1 00:00:00,520 --> 00:00:03,720 Speaker 1: This is Bloomberg Wall Street Week. We turn our attention 2 00:00:03,880 --> 00:00:08,320 Speaker 1: to the markets this week. USCPI nevers reinforcing concerns about inflation, 3 00:00:08,440 --> 00:00:11,559 Speaker 1: the financial stories that cheap our world, a really different 4 00:00:11,600 --> 00:00:14,520 Speaker 1: reaction to mark its more indications of just how hot 5 00:00:14,560 --> 00:00:16,959 Speaker 1: the US economy really is. Through the eyes of the 6 00:00:17,000 --> 00:00:21,400 Speaker 1: most influential voices Larry Summers, the former Treachery Secretary, Katherine Keening, 7 00:00:21,560 --> 00:00:24,639 Speaker 1: CEO of n y Mon Sam's l Sherman N, founder 8 00:00:24,640 --> 00:00:27,920 Speaker 1: of Equatic Group Investment in Bloomberg Wall Street Week with 9 00:00:28,160 --> 00:00:32,120 Speaker 1: David Weston from Bloomberg Radio, walking and chewing gum at 10 00:00:32,200 --> 00:00:34,920 Speaker 1: the same time, as central banks address the need for 11 00:00:35,000 --> 00:00:39,479 Speaker 1: financial stability without giving up their battle with inflation. Welcome 12 00:00:39,479 --> 00:00:42,920 Speaker 1: to Bloomberg Wall Street Week Time David Weston. This week's 13 00:00:42,920 --> 00:00:45,600 Speaker 1: special contribute to Larry Summers takes us through the FED 14 00:00:45,680 --> 00:00:47,960 Speaker 1: decision and what the banking crisis could mean for the 15 00:00:48,040 --> 00:00:54,800 Speaker 1: real economy. They need to recognize that regulation lost its 16 00:00:54,880 --> 00:00:59,760 Speaker 1: way over the last year or two. A ruined Sundarajan 17 00:01:00,240 --> 00:01:04,040 Speaker 1: NYU sort out the reel from the fanciful and chat GPT. 18 00:01:04,480 --> 00:01:06,920 Speaker 1: The more people who use the system early on, the 19 00:01:07,000 --> 00:01:10,120 Speaker 1: better it becomes and a special Wall Street Week roundtable 20 00:01:10,160 --> 00:01:13,720 Speaker 1: on the banking breakdown, with Larry Summers joining former FED 21 00:01:13,800 --> 00:01:18,240 Speaker 1: Governor Dan Trulo and stephaniely Flanders of Bloomberg Economics. We 22 00:01:18,400 --> 00:01:23,920 Speaker 1: know first that there was a significant supervisory failure somewhere 23 00:01:24,000 --> 00:01:39,640 Speaker 1: along the way. Central banks already had their hands full 24 00:01:39,720 --> 00:01:42,840 Speaker 1: fighting inflation, but then a second front opened up with 25 00:01:42,920 --> 00:01:46,280 Speaker 1: the banking crisis. They quickly spread from Silicon Valley to Zurich, 26 00:01:46,560 --> 00:01:50,000 Speaker 1: where officials began the week announcing that UBS would take 27 00:01:50,040 --> 00:01:53,760 Speaker 1: over credit suis, a move praised by ECB President Christine 28 00:01:53,840 --> 00:01:58,000 Speaker 1: lagard I wilcome the swift action and the decisions taken 29 00:01:58,080 --> 00:02:02,200 Speaker 1: by the Swiss authorities. The actions are instrumental for restoring 30 00:02:02,520 --> 00:02:07,240 Speaker 1: orderly market conditions and ensuring financial stability. But it was 31 00:02:07,280 --> 00:02:10,400 Speaker 1: a shotgun wedding that left holders of so called Coco 32 00:02:10,600 --> 00:02:14,760 Speaker 1: bonds of credit suites out in the coal. Seventeen billion 33 00:02:14,840 --> 00:02:18,560 Speaker 1: dollars of them are now rendered worthless, all of which 34 00:02:18,600 --> 00:02:20,880 Speaker 1: put pressure on the FED to explain how we would 35 00:02:20,880 --> 00:02:24,880 Speaker 1: pursue price stability and financial stability at the same time, 36 00:02:25,240 --> 00:02:28,440 Speaker 1: and Wednesday we got our answer. Inflation remains too high 37 00:02:28,520 --> 00:02:30,840 Speaker 1: and the labor market continues to be very tight. We 38 00:02:31,000 --> 00:02:33,400 Speaker 1: remain committed to bring inflation back down to our two 39 00:02:33,440 --> 00:02:37,440 Speaker 1: percent goal and to keep longer term inflation expectations well anchored. 40 00:02:37,639 --> 00:02:40,400 Speaker 1: We will continue to closely monitor conditions in the banking 41 00:02:40,440 --> 00:02:42,720 Speaker 1: system and are prepared to use all of our tools 42 00:02:43,160 --> 00:02:46,320 Speaker 1: as needed to keep it safe and sound. My colleagues 43 00:02:46,360 --> 00:02:49,079 Speaker 1: and I understand the hardship that high inflation is causing, 44 00:02:49,639 --> 00:02:52,799 Speaker 1: and we remain strongly committed to bringing inflation back down 45 00:02:52,880 --> 00:02:55,640 Speaker 1: to our two percent goal. And while global Wall Street 46 00:02:55,800 --> 00:02:58,040 Speaker 1: was consumed with the stability of the banks and how 47 00:02:58,080 --> 00:03:00,840 Speaker 1: the central banks would respond, the rest of the world 48 00:03:00,919 --> 00:03:03,560 Speaker 1: went on as President G of China paid a visit 49 00:03:03,639 --> 00:03:06,600 Speaker 1: to Moscow for a visit with his good friend Vladimir Putin. 50 00:03:07,120 --> 00:03:10,480 Speaker 1: She is there to present himself as a responsible stakeholder 51 00:03:10,560 --> 00:03:15,200 Speaker 1: and a peacemaker to try to further boaster China's reputation 52 00:03:15,320 --> 00:03:17,760 Speaker 1: on the global stage. Congress some of the CEO of 53 00:03:17,880 --> 00:03:21,440 Speaker 1: TikTok the Capitol Hill for a grilling over his social media. 54 00:03:21,560 --> 00:03:25,360 Speaker 1: Female would also like to talk about national security concerns 55 00:03:25,440 --> 00:03:29,640 Speaker 1: that you have raised that we take very very seriously. 