Latest / Balance of Power / Former Secretary of State Antony Blinken on AI, Iran and Russia

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Former Secretary of State Antony Blinken on AI, Iran and Russia · Balance of Power

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Speaker 5: And there we have it, a hearing with the Treasury
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Speaker 5: Secretary Scott Besson before the House Financial Services Committee wraps up.
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Speaker 5: Welcome to Balance of Power on Bloomberg TV and radio.
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Speaker 5: You're joining us on the day. that the 10-year Treasury
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Speaker 5: yield hits the highest since 2007. So what a time
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Speaker 5: for the Treasury Secretary to be facing questions from lawmakers
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Speaker 5: when pushed on higher long-term borrowing costs. He did say
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Speaker 5: that the Treasury's recent expanded buyback operations were successful and
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Speaker 5: once again promised that fiscal consolidation is coming, even as
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Speaker 5: he suggests the planned $ 5, 000 Trump dividend checks the president
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Speaker 5: wants to send out are a good idea and can
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Speaker 5: be done without affecting the deficit. We'll get into all
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Speaker 5: of this with Bloomberg's Mike McKeeb. coming up in just
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Speaker 5: a minute. And of course, we also have an important
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Speaker 5: conversation taking place this hour between my colleague Joe Matthew
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Speaker 5: and the former Secretary of State Antony Blinken live in
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Speaker 5: New York, and they'll be joining us shortly. But we
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Speaker 5: do want to begin with Mr. Besson's remarks before the
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Speaker 5: committee today and what it means for the bond market,
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Speaker 5: which of course is continuing to see a sell-off. So
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Speaker 5: for more, Michael McKee, Bloomberg International Economics Policy. correspondent is
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Speaker 5: joining us now. So, Mike, let's first begin with the
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Speaker 5: fact that we do have a 10-year Treasury yield now
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Speaker 5: at 5%. We haven't seen this in nearly two decades,
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Speaker 5: and yet he's arguing that his moves to rein in
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Speaker 5: the long end have been successful. Is that true?
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Speaker 6: I don't think you could say it's true. His argument was, well,
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Speaker 6: we don't know what would have happened if I hadn't
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Speaker 6: done that. And I suppose the follow-on from that would
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Speaker 6: be that rates would be even higher or something like that.
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Speaker 6: Nobody in the bond market thinks it was successful, but
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Speaker 6: that was just sort of a passing comment he made.
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Speaker 6: I think, you know, if you were listening into this,
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Speaker 6: you heard a lot of antagonistic questions and a lot
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Speaker 6: of softball questions, depending on the political party asking, and
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Speaker 6: you didn't hear the Treasury Secretary say a whole lot
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Speaker 6: in terms of news.
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Speaker 7: Yeah.
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Speaker 5: Yeah, well, of course, that's often how these things go
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Speaker 5: on Capitol Hill. It's an opportunity to cut maybe some
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Speaker 5: things for campaign advertisements in an election season, Mike. But
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Speaker 5: on the moves we've seen in the bond market, he
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Speaker 5: once again reiterated that a fiscal consolidation plan is coming.
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Speaker 5: How would that track with the suggestion that sending $ 5, 000
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Speaker 5: checks to Americans are indeed a good idea that won't
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Speaker 5: affect the deficit? Is that fiscal consolidation?
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Speaker 3: Yeah.
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Speaker 8: Well, it doesn't appear it would be.
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Speaker 6: Now, Secretary Besson was asked about the $ 5, 000 checks a
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Speaker 6: number of times, and he said a number of times
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Speaker 6: there are ways to do it without adding to the deficit.
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Speaker 6: And he also kept adding, but I'm not going to
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Speaker 6: tell you what they are.
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Speaker 9: And so.
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Speaker 6: It was kind of odd because as far as anybody knows,
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Speaker 6: the first time we heard of this plan was the
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Speaker 6: president's comments in Dallas last week. But the secretary said, oh,
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Speaker 6: we've been working on this for some time and we
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Speaker 6: have a lot of good ideas. But he refused to
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Speaker 6: tell Congress what those ideas are. The fiscal consolidation thing
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Speaker 6: is something that he said before in response to questions
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Speaker 6: about rising bond yields because the markets are worried about
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Speaker 6: the deficit. But he also has offered no plan, and
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Speaker 6: he hasn't said when he would have a plan. And
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Speaker 6: I might point out we're two weeks away from the
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Speaker 6: end of the fiscal year.
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Speaker 10: Indeed.
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Speaker 5: And as we consider the bond market, I would point
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Speaker 5: out we just got the results of a $ 13 billion
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Speaker 5: 20-year auction and was a little bit of a tail,
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Speaker 5: drawing 5.42% compared to the 5.40% when issued yield. So
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Speaker 5: we have to keep that in mind, that sending yields
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Speaker 5: back in the upward direction. We are now just about
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Speaker 5: at 5.01% on the 10-year. I want to talk about
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Speaker 5: the other news we got from the Treasury Secretary as
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Speaker 5: well as it pertains to China. He plans to meet
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Speaker 5: with his Chinese counterpart, He Lifeng. this weekend ahead, of course,
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Speaker 5: of Xi Jinping's visit here in Washington planned for next week.
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Speaker 5: Walk us through the significance of that, Mike.
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Speaker 8: Well, it's something you would expect.
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Speaker 6: Normally, the cabinet members from the State Department and from
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Speaker 6: the Treasury and perhaps trade representative would meet with their
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Speaker 6: counterparts ahead of time because when heads of state meet,
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Speaker 6: the agenda is pretty much planned and the outcomes are
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Speaker 6: pretty much planned. They know in advance what where they're
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Speaker 6: going with this, this chance for the two leaders to talk.
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Speaker 6: But it is rare that you would ever have an
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Speaker 6: initiative come up in the meetings and then be worked
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Speaker 6: on and something presented. So they will have talked through
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Speaker 6: a lot of what they're going to be working on.
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Speaker 8: And the U.S.
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Speaker 6: Has a lot it wants to talk to China about.
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Speaker 6: And Secretary Besson, his remit covers a lot of areas.
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Speaker 6: I'm sure they'll be talking about the trade sanctions that
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Speaker 6: the president wants to put on and the concerns that
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Speaker 6: the U.S. and others have about overproduction in China and
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Speaker 6: how it's flooding the world with goods. And then I
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Speaker 6: am sure they'll probably get into some of the AI
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Speaker 6: questions about what kind of safeguards could be put in place. Now,
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Speaker 6: it's a little harder to see how they do this
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Speaker 6: because the president keeps saying there's no worry about But
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Speaker 6: I suspect that Secretary Besson is also listening to some
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Speaker 6: of those people in Silicon Valley who say, yeah, we
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Speaker 6: should worry and we should have a global regime to
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Speaker 6: try to prevent AI from.
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Speaker 8: Getting out of hand.
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Speaker 5: Yeah, the Treasury Secretary was asked about artificial intelligence repeatedly.
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Speaker 5: Michael McKee, Bloomberg International Economics and Policy Correspondent, thank you
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Speaker 5: so much. And of course, artificial intelligence and the global
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Speaker 5: question of how to regulate it, I know, is about
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Speaker 5: to come up in conversation as I hand things over
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Speaker 5: to my colleague, Joe Matthew, who is live in New
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Speaker 5: York with the former Secretary of State, Antony Blinken.
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Speaker 7: Joe.
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Speaker 8: Kayleigh, thank you so much. Mr.
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Speaker 2: Secretary, it's great to have you back on Bloomberg TV
6:20
Speaker 2: and radio. We meet at a precarious time today. The
6:24
Speaker 2: war with Iran is stretching on. Oil prices are at
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Speaker 2: their highest we've seen in some time, certainly since the
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Speaker 2: open of this invasion. Interest rates are at their highest
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Speaker 2: in years. And it's all taking place against the backdrop
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Speaker 2: of an argument over an emerging technology that some believe
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Speaker 2: could bring the end of humanity.
6:42
Speaker 8: It's just another Tuesday.
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Speaker 2: But I'd like to start there with you in this
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Speaker 2: AI debate that's underway right now in Washington. The people
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Speaker 2: building the most advanced AI models are saying it's time
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Speaker 2: to slow down. The president of the United States says
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Speaker 2: we have to win. Whoever wins AI wins. Is the
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Speaker 2: president right or the CEOs?
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Speaker 11: These shouldn't be irreconcilable positions because here's the reality, Joe.
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Speaker 11: The statement that we heard the other day from Dario Modi,
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Speaker 11: from Sam Altman, from Elon Musk saying, we've got to
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Speaker 11: do something. That should be a big flashing red light.
7:17
Speaker 11: This is like the wizards telling you something's rotten in Oz.
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Speaker 11: We ought to listen and pay attention when we hear that.
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Speaker 11: And the reality is this. This technology is moving at
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Speaker 11: a speed that we can't even begin to wrap our
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Speaker 11: arms around, never mind get ahead of. We're seeing a
7:34
Speaker 11: doubling in capacity on the frontier platforms. Every several months,
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Speaker 11: Moore's Law is out the window when it comes to computers.
