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Pain Ahead As Election Politics Quash Stimulus Hopes: BI's Dean · Bloomberg Intelligence

0:01
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
0:04
Speaker 1: with my co host of Bonnie Quinn. Every business day
0:06
Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
0:10
Speaker 1: along with essential market moving news. Find the Bloomberg Markets
0:13
Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,
0:17
Speaker 1: and on Bloomberg dot com. We are still a wedding
0:21
Speaker 1: FED Chairman j Pal, Treasury Secretary step In Manuchin, the
0:24
Speaker 1: House Financial Services Committee talking about the need for more stimulus.
0:27
Speaker 1: To get a preview, we welcome Nathan Dean, senior government
0:31
Speaker 1: analysts for Bloomberg Intelligence. Nathan, thanks so much for joining
0:34
Speaker 1: us here. I mean, what can Mr Manuchin and Mr Powe,
0:39
Speaker 1: What do you think the committee is really going to
0:41
Speaker 1: focus on with these two uh folks. Well, there's really
0:44
Speaker 1: three things I think that the we're going to see
0:47
Speaker 1: come out from the hearing, you know. I think you're
0:48
Speaker 1: going to see the Democrats really stressed the need for
0:51
Speaker 1: municipality relief uh and individual relief. UH. And then on
0:55
Speaker 1: the Republican side, I think you're going to see questions
0:58
Speaker 1: about utilize unsere unspent money from previous Care Act. UH.
1:03
Speaker 1: And what what investors should really know is that you're
1:06
Speaker 1: probably not going to get any answer or any clarity
1:09
Speaker 1: in terms of what you're going to see going forward.
1:12
Speaker 1: I think the most important thing to look in today's
1:14
Speaker 1: hearing is to see if you get a signal from
1:16
Speaker 1: Chairman Powell on whether or not the Fed not Congress
1:20
Speaker 1: is going to do anything to support the economy in
1:23
Speaker 1: the interim, because our take is just that stimulus is
1:26
Speaker 1: pretty much dead for and that's going to have to
1:29
Speaker 1: be something that we're going to figure out. I mean,
1:32
Speaker 1: there is the suggestion that with everything the Fed did
1:35
Speaker 1: and with the original Cares Act, it wasn't maybe targeted
1:40
Speaker 1: in such a way that it might be extra efficient. Right,
1:43
Speaker 1: So there's there's plenty money out there, but it doesn't
1:45
Speaker 1: mean that people are not suffering. Still, is there going
1:48
Speaker 1: to be any mention of that? That's exactly right. So
1:51
Speaker 1: if you look at the FETs two big programs, you
1:53
Speaker 1: get the Municipal Liquidity Facility for municipalities. I think German
1:58
Speaker 1: power can actually do some defense there. I think he
2:00
Speaker 1: can say that you know, he's shoring up uh some
2:02
Speaker 1: of the inmunicipality market where he's going to struggle I
2:05
Speaker 1: think is going to be on the main street lending facility.
2:08
Speaker 1: So where what do small businesses get their their funds?
2:11
Speaker 1: You know, PPP has gone, and so small businesses are
2:14
Speaker 1: continuing to struggle, and so I think you're gonna get
2:17
Speaker 1: some questions on it. We'll see what what if he
2:20
Speaker 1: actually comes out and says anything about how that's going
2:22
Speaker 1: to work, my guess is probably not. He's just going
2:25
Speaker 1: to throw it back onto Congress and say, if you
2:27
Speaker 1: want to support small businesses, we need to have another
2:30
Speaker 1: stimulus deal. And then you know, just unfortunately, because of
2:33
Speaker 1: the election and the SCO to fight, you know, that
2:36
Speaker 1: deal is probably not going to happen this year since Nathan,
2:39
Speaker 1: you know, I would suggest the vast majority of experts
2:42
Speaker 1: we've spoken to over the last three months pretty much
2:45
Speaker 1: all said we will get some fiscal stimulus before the election.
2:50
Speaker 1: What went wrong here? So I was one of those.