56 00:03:31,520 --> 00:03:34,480 Speaker 1: At the end of this challenging week, equities actually held 57 00:03:34,560 --> 00:03:37,400 Speaker 1: up remarkably well, with the SMP five hundred up one 58 00:03:37,440 --> 00:03:40,720 Speaker 1: point four percent the NAZAC up one and two thirds percent, 59 00:03:41,120 --> 00:03:43,600 Speaker 1: while much of the action was over in bonds, where 60 00:03:43,600 --> 00:03:45,520 Speaker 1: the yield in a ten year started the week just 61 00:03:45,640 --> 00:03:48,440 Speaker 1: over three point four percent spiked up well over three 62 00:03:48,480 --> 00:03:50,680 Speaker 1: point six to end a week back down at three 63 00:03:50,720 --> 00:03:53,200 Speaker 1: point three seven, just a handful of basis points from 64 00:03:53,240 --> 00:03:55,600 Speaker 1: where it all started. Tell us sort all of this out. 65 00:03:55,680 --> 00:03:58,360 Speaker 1: We welcome now Dennis de Busher, his founder and president 66 00:03:58,400 --> 00:04:01,800 Speaker 1: of twenty two V Research, and SONALDA Said, chief investment 67 00:04:01,840 --> 00:04:05,200 Speaker 1: officer for fixed income at Franklin Templeton. So welcome both 68 00:04:05,240 --> 00:04:06,600 Speaker 1: of you. Great to have you here. So now I'm 69 00:04:06,600 --> 00:04:08,520 Speaker 1: gonna start with you, because the action really was largely 70 00:04:08,600 --> 00:04:11,360 Speaker 1: in bonds. You're our fixed income person. Well, how do 71 00:04:11,440 --> 00:04:14,360 Speaker 1: you explain how the bond market reacted to the news 72 00:04:14,480 --> 00:04:18,800 Speaker 1: this week? So, you know, I wish it was an 73 00:04:18,839 --> 00:04:21,880 Speaker 1: equity market equity week, but it is a bond market week. 74 00:04:21,920 --> 00:04:24,920 Speaker 1: Clearly i'd see other type of volatility we're seeing in 75 00:04:25,600 --> 00:04:30,400 Speaker 1: the treasury yield curve. It is very interesting. There is 76 00:04:30,440 --> 00:04:34,880 Speaker 1: a certain amount, in my mind, disonance the bond market 77 00:04:35,600 --> 00:04:39,200 Speaker 1: is asking pleading with the Fed to cut rates. However, 78 00:04:39,760 --> 00:04:42,440 Speaker 1: if I look at what is being priced in by 79 00:04:42,480 --> 00:04:44,800 Speaker 1: the bond market, the number of rate cuts being priced in, 80 00:04:45,600 --> 00:04:48,600 Speaker 1: it just doesn't make sense. It only makes sense if 81 00:04:48,640 --> 00:04:54,600 Speaker 1: you're anticipating a really drastic recession triggered by a massive 82 00:04:54,680 --> 00:04:59,000 Speaker 1: banking crisis. But if that's the case, then the remainder 83 00:04:59,160 --> 00:05:01,880 Speaker 1: of the bondmark it doesn't make much sense. I'm talking 84 00:05:01,880 --> 00:05:05,680 Speaker 1: about credit markets, for example, we haven't seen spreads blowout. 85 00:05:06,240 --> 00:05:10,520 Speaker 1: All the action really seems to be driven off market 86 00:05:10,600 --> 00:05:15,600 Speaker 1: participants being unhappy with the FED not essentially doing what 87 00:05:16,160 --> 00:05:19,239 Speaker 1: we've seen the FED do frankly since the global financial crisis, 88 00:05:19,560 --> 00:05:23,200 Speaker 1: which has used overwhelming posts at the first sign of 89 00:05:23,360 --> 00:05:28,360 Speaker 1: wobbles in any particular piece of the financial sector. So, Dennis, 90 00:05:28,480 --> 00:05:30,520 Speaker 1: is the equity market basically having a big debate with 91 00:05:30,600 --> 00:05:32,640 Speaker 1: the bond market right now because the bond markets are 92 00:05:32,680 --> 00:05:34,960 Speaker 1: saying we're going to have cuts this week this year, 93 00:05:35,080 --> 00:05:37,560 Speaker 1: even though Jay Palla keeps saying we're not going to have, guys, 94 00:05:37,600 --> 00:05:39,360 Speaker 1: but the bond market seems to think it is. If 95 00:05:39,440 --> 00:05:42,120 Speaker 1: really we were, wouldn't that signal something really bad going on? 96 00:05:42,240 --> 00:05:45,479 Speaker 1: And shouldn't that be hurting equities? Right? Now he would 97 00:05:45,520 --> 00:05:47,840 Speaker 1: say theoretically that it should be a pretty big drag 98 00:05:47,960 --> 00:05:50,800 Speaker 1: on equities. I think one of the reasons why equities 99 00:05:50,839 --> 00:05:54,040 Speaker 1: aren't reacting is because a lot of what's happening in 100 00:05:54,080 --> 00:05:56,640 Speaker 1: the bond market could be a hedge against a really 101 00:05:56,680 --> 00:05:59,120 Speaker 1: bad outcome, and at the end of the day, unless 102 00:05:59,200 --> 00:06:02,200 Speaker 1: the near term adomic data is falling off a cliff, 103 00:06:02,240 --> 00:06:06,120 Speaker 1: what it clearly is not doing. Lower rates are not 104 00:06:06,279 --> 00:06:10,040 Speaker 1: going to be terrible for equities until it becomes very 105 00:06:10,120 --> 00:06:13,920 Speaker 1: obvious that you're going to see significant earning degradation. And 106 00:06:14,040 --> 00:06:18,600 Speaker 1: so there's some chance that the banking system gets or 107 00:06:18,640 --> 00:06:20,719 Speaker 1: people have a lot more confidence in the banking system, 108 00:06:21,160 --> 00:06:24,840 Speaker 1: and if that happens, then deposit risk goes away or 109 00:06:25,200 --> 00:06:28,680 Speaker 1: is significantly reduced. You don't have this drastic tightening of 110 00:06:28,760 --> 00:06:32,120 Speaker 1: financial conditions or lending standards. And if that were to happen, 111 00:06:32,200 --> 00:06:35,160 Speaker 1: then the economy can weather it and maybe even with 112 00:06:35,720 --> 00:06:39,839 Speaker 1: a lower rate outlook, and that combination at least stabilizes 113 00:06:39,920 --> 00:06:42,920 Speaker 1: dequities until they have a little bit more information, because again, 114 00:06:43,120 --> 00:06:45,600 Speaker 1: the earnings outlook is not terrible to start the year, 115 00:06:45,600 --> 00:06:49,440 Speaker 1: and that's a really important point. So now the news 116 00:06:49,640 --> 00:06:51,800 Speaker 1: was not just about what the Fed did or what 117 00:06:51,920 --> 00:06:54,480 Speaker 1: j Powe said this week. We also have this overhang 118 00:06:54,560 --> 00:06:58,080 Speaker 1: of some confusion, even some fear in parts of the 119 00:06:58,160 --> 00:07:00,920 Speaker 1: banking industry, was that reflecting the market? Did the bonds 120 00:07:01,000 --> 00:07:04,159 Speaker 1: react to all of that that was going on there 121 00:07:04,360 --> 00:07:06,960 Speaker 1: some extent. But the reality is, you know, if we 122 00:07:07,480 --> 00:07:10,240 Speaker 1: you know, you started off talking about the banking crisis, 123 00:07:10,800 --> 00:07:13,200 Speaker 1: I would almost take issue with the idea that there 124 00:07:13,360 --> 00:07:17,360 Speaker 1: is a crisis as such, because I would really distinguish 125 00:07:17,480 --> 00:07:20,600 Speaker 1: what we are seeing today in banks from what we 126 00:07:20,680 --> 00:07:24,400 Speaker 1: saw when we had a true banking crisis, a financial crisis, 127 00:07:24,640 --> 00:07:28,440 Speaker 1: say two thousand and seven. Eight. We have to recognize 128 00:07:28,480 --> 00:07:31,560 Speaker 1: that what we're looking at our banks, which buy and large, 129 00:07:31,600 --> 00:07:34,559 Speaker 1: are extremely solvent. If you look at banks like SVP, 130 00:07:34,680 --> 00:07:40,320 Speaker 1: for example, problem was the most fundamental mismatch of duration. 