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Speaker 7: So.
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Speaker 11: The necessity of doing something to put some governing rails
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Speaker 11: on this, I think, is increasingly evident to pretty much everyone,
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Speaker 11: although the president seems to disagree. We regulate the airplanes
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Speaker 11: flying in the skies. We regulate the nuclear power plants
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Speaker 11: producing power for us. We regulate the stuff that we
7:59
Speaker 11: put into our bodies through pharmaceuticals. AI has the potential
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Speaker 11: both for incredible good but also for terrible consequences if
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Speaker 11: it's not properly guardrailed. I'm convinced we can do this
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Speaker 11: in a way that doesn't set back our innovation, that
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Speaker 11: doesn't set us back in the.
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Speaker 8: Race with China. And by the way.
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Speaker 11: It's very good that the Treasury Secretary is meeting with
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Speaker 11: his Chinese counterpart. I suspect this will be front and
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Speaker 11: center on the agenda.
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Speaker 8: Here's the thing.
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Speaker 11: Do you think that China wants an AI that is,
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Speaker 11: from the perspective of an autocratic state, an AI running
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Speaker 11: amok either in the hands of people that it doesn't
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Speaker 11: control or in its own hands in ways it can't control?
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Speaker 11: There is a way of bringing us together to see
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Speaker 11: if we can't find Well, should.
8:40
Speaker 2: There be an AI safety framework on the table when
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Speaker 2: the president meets with Xi next week?
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Speaker 11: I believe there should be. Look, first of all, we
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Speaker 11: need that at home. So that doesn't give the win
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Speaker 11: to China? No, I don't think it gives the win
8:51
Speaker 11: to China. I think there's a shared interest for all
8:53
Speaker 11: of our differences, for all of the very profound mutual suspicions.
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Speaker 11: The Chinese are going to be very suspicious of us,
8:58
Speaker 11: just as we're rightly suspicious.
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Speaker 8: Very suspicious of them.
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Speaker 11: So it doesn't make this easy, but we know from
9:04
Speaker 11: decades of arms control during the Cold War with the
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Speaker 11: Soviet Union, these kinds of things are possible.
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Speaker 8: As hard as they are.
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Speaker 11: Again, I don't want to minimize the difficulty, but I
9:12
Speaker 11: want to emphasize the necessity. And by the way, it's
9:15
Speaker 11: not just, it's the governing principles, it's trust.
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Speaker 2: Yeah.
9:19
Speaker 8: It's safety. It's security. It's in some way getting a.
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Speaker 11: Partnership between the private sector and government to embed experts, perhaps,
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Speaker 11: to look at every model before it goes out, but
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Speaker 11: to do it in a way that doesn't hold back innovation.
9:31
Speaker 8: We need to get all the companies on board. We
9:33
Speaker 8: need to get China on board. We need to get
9:35
Speaker 8: the world on board. And finally... Our community is on board.
9:38
Speaker 8: We need a new social compact.
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Speaker 11: If you're building a data center, we've got to make
9:42
Speaker 11: sure that the electricity rates aren't going to kill the community,
9:45
Speaker 11: that they're not going to lose out on water, that
9:47
Speaker 11: jobs are not going to go in the wrong direction,
9:49
Speaker 11: that there's upskilling, and the community benefits.
9:52
Speaker 8: If we do all of.
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Speaker 11: Those things, I think we have a chance to harness
9:55
Speaker 11: this for good and to try to minimize the negative.
9:58
Speaker 2: You mentioned Scott Bassett's with his counterpart from China this weekend.
10:04
Speaker 2: The channel for AI is going through Treasury. Why is
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Speaker 2: this not being led by the State Department?
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Speaker 11: Look, different administrations engage on these issues in different ways.
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Speaker 11: I would think you need both, honestly.
10:17
Speaker 8: This is entering statecraft now, is it not? This is
10:20
Speaker 8: just a text story.
10:20
Speaker 11: This is statecraft, but both departments have a critical role
10:23
Speaker 11: to play. When we were doing this during the Biden administration, first,
10:27
Speaker 11: the White House worked intensely with the frontier platforms.
10:30
Speaker 8: Yes. They got voluntary commitments, right, on... security, on safety,
10:34
Speaker 8: on trust.
10:35
Speaker 11: Then we at the State Department, but working hand in
10:38
Speaker 11: hand with the Treasury Department and with the Commerce Department,
10:41
Speaker 11: went around the world and tried to build support for that.
10:44
Speaker 11: We got the G7 on board. We got the first
10:46
Speaker 11: ever resolution out of the UN General Assembly. That's the
10:49
Speaker 11: direction we were tracking in.
10:52
Speaker 2: Well, I remember To that extent, you got President Xi
10:55
Speaker 2: to say, only humans, not machines, decide on nuclear weapons.
10:58
Speaker 8: That's right. Was that a real agreement?
11:00
Speaker 11: Well, look, it was certainly a real agreement to the
11:04
Speaker 11: extent that that's what he said. But as Ronald Reagan
11:07
Speaker 11: said many years ago, trust but verify. The challenge in
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Speaker 11: these areas is to put in place the necessary verification mechanisms.
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Speaker 8: And I don't want to minimize the difficulty of doing that.
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Speaker 8: But again... It's possible, and I think it's necessary.
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Speaker 2: Well, I ask you that in part because Elon Musk says,
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Speaker 2: and you've heard this, that AI could be more dangerous
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Speaker 2: than nuclear weapons. As someone who negotiated nuclear diplomacy for years,
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Speaker 2: does that square with your experience?
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Speaker 11: Yeah, I think that possibility, that potential is real. And
11:36
Speaker 11: when he's saying that, when Sam Altman is saying that,
11:39
Speaker 11: when Dario Mori is saying that, again, we need to listen.
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Speaker 8: The White House would call you a doer. We need
11:43
Speaker 8: to act. White House would call you a doomer at
11:46
Speaker 8: a critical moment.
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Speaker 11: I'm not a doomer because I see the incredible, extraordinary,
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Speaker 11: life-changing potential of this technology to solve problems we couldn't
11:55
Speaker 11: solve before, to make scientific breakthroughs, to cure diseases, to
11:59
Speaker 11: educate people.
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Speaker 8: I'm not a doomer. I'm a realist.
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Speaker 11: And I think we all need to be realists. And again,
12:04
Speaker 11: as I said earlier, you've got the wizards telling you
12:07
Speaker 11: all ain't right in Oz.
12:08
Speaker 8: Yeah. Listen to them.
12:10
Speaker 2: So just lastly, should the U.S. sign an AI security
12:13
Speaker 2: framework with China?
12:14
Speaker 11: Should that be a goal? I think if we, yeah,
12:16
Speaker 11: that should be a goal. I think if we can
12:17
Speaker 11: find a way to get to yes on that. But
12:20
Speaker 11: of course, China's critical, but it's setting the rules and
12:24
Speaker 11: norms for the entire world. We need to be in
12:26
Speaker 11: the driver's seat in doing that. Because here's the thing, Joe,
12:29
Speaker 11: if we're not doing that, I can tell you China
12:31
Speaker 11: will be in our absence. And as they say, if
12:34
Speaker 11: you're not at the table, you know, you're on the menu.
12:36
Speaker 8: Yeah, interesting. That said, the president says Iran.
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Speaker 5: Mm-hmm.
12:40
Speaker 2: Is begging to make a deal. Iran says don't pay
12:43
Speaker 2: attention to the president's mixed messages. You negotiated with these
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Speaker 2: people for four years, many of the same people.
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Speaker 8: Who's bluffing?
12:51
Speaker 11: They have an interesting way of begging, if that means
12:53
Speaker 11: launching more projectiles at us, at our partners, getting the
12:58
Speaker 11: Houthis in the act to pull down the Red Sea
13:01
Speaker 11: corridor along with the Strait of Hormuz. Look, we're in
13:04
Speaker 11: a very difficult position, unfortunately, of the president's making. Every
13:08
Speaker 11: past administration, every past administration, including the first Trump administration,
13:12
Speaker 11: looked at what would happen if you pushed Iran too far,
13:15
Speaker 11: if you posed an existential threat to the regime. We
13:17
Speaker 11: knew they could do a few things. They could attack
13:19
Speaker 11: our forces in the region. They could attack our bases
13:21
Speaker 11: in the region. They could attack our friends in the region.
13:23
Speaker 11: They could shut down the Strait of Hormuz.
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Speaker 8: You got them all. Yes, we got them all. There's
13:27
Speaker 8: a clear off-ramp here.
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Speaker 11: I think the president's wanted to take that off-ramp for
13:30
Speaker 11: months because he has huge pressure when it comes to markets.
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Speaker 4: Mm-hmm.
13:34
Speaker 11: Munitions and their short supply and of course the midterms.
13:38
Speaker 11: But taking the off ramp, which means a diplomatic agreement
13:41
Speaker 11: with Iran that by definition gives Iran something, means it
13:45
Speaker 11: looks like a loss. And I think that's the hesitation
13:48
Speaker 11: on his part. This could and should be over tomorrow. Okay,
13:52
Speaker 11: you didn't want this war.
