second most important person in Washington. So, Dan, you serve 390 00:23:01,200 --> 00:23:04,159 Speaker 1: in the photo reserve. Do they have to continue Larry's 391 00:23:04,160 --> 00:23:06,720 Speaker 1: analogy an effective speedometer, that is to say, in so 392 00:23:06,800 --> 00:23:08,560 Speaker 1: far as they're saying let's get the inflation rate up, 393 00:23:08,560 --> 00:23:10,800 Speaker 1: we're willing to tolerate more than to percent. Is there 394 00:23:10,800 --> 00:23:13,000 Speaker 1: a spendometer that really tells them more inflation is going? 395 00:23:13,200 --> 00:23:16,760 Speaker 1: Do they have a theory? Well, now there's no. There 396 00:23:16,800 --> 00:23:19,879 Speaker 1: hasn't been a working theory of inflation for central banks 397 00:23:19,920 --> 00:23:22,240 Speaker 1: for quite some time now. I mean the flattening of 398 00:23:22,320 --> 00:23:26,639 Speaker 1: Phillips curve, which occurred obviously some years ago, but the 399 00:23:26,760 --> 00:23:29,760 Speaker 1: central banks have finally caught up to seeing that, uh, 400 00:23:30,000 --> 00:23:33,200 Speaker 1: it is flat. Means that there's really no way to 401 00:23:33,320 --> 00:23:35,639 Speaker 1: be particularly predictive, and I think that's one of the 402 00:23:35,720 --> 00:23:40,119 Speaker 1: reasons why the Fed was unanimous and shifting to an 403 00:23:40,160 --> 00:23:44,480 Speaker 1: approach to monetary policy that looks more actual inflation rather 404 00:23:44,680 --> 00:23:50,760 Speaker 1: than predicted inflation based on expectations of where the unemployment 405 00:23:50,880 --> 00:23:53,040 Speaker 1: rate is going to be going. You know, David on 406 00:23:53,119 --> 00:23:55,200 Speaker 1: the on the question you asked Larry a moment ago, 407 00:23:55,920 --> 00:23:58,159 Speaker 1: I mean, I do, I do think that there's a 408 00:23:58,359 --> 00:24:01,520 Speaker 1: bunch of intramarket stuff going on here. I mean the 409 00:24:02,080 --> 00:24:04,399 Speaker 1: the if you look at what some of the market 410 00:24:04,440 --> 00:24:09,960 Speaker 1: commentary said, the disappointment came because share Powell didn't go 411 00:24:10,280 --> 00:24:14,480 Speaker 1: forward with giving some more indication of where quantitative easing 412 00:24:14,560 --> 00:24:18,000 Speaker 1: would be. That sounded to me like a situation in 413 00:24:18,119 --> 00:24:22,320 Speaker 1: which there were some financial actors who had positions which 414 00:24:22,320 --> 00:24:25,359 Speaker 1: would have benefited from a little more specificity on quey 415 00:24:25,480 --> 00:24:28,040 Speaker 1: than they got, but not very much to do with 416 00:24:28,160 --> 00:24:30,840 Speaker 1: the real economy. So Lawry, one of the things that 417 00:24:30,920 --> 00:24:33,159 Speaker 1: I'm interest trigued in is the extent of which in 418 00:24:33,840 --> 00:24:36,800 Speaker 1: basically the stock values have been driven by the discount factor. 419 00:24:36,840 --> 00:24:38,560 Speaker 1: When you get down to zero or close to zero, 420 00:24:39,000 --> 00:24:41,960 Speaker 1: theoretically the value stock could be infinite. Is that part 421 00:24:42,000 --> 00:24:43,680 Speaker 1: of what's going on with tech the people are figuring 422 00:24:43,720 --> 00:24:45,840 Speaker 1: out that part of the value that's put into the 423 00:24:45,880 --> 00:24:50,040 Speaker 1: stock attack is actually because the interest rates so low. Yeah, 424 00:24:50,040 --> 00:24:54,119 Speaker 1: I don't think there's any question that the longer live 425 00:24:54,240 --> 00:24:58,680 Speaker 1: to financial asset is, the more sensitivity is to interest rate. 426 00:24:59,440 --> 00:25:03,440 Speaker 1: And if you're a growth company, you're more you're a 427 00:25:03,560 --> 00:25:07,159 Speaker 1: longer lived asset in terms of your future profits and 428 00:25:07,240 --> 00:25:11,720 Speaker 1: your future cash flows than if you're a value company. 