131 00:07:40,960 --> 00:07:47,440 Speaker 1: We're not looking at deep, strange, unvaluable securities where you 132 00:07:47,480 --> 00:07:49,480 Speaker 1: can't figure out how much their work. You're looking at 133 00:07:49,560 --> 00:07:52,640 Speaker 1: government treasuries. You're looking at US treasuries. You're looking at 134 00:07:52,680 --> 00:07:55,640 Speaker 1: mortgage bonds, where we know the value of the asset 135 00:07:55,840 --> 00:07:58,400 Speaker 1: by the minute. So I think that's one thing to 136 00:07:58,560 --> 00:08:03,280 Speaker 1: keep in mind every time I hear about the banking 137 00:08:03,360 --> 00:08:08,160 Speaker 1: crisis and how this is spreading and there's something catastrophic waiting. 138 00:08:09,000 --> 00:08:11,440 Speaker 1: I would I actually argue that what we heard from 139 00:08:11,600 --> 00:08:14,880 Speaker 1: j Powell, indeed what we heard from Janet Yellin is 140 00:08:15,040 --> 00:08:20,760 Speaker 1: broadly on point. If they see banks having runs, and 141 00:08:20,880 --> 00:08:23,320 Speaker 1: remember in banking where in the business people are in 142 00:08:23,400 --> 00:08:26,520 Speaker 1: the business and banking of borrowing short and lending long deposits, 143 00:08:26,560 --> 00:08:30,320 Speaker 1: fund loans, it's what banking is. I just think that 144 00:08:30,880 --> 00:08:34,560 Speaker 1: what they are doing, which is trying to separate out 145 00:08:35,200 --> 00:08:38,000 Speaker 1: what to do about the banks from interest rates, up 146 00:08:38,040 --> 00:08:40,640 Speaker 1: to a point, this is a very sensible thing to do. 147 00:08:42,160 --> 00:08:44,880 Speaker 1: So Dennis said, whether the banks are in a crisis 148 00:08:45,000 --> 00:08:47,280 Speaker 1: or not, I guess it matters whether they think they're 149 00:08:47,320 --> 00:08:49,040 Speaker 1: in a crisis. You could go into a crisis because 150 00:08:49,040 --> 00:08:52,040 Speaker 1: it really affects their willingness to lend to some corporations, 151 00:08:52,080 --> 00:08:55,040 Speaker 1: and that could really affect equities. That is what the 152 00:08:55,120 --> 00:08:57,880 Speaker 1: problem is for equities over time. And what we don't 153 00:08:57,960 --> 00:09:00,720 Speaker 1: know is how much of that fighting of lending standards 154 00:09:00,760 --> 00:09:04,600 Speaker 1: will actually show up over time. No one really knows. 155 00:09:05,559 --> 00:09:07,640 Speaker 1: Tightening of lending standards is going to be quote unquote 156 00:09:07,679 --> 00:09:09,640 Speaker 1: off the screen, So you're not going to be able 157 00:09:09,640 --> 00:09:12,080 Speaker 1: to pick it up in the typical type of financial 158 00:09:12,120 --> 00:09:14,080 Speaker 1: conditions in the sees that we are normally look at, 159 00:09:14,400 --> 00:09:17,360 Speaker 1: you know, on a Bloomberg screen. So it's a really 160 00:09:17,440 --> 00:09:19,839 Speaker 1: unknown But you know, we did a search today of 161 00:09:20,000 --> 00:09:23,640 Speaker 1: Google trends FDIC insurance and after a giant spike up, 162 00:09:23,720 --> 00:09:27,440 Speaker 1: it's come down aggressively. So the broader public is probably 163 00:09:27,600 --> 00:09:30,800 Speaker 1: not so focused on this as much anymore. I realize 164 00:09:30,840 --> 00:09:32,160 Speaker 1: we all are on Wall Street, and there's a lot 165 00:09:32,160 --> 00:09:34,240 Speaker 1: of people in California that are. And so if you 166 00:09:34,360 --> 00:09:38,720 Speaker 1: get past that risk, which is the deposit flight risk, yes, 167 00:09:39,080 --> 00:09:41,480 Speaker 1: banks will have tighter lending standards. That might mean that 168 00:09:41,600 --> 00:09:43,800 Speaker 1: the FED doesn't have to tighten as much on a 169 00:09:43,880 --> 00:09:46,600 Speaker 1: go forward basis. In aggregate, you still have the same 170 00:09:46,640 --> 00:09:50,920 Speaker 1: outcome slowing economy, lower inflation, but it doesn't mean a 171 00:09:51,040 --> 00:09:53,720 Speaker 1: recession in the next six months. And if you don't 172 00:09:53,760 --> 00:09:56,160 Speaker 1: have a recession in the next six months, then you 173 00:09:56,320 --> 00:09:58,199 Speaker 1: have the case for eight equities to at least be 174 00:09:58,320 --> 00:10:01,120 Speaker 1: stable and to have a significan get bounced back in 175 00:10:01,200 --> 00:10:03,760 Speaker 1: some of the more cyclical areas of the market. So 176 00:10:03,880 --> 00:10:06,800 Speaker 1: now the side, oh sorry, go ahead, So now please now, 177 00:10:06,880 --> 00:10:08,800 Speaker 1: I was just going to just say to Dennis that 178 00:10:08,920 --> 00:10:11,800 Speaker 1: in fact, that's exactly I've seen so much of talk 179 00:10:11,840 --> 00:10:15,640 Speaker 1: about how j Powell talked about raising rates just two 180 00:10:15,760 --> 00:10:17,679 Speaker 1: days you know that rates needed to go up a 181 00:10:17,760 --> 00:10:20,920 Speaker 1: lot more two days before sv BE broke, and then 182 00:10:21,000 --> 00:10:23,719 Speaker 1: we saw that when we saw the new SEPs the 183 00:10:23,920 --> 00:10:26,680 Speaker 1: top peak rate is still where it was in December. 184 00:10:26,960 --> 00:10:31,600 Speaker 1: So essentially what we're seeing is a substitution of higher 185 00:10:31,720 --> 00:10:36,640 Speaker 1: rates which would have contracted demand for loans more yes, 186 00:10:36,920 --> 00:10:41,959 Speaker 1: with fighter lending standards, as you said, which constrains the 187 00:10:42,080 --> 00:10:46,520 Speaker 1: supply of credit. So overall, I do think it's too 188 00:10:46,679 --> 00:10:50,240 Speaker 1: premature to assume that we're going to see this massive 189 00:10:50,880 --> 00:10:53,760 Speaker 1: meltdown of the economy on the back of what we've 190 00:10:53,800 --> 00:10:56,200 Speaker 1: seen in the past two weeks. So now the side 191 00:10:56,240 --> 00:10:57,880 Speaker 1: and Denis be sure, we'll stay with us because we're 192 00:10:57,960 --> 00:10:59,480 Speaker 1: a turn from what happened this week to what it 193 00:10:59,559 --> 00:11:02,400 Speaker 1: means of medium and long term. That's gonna have next 194 00:11:02,440 --> 00:11:07,600 Speaker 1: on Wall Street Weet on Bloomberg. This is Bloomberg Wall 195 00:11:07,640 --> 00:11:17,480 Speaker 1: Street Week with David Weston from Bloomberg Radio. I think 196 00:11:17,520 --> 