13:54
Speaker 3: No.
13:55
Speaker 8: But here we are, and you've got Houthi rebels.
13:57
Speaker 2: Now adding another choke point and attacking the bypass pipeline
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Speaker 2: in Saudi Arabia.
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Speaker 11: What could you do tomorrow to end it? Again, it
14:04
Speaker 11: comes down to diplomacy. It comes down to a negotiation.
14:06
Speaker 11: By definition, a negotiation is a two-way street. It's got
14:10
Speaker 11: to be, unfortunately, from my perspective, have something in it
14:13
Speaker 11: for Iran because... The president, as a result of this war,
14:18
Speaker 11: has given the Iranians the ability to demonstrate that they
14:20
Speaker 11: have a chokehold, not just on us, but on the
14:23
Speaker 11: global economy.
14:25
Speaker 8: So we need to deal with that. And here's the thing.
14:27
Speaker 11: Our problem, Joe, is that we've been able to escalate
14:30
Speaker 11: this vertically. We've lobbed more missiles at them. They escalate horizontally.
14:35
Speaker 8: They go at us.
14:36
Speaker 11: They go at our partners. They go at our bases.
14:38
Speaker 11: They get the Houthis involved. They shut down the Red
14:40
Speaker 11: Sea Corridor. That's a real advantage for them. And the
14:44
Speaker 11: problem is there's not really a good military solution absent
14:47
Speaker 11: a full-scale invasion of Iran, which would be a disaster
14:49
Speaker 11: because thousands of miles of coastline, right, along the Strait
14:53
Speaker 11: of Hormuz. And a real problem, too, because many of
14:56
Speaker 11: the drones, the missiles, the things that they have They're
15:01
Speaker 11: based not just along that coastline, but several hundred miles in.
15:04
Speaker 11: That's the kind of range they have. They have tens
15:06
Speaker 11: of thousands of these things left. For all of the
15:08
Speaker 11: damage that we've done, they still have a lot in
15:10
Speaker 11: their arsenal, and they keep producing more. There is not
15:13
Speaker 11: a good military way out. Diplomacy is the way you've
15:15
Speaker 11: got to go. Well, we've been firing a lot of missiles.
15:18
Speaker 2: This new inspector general report from the Pentagon is remarkable,
15:21
Speaker 2: showing not only that we have strategic inventory shortfalls, which
15:24
Speaker 2: I will note that you predicted some months ago, but
15:28
Speaker 2: also caused about $ 184 million worth of damage to our
15:31
Speaker 2: diplomatic facilities, Iraq, Kuwait, Saudi Arabia, UAE.
15:36
Speaker 8: How does that impact our diplomatic corps?
15:38
Speaker 11: Well, it's sending a message, unfortunately, to our partners in
15:42
Speaker 11: the region that they can't necessarily count on us when
15:46
Speaker 11: it comes to coming to their defense. And what's the result?
15:50
Speaker 11: We see this now, and it's reported pretty widely. They're
15:52
Speaker 11: all looking to talk to Tehran, maybe cut a deal
15:56
Speaker 11: with Tehran. These are countries that have no love lost
16:00
Speaker 11: for the regime, a regime that unfortunately has been reinforced
16:03
Speaker 11: with the hardest of its hardliners now as a result
16:04
Speaker 11: of this. But they're looking to cut deals because they
16:07
Speaker 11: know that Unfortunately, what they've seen is we can't necessarily
16:10
Speaker 11: defend them.
16:11
Speaker 2: Of course, we're not using our diplomatic corps, at least
16:14
Speaker 2: in a very present or public way. Is it helping
16:17
Speaker 2: or hurting to have real estate professionals at the diplomatic table?
16:22
Speaker 11: Look, you have individuals that come into different administrations on
16:25
Speaker 11: the political side from a variety of backgrounds. They bring
16:28
Speaker 11: skill sets with them that can be really useful and important.
16:31
Speaker 11: But the question is, how do they get married up?
16:34
Speaker 11: to genuine expertise when it comes to incredibly complicated issues.
16:39
Speaker 8: When we negotiated the.
16:39
Speaker 11: Iran nuclear agreement with Tehran, it was not just the
16:45
Speaker 11: really smart, really effective people who came in with President Obama,
16:50
Speaker 11: whether it was Jake Sullivan, Bill Burns, Wendy Sherman, John Kerry, myself.
16:56
Speaker 11: We always had extraordinary experts around the table.
17:00
Speaker 8: Who knew these issues in detail, in depth.
17:03
Speaker 11: And it took us two and a half years to
17:05
Speaker 11: get the agreement that we reached with Iran that set
17:07
Speaker 11: back its nuclear program and put it in a box
17:09
Speaker 11: such that if Iran had chosen to break out of
17:11
Speaker 11: that box, it would have taken it more than a year,
17:13
Speaker 11: and we could have done something about it to stop it. Unfortunately,
17:16
Speaker 11: President Trump tore up that agreement, and that's really why
17:19
Speaker 11: we are where.
17:19
Speaker 8: We are now.
17:20
Speaker 2: We talked to Wendy Sherman quite recently about this, who
17:23
Speaker 2: suggested it would be impossible to find a deal as
17:26
Speaker 2: good as the JCPOA deal.
17:28
Speaker 8: At this point.
17:28
Speaker 2: I don't know if you feel that way. You seem
17:30
Speaker 2: to think that this could be ended through diplomacy tomorrow. Well,
17:32
Speaker 2: when I say ended through diplomacy, here's what I'm talking about.
17:35
Speaker 8: What's the goal now? It's kind of perverse.
17:39
Speaker 11: It's to undo a problem of the president's making, and
17:42
Speaker 11: that problem is the Strait of Hormuz. It's to get
17:44
Speaker 11: back to regular, normalized shipping so that people have confidence,
17:48
Speaker 11: the shippers, the insurers, everyone have confidence that things can
17:51
Speaker 11: move freely through the Strait of Hormuz and the Red Sea.
17:54
Speaker 8: That's the goal. The nuclear program is a whole other problem.
17:56
Speaker 8: That's a separate negotiation. That's a separate issue.
17:58
Speaker 2: So how much will this cost by the time it's done?
18:01
Speaker 11: Look, I think at the end of the day, again,
18:04
Speaker 11: this is where I think the president is having trouble
18:06
Speaker 11: taking the off ramp that's there. Again, it means acknowledging
18:09
Speaker 11: that the Iranians are going to get something that is
18:11
Speaker 11: likely to be a toll that's not called a toll
18:13
Speaker 11: on the state of Hormuz. Maybe it's sanctions relief, some
18:17
Speaker 11: combination of those two things. And then there's the whole
18:21
Speaker 11: question of the nuclear piece. And I hope that at
18:23
Speaker 11: the very least, we can get back to some of
18:27
Speaker 11: the basics that we had in the JCPOA. In particular,
18:30
Speaker 11: trying to get some of the enriched uranium out of Iran.
18:34
Speaker 11: trying to get some limitations on the centrifuges. But that's
18:37
Speaker 11: a whole other piece of business. Now, the most immediate
18:40
Speaker 11: is let's get the shipping back to where it was.
18:42
Speaker 11: Let's get oil prices under greater control. The affordability impact
18:46
Speaker 11: for people is incredible, especially now on diesel. I was
18:51
Speaker 11: with a guy the other day who was driving me
18:53
Speaker 11: around in an Uber, and he had a big SUV
18:59
Speaker 11: running on diesel. I said, how much does it cost
19:00
Speaker 11: you to fill the tank? He said twice what it
19:03
Speaker 11: was before this war started.
19:05
Speaker 8: Where's the margin? You can't make a living that way. Wow.
19:09
Speaker 8: Just curious before I move on.
19:11
Speaker 2: Has Secretary Rubio had any conversations with you to tap
19:14
Speaker 2: your expertise or get your opinion on it?
19:16
Speaker 11: We had some extensive conversations during the transition.
19:19
Speaker 8: Okay. Since the invasion? Not since the invasion. The initial strikes?
19:23
Speaker 11: No.
19:24
Speaker 2: We're having this conversation as we prepare to mark another
19:27
Speaker 2: October 7th, which is pretty wild to think that this
19:30
Speaker 2: is number three. You recently called a newspaper report out
19:33
Speaker 2: of Israel, Complete Fiction, a report that Qatar's prime minister
19:39
Speaker 2: called you to broker the release of civilian hostages that night.