429 00:25:12,240 --> 00:25:16,160 Speaker 1: And that explains a lot about the cleavages that we've 430 00:25:16,200 --> 00:25:19,480 Speaker 1: seen in the stock market, along of course with the 431 00:25:19,600 --> 00:25:24,919 Speaker 1: fact that various kinds of UH I t UH companies 432 00:25:25,280 --> 00:25:30,200 Speaker 1: have seen their underlying businesses strengthened because people can't go 433 00:25:30,359 --> 00:25:36,080 Speaker 1: to stores and can't go outside. So I think that's 434 00:25:36,160 --> 00:25:39,960 Speaker 1: what's going on. But look, as UH Bob Rubin used 435 00:25:39,960 --> 00:25:43,840 Speaker 1: to say during the Clinton administration, UH, markets go up, 436 00:25:43,960 --> 00:25:48,280 Speaker 1: markets go down, and they're gonna be fluctuations, and they're 437 00:25:48,280 --> 00:25:52,000 Speaker 1: not gonna be obvious causes for them. So I think 438 00:25:52,040 --> 00:25:57,320 Speaker 1: it will be a mistake to be overinterpreting movements of 439 00:25:58,560 --> 00:26:02,960 Speaker 1: a few percent over over a few days. I think 440 00:26:03,000 --> 00:26:10,040 Speaker 1: the deep truth about our moment is UH that the 441 00:26:10,280 --> 00:26:14,720 Speaker 1: FED doesn't have the capacity to predict inflation with great 442 00:26:14,760 --> 00:26:20,240 Speaker 1: accuracy and doesn't have a capacity to control inflation with 443 00:26:20,920 --> 00:26:25,480 Speaker 1: any great efficacy, given that it can't move interest rates 444 00:26:25,680 --> 00:26:28,680 Speaker 1: down and there's not much reason to want to move 445 00:26:28,760 --> 00:26:33,840 Speaker 1: interest rates up, and so without the ability to predict 446 00:26:34,520 --> 00:26:39,480 Speaker 1: or control UH inflation, the FED becomes a bit more 447 00:26:39,560 --> 00:26:43,520 Speaker 1: of a side show. And for people who have relied 448 00:26:43,680 --> 00:26:47,119 Speaker 1: on the FED to make their life work UH and 449 00:26:47,240 --> 00:26:52,800 Speaker 1: to achieve what they want, that's a discouraging and perhaps 450 00:26:52,880 --> 00:26:58,600 Speaker 1: even somewhat dissolution disillusioning thing. It doesn't mean that the 451 00:26:58,680 --> 00:27:02,879 Speaker 1: FED isn't doing the right thing. Uh, there are underlying 452 00:27:03,040 --> 00:27:07,440 Speaker 1: there's some underlying uh realities here that shape the situation. 453 00:27:08,160 --> 00:27:11,719 Speaker 1: So dan thus far, the markets were fairly reassured by 454 00:27:11,760 --> 00:27:16,320 Speaker 1: the FED, essentially giving an underpinning to the markets. Is 455 00:27:16,359 --> 00:27:19,560 Speaker 1: there a risk here, a macropodential risk basically having almost 456 00:27:19,640 --> 00:27:24,200 Speaker 1: free money indefinitely, Well, presumably over time there will be, 457 00:27:25,080 --> 00:27:31,920 Speaker 1: which obviously counsels renewed attention to financial regulatory policy. You 458 00:27:32,000 --> 00:27:35,960 Speaker 1: may people, your viewers may have noticed that in the 459 00:27:36,080 --> 00:27:40,080 Speaker 1: FED statement of longer term strategy there was a paragraph 460 00:27:40,240 --> 00:27:45,719 Speaker 1: about potential financial stability concerns. How that translates into Fed action. 