00:11:20,280 Speaker 1: we have a lot of individual investors who are on 197 00:11:20,360 --> 00:11:22,880 Speaker 1: the internet buying and selling stocks almost every single day, 198 00:11:23,000 --> 00:11:25,480 Speaker 1: and as a consequence, their behavior is somewhat different than 199 00:11:25,520 --> 00:11:28,520 Speaker 1: the traditional institution, and quite frankly, I think the institutions 200 00:11:28,559 --> 00:11:31,760 Speaker 1: these days are behaving a little bit foolish as well. 201 00:11:32,679 --> 00:11:35,440 Speaker 1: That was Roger mcnabe, a much younger Roger McBey then 202 00:11:35,520 --> 00:11:38,439 Speaker 1: with Integral Capital Partners on Wall Street week back in 203 00:11:38,559 --> 00:11:41,680 Speaker 1: February of nineteen ninety nine, when the number one moving 204 00:11:41,720 --> 00:11:45,120 Speaker 1: the country was Message in a Bottle starring Kevin Coster 205 00:11:45,200 --> 00:11:47,360 Speaker 1: and Robin Ry, and the number one song, well, that 206 00:11:47,559 --> 00:11:50,840 Speaker 1: was Angel of Mine by Monica so Alacie of Franklin 207 00:11:50,880 --> 00:11:53,680 Speaker 1: Templeton and Dennis de Buscher of twenty two V Research 208 00:11:53,760 --> 00:11:55,520 Speaker 1: are still with us. So Dennis, let's go back to 209 00:11:55,600 --> 00:11:58,560 Speaker 1: where you left us. Basically depends at the time horizon. 210 00:11:58,600 --> 00:12:00,600 Speaker 1: We were talking about what happened this week. But when 211 00:12:00,640 --> 00:12:02,839 Speaker 1: you look six months out, twelve months out, if you're 212 00:12:02,840 --> 00:12:05,839 Speaker 1: an equity investor at this point, given all the uncertainty're facing, 213 00:12:06,000 --> 00:12:09,040 Speaker 1: what do you do you plan for lower inflation and 214 00:12:09,120 --> 00:12:13,440 Speaker 1: stocks that benefit from lower inflation? Very simply, we spend 215 00:12:13,440 --> 00:12:15,280 Speaker 1: a lot of time trying to figure out what the 216 00:12:15,400 --> 00:12:18,800 Speaker 1: Fed is trying to accomplish, and this is an open secret. 217 00:12:19,400 --> 00:12:23,600 Speaker 1: They want lower aggregate demand to lower inflation. They're going 218 00:12:23,679 --> 00:12:25,720 Speaker 1: to accomplish that goal one way or the other. Maybe 219 00:12:25,760 --> 00:12:28,319 Speaker 1: the bank's timing of lending standard does it form. If 220 00:12:28,360 --> 00:12:30,080 Speaker 1: that doesn't do it for them, they're going to tighten 221 00:12:30,120 --> 00:12:33,040 Speaker 1: a lot. They're going to type more to make that happen. 222 00:12:33,440 --> 00:12:35,640 Speaker 1: And so the net result of that is companies that 223 00:12:35,760 --> 00:12:38,599 Speaker 1: benefit from lower inflation are going to outfl form. And 224 00:12:38,679 --> 00:12:40,760 Speaker 1: as we see it, the things that will probably do 225 00:12:40,840 --> 00:12:42,959 Speaker 1: the best of that backdrop are your early cyclicals on 226 00:12:43,040 --> 00:12:47,520 Speaker 1: a relative basis, that's tech, communications, and discretionary, So that's 227 00:12:47,559 --> 00:12:51,120 Speaker 1: an area we'd be focused on. Then the main question 228 00:12:51,360 --> 00:12:54,439 Speaker 1: is as the economy slows, is it a recession or not. 229 00:12:55,280 --> 00:12:59,000 Speaker 1: If it's a recession, then more your defensive sectors work. 230 00:12:59,080 --> 00:13:02,640 Speaker 1: That gets you to the stables, utilities, etc. If it's 231 00:13:02,679 --> 00:13:05,199 Speaker 1: a mild recession, I think you want to fade defenses, 232 00:13:05,520 --> 00:13:07,520 Speaker 1: and I think you really need to start thinking about 233 00:13:07,559 --> 00:13:11,000 Speaker 1: the next cycle, which to me is the most interesting conversation. 234 00:13:11,600 --> 00:13:14,600 Speaker 1: Are we in and I know you talk to Larry Summers. 235 00:13:14,679 --> 00:13:17,800 Speaker 1: Are we in a lower savings economy that's going to 236 00:13:17,880 --> 00:13:22,079 Speaker 1: have consistently higher nominal GDP growth, consistently higher inflation and 237 00:13:22,160 --> 00:13:24,839 Speaker 1: pressure affect. That's never really going back to two, but 238 00:13:24,960 --> 00:13:27,440 Speaker 1: letting inflation run a little bit above target and over 239 00:13:27,600 --> 00:13:31,080 Speaker 1: that longer term, right, you know, the defenses are going 240 00:13:31,160 --> 00:13:33,760 Speaker 1: to be extremely unattractive if you're gonna have a two 241 00:13:33,840 --> 00:13:36,360 Speaker 1: year great ramp put to book these levels for a 242 00:13:36,440 --> 00:13:40,240 Speaker 1: persistent period of time. It's just possible in a lower economy. Dennis, 243 00:13:40,240 --> 00:13:41,800 Speaker 1: I want to sneak Sonil in here because I want 244 00:13:41,800 --> 00:13:43,960 Speaker 1: to ask you the same question as a fixed income Unfortunately, 245 00:13:43,960 --> 00:13:45,559 Speaker 1: we have just a short period of time. What do 246 00:13:45,600 --> 00:13:47,680 Speaker 1: you do when you're investing as a fixed income investor? 247 00:13:48,320 --> 00:13:50,840 Speaker 1: So right now is staying up in quality. We've been 248 00:13:50,960 --> 00:13:53,560 Speaker 1: relatively neutral duration because I think we're going to get 249 00:13:53,559 --> 00:13:56,080 Speaker 1: a lot more volatility. I do think ten year rates 250 00:13:56,120 --> 00:13:59,040 Speaker 1: are going to go back up before we actually stopped 251 00:13:59,080 --> 00:14:02,400 Speaker 1: coming down. Because right now market and FED are playing 252 00:14:02,440 --> 00:14:04,600 Speaker 1: a game of chicken. I happen to think the Fed's 253 00:14:04,600 --> 00:14:08,160 Speaker 1: going to win, and so eventually we get higher yields 254 00:14:08,240 --> 00:14:11,920 Speaker 1: and then I think we set ourselves up for a 255 00:14:12,200 --> 00:14:15,760 Speaker 1: pretty good period for fixed income. We're already there as 256 00:14:15,840 --> 00:14:18,400 Speaker 1: we move into slowdown, which allows the FED to cut 257 00:14:18,600 --> 00:14:20,880 Speaker 1: some time next to that is terrific. Thank you, so 258 00:14:21,040 --> 00:14:24,160 Speaker 1: much to both you, as Sonaldasai of Franklin Templeton and 259 00:14:24,240 --> 00:14:28,360 Speaker 1: Dennis the Busher of twenty two V Research. FED chair 260 00:14:28,480 --> 00:14:31,040 Speaker 1: pal this week said he didn't yet know exactly what 261 00:14:31,240 --> 00:14:33,920 Speaker 1: went wrong with Silicon Valley Bank, but the vice chair 262 00:14:34,000 --> 00:14:37,440 Speaker 1: bar was conducting an investigation to find out. We convened 263 00:14:37,440 --> 00:14:40,520 Speaker 1: our own expert roundtable to discuss what we know at 264 00:14:40,600 --> 00:14:43,480 Speaker 1: this point, what we don't know, and what changes it 265 00:14:43,600 --> 00:14:45,720 Speaker 1: should be on the table to make sure we don't 266 00:14:45,800 --> 00:14:48,520 Speaker 1: repeat what we saw over the last two weeks. Here's 267 00:14:48,520 --> 00:14:53,040 Speaker 1: former treasure Secretary Larry Summers, former FED board member Jan Trullo, 268 00:14:53,320 --> 00:14:57,200 Speaker 1: and Stephanie Flanders Bloomberg Executive editor for Economics and Government. 