2:53
Speaker 1: I actually had uh you know, my my my deal
2:57
Speaker 1: was three billion for municipalities before the election, and unfortunately
3:02
Speaker 1: what happened is it just took too much time to
3:04
Speaker 1: negotiate and we got into a too close to the election.
3:07
Speaker 1: If you're on the Democratic side now and not even
3:09
Speaker 1: in taking into account what's happening with the Supreme Court.
3:13
Speaker 1: If you're on the Democratic side, the last thing you
3:15
Speaker 1: want to do is interject a boost into the economy
3:18
Speaker 1: one month before the election. If you're on the Republican side, well,
3:22
Speaker 1: the last thing you want to do is support a
3:24
Speaker 1: three chillion dollar bill or one point five trillion dollar
3:27
Speaker 1: bill when you have things like job numbers increasing and
3:31
Speaker 1: I can anecdotal stories about the economy coming back, and
3:34
Speaker 1: so we just got to a point where they ran
3:38
Speaker 1: out of time. Both sides are going to go to
3:40
Speaker 1: the election. They think it's both politically uh advantage advantageous
3:45
Speaker 1: for them to uh not negotiate, and so we're gonna
3:48
Speaker 1: have to see what happens in one after the election. Yeah,
3:51
Speaker 1: I mean by then, will there have been irregarsable damaged
3:55
Speaker 1: on You know, there are still millions and millions of
3:58
Speaker 1: people in the United States unemployed, and this hopscott kind
4:01
Speaker 1: of virus could strike anywhere soon. Again. Yeah, that's exactly right.
4:06
Speaker 1: I think that, you know, it's a lot of people
4:09
Speaker 1: want this stimulus to happen. Uh, you know, we'll see
4:12
Speaker 1: what happens in the lame Duck. There's always this possibility,
4:15
Speaker 1: and I I'm making it out of consensus call right now,
4:18
Speaker 1: where I think there's a small chance that you could
4:20
Speaker 1: see a very skinny bill in the lame duck period.
4:24
Speaker 1: I'm thinking airlines because there's plenty of bipartisans support for
4:28
Speaker 1: giving airlines additional relief. So there's still this desire and
4:31
Speaker 1: there's still this acknowledgement that they need to get something done.
4:34
Speaker 1: But we need to get the election out of the way,
4:36
Speaker 1: we need to get the Supreme Court fight out of
4:38
Speaker 1: the way, we need to find out who our next
4:41
Speaker 1: president is going to be. And when we get all
4:43
Speaker 1: of that, we'll be able to come together in one
4:45
Speaker 1: and hopefully hammer out a Phase four stimulus deal. Nathan,
4:49
Speaker 1: you spent obviously a lot of time looking at this
4:51
Speaker 1: whole DC functionality here or dysfunctionality. Talk to us about
4:55
Speaker 1: what a lame duck period is and what types of
4:59
Speaker 1: legislation can or cannot get done during that time between
5:03
Speaker 1: November and January. So the lame duck period is obviously
5:07
Speaker 1: after the election, but before the new Congress comes in.