19:44
Speaker 11: What did happen on that call? Well, first of all,
19:47
Speaker 11: no call. I was in the region. There was no call. Well,
19:51
Speaker 11: there were calls, but I think what this report was
19:54
Speaker 11: claiming was and is fiction. But here's what happened. I
19:59
Speaker 11: was in the region almost immediately, a few days after
20:01
Speaker 11: October 7th. Not just in Israel, but also in Qatar
20:04
Speaker 11: and Saudi Arabia and UAE and Jordan, Bahrain, all of
20:08
Speaker 11: these places. When I got to Qatar, my very good partner, colleague, friend,
20:15
Speaker 11: the foreign minister and prime minister said that there had
20:18
Speaker 11: been outreach from Hamas about talking about the hostages. That
20:24
Speaker 11: was great news for me because we had Americans who
20:27
Speaker 11: were being held hostage. And he said, but I'm having
20:30
Speaker 11: trouble getting through to the Israelis to try to figure
20:32
Speaker 11: out how we move forward with the conversation.
20:35
Speaker 8: So I said, I'm on it.
20:37
Speaker 11: Right after that meeting, I went back on my plane,
20:41
Speaker 11: got on the phone to very senior people in Israel
20:43
Speaker 11: and said, I've just heard that Hamas is at least
20:45
Speaker 11: ready to talk. There was no offer to free all
20:49
Speaker 11: the hostages or the civilian hostages. If they'd wanted to
20:51
Speaker 11: free the civilian hostages, never mind that they never should
20:53
Speaker 11: have been taken in the first place, they could have
20:55
Speaker 11: done it any time. No, the only offer that was
20:58
Speaker 11: on the table was, we're prepared to talk. We need
21:01
Speaker 11: a channel to do that. I got on the phone
21:02
Speaker 11: with the Israelis and said, you need to designate someone
21:04
Speaker 11: immediately to to engage in these conversations, and they did.
21:08
Speaker 3: Yeah.
21:08
Speaker 2: Was any hostage release proposal put before you in the
21:12
Speaker 2: first 72 hours?
21:13
Speaker 8: Is that right?
21:13
Speaker 7: No.
21:14
Speaker 8: Not that I saw.
21:15
Speaker 2: There's reporting separately by this same group, Heretz, that the
21:20
Speaker 2: UAE president warned Benjamin Netanyahu that Hamas was planning this
21:24
Speaker 2: attack days before it happened.
21:25
Speaker 11: Do you believe that's true? Look, I don't know the
21:29
Speaker 11: substance of that. I can tell you we didn't hear that.
21:32
Speaker 11: I can tell you that while... People might have said
21:36
Speaker 11: general things about heightened tensions, heightened risks. I am not
21:40
Speaker 11: aware of anyone saying or any report that we received,
21:44
Speaker 11: I can't speak to the Israelis, that said this is
21:46
Speaker 11: going to happen in such and such a place, in
21:49
Speaker 11: such and such a time, by such and such a means.
21:52
Speaker 11: I didn't see, but I really can't speak to what
21:54
Speaker 11: the Israelis heard.
21:55
Speaker 2: Secretary, lawmakers in Washington, I know you're headed back to
21:58
Speaker 2: the nation's capital, are faced with an important decision about
22:01
Speaker 2: Russia's sanctions. I'm sure you know the ins and outs
22:04
Speaker 2: of this bill, and there's a pretty robust debate between
22:06
Speaker 2: Democrats and Republicans. Many Democrats are worried that they will
22:09
Speaker 2: be handing President Trump over. ever more authority to lay
22:13
Speaker 2: tariffs on other countries, watch prices continue to rise?
22:16
Speaker 8: Should it pass anyway?
22:18
Speaker 11: Look, I'm focused on what can we do in this
22:21
Speaker 11: moment to increase the pressure on Russia to get to
22:25
Speaker 11: the table to finally end this war, a war that
22:27
Speaker 11: the president said he would end within 24 hours of
22:29
Speaker 11: assuming the presidency. I think we're a little more than
22:31
Speaker 11: 24 hours past that assumption of the presidency.
22:35
Speaker 8: And what I heard this week was really the world
22:38
Speaker 8: upside down.
22:38
Speaker 11: The president was complaining about the Ukrainian responsibility for higher
22:43
Speaker 11: oil prices because they're going at some of the energy
22:45
Speaker 11: infrastructure in Russia. And he said he was talking to
22:49
Speaker 11: Zelensky about it.
22:50
Speaker 8: He's calling the wrong guy.
22:51
Speaker 11: He should be calling Vladimir Putin and telling Putin to
22:54
Speaker 11: stop going at Ukraine's energy, to stop going at Ukraine's
22:58
Speaker 11: civilian infrastructure, to stop going at trains, civilian trains that
23:02
Speaker 11: are carrying people in and out of Ukraine. It would
23:04
Speaker 11: be like attacking airplanes. There are no airports functioning now
23:08
Speaker 11: in Ukraine.
23:09
Speaker 8: Mm-hmm.
23:09
Speaker 11: So there's, I think, a short-term deal to be had here,
23:12
Speaker 11: which is where I hope the president can put his efforts.
23:14
Speaker 11: The short-term deal would be a stand-down by both Russia
23:18
Speaker 11: and Ukraine on going at each other's energy. He seems
23:21
Speaker 11: to think he achieved that. Well, we're certainly not seeing that. And,
23:24
Speaker 11: by the way, as you know very well, the real
23:27
Speaker 11: impact that we're seeing around the world on prices is
23:29
Speaker 11: really coming from the Gulf.
23:29
Speaker 8: It's not coming from Ukraine and Russia. Mm-hmm. So yes
23:33
Speaker 8: or no on the sanctions bill?
23:34
Speaker 11: Look, I think we need to find ways with the
23:37
Speaker 11: sanctions to, again, exert further pressure on Russia. Whether this
23:41
Speaker 11: is the right mechanism, I'm hopeful that something comes out
23:45
Speaker 11: in the wash that would be productive. Both countries are suffering.
23:51
Speaker 11: But Russia is, we know, under tremendous pressure right now.
23:54
Speaker 11: And this is the moment, I think, to not only
23:57
Speaker 11: reinforce that pressure, but to get it to the point where, hopefully,
24:02
Speaker 11: you can get to the bargaining table and finally bring
24:04
Speaker 11: this to an end, and in a way that ensures
24:07
Speaker 11: Ukraine's security going forward.
24:08
Speaker 2: You hear what critics say about the Biden administration's approach
24:12
Speaker 2: to Ukraine, that you slow-walked long-range missiles, you slow-walked F-16s,
24:16
Speaker 2: slow-walked Patriots. Did your— attempts to manage escalation caused Ukraine
24:22
Speaker 2: to lose this war?
24:23
Speaker 11: So first, Joe, you know, all of us can give
24:26
Speaker 11: the advice that we give, make the recommendations we make.
24:28
Speaker 11: Only one person bears the full responsibility. That's the president
24:31
Speaker 11: of the United States. And President Biden had to balance
24:35
Speaker 11: doing everything we possibly could for Ukraine with averting a
24:38
Speaker 11: direct conflict with another nuclear power, Russia.
24:41
Speaker 8: So that was something that was on his mind.
24:43
Speaker 11: Having said that, look, I think from my perspective, had
24:46
Speaker 11: we not done what we did starting before the Russian aggression, there.
24:50
Speaker 8: Would not be an independent Ukraine right now. And I'm
24:53
Speaker 8: very proud of the fact that we stood with them
24:55
Speaker 8: every step of the way.
24:56
Speaker 11: I don't think there's an individual weapon system that would
24:59
Speaker 11: have been necessarily dispositive in any particular moment. We also
25:02
Speaker 11: had to ask a lot of other questions. If you're
25:04
Speaker 11: giving them a tank, if you're giving them an F-16,
25:07
Speaker 11: not only do you give it to them, but can
25:09
Speaker 11: they use it? Can they maintain it? All of these
25:12
Speaker 11: things are important. We tried as best we could to,
25:16
Speaker 11: I think, make the right decisions. I certainly was leaning
25:18
Speaker 11: in on trying to make sure that they got everything they.
25:20
Speaker 8: Could possibly get. not only to.
25:23
Speaker 11: Ward off the Russians, but also to put real pressure
25:25
Speaker 11: on them, again, for purposes of getting to a negotiation
25:28
Speaker 11: and ending the war.
25:29
Speaker 2: Should Ukrainians be allowed to make their own patriots? Should
25:32
Speaker 2: they have that license? Yes, I believe they should. I
25:34
Speaker 2: believe they should.
25:34
Speaker 8: Look, we have a worldwide shortage. Ukraine can.
25:39
Speaker 11: and I believe eventually will become a critical contributor to
25:43
Speaker 11: defense of democratic countries.
25:46
Speaker 8: Its drone industry is extraordinary. I saw it firsthand, repeatedly.
25:51
Speaker 11: Same thing could be the case when it comes to
25:53
Speaker 11: manufacturing things like defensive patriot interceptors.
25:56
Speaker 8: Short answer is yes. Interesting.
25:58
Speaker 2: Primary season ends today. Kind of interesting, if I could
26:01
Speaker 2: throw a little domestic politics at you. There's been a
26:04
Speaker 2: remarkable split in the Democratic Party, specifically when it comes
26:07
Speaker 2: to Israel, and you're seeing this come to light today.