461 00:27:46,000 --> 00:27:50,280 Speaker 1: I think they have less, have less, substantially less clear. 462 00:27:50,440 --> 00:27:54,720 Speaker 1: I mean, they they're they're lean against using monetary policy 463 00:27:54,800 --> 00:28:00,080 Speaker 1: itself as a way of restraining um inflated assets, but 464 00:28:00,680 --> 00:28:03,399 Speaker 1: they haven't made clear what, if anything, they're prepared to 465 00:28:03,480 --> 00:28:07,000 Speaker 1: do with regulatory policy, which by the way, probably is 466 00:28:07,040 --> 00:28:11,440 Speaker 1: inadequate to deal with the leverage and short term financing 467 00:28:11,520 --> 00:28:14,439 Speaker 1: that hedge funds and reats and lots of other intermediaries 468 00:28:14,560 --> 00:28:18,720 Speaker 1: can can engage in David, I just wanted to add 469 00:28:18,800 --> 00:28:22,680 Speaker 1: something or maybe UM put things in a slightly different way, 470 00:28:22,720 --> 00:28:24,479 Speaker 1: and the Larry did a minute ago about the role 471 00:28:24,560 --> 00:28:27,120 Speaker 1: of the FED. I'm not sure i'd characterize it as 472 00:28:27,160 --> 00:28:30,840 Speaker 1: a sideshow quite because for a couple of reasons, one 473 00:28:31,440 --> 00:28:34,320 Speaker 1: as a liquidity provider and as a regulator, it's still 474 00:28:34,480 --> 00:28:39,200 Speaker 1: quite important. UM and I also agree with what Larry 475 00:28:39,320 --> 00:28:43,080 Speaker 1: was saying about the diminished capacity of the FED to 476 00:28:43,280 --> 00:28:47,240 Speaker 1: rectify the macro economic issues and problems that we've got. 477 00:28:47,880 --> 00:28:50,840 Speaker 1: But I actually would say I would say that I 478 00:28:51,000 --> 00:28:55,520 Speaker 1: think where the FED is almost inevitably headed is towards 479 00:28:55,720 --> 00:29:00,600 Speaker 1: more of a de facto partnership with the trash Department, 480 00:29:00,720 --> 00:29:04,880 Speaker 1: with the executive branch. That is, because of the dependence 481 00:29:05,000 --> 00:29:10,440 Speaker 1: on fiscal policy to move us out of the situation 482 00:29:10,520 --> 00:29:13,480 Speaker 1: we're going to be in for quite some time. Because 483 00:29:13,520 --> 00:29:16,640 Speaker 1: of the Fed's commitment to keeping rates low and thus 484 00:29:17,360 --> 00:29:19,640 Speaker 1: keeping raids at the long end, presumably at the long 485 00:29:19,760 --> 00:29:21,480 Speaker 1: end of the yield curve low, as well as at 486 00:29:21,520 --> 00:29:24,920 Speaker 1: the short end. Think you're gonna see and in almost 487 00:29:24,960 --> 00:29:27,880 Speaker 1: inevitably and increasing the amount of treasure of purchases of 488 00:29:27,920 --> 00:29:31,960 Speaker 1: treasuries over time, and you're going to see the need 489 00:29:32,400 --> 00:29:36,040 Speaker 1: for the FED to think more closely about how it 490 00:29:36,200 --> 00:29:40,160 Speaker 1: fits in with fiscal developments, deet issuance and under those 491 00:29:40,240 --> 00:29:45,200 Speaker 1: circumstances as those circumstancess have described them do not sound 492 00:29:45,440 --> 00:29:49,800 Speaker 1: like the independent FED that we have gotten used to 493 00:29:50,120 --> 00:29:54,440 Speaker 1: since the early fifties when Treasury and the FED agreed 494 00:29:54,520 --> 00:29:59,040 Speaker 1: to break apart the cooperative arrangement they had had during 495 00:29:59,080 --> 00:30:03,160 Speaker 1: the war. And Larry Listen, maybe truly independent FED is 496 00:30:03,200 --> 00:30:05,000 Speaker 1: not what we need right now. But whether it's dependent 497 00:30:05,120 --> 00:30:07,640 Speaker 1: or independent, this de facto partnership isn't going to get 498 00:30:07,720 --> 00:30:09,960 Speaker 1: us where we need to go with the economy overall. 