5:10
Speaker 1: And so if you've lost your seat, you know you're
5:13
Speaker 1: only gonna be around for a few more weeks and
5:15
Speaker 1: that doesn't they give you an incentive to maybe vote
5:18
Speaker 1: vote for something that you wouldn't otherwise voted for. Now,
5:21
Speaker 1: there's really two types of lame ducks. There's one where
5:23
Speaker 1: they just try and do a ton of stuff because
5:25
Speaker 1: they recognize it's not going to happen when a new
5:28
Speaker 1: president or a new Congress takes over. And then you
5:31
Speaker 1: have lame ducks where they just say, you know what,
5:33
Speaker 1: we're just tired. We're just gonna go home. Odds favor
5:37
Speaker 1: that in this lame duck they're just gonna say we're tired,
5:40
Speaker 1: we're gonna go home, and we'll figure it out in
5:42
Speaker 1: the next election. But because like you said, Bonnie, there
5:45
Speaker 1: is so much, so many people that are looking for
5:48
Speaker 1: help right now, you know, there is this possibility that
5:51
Speaker 1: they could come together and say, right we're going to
5:54
Speaker 1: figure out something to do, just a band aid, patchwork deal,
5:57
Speaker 1: put it out there. You know, government shuts down in
6:00
Speaker 1: eight days, and so they have to actually finally the
6:02
Speaker 1: stopgap funding bill. Maybe that goes into the lame duck period,
6:06
Speaker 1: and so we're not done yet in terms of things
6:08
Speaker 1: that Congress have to pass. Uh. So you know, again
6:12
Speaker 1: the odds favor that nothing happens. But if I'm an
6:15
Speaker 1: investor in specific type of industries, there's certainly I'm going
6:18
Speaker 1: to keep my eyes on it because there is still
6:20
Speaker 1: a chance. That's you know, a good point, Nathan. Industry
6:23
Speaker 1: is very good at getting this president's ear and this
6:26
Speaker 1: administration's here, and certainly restaurants have been trying to do
6:29
Speaker 1: that for several months. And you mentioned the airlines. It's
6:32
Speaker 1: almost surprising that some of these industries haven't been able
6:37
Speaker 1: to eke something, you know, out of the president, whether
6:39
Speaker 1: it be by executive order or some other way. Is
6:42
Speaker 1: there a chance of something like that happens in the
6:44
Speaker 1: next few weeks, you know, In terms of executive order, yes, um,
6:48
Speaker 1: executive orders are limited, though we saw that with President
6:50
Speaker 1: Trump's executive order on providing relief. You know, certain states
6:54
Speaker 1: embraced it, other states didn't, and so consumers didn't get
6:58
Speaker 1: the same number of stimulus checks at the gotten before.
7:01
Speaker 1: In terms of industry, though, you know, restaurants have a
7:03
Speaker 1: great case of why they're you know, while they're being damaged, airlines,
7:08
Speaker 1: movie theaters, and they all have asks and these asks
7:11
Speaker 1: are going to politicians that are sympathetic to them. What happens, though,
7:15
Speaker 1: is that they get interjected into this three billion dollar debate,
7:18
Speaker 1: this one point five trillion dollar debate normally for the
7:21
Speaker 1: last two to three years. How these bills get passed,
7:24
Speaker 1: they get attached to either funding bills or must pass
7:27
Speaker 1: pieces of legislation, and that's where the lobbyists and the
7:30
Speaker 1: policymakers do their their dirty work. If you call it that,
7:33
Speaker 1: that really hasn't happened in this case. So I think
7:35
Speaker 1: if you get into the lame duck period and something
7:38
Speaker 1: does pass, you know, then you know you have this
7:40
Speaker 1: shot of being able to interject your your industry specific legislation.
7:45
Speaker 1: If it doesn't, you know, let's just say, no matter
7:47
Speaker 1: who wins the election, we're gonna have an extremely busy
7:50
Speaker 1: year next year because remember we also have the debt
7:53
Speaker 1: ceiling coming back in the first half of next year.
7:55
Speaker 1: We also have a lot more stimulus that we need
7:57
Speaker 1: to do, and whoever president wins, they're also going to
8:01
Speaker 1: try and interject their hundred day agenda, So lots of
8:04
Speaker 1: stuff is going to happen in the first half of
8:06
Speaker 1: next year. Well, Nathan, you know, you mentioned the municipality
8:09
Speaker 1: states and municipalities we had, you know, Governor Cuomo from
8:12
Speaker 1: New York, Governor in Newsom from California, you know, talking
8:15
Speaker 1: about huge budget holes in their fiscal year budgets that
8:19
Speaker 1: they need to fill in. They you know, made the
8:21
Speaker 1: argument that they need help from the federal government to
8:24
Speaker 1: fill them. It looks like states and municipalities are going
8:26
Speaker 1: to come out come up empty here. How much pain
8:29
Speaker 1: is that going to be? It's going to be bad.