26:09
Speaker 2: in some of the races that we've seen in Michigan,
26:12
Speaker 2: here in New York, of course, out in California. I'm
26:15
Speaker 2: wondering your thoughts on this. Can Democrats run on the
26:19
Speaker 2: Biden foreign policy agenda, or must they run away from it?
26:22
Speaker 11: Look, Democrats need to come up with their agenda that
26:27
Speaker 11: carries the country forward. I believe and hope that there
26:31
Speaker 11: are important elements of what President Biden did, what we did,
26:34
Speaker 11: that people will find inspiring and be a good foundation.
26:38
Speaker 11: We tried to do two basic things as a matter
26:41
Speaker 11: of principle. Make sure we were as strong as possible
26:44
Speaker 11: at home by the investments we made, and we made
26:46
Speaker 11: historic investments in infrastructure. in ships and science, in clean technology.
26:52
Speaker 11: And we believe very strongly that a key to our
26:54
Speaker 11: success around the world and showing strength around the world
26:57
Speaker 11: was the strength of our alliances and partnerships. But on
27:00
Speaker 11: specific policies, look, the Democrats that are coming up now,
27:03
Speaker 11: they're going to have to make those decisions. Look, I
27:05
Speaker 11: know one thing as a longtime Democrat. There's the famous
27:09
Speaker 11: line many years ago by Will Rogers who said, I'm
27:11
Speaker 11: not a member of any organized political party.
27:13
Speaker 8: I'm a Democrat. That's kind of the nature of these things.
27:16
Speaker 11: And Until there is, in all likelihood, a nominee, you're
27:20
Speaker 11: not necessarily going to have that unity.
27:23
Speaker 8: There should be a battle of ideas within the party
27:25
Speaker 8: about what is the best way forward.
27:27
Speaker 2: Will it be the next president who has to solve Gaza?
27:33
Speaker 8: My conviction is this.
27:35
Speaker 11: When you cut everything away, I think we have to,
27:42
Speaker 11: if we're ever going to solve not just Gaza, but
27:44
Speaker 11: the larger problem, Here is the reality.
27:49
Speaker 8: If you're part of the crowd.
27:50
Speaker 11: From the river to the sea that says you want
27:53
Speaker 11: Israel to go away, guess what?
27:54
Speaker 8: It's not.
27:55
Speaker 11: If you're part of the greater Israel crowd that wants
27:58
Speaker 11: the Palestinians to go away, guess what?
28:00
Speaker 8: They're not.
28:01
Speaker 11: There are 7 million Jews. There are 7 million Arabs.
28:04
Speaker 11: No one is going anywhere. And until you reconcile that
28:09
Speaker 11: basic reality, you are part of the problem, not the solution.
28:12
Speaker 8: What is the solution?
28:13
Speaker 11: The solution is what it's been, even though no one
28:15
Speaker 11: seems to believe it anymore. A secure Israel, a sovereign Palestine.
28:20
Speaker 11: We need to see a renewed groundswell of support, not
28:24
Speaker 11: just in those countries, but in the United States for
28:26
Speaker 11: that proposition. And that means making sure that, yes, we
28:30
Speaker 11: can oppose Israeli policies rightly, but we shouldn't be opposing
28:35
Speaker 11: the existence of the state. We need to look at
28:39
Speaker 11: what it would take to make Israel secure, as well
28:42
Speaker 11: as to make Palestinians sovereign with a country of their own.
28:45
Speaker 11: That's the only way forward. In Gaza, I handed over
28:49
Speaker 11: a plan, a day-after plan. How do you secure the place?
28:53
Speaker 11: How do you govern the place? How do you rebuild
28:56
Speaker 11: the place? And do it in a way that would
28:59
Speaker 11: allow the Israelis to pull out entirely. My hope is
29:02
Speaker 11: that we come back to that, at least as a
29:04
Speaker 11: means of dealing with the tragedy that is Gaza. But
29:08
Speaker 11: the wider picture, the bigger picture is, unless we come
29:12
Speaker 11: to our own reconciliation with the notion that The only
29:16
Speaker 11: way forward is a recognition on each side that neither
29:20
Speaker 11: is going anywhere.
29:21
Speaker 8: That's got to be the basis. That's where we need
29:23
Speaker 8: to go.
29:24
Speaker 2: Secretary, about 20 months ago, if my count is correct,
29:28
Speaker 2: it was announced that you were working on a memoir.
29:30
Speaker 8: When's it coming out?
29:31
Speaker 2: And we'll include the stories and the experiences that you
29:36
Speaker 2: endured around October 7th.
29:37
Speaker 11: Well, God willing, it'll come out a almost exactly a
29:40
Speaker 11: year from now, in the fall of 27. These things
29:44
Speaker 11: take a long time. And yeah, it's going to include
29:48
Speaker 11: everything that I saw, experienced, worked on, not just in
29:52
Speaker 11: my time with President Biden, but throughout my career. I've
29:55
Speaker 11: worked on these issues for 30 years through three administrations.
29:58
Speaker 11: and on the Hill, and I hope I have something
30:00
Speaker 11: to say that's going to be of interest to people.
30:02
Speaker 2: Well, I hope we have a chance to talk to
30:03
Speaker 2: you before then. And when the book comes out, Mr. Secretary,
30:06
Speaker 2: thank you for your insights and the time today here
30:09
Speaker 2: at World.
30:09
Speaker 8: Headquarters in New York. Joe, great to be with you.
30:11
Speaker 8: Thank you.
30:11
Speaker 2: Anthony Blinken, live on Bloomberg TV and radio. I'm Joe
30:14
Speaker 2: Matthew at World Headquarters. Stay with us on Balance of Power.
30:17
Speaker 2: We'll have much more coming up after this.
30:22
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30:26
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30:41
Speaker 5: Great conversation with the former Secretary of State, covering, of course,
30:45
Speaker 5: a wide range of topics from AI to Iran to
30:48
Speaker 5: the war between Russia and Ukraine. And as we reflect
30:50
Speaker 5: on what we heard from the former Secretary of State,
30:52
Speaker 5: we turn now to our political panel. Bloomberg Politics contributors
30:55
Speaker 5: Rick Davis and Jeanne Shanzano are with us. Rick, of course,
30:58
Speaker 5: Stonecourt Capital partner and Republican strategist. Jeanne, a Democratic analyst.
31:02
Speaker 5: and Democracy Visiting Fellow at Harvard Kennedy School's Ash Center.
31:06
Speaker 5: Welcome to you both. I want to begin with what
31:08
Speaker 5: we heard from the Secretary around Russia and Ukraine and
31:11
Speaker 5: the sanctions bill that is about to get a vote
31:13
Speaker 5: in the House of Representatives, as that is obviously an
31:15
Speaker 5: issue pressing before Congress. Jeannie, I wonder what you made
31:19
Speaker 5: of the Secretary's suggestion that there does need to be
31:22
Speaker 5: a way to find greater sanctions pressure to exert on Russia,
31:27
Speaker 5: but the fact that he was lukewarm on whether this
31:29
Speaker 5: is the right mechanism. He said it should all come
31:32
Speaker 5: out in the wash. What will come out in the wash?
31:37
Speaker 10: Yeah, I'm not sure what's going to come out in
31:39
Speaker 10: the wash, but I think he's absolutely right on both counts.
31:42
Speaker 10: I am not sure the vehicle in front of Congress
31:45
Speaker 10: today is the right one because of the impact with
31:50
Speaker 10: the executive branch and the expansion of those tariff powers.
31:55
Speaker 10: That said, we do need to exert influence, economic influence,
32:00
Speaker 10: and we do need to do that immediately on Russia.
32:03
Speaker 10: And I thought his comment that the president is calling
32:07
Speaker 10: the wrong guy, if I got that quote accurate, is
32:10
Speaker 10: absolutely on point. I mean, we have seen Steve Witkoff,
32:14
Speaker 10: Jared Kushner come back from meeting with Putin, and they're
32:17
Speaker 10: almost awestruck by meeting with him and acting as if
32:20
Speaker 10: they're going to deal with him like a businessman and make.
32:23
Speaker 5: Some business deal. That is not the.
32:28
Speaker 10: Way in which he has operated Vladimir Putin for decades,
32:31
Speaker 10: and it's not the way he's going to operate now.
32:34
Speaker 10: And so I do think that Blinken is right to
32:37
Speaker 10: say we need to exert pressure on Putin. We can't
32:41
Speaker 10: be awestruck by him in these meetings and then be
32:44
Speaker 10: calling on Ukraine to take.
32:46
Speaker 8: A step forward.
32:48
Speaker 5: Well, so if it is about calling Putin or sending
32:51
Speaker 5: a signal to Putin, Rick, if the sanctions bill doesn't pass,
32:55
Speaker 5: what signal would that send or do you expect it to?
32:59
Speaker 7: Yeah, I must admit I was a little disappointed that
33:01
Speaker 7: the secretary didn't give a more full-throated support for more
33:05
Speaker 7: sanctions and a tougher bill. And it was very diplomatic,
33:10
Speaker 7: which I guess with a lifetime of diplomacy, you would
33:13
Speaker 7: expect that. But at the end of the day, the
33:15
Speaker 7: bill's on the floor tomorrow. Are you for it or
33:17
Speaker 7: are you against it? And you can be both and
33:21
Speaker 7: be right. But in this case... Yes, it sends a
33:25
Speaker 7: horrible message to the Kremlin if this bill doesn't pass.