499 00:30:10,320 --> 00:30:12,880 Speaker 1: I mean, long before the COVID nineteen hit, you were 500 00:30:12,880 --> 00:30:15,960 Speaker 1: talking about secular stagnation. We had very modest growth. We 501 00:30:16,040 --> 00:30:18,640 Speaker 1: did not have productivity growth. What do we need to 502 00:30:18,760 --> 00:30:21,680 Speaker 1: get productivity growth going in and real fundamental growth going 503 00:30:21,720 --> 00:30:26,640 Speaker 1: in the economy? Dan and I are basically in agreement. 504 00:30:27,320 --> 00:30:29,520 Speaker 1: You know, some of this has been in the making 505 00:30:29,640 --> 00:30:32,600 Speaker 1: for a long time. If you thought about the early 506 00:30:32,760 --> 00:30:37,640 Speaker 1: financial crisis years, every month or every two months, the 507 00:30:37,880 --> 00:30:40,440 Speaker 1: FED was proudly announcing that it was going to do 508 00:30:40,640 --> 00:30:44,160 Speaker 1: quantitative easing, where it was going to issue short term 509 00:30:44,240 --> 00:30:47,760 Speaker 1: debt and buy long term debt in order to stimulate 510 00:30:47,840 --> 00:30:52,080 Speaker 1: the economy, and the Treasury Department every month was announcing 511 00:30:52,160 --> 00:30:54,400 Speaker 1: that it was going to issue more long term debt 512 00:30:54,840 --> 00:30:57,880 Speaker 1: to lock in low rates for the benefit of taxpayers, 513 00:30:58,400 --> 00:31:01,640 Speaker 1: and basically they were trading at each other and making 514 00:31:01,680 --> 00:31:05,280 Speaker 1: the broker dealers rich. So the idea that we're gonna 515 00:31:05,360 --> 00:31:11,480 Speaker 1: have more coordination I think is overdue and welcome, and 516 00:31:11,720 --> 00:31:15,160 Speaker 1: at a moment when we've got inflation below what we want, 517 00:31:15,760 --> 00:31:22,760 Speaker 1: I'm not deeply worried about some sacred independence of of 518 00:31:22,960 --> 00:31:28,160 Speaker 1: the FED at all. I also agree with uh Dan 519 00:31:28,880 --> 00:31:32,640 Speaker 1: that perhaps I should have said conventional monetary policy is 520 00:31:32,720 --> 00:31:37,720 Speaker 1: a sideshow, because there certainly are important regulatory decisions, and 521 00:31:38,360 --> 00:31:41,640 Speaker 1: if we have another panic, the FED will certainly have 522 00:31:41,800 --> 00:31:46,280 Speaker 1: a crucial role in dealing with UH that panic. I 523 00:31:46,320 --> 00:31:52,160 Speaker 1: think with respect to regulation, David um, the problem always 524 00:31:52,360 --> 00:31:57,640 Speaker 1: is that we realize we should have regulated when we're 525 00:31:57,720 --> 00:32:00,760 Speaker 1: in a mess and we need more are credit, not 526 00:32:01,040 --> 00:32:08,640 Speaker 1: less credit, and regulation will slow UH the UH flow 527 00:32:09,320 --> 00:32:13,360 Speaker 1: of credit. That was Larry Summers of Harvard that does it. 528 00:32:13,480 --> 00:32:16,600 Speaker 1: For this special edition of Wall Street Week, I'm David Weston. 529 00:32:16,800 --> 00:32:18,800 Speaker 1: This is Gloomberg see you next week.