269 00:14:59,080 --> 00:15:03,680 Speaker 1: I trust that the largest banks truly are in the 270 00:15:03,840 --> 00:15:07,320 Speaker 1: much better capital and liquidity position that Jay Powell referred 271 00:15:07,320 --> 00:15:10,840 Speaker 1: to yesterday during the press conference. We know first that 272 00:15:11,040 --> 00:15:16,400 Speaker 1: there was a significant supervisory failure somewhere along the way. 273 00:15:17,240 --> 00:15:23,240 Speaker 1: Was that failure in San Francisco Fed's inability to identify 274 00:15:23,520 --> 00:15:27,840 Speaker 1: problems of growth and maturity mismatches and the like early on? 275 00:15:28,800 --> 00:15:31,840 Speaker 1: Was it the failure of the second San Francisco FED 276 00:15:31,920 --> 00:15:35,480 Speaker 1: team to which did identify some problems to follow up 277 00:15:35,520 --> 00:15:39,760 Speaker 1: in a sufficiently robust way. Was it a supervisory failure 278 00:15:39,880 --> 00:15:42,760 Speaker 1: because of the light touch approach to supervision that the 279 00:15:42,960 --> 00:15:46,120 Speaker 1: Federal Reserve Board had put in place over the last 280 00:15:46,200 --> 00:15:49,400 Speaker 1: four or five years. But I think in the most 281 00:15:49,560 --> 00:15:55,480 Speaker 1: immediate sense, this is clearly a supervisory failure. Other factors 282 00:15:55,760 --> 00:15:59,840 Speaker 1: may be uncovered as the FED Zone investigation proceeds. Larry, 283 00:16:00,040 --> 00:16:01,960 Speaker 1: Let's put you back at the Treasury, or for that matter, 284 00:16:02,080 --> 00:16:04,560 Speaker 1: at the White House. If you were looking at this situation, 285 00:16:04,720 --> 00:16:07,320 Speaker 1: what questions would you be asking to make sure you 286 00:16:07,560 --> 00:16:10,560 Speaker 1: understood the possible ramifications of what we've seen so far 287 00:16:10,880 --> 00:16:14,440 Speaker 1: in a broader financial context. Before I answer that hypothetical, 288 00:16:14,600 --> 00:16:20,760 Speaker 1: let me put a question to my friend Dan. Dan, 289 00:16:20,960 --> 00:16:25,200 Speaker 1: I've heard it said, and I don't know that even 290 00:16:25,320 --> 00:16:30,840 Speaker 1: in twenty twenty two, the FED stress tests that were 291 00:16:30,880 --> 00:16:36,800 Speaker 1: applied to the largest banks did not include an analysis 292 00:16:36,880 --> 00:16:42,040 Speaker 1: of the stress from a major interest rate hike. If 293 00:16:42,120 --> 00:16:46,040 Speaker 1: that's true, that seems kind of bizarre from the point 294 00:16:46,080 --> 00:16:49,240 Speaker 1: of view of the world of early twenty twenty two, 295 00:16:50,080 --> 00:16:55,880 Speaker 1: when it certainly many people, certainly me on David's show, 296 00:16:56,640 --> 00:17:01,680 Speaker 1: were emphasizing that there was likely to need to be 297 00:17:02,040 --> 00:17:06,320 Speaker 1: very substantial increases in interest rates. Can you say something 298 00:17:06,359 --> 00:17:11,680 Speaker 1: and if the stress tests weren't considering increases in interest rates, 299 00:17:12,320 --> 00:17:16,560 Speaker 1: then perhaps the exempting of Silicon Valley Bank from the 300 00:17:16,720 --> 00:17:22,040 Speaker 1: stress tests was not central to understanding the problem. Can 301 00:17:22,119 --> 00:17:28,840 Speaker 1: you say something about interest rate hikes and FED stress tests? Sure? So, 302 00:17:29,200 --> 00:17:34,159 Speaker 1: First off, I think, Larry, I agree with the statement 303 00:17:34,200 --> 00:17:37,359 Speaker 1: you made towards the end of your question, which is, actually, 304 00:17:37,480 --> 00:17:40,720 Speaker 1: if Silicon Valley had been in last year's stress test 305 00:17:41,200 --> 00:17:44,719 Speaker 1: for real rather than its stress rehearsal, I don't think 306 00:17:44,760 --> 00:17:47,320 Speaker 1: it would have made much difference, for precisely the reason 307 00:17:47,440 --> 00:17:50,320 Speaker 1: you say that they weren't stressing the things that were 308 00:17:50,359 --> 00:17:55,760 Speaker 1: the SVB vulnerabilities with respect to stress testing generally, over again, 309 00:17:55,840 --> 00:17:59,200 Speaker 1: over the last five or six years, the stress test 310 00:17:59,280 --> 00:18:03,960 Speaker 1: has become eminently predictable, but it follows the basic pattern 311 00:18:04,119 --> 00:18:07,200 Speaker 1: of the scenario that was developed when we began doing 312 00:18:07,680 --> 00:18:13,560 Speaker 1: the annual stress test. The scenario, of course includes a 313 00:18:13,720 --> 00:18:17,960 Speaker 1: reduction in interest rates because of the hypothesis of a 314 00:18:18,080 --> 00:18:21,440 Speaker 1: recession and the Fed's reaction, so to some degree, the 315 00:18:21,520 --> 00:18:26,640 Speaker 1: answer to your question is like supervision. Generally, the stress 316 00:18:26,760 --> 00:18:31,280 Speaker 1: test has become less rigorous over time, and I think, 317 00:18:31,600 --> 00:18:35,800 Speaker 1: more importantly it's become too predictable, and the whole purpose 318 00:18:35,840 --> 00:18:38,399 Speaker 1: of a stress test is that you're trying to stress 319 00:18:38,440 --> 00:18:42,640 Speaker 1: against the unanticipated, not the anticipated. It does our entire 320 00:18:42,720 --> 00:18:45,159 Speaker 1: approach to deposits change, given what we're seeing in the 321 00:18:45,240 --> 00:18:47,000 Speaker 1: fact is they're not as stick as we thought they were. 322 00:18:47,720 --> 00:18:50,320 Speaker 1: That's what I was alluding to earlier. I'd like to 323 00:18:50,400 --> 00:18:54,680 Speaker 1: have a sense of exactly what the deposit profiles of 324 00:18:54,920 --> 00:18:59,080 Speaker 1: this group