33:29
Speaker 7: It's another way that Putin slips the knot, too. At
33:32
Speaker 7: some point, we ought to set aside everybody's anger at
33:34
Speaker 7: the Trump administration around tariffs.
33:36
Speaker 8: I'm angry, too.
33:37
Speaker 7: But at the same time, tariffs could be a very
33:41
Speaker 7: viable option. approach to sanctions in Russia. So you can't
33:44
Speaker 7: have it both ways. And so at some point, you've
33:47
Speaker 7: got to just hold your nose and say, yes, we're
33:49
Speaker 7: going to go forward with this and we're going to
33:50
Speaker 7: hope that the president does the right thing. But at
33:53
Speaker 7: the end of the day, we're doing it in order
33:55
Speaker 7: to help the Ukrainian people. I really don't see it's
33:58
Speaker 7: much more difficult than that politically. And we're going to
34:00
Speaker 7: find out tomorrow when this bill hits the floor.
34:04
Speaker 5: Indeed, we will. Meantime, I want to ask you about
34:06
Speaker 5: the other conflict that Joe touched on with Secretary Blinken, which,
34:10
Speaker 5: of course, is the still unresolved war with Iran. The secretary, Jeannie,
34:14
Speaker 5: suggested that it could and should be over tomorrow. But
34:18
Speaker 5: with a caveat, he says what could be resolved tomorrow
34:21
Speaker 5: is simply having free shipping once again through the Strait
34:24
Speaker 5: of Hormuz that that won't even touch the nuclear issue.
34:27
Speaker 5: Do you think that assessment is fair? You know, I
34:31
Speaker 5: don't think.
34:32
Speaker 10: This is going to be over tomorrow, although I think
34:35
Speaker 10: the president and most Americans hope it will be, because
34:39
Speaker 10: I don't think the way out of this is going
34:41
Speaker 10: to be anything more than what we got out of
34:44
Speaker 10: that MOU, which satisfied nobody, which is essentially the United
34:48
Speaker 10: States walking away and hopefully getting the Strait reopened. But
34:52
Speaker 10: we will pay a big cost for that. I don't
34:55
Speaker 10: think the president wants to do that. So they're trying
34:58
Speaker 10: this economic pressure campaign now. But that economic pressure campaign
35:02
Speaker 10: involves getting China and Russia on board.
35:05
Speaker 8: And none of those.
35:06
Speaker 10: People or those countries have our best interest at heart.
35:10
Speaker 10: They would much rather Iran wins this thing or the
35:13
Speaker 10: United States.
35:13
Speaker 8: Stays in this quagmire.
35:15
Speaker 10: So we're banking on something that's likely not going to happen.
35:19
Speaker 10: So I don't think we are looking at any short
35:21
Speaker 10: term solution unless the president is prepared to get up
35:26
Speaker 10: and walk away from this. And I don't see signs
35:28
Speaker 10: of that yet. In fact, he just said we're going
35:30
Speaker 10: to be at this for at least through the midterm.
35:35
Speaker 5: Well, yeah, to Jeannie's point, Rick, the president did suggest
35:38
Speaker 5: that on the stage in Dallas last week, though it
35:40
Speaker 5: seemed to me at least that his suggestion was that
35:42
Speaker 5: Iran is going to want to keep this going past
35:45
Speaker 5: the midterms due to the potential political pressure it would
35:48
Speaker 5: pile on the U.S. So what's your take on this
35:51
Speaker 5: and the secretary's suggestion that Iran, at the end of
35:54
Speaker 5: the day, is going to have to get something out
35:56
Speaker 5: of this, be it the ability to charge tolls that
35:59
Speaker 5: aren't exactly described as tolls or sanctions relief or what
36:02
Speaker 5: have you?
36:04
Speaker 8: Yeah, I think the distinction you make is right, Kayleigh.
36:06
Speaker 7: I mean, it's not that Donald Trump is enthusiastic about
36:09
Speaker 7: prosecuting this war through the primaries. I mean, like, if anything,
36:12
Speaker 7: I would suspect it's anything but that.
36:14
Speaker 8: But you're right.
36:15
Speaker 7: There's no incentive today for Iran to cop a deal
36:19
Speaker 7: because every day that goes by, frankly, they're just strengthening
36:22
Speaker 7: their hand, especially with the new war opening up in
36:26
Speaker 7: the Red Sea with the Houthis. It's just another sort
36:31
Speaker 7: of leverage point for the regime in Tehran. That being said,
36:35
Speaker 7: we like to talk a lot about how all this
36:37
Speaker 7: affects the United States and what we're doing, but there
36:39
Speaker 7: is a critical situation happening in Iran right now, and
36:44
Speaker 7: that's both economic and humanitarian. At some point in time,
36:49
Speaker 7: even this administration in Tehran is going to have the
36:53
Speaker 7: incentive to not want to continue to prosecute the war
36:56
Speaker 7: and find a way out. And then probably only then
36:59
Speaker 7: will you have a solution like what Secretary Blinken said.
37:02
Speaker 7: Whether that meets the bar that was set by JCPOA,
37:07
Speaker 7: I doubt it because, as you point out, there's really
37:10
Speaker 7: no constructive conversation about the nuclear program in Tehran.
37:15
Speaker 8: So does the president want to get out?
37:17
Speaker 2: Yes.
37:18
Speaker 8: He'd take a deal in a.
37:21
Speaker 7: Once and only when Tehran decides to cut a deal.
37:26
Speaker 5: Well, and this is where I want to bring it
37:28
Speaker 5: back to the testimony we just heard from the Treasury
37:31
Speaker 5: Secretary Scott Besson as well before the Financial Services Committee, because,
37:34
Speaker 5: of course, he was asked about the economic campaign against Iran.
37:38
Speaker 5: And he said that that's something, Rick, that he is
37:40
Speaker 5: going to discuss with China's He Lifeng this weekend when
37:43
Speaker 5: they meet, that the talks on Iran will continue. How
37:46
Speaker 5: much of the economic pressure campaign hinges— on China and
37:52
Speaker 5: whether or not the U.S. can get them on side
37:53
Speaker 5: with its initiatives to help choke off Iran economically.
37:57
Speaker 7: Well, you know, it's like having D-Day without the Germans.
38:01
Speaker 8: I mean, like, who are we fighting here? What happened
38:04
Speaker 8: to D-Day? Has anything occurred?
38:07
Speaker 7: And we also suspected that you were going to have
38:10
Speaker 7: to engage China in this. But, you know, there's evidence
38:13
Speaker 7: that China's been supporting the war in Iran. So what
38:16
Speaker 7: expectation do you have, if you're the Secretary of Treasury,
38:19
Speaker 7: that somehow there's going to be common cause there?
38:22
Speaker 8: I mean, like, I hope so.
38:23
Speaker 7: I hope that they're able to convince the Chinese to
38:25
Speaker 7: cut off against Iran and sacrifice their own access in
38:29
Speaker 7: the future to oil there. Because, by the way, the
38:33
Speaker 7: lessons that we've learned from Venezuela is if this administration
38:36
Speaker 7: had its way, it would decide who gets the oil
38:38
Speaker 7: from Tehran.
38:39
Speaker 8: And I'm sure China would be at the bottom of
38:41
Speaker 8: the list.
38:41
Speaker 7: So, you know, it's hard to see a solution through
38:45
Speaker 7: Beijing to the situation in the Middle East.
38:50
Speaker 5: Well, of course, as we consider what might be on
38:51
Speaker 5: the agenda for the meeting with China, there's the question
38:53
Speaker 5: of artificial intelligence as well, which Joe obviously talked about
38:57
Speaker 5: with Secretary Blinken. Jeannie, it was interesting when Joe posed
39:01
Speaker 5: to him the comparison that Elon Musk has made about
39:04
Speaker 5: the AI issue being akin to the nuclear challenge that
39:07
Speaker 5: the world has had to deal with in terms of
39:09
Speaker 5: regulating it. Secretary Blinken seemed to think that that was
39:13
Speaker 5: a fair comparison, that there should be an AI security framework,
39:17
Speaker 5: at least with the U.S. and China, saying he's a
39:19
Speaker 5: doomer and not a realist. What do you make of it, Jeannie?
39:24
Speaker 5: He's a realist, Yeah, yeah.
39:28
Speaker 10: Yeah, I think that it was interesting also that the
39:31
Speaker 10: secretary made a point that I hope seeps into the
39:36
Speaker 10: thinking in Washington, which is that it is not irreconcilable
39:41
Speaker 10: to think that we could both regulate and keep ourselves
39:44
Speaker 10: secure and safe. And we could be competitive with China.