of banks is as a whole, because in theory, 325 00:18:59,160 --> 00:19:04,119 Speaker 1: at least, the supervisor should already have been distinguishing among 326 00:19:04,440 --> 00:19:09,240 Speaker 1: different kinds of uninsured deposits, some of which I've always 327 00:19:09,280 --> 00:19:12,920 Speaker 1: been understood to be eminently runnable, others of which have 328 00:19:13,080 --> 00:19:16,840 Speaker 1: thought too were thought to be at least somewhat stickier 329 00:19:17,240 --> 00:19:22,400 Speaker 1: than insured retail deposits. If it turns out that those 330 00:19:22,720 --> 00:19:24,840 Speaker 1: and this is what Stephanie I think was suggesting that 331 00:19:24,960 --> 00:19:30,600 Speaker 1: those middle categories have changed, then you're going to need 332 00:19:30,640 --> 00:19:35,399 Speaker 1: a change in regulation and not just in supervision. That 333 00:19:35,520 --> 00:19:38,880 Speaker 1: was our Wall Street Week roundtable of Larry Summers, Dan Trulo, 334 00:19:39,200 --> 00:19:42,960 Speaker 1: and Stephanie Flanders coming up. It was a week that 335 00:19:43,119 --> 00:19:46,240 Speaker 1: called for courage, and we found it in a somewhat 336 00:19:46,359 --> 00:19:49,800 Speaker 1: unlikely place. That's next on Wall Street Week on Bloomberg. 337 00:19:51,400 --> 00:19:55,600 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 338 00:19:55,800 --> 00:20:02,960 Speaker 1: Bloomberg Radio. This is Wall Street Week. I'm David Weston. 339 00:20:03,000 --> 00:20:05,200 Speaker 1: We're joined once again by our very special contributor to 340 00:20:05,240 --> 00:20:07,960 Speaker 1: Wall Street Week. He is Larry Summers of Harvard. So, Larry, 341 00:20:08,040 --> 00:20:11,560 Speaker 1: we now have had another week of turmoil, continued turmoil 342 00:20:11,720 --> 00:20:14,760 Speaker 1: in the banking sector. What are you looking for going 343 00:20:14,920 --> 00:20:19,480 Speaker 1: forward from our policy leaders in Washington? I think policy 344 00:20:19,920 --> 00:20:25,920 Speaker 1: leaders need to be clear and decisive that depositors are 345 00:20:26,119 --> 00:20:30,920 Speaker 1: not going to lose their money in large banks, in 346 00:20:31,160 --> 00:20:35,720 Speaker 1: medium sized banks, or in small banks. They can do 347 00:20:35,960 --> 00:20:41,159 Speaker 1: that within their existing authorities simply by being clear that 348 00:20:41,480 --> 00:20:47,639 Speaker 1: in the event of failures, given the highly fevered environment 349 00:20:47,800 --> 00:20:52,359 Speaker 1: with respect to contagion right now, they are prepared to 350 00:20:52,640 --> 00:20:59,480 Speaker 1: use systematic systemic risk exemptions to allow the FDIC to 351 00:20:59,640 --> 00:21:07,480 Speaker 1: pay off depositors with assurance that those funds will come 352 00:21:07,720 --> 00:21:13,400 Speaker 1: from the banking industry. I think by doing that they 353 00:21:13,520 --> 00:21:20,200 Speaker 1: can contain a significant amount of the pressures that we're facing. 354 00:21:20,560 --> 00:21:26,200 Speaker 1: To provide confidence. I think they also need to increase 355 00:21:26,280 --> 00:21:32,000 Speaker 1: the confidence they are providing in regulation. While it is 356 00:21:32,160 --> 00:21:41,160 Speaker 1: true that the twenty eighteen Trump era legal changes were 357 00:21:41,720 --> 00:21:46,880 Speaker 1: passed by the Congress were in almost every respect ill advised, 358 00:21:47,400 --> 00:21:53,560 Speaker 1: and the important respects were driven by special interests pressure. 359 00:21:54,440 --> 00:21:58,000 Speaker 1: It is also, i think clear that they are not 360 00:21:58,840 --> 00:22:02,800 Speaker 1: the reason why we have had the problems we have had. 361 00:22:03,480 --> 00:22:08,760 Speaker 1: The problems we have had reflect problems of management and 362 00:22:08,880 --> 00:22:14,560 Speaker 1: a number of financial institutions, and reflect major failures of 363 00:22:14,880 --> 00:22:23,360 Speaker 1: the supervisory and regulatory paradigm as implemented by the Federal Reserve, 364 00:22:24,080 --> 00:22:29,320 Speaker 1: in particular the failure to do a stress test in 365 00:22:29,600 --> 00:22:35,520 Speaker 1: twenty twenty two when interest rate interest rates were clearly 366 00:22:35,680 --> 00:22:39,680 Speaker 1: on the upwards path. The failure to do any kind 367 00:22:39,760 --> 00:22:49,080 Speaker 1: of stress tests about interest rate increases manifests a misunderstanding 368 00:22:49,760 --> 00:22:54,440 Speaker 1: of what a major source of risk in the system was, 369 00:22:55,119 --> 00:23:00,600 Speaker 1: and they need to signal an awareness of day shouldn't risk. 370 00:23:01,080 --> 00:23:05,040 Speaker 1: They need to signal an awareness of solvency as well 371 00:23:05,200 --> 00:23:12,320 Speaker 1: as liquidity issues in the regulatory paradigm going forward. Larry, 372 00:23:12,359 --> 00:23:14,560 Speaker 1: we heard, of course from the Federal Reserve in particularly J. 373 00:23:14,720 --> 00:23:17,840 Speaker 1: Powell news conference this week in which they did raise 374 00:23:17,920 --> 00:23:20,320 Speaker 1: the rates again twenty five basis points. We're a little 375 00:23:20,359 --> 00:23:22,520 Speaker 1: more vague on where they go from here At the 376 00:23:22,600 --> 00:23:25,320 Speaker 1: same time the chair said that this was an outlier. 377 00:23:25,480 --> 00:23:28,320 Speaker 1: Silicon Valley Bank was an outlier. I guess my question 378 00:23:28,400 --> 00:23:31,240 Speaker 1: to you is how confident are we actually the FED 379 00:23:31,320 --> 00:23:33,600 Speaker 1: has our arms around the problem now now we know 380 00:23:33,720 --> 00:23:35,200 Speaker 1: there is the problem to interest rate risk when it 381 00:23:35,240 --> 00:23:38,119 Speaker 1: comes to SVB, How confident that we know that there 382 00:23:38,200 --> 00:23:41,400 Speaker 1: aren't other svbs out there. I think it's pretty clear 383 00:23:41,960 --> 00:23:47,160 Speaker 1: looking at a variety of ratios that SVB and perhaps 384 00:23:47,240 --> 00:23:53,040 Speaker 1: a couple of other banks were important respects outliers, but 385 00:23:54,040 --> 00:24:01,000 Speaker 1: extreme examples tend often in life to point up digmatic issues. 