39:48
Speaker 10: And so I thought that was critically important because what
39:51
Speaker 10: we've been hearing from the president and others is if
39:54
Speaker 10: we regulate, we will lose this competition with China. And
39:58
Speaker 10: I also thought Joe's question to him about why this
40:01
Speaker 10: is being routed. specifically through Treasury and not through state
40:05
Speaker 10: is another important question. And he mentioned also commerce. You know,
40:09
Speaker 10: we need a all hands on deck approach to this,
40:12
Speaker 10: which should involve all three. So I think those two
40:15
Speaker 10: points that he was making are really critical to going forward.
40:18
Speaker 10: And God willing, Congress sees their way to think that
40:22
Speaker 10: we can both regulate, keep ourselves secure and compete with China.
40:27
Speaker 10: In other words, we don't have to do just one
40:29
Speaker 10: or the other.
40:31
Speaker 8: All right.
40:31
Speaker 5: Jeannie Shanzano and Rick Davis, Bloomberg Politics contributors and our
40:34
Speaker 5: political panel today. Thank you so much for helping us
40:37
Speaker 5: reflect on the conversation between the Secretary of State, former
40:40
Speaker 5: Secretary of State Antony Blinken, and my colleague and co-host,
40:44
Speaker 5: Joe Matthew, who is, of course, in New York for
40:46
Speaker 5: that conversation today and is rejoining us now. in its aftermath. So, Joe, obviously,
40:51
Speaker 5: you had a wide-ranging conversation with the secretary. The fact
40:54
Speaker 5: that you have a former secretary of state and the
40:56
Speaker 5: conversation must, frankly, begin on artificial intelligence tells you a lot.
41:02
Speaker 5: What do you make of his responses on this issue?
41:03
Speaker 8: Isn't that the truth?
41:04
Speaker 2: I was really taken as well by how well read
41:07
Speaker 2: in he is on all of this technology. And it
41:09
Speaker 2: just reminds us that if you want to be in
41:11
Speaker 2: this space, if you work In the business of statecraft,
41:14
Speaker 2: you have to be kind of an expert on this,
41:16
Speaker 2: just like, to your point a minute ago, he had
41:18
Speaker 2: to become, when it's involving nuclear technology. We walked through
41:22
Speaker 2: a lot of stuff, though, and, you know, his very
41:26
Speaker 2: stern words about October 7 and some of the reporting
41:29
Speaker 2: that has come out. out of Israel, I thought were noteworthy.
41:32
Speaker 2: The idea that Benjamin Netanyahu ignored warnings or that he
41:36
Speaker 2: rebuffed himself, Blinken rebuffed as had been reported an offer
41:40
Speaker 2: to release hostages. He got pretty serious at that point
41:43
Speaker 2: of the interview. And when it came to the Russia
41:45
Speaker 2: sanctions bill, had to come back around a couple of
41:48
Speaker 2: times just to really get a sense of whether he
41:50
Speaker 2: wanted to see it pass or not.
41:53
Speaker 5: Yeah, he didn't necessarily indicate. He kind of said whether
41:56
Speaker 5: or not this is the right mechanism and tailed off,
41:58
Speaker 5: talked about it all coming out in the wash, which
42:00
Speaker 5: perhaps shows really telling in terms of whether or not
42:03
Speaker 5: he wants to give Democrats an order or a directive
42:05
Speaker 5: about what to do here. You also asked him how
42:07
Speaker 5: Democrats should be handling the Israel issue. issue, which he
42:10
Speaker 5: took very seriously as well. The suggestion that if you
42:13
Speaker 5: want Israel to go away or the Palestinians to go away,
42:16
Speaker 5: that you're not going to get that.
42:18
Speaker 8: They're not going anywhere.
42:19
Speaker 2: And that conversation comes against the backdrop of Iran, of course,
42:23
Speaker 2: which has made things awfully complicated right now.
42:26
Speaker 8: To hear him repeatedly say that this.
42:28
Speaker 2: Could end tomorrow, that the off-ramp is there, the president
42:31
Speaker 2: just doesn't want to take it, was not what I
42:33
Speaker 2: expected to hear, Kayleigh.
42:36
Speaker 5: Yeah, well, at least tomorrow when it comes to the
42:38
Speaker 5: Strait of Hormuz, as he later made clear, suggesting that
42:41
Speaker 5: the nuclear program is a whole other issue. And it
42:43
Speaker 5: seems that he shares in the belief of what we've
42:46
Speaker 5: heard from others, including a negotiator of the JCPOA, Wendy Sherman,
42:49
Speaker 5: and that he doesn't necessarily think that getting back to
42:52
Speaker 5: the terms of the JCPOA or terms that would be
42:54
Speaker 5: as favorable to the U.S. would be realistic.
42:57
Speaker 2: We had an interesting back and forth as well about his... replacement,
43:04
Speaker 2: if I could, successor, I should say, in Marco Rubio.
43:07
Speaker 2: They have compared notes, but only in the very early
43:11
Speaker 2: stages of the administration. He did not take the opportunity, however,
43:14
Speaker 2: to criticize Jared Kushner and Steve Witkoff when I presented
43:18
Speaker 2: that with him. As real estate professionals sitting at the
43:21
Speaker 2: diplomatic table, he's clearly someone who knows he has a
43:25
Speaker 2: future in politics and was careful with some of these ideas.
43:29
Speaker 11: Yep.
43:30
Speaker 5: Also, clearly someone who has a long, long history of
43:32
Speaker 5: engaging in diplomacy with some of those diplomatic answers.
43:35
Speaker 8: That's for sure, Kayleigh.
43:37
Speaker 2: We'll be talking a lot more, of course, about the
43:39
Speaker 2: start of this Federal Reserve meeting, the impact of rising
43:42
Speaker 2: interest rates, higher oil prices, all tying into the issues
43:45
Speaker 2: that we were just discussing with the former Secretary of State.
43:48
Speaker 2: And we'll be doing that straight ahead here. Stay with
43:50
Speaker 2: us on Balance of Power. We'll have much more coming
43:53
Speaker 2: up after this.
43:58
Speaker 4: You're listening to the Bloomberg Balance of Power podcast. Catch
44:01
Speaker 4: us live weekdays at noon and 5 p.m. Eastern on
44:04
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44:08
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44:11
Speaker 4: us live on YouTube.
44:14
Speaker 8: I'm Joe Matthew.
44:15
Speaker 2: In New York, Kayleigh Lyons is in the nation's capital
44:18
Speaker 2: as the two-day Fed meeting gets underway. And Kayleigh, the number,
44:21
Speaker 2: of course, that Charlie just mentioned that the market is
44:25
Speaker 2: fixated on is the five handle on the 10-year. It
44:27
Speaker 2: finally happened. We've come back from that, what, 504, I think,
44:30
Speaker 2: was the high that we saw earlier today. But it's
44:33
Speaker 2: looking pretty stubborn at 500. Yep.
44:36
Speaker 5: The highest level since 2007. And of course, that and
44:40
Speaker 5: the even higher 30-year yield, which right now stands just
44:44
Speaker 5: shy of 538 or so, are what Treasury Secretary Scott
44:47
Speaker 5: Besson had been trying to address with the expanded buyback program,
44:52
Speaker 5: trying to rein in longer-term borrowing costs. Perhaps no surprise
44:55
Speaker 5: that the Treasury Secretary was asked about that in his
44:57
Speaker 5: testimony before the House Financial Services Committee today. He said
45:00
Speaker 5: that buyback operation was successful. But once again, when it
45:03
Speaker 5: came to questions of the bond market and what he
45:06
Speaker 5: can do to address it, he floated the idea of
45:08
Speaker 5: coming fiscal consolidation without detailing it. And whether or not
45:13
Speaker 5: a $ 5, 000 check sent to every adult American factors into
45:16
Speaker 5: that fiscal consolidation plan, I guess, is an open question.
45:19
Speaker 5: The Treasury Secretary seems to think those checks are a
45:22
Speaker 5: good idea.
45:22
Speaker 11: Listen.
45:23
Speaker 3: When the Republicans win in November, if we need to,
45:25
Speaker 3: I look forward to working with Speaker Johnson on it.
45:28
Speaker 3: I think putting more money in the American people's pocket
45:32
Speaker 3: should be an objective for everyone. And I believe there
45:37
Speaker 3: are ways to do it that would not affect the deficit.
45:44
Speaker 5: So for more on this, we turn to a former
45:47
Speaker 5: Treasury Department official, Katie Richards, who's now senior fellow at
45:50
Speaker 5: the Groundwork Collaborative, who's here with me in the Washington, D.C.
45:55
Speaker 3: Studio.
45:55
Speaker 5: So, Katie, as we suggest that there may be a
45:57
Speaker 5: way to give these checks to Americans without affecting the deficit,
46:02
Speaker 5: what would that actually look like?