386 00:24:01,840 --> 00:24:07,200 Speaker 1: And as I've been pointing out, a world of high 387 00:24:07,320 --> 00:24:13,919 Speaker 1: interest rates with digital banking click of a finger ability 388 00:24:14,080 --> 00:24:19,040 Speaker 1: both to move accounts out and to open new accounts 389 00:24:19,920 --> 00:24:23,280 Speaker 1: is going to be a different kind of world in 390 00:24:23,520 --> 00:24:26,200 Speaker 1: terms of risk, And it's going to be a different 391 00:24:26,280 --> 00:24:30,560 Speaker 1: kind of world in terms of what banks can rely 392 00:24:30,840 --> 00:24:34,960 Speaker 1: on in terms of the stickiness of deposits, and to 393 00:24:35,160 --> 00:24:40,480 Speaker 1: what extent that's true is something we're likely to learn 394 00:24:41,880 --> 00:24:46,800 Speaker 1: in the next year or two. That's why I think 395 00:24:46,840 --> 00:24:51,560 Speaker 1: it's appropriate, ahead of the curve to be sending clear 396 00:24:51,880 --> 00:25:00,720 Speaker 1: signals of assurance with respect to bank deposits, because it 397 00:25:00,960 --> 00:25:04,280 Speaker 1: is better to err on the side of overdoing it 398 00:25:04,800 --> 00:25:08,960 Speaker 1: when you're talking about protecting against bank runs than it 399 00:25:09,160 --> 00:25:13,720 Speaker 1: is to err on the side of under doing it. 400 00:25:14,000 --> 00:25:17,840 Speaker 1: There are profound issues raised about the banking supervision here 401 00:25:17,880 --> 00:25:20,000 Speaker 1: in the United States, and particularly with the stress tests. 402 00:25:20,160 --> 00:25:22,639 Speaker 1: There are also questions being raised over in Europe right now. 403 00:25:22,800 --> 00:25:25,119 Speaker 1: They had the approach of those at one bonds or 404 00:25:25,200 --> 00:25:29,400 Speaker 1: cocos that did not hold up so well for Credit 405 00:25:29,480 --> 00:25:32,920 Speaker 1: Suite certainly, and now as the weekest progressed here, we've 406 00:25:32,960 --> 00:25:35,480 Speaker 1: seen Deutsche Bank com under the siege. What questions are 407 00:25:35,480 --> 00:25:38,359 Speaker 1: being raised about the European approach to protecting the banks. 408 00:25:39,680 --> 00:25:43,840 Speaker 1: I think it's important to recognize that, as Christine Legarde said, 409 00:25:44,480 --> 00:25:48,879 Speaker 1: there are very important differences both between the way the 410 00:25:49,119 --> 00:25:52,840 Speaker 1: terms of the Swiss banks are written at ones are 411 00:25:52,920 --> 00:25:55,760 Speaker 1: written and the way the terms are written in other 412 00:25:55,840 --> 00:26:00,879 Speaker 1: parts of Europe, and also to recognize that the ECB 413 00:26:01,840 --> 00:26:08,200 Speaker 1: made clear that they're operating in a different paradigm than 414 00:26:08,800 --> 00:26:13,760 Speaker 1: the Swiss authorities were. But I think it's also clear 415 00:26:14,440 --> 00:26:18,280 Speaker 1: that there's going to need to be some fairly systematic 416 00:26:18,440 --> 00:26:24,359 Speaker 1: rethinking of these contingent capital instruments and how they work, 417 00:26:24,520 --> 00:26:27,800 Speaker 1: and on what occasions they are going to be bailed in, 418 00:26:28,440 --> 00:26:34,280 Speaker 1: and on what occasions they're not. Despite many years of 419 00:26:34,520 --> 00:26:39,320 Speaker 1: legal discussion, it's clear that there were not sharp and 420 00:26:39,480 --> 00:26:45,080 Speaker 1: shared understandings in the marketplace. I suspect and hope that 421 00:26:45,560 --> 00:26:51,879 Speaker 1: the European authorities, with the support of the United States 422 00:26:52,000 --> 00:26:58,600 Speaker 1: and Secretary Yelling and Chair Powell, will send strong signals 423 00:26:58,680 --> 00:27:05,760 Speaker 1: of support over the weekend for the European banking system, 424 00:27:06,200 --> 00:27:13,040 Speaker 1: because given the scale of European institutions, there are potentially 425 00:27:13,200 --> 00:27:20,639 Speaker 1: global consequences if problems spread from them. Larry, we have 426 00:27:20,720 --> 00:27:23,639 Speaker 1: been understandably really focused on the banking situation, whether the 427 00:27:23,760 --> 00:27:25,800 Speaker 1: United States or in Europe. In the meantime, the war 428 00:27:25,840 --> 00:27:28,960 Speaker 1: in Ukraine proceeds. You had an ed piece in the 429 00:27:29,040 --> 00:27:32,480 Speaker 1: Washington Post specifically on Russian assets. Take us through what 430 00:27:32,640 --> 00:27:34,520 Speaker 1: you think would be a good step forward on the 431 00:27:34,600 --> 00:27:37,320 Speaker 1: economic front as opposed to the military front in Ukraine. 432 00:27:38,440 --> 00:27:45,080 Speaker 1: I've been working with former World Bank President Robert Zellek 433 00:27:45,200 --> 00:27:51,920 Speaker 1: on this and with noted policy academic Philip Zeliko, who's 434 00:27:51,920 --> 00:27:55,960 Speaker 1: a real legal expert. We are going to have to 435 00:27:56,160 --> 00:28:00,640 Speaker 1: put billions of dollars, probably ultimately over a hundred billion 436 00:28:00,680 --> 00:28:09,280 Speaker 1: dollars into Ukraine to win the war and then to 437 00:28:10,280 --> 00:28:13,840 Speaker 1: win the peace. And the question is how that's going 438 00:28:13,920 --> 00:28:18,680 Speaker 1: to be financed, And we believe there is both precedent, 439 00:28:19,760 --> 00:28:25,720 Speaker 1: moral right and appropriateness to the financing coming from the 440 00:28:25,840 --> 00:28:32,120 Speaker 1: Russian reserve assets that we have frozen. And right now 441 00:28:32,280 --> 00:28:36,680 Speaker 1: those assets are frozen, but there is not yet a 442 00:28:36,760 --> 00:28:42,120 Speaker 1: willingness to deploy them to finance the ongoing support for 443 00:28:42,360 --> 00:28:47,360 Speaker 1: the economy and the ongoing compensation for damage that Russia 444 00:28:47,440 --> 00:28:51,960 Speaker 1: has caused to the Ukrainian economy. And we believe that 445 00:28:52,320 --> 00:28:56,600 Speaker 1: there needs to be appropriate and creative lawyering, along with 446 00:28:57,600 --> 00:29:03,160 Speaker 1: strong political leadership to get past that and to be 447 00:29:03,240 --> 00:29:07,840 Speaker 1: able to deploy those Russian reserves for that purpose. At 448 00:29:07,880 --> 00:29:12,200 Speaker 1: a time when we are declaring that President Plutin is 449 00:29:12,240 --> 00:29:16,520 Speaker 1: a war criminal, it seems to me almost inconceivable that 450 00:29:16,680 --> 00:29:21,000 Speaker 1: we should be stopping short of using what are the 451 00:29:21,840 --> 00:29:28,200 Speaker 1: currently immobilized assets of his state to deal with the 452 00:29:28,400 --> 00:29:32,320 Speaker 1: damage that he and the Russians are causing. Larry, thank 453 00:29:32,360 --> 00:29:34,280 Speaker 1: you so very much as our special contribute here in 454 00:29:34,280 --> 00:29:38,360 Speaker 1: Wall Street Week. He's Larry Summers of Harvard coming up. 455 00:29:38,400 --> 00:29:40,760 Speaker 1: It was a week that calls for courage, and we 456 00:29:40,960 --> 00:29:44,280 Speaker 1: found it in somewhat unlikely place. That's the next on 457 00:29:44,360 --> 00:29:49,760 Speaker 1: Wall Street Week on Bloomberg. This is Bloomberg Wall Street 458 00:29:49,800 --> 00:30:00,640 Speaker 1: Week with David Weston from Bloomberg Radio. Finally, one more thought. 459 00:30:01,400 --> 00:30:04,920 Speaker 1: One man with courage is a majority, so said Thomas Jefferson. 460 00:30:05,080 --> 00:30:07,760 Speaker 1: And through the years we've seen some notable examples of 461 00:30:07,800 --> 00:30:11,200 Speaker 1: a single person being a man or a woman standing 462 00:30:11,360 --> 00:30:14,040 Speaker 1: up for what they believe in despite all the odds, 463 00:30:14,400 --> 00:30:17,320 Speaker 1: like Army Secretary Joe Welch back in nineteen fifty four 464 00:30:17,600 --> 00:30:20,960 Speaker 1: going toetete with Senator Joe McCarthy during the Red Scare 465 00:30:21,240 --> 00:30:25,840 Speaker 1: untailed moment. Senator, I think I'll never really be you 466 00:30:25,920 --> 00:30:29,960 Speaker 1: are crowding, are your right? Westman? Look you look down 467 00:30:30,040 --> 00:30:34,240 Speaker 1: and don have you know damn about heat them dirt? 468 00:30:34,720 --> 00:30:37,600 Speaker 1: Or in the nineteen eighties, Johnson and Johnson CEO Jim 469 00:30:37,680 --> 00:30:41,160 Speaker 1: Burke taking the bold and expensive decision to pull All 470 00:30:41,360 --> 00:30:44,440 Speaker 1: Thailan all off the shelves across the country until he 471 00:30:44,520 --> 00:30:47,480 Speaker 1: could be sure of the absolute safety of his product, 472 00:30:47,960 --> 00:30:50,720 Speaker 1: and that brave student we saw stand up to the 473 00:30:50,800 --> 00:30:54,080 Speaker 1: tanks in Tenement Square in nineteen eighty nine, never to 474 00:30:54,200 --> 00:30:58,240 Speaker 1: be seen again. Vice President Pence on January six, twenty 475 00:30:58,480 --> 00:31:01,440 Speaker 1: twenty one, stood up to his book President Trump and 476 00:31:01,560 --> 00:31:04,560 Speaker 1: a rampaging mob calling for him to be lynched as 477 00:31:04,600 --> 00:31:07,920 Speaker 1: he insisted on doing his constitutional duty to certify the 478 00:31:08,000 --> 00:31:12,640 Speaker 1: election of President Biden. President Trump is wrong. I had 479 00:31:12,720 --> 00:31:16,360 Speaker 1: no right to overturn the election. The presidency belongs to 480 00:31:16,480 --> 00:31:20,400 Speaker 1: the American people and the American people alone. But one 481 00:31:20,520 --> 00:31:23,240 Speaker 1: area where we haven't seen much courage in our dealing 482 00:31:23,280 --> 00:31:26,200 Speaker 1: with our national debt, especially when it comes to how 483 00:31:26,240 --> 00:31:28,000 Speaker 1: we're going to pay for all that we owe in 484 00:31:28,160 --> 00:31:32,000 Speaker 1: Social Security and Medicare. Everyone agrees that what we are 485 00:31:32,080 --> 00:31:36,240 Speaker 1: doing is not sustainable. There's artisan support for Social Security 486 00:31:36,240 --> 00:31:38,760 Speaker 1: and Medicare. If anything, we need to shore those programs up. 487 00:31:38,800 --> 00:31:41,400 Speaker 1: They're running out of money. But when President Biden brought 488 00:31:41,440 --> 00:31:43,400 Speaker 1: up the subject at the State of the Union address 489 00:31:43,480 --> 00:31:46,240 Speaker 1: this year, he managed to get Republicans and Democrats to 490 00:31:46,320 --> 00:31:49,480 Speaker 1: agree that we shouldn't do anything about the problem. Some 491 00:31:49,680 --> 00:31:53,440 Speaker 1: Republicans want medicare and so security sunset. I'm not saying 492 00:31:53,480 --> 00:31:58,400 Speaker 1: it's a majority, and he was proud of it because 493 00:31:58,440 --> 00:32:02,960 Speaker 1: we all apparently agree, So security Medicare is off the 494 00:32:03,040 --> 00:32:06,880 Speaker 1: books now a right try not to do front all, right, 495 00:32:08,480 --> 00:32:12,320 Speaker 1: forgot this week, though, we did get an example of 496 00:32:12,480 --> 00:32:16,640 Speaker 1: real courage in addressing an aging population, as President mccron 497 00:32:16,760 --> 00:32:20,440 Speaker 1: of France stood up to his parliament to implement pension reform. 498 00:32:20,920 --> 00:32:25,040 Speaker 1: In France, President Emmanuel mccrone's government faces two confidence votes 499 00:32:25,160 --> 00:32:28,560 Speaker 1: as soon as today over his pension reform. Last week, 500 00:32:28,680 --> 00:32:31,880 Speaker 1: McCrone used a constitutional provision to push through the plan 501 00:32:32,000 --> 00:32:34,680 Speaker 1: to boost the minimum retirement age from sixty two to 502 00:32:34,840 --> 00:32:39,200 Speaker 1: sixty four that led to violent protests. Mccron's government says 503 00:32:39,240 --> 00:32:42,680 Speaker 1: that no confidence votes won't get a majority in parliament. 504 00:32:43,040 --> 00:32:45,480 Speaker 1: Financial markets this week have called for more than a 505 00:32:45,640 --> 00:32:49,240 Speaker 1: little bit of courage, Courage to face the truth, courage 506 00:32:49,280 --> 00:32:52,920 Speaker 1: not to overreact, courage to remain calm. And so we 507 00:32:53,080 --> 00:32:55,920 Speaker 1: leave you this week with some further thoughts from John Mack, 508 00:32:56,040 --> 00:32:58,400 Speaker 1: who led Morgan Stanley through the worst of it in 509 00:32:58,440 --> 00:33:00,960 Speaker 1: the Great Financial Crisis, and it took to lead his 510 00:33:01,080 --> 00:33:05,440 Speaker 1: organization through that time. I knew if I cracked, they 511 00:33:05,520 --> 00:33:08,400 Speaker 1: all cracked. So I had to put on a face. 512 00:33:08,640 --> 00:33:11,840 Speaker 1: What they didn't know. I was shut my office door 513 00:33:13,600 --> 00:33:17,040 Speaker 1: and just trying to pull myself together. I couldn't show 514 00:33:17,320 --> 00:33:20,040 Speaker 1: the stress of fear that we were under. That doesn't 515 00:33:20,080 --> 00:33:22,280 Speaker 1: for this episode of Wall Street Week, I'm David Weston. 516 00:33:22,440 --> 00:33:23,160 Speaker 1: See you next week.