46:04
Speaker 9: I don't think that we should take the secretary very
46:06
Speaker 9: seriously when he says that. You know, first, the $ 5, 000
46:10
Speaker 9: check is just another kind of bizarre Trump Hail Mary
46:15
Speaker 9: for this election. I don't think that we are going
46:18
Speaker 9: to see legislation moving anytime soon to effectuate that attempted
46:24
Speaker 9: bribe of the populace to get votes. But You know,
46:29
Speaker 9: we are going to be talking about the bond market
46:31
Speaker 9: and the Fed, and I know that Secretary Besson also
46:35
Speaker 9: made some nods toward fiscal consolidation. And, you know, honestly,
46:39
Speaker 9: much like the crisis in the Strait of Hormuz, The
46:44
Speaker 9: fiscal picture is very much of the president's own making.
46:47
Speaker 9: The fastest, easiest fiscal consolidation would be to repeal last
46:52
Speaker 9: year's big Republican budget bill, the OBBBA, which added $ 4
46:57
Speaker 9: trillion to the deficit over 10 years.
46:59
Speaker 1: And more in the following decade.
47:03
Speaker 9: And that would actually have the effect of putting money
47:06
Speaker 9: back in many Americans' pockets who lost their health insurance
47:09
Speaker 9: coverage during that debate. So I think if the president
47:13
Speaker 9: is looking for a way to make life more affordable
47:16
Speaker 9: for the American people and bring down the long-term deficit
47:19
Speaker 9: and perhaps bring down those bond rates, repealing his signature
47:24
Speaker 9: legislation would be a good first step.
47:26
Speaker 2: Hey, Kitty, it's great to have you back. Does Kevin Warsh...
47:30
Speaker 2: make a move that makes life more affordable tomorrow?
47:34
Speaker 9: I think it's going to be extremely difficult for the
47:38
Speaker 9: FOMC to not raise rates tomorrow. We're already seeing, as
47:43
Speaker 9: Kaylee mentioned, bond rates at their highest level since 2007.
47:48
Speaker 9: And that's already pricing in an expectation of at least
47:51
Speaker 9: a quarter point interest rate raise. I think that it
47:55
Speaker 9: will really call into question Kevin Warsh's credibility as a
48:00
Speaker 9: central banker if that interest rate hike doesn't happen. And
48:04
Speaker 9: that could have the paradoxic effect of driving up those
48:08
Speaker 9: longer-term interest rates that are the things that things like
48:12
Speaker 9: mortgages are pegged to.
48:14
Speaker 5: Well, so to that point, if rates could actually go
48:16
Speaker 5: higher if the Fed holds, what do you anticipate will
48:19
Speaker 5: realistically happen to rates even if they hike, specifically at
48:22
Speaker 5: the long end? Is that actually something that could suppress
48:25
Speaker 5: longer-term borrowing costs?
48:27
Speaker 1: That is the idea, right?
48:28
Speaker 9: Because the game that the Fed is playing is one
48:31
Speaker 9: of expectations and trying to communicate that they are taking
48:34
Speaker 9: inflation seriously to convince the markets that they are going
48:39
Speaker 9: to do what it takes to get inflation under control
48:41
Speaker 9: over the medium term, and the long term. And so
48:45
Speaker 9: this is a credibility and expectations game as much as
48:48
Speaker 9: it is about the short-term move in the federal funds rate.
48:52
Speaker 2: What should the Fed be more worried about, persistently high
48:55
Speaker 2: or ever higher oil prices or the federal debt?
49:01
Speaker 9: I think at the moment, what the Fed needs to
49:03
Speaker 9: be most concerned about is the impact that the war
49:06
Speaker 9: in Iran is having on the American economy and the
49:11
Speaker 9: prices that people are paying at the pump and also
49:16
Speaker 9: all through the economy. As we saw in COVID, when
49:19
Speaker 9: you get these supply chain crises, they really ripple through
49:24
Speaker 9: and drive prices higher. And unfortunately, there's not a lot
49:30
Speaker 9: the Fed can do about what's going on in the
49:33
Speaker 9: Strait of Hormuz. There is a lot that the Trump
49:35
Speaker 9: administration can do about that. There's less that they can
49:39
Speaker 9: do about borrowing costs if they are not willing to
49:42
Speaker 9: take on the big driver of inflation at the moment.
49:47
Speaker 5: Well, and so if that is the Middle East, which
49:49
Speaker 5: is pushing energy prices higher in diesel, which, as you mentioned,
49:52
Speaker 5: is at There is a conversation happening as to whether
49:56
Speaker 5: or not a diesel export ban should be under consideration
49:58
Speaker 5: here in the U.S. The Interior Secretary, Doug Burgum, last
50:02
Speaker 5: week told me that it and other options are on
50:04
Speaker 5: the table. And interestingly, the Senate Majority Leader, John Thune,
50:07
Speaker 5: today said he's open to considering that if it will
50:09
Speaker 5: bring prices down. Is that necessarily the effect? a diesel
50:12
Speaker 5: export ban would have, Kitty?
50:14
Speaker 9: I think that these ideas of, you know, releasing more
50:18
Speaker 9: oil from the strategic oil reserve, although we have released
50:22
Speaker 9: a lot and that is, you know, has been depleted significantly,
50:26
Speaker 9: or export bans, they're all kind of appealing band-aid fixes.
50:31
Speaker 9: But oil is traded on a global commodity market. And
50:37
Speaker 9: if you end up, you know, with slightly more supply
50:42
Speaker 9: here in the United States, you're not going to be able.
50:45
Speaker 1: To wash out the major.
50:46
Speaker 9: Effect of what's going on in the Middle East. And remember,
50:50
Speaker 9: it's not just oil. It's natural gas. It's other petroleum products.
50:56
Speaker 5: It's shipping.
50:57
Speaker 9: So I don't think that that is going to be
50:59
Speaker 9: a fix for the prices that Americans are paying.
51:03
Speaker 2: We talked to your buddy Peter Navarro from time to
51:06
Speaker 2: time here on Balance of Power, Kitty Richards, and he
51:09
Speaker 2: was strident in his most recent appearance to say that
51:13
Speaker 2: hiking interest rates during an energy crisis is the wrong
51:16
Speaker 2: move because of the way interest rates work here and
51:20
Speaker 2: wouldn't have any impact on actual energy prices.
51:24
Speaker 8: Does he have a point?
51:25
Speaker 2: And by extension, does this end up being the start
51:28
Speaker 2: of a recession?
51:31
Speaker 9: Look, we had this same conversation in many ways during
51:35
Speaker 9: the COVID crisis where we had really supply chain driven
51:39
Speaker 9: inflation that needed to work its way through the system.
51:43
Speaker 9: And at that point, folks like Navarro were very interested
51:48
Speaker 9: in the Fed taking a more hawkish approach to interest rates.
51:52
Speaker 7: Mm-hmm.
51:52
Speaker 9: I do think that the Fed's being put in a really,
51:55
Speaker 9: really difficult position by the Trump administration, both because of
51:59
Speaker 9: the war in Iran and because of the tariff chaos
52:03
Speaker 9: that is also driving prices up. So we have a
52:06
Speaker 9: lot of self-inflicted wounds that the Fed is then trying
52:09
Speaker 9: to patch with Band-Aids. But as you say, these rate
52:13
Speaker 9: hikes do have real negative effects on people's pocketbooks. Credit
52:19
Speaker 9: card interest rates go up. car loan rates go up,
52:23
Speaker 9: mortgage rates go up. Though again, with what's going on
52:25
Speaker 9: in the bond market, it's a little more complicated than that.
52:28
Speaker 5: And finally, Katie, in our final minute, we should note
52:31
Speaker 5: you weren't just an official at the Treasury Department. You
52:32
Speaker 5: were actually the director of the state and local fiscal
52:35
Speaker 5: recovery funds that were authorized in the American Rescue Plan. Obviously,
52:39
Speaker 5: stimulus checks went out as part of that. What was
52:41
Speaker 5: different about that compared to $ 5, 000 checks the president says
52:45
Speaker 5: he will Because Republicans have raised this. He's not the
52:48
Speaker 5: only president who has suggested sending money to Americans.
52:51
Speaker 3: Sure.
52:52
Speaker 9: So remember that the checks in the American Rescue Plan
52:56
Speaker 9: Act were in the depths of the COVID crisis when many,
53:00
Speaker 9: many people were involuntarily unemployed. And we were really concerned
53:05
Speaker 9: that folks were going to be going hungry. They were
53:08
Speaker 9: going to be unable to purchase things in the market.
53:12
Speaker 9: And then other people were going to lose their jobs.
53:15
Speaker 9: the sort of classic dynamic of a recession. Right now,
53:18
Speaker 9: we're facing high interest rates, high.
53:22
Speaker 1: Inflation, and it's just a really different scenario.
53:26
Speaker 5: All right. Katie Richards now at the Groundwork Collaborative. Thanks
53:29
Speaker 5: for joining us on Balance of Power, both from Washington
53:32
Speaker 5: and New York today. It's great to have Joe Matthew
53:34
Speaker 5: back in the seat.
53:37
Speaker 8: Thanks for listening to the Balance of Power podcast.
53:40
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53:43
Speaker 2: or wherever you get your podcasts.
53:46
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53:48
Speaker 8: at noontime Eastern at Bloomberg.com.