8:31
Speaker 1: You know. So the Center of Budget and Public Policy
8:33
Speaker 1: Priorities put out an analysis that we we like, um
8:37
Speaker 1: that said that just taking out the local and county municipalities,
8:40
Speaker 1: just states plus the District of Columbia from two, you're
8:45
Speaker 1: looking at probably somewhere between two hundred to two or
8:48
Speaker 1: fifty billion dollars in lost tax revenue. You know, that's
8:50
Speaker 1: just that's just lost tax revenue. That's not even taking
8:52
Speaker 1: into account increased costs or anything like that. You know,
8:56
Speaker 1: the Democrats had proposed giving about eight hundred dollars in
9:00
Speaker 1: municipality relief across everything, so local and states and so forth.
9:04
Speaker 1: Democrat Republicans counterback with nothing other than unspent money from
9:08
Speaker 1: the Cares Acts, probably about a hundred billion dollars. So,
9:11
Speaker 1: you know, we always thought that three five billion dollar
9:14
Speaker 1: number would be reasonable from both sides. It wouldn't solve anything.
9:17
Speaker 1: Municipalities are still going to be hurting for the next
9:20
Speaker 1: few years. You know, if you take into every single county,
9:23
Speaker 1: and I remember even the city of Tuscaloosa, Alabama, once
9:26
Speaker 1: said that if the Alabama football team didn't play this year,
9:29
Speaker 1: they're gonna lose two billion dollars in tax revenue. How
9:31
Speaker 1: do you make that up? And so municipalities are going
9:35
Speaker 1: to be in some pain, and I think they'll continue
9:37
Speaker 1: to be in pain no matter what happens with Congress.
9:40
Speaker 1: Can't they just borrow and worry about it some other time.
9:43
Speaker 1: You know, that's a great you know, it's one thing
9:45
Speaker 1: they can do, and it's one thing the Republicans have said,
9:47
Speaker 1: you know, Uh, Chairman McHenry will probably make a statement
9:50
Speaker 1: in the committee today, I'm sorry, Ranking Member mckenry from
9:53
Speaker 1: North Carolina, UM. He will probably make a statement in
9:57
Speaker 1: which he says that, you know, listening to the governors
10:00
Speaker 1: and so forth talking about all the money they need
10:04
Speaker 1: is a waste of time. You know, rather than actually
10:07
Speaker 1: trying to get Congress to provide the money, they should
10:09
Speaker 1: go to the fed. They should go, they should borrow money,
10:11
Speaker 1: they should take advantage of low rates, and they should
10:14
Speaker 1: try and make sure that the market, you know, brings
10:16
Speaker 1: their economy backups so that they can do it use
10:19
Speaker 1: this time to actually cut some of the fat from
10:21
Speaker 1: your from your budgets. So the Republican argument is that,
10:25
Speaker 1: you know, the markets should be able to resolve this.
10:28
Speaker 1: We haven't seen thousands of policemen or firefighters being laid
10:32
Speaker 1: off yet. I mean, certainly that could happen, but you know,
10:35
Speaker 1: for the Republican argument, the pain hasn't comes to the
10:38
Speaker 1: municipalities yet. It's still just a theoretical idea. Nathan, what's
10:43
Speaker 1: the expectation in Washington and people you talk to about
10:47
Speaker 1: a scenario where former Vice President Biden does win the election,
10:51
Speaker 1: the Democrats do take control of the Senate. What's the
10:54
Speaker 1: expectation then, So it really it really it has changed
11:00
Speaker 1: with the Scotus fight that we're having right now. Before
11:03
Speaker 1: this past weekend, you know, it was going to be
11:05
Speaker 1: there was gonna be pressure to do away with the
11:07
Speaker 1: filibuster um. But I think that, you know, unless the
11:10
Speaker 1: Democrats really takes let's say fifty three or fifty four seats,
11:14
Speaker 1: you weren't going to be able to do it. You
11:16
Speaker 1: still have holdouts like Senator Cinema from Arizona, Senator Mansion
11:20
Speaker 1: from West Virginia. They were against filibuster reform. Now this
11:24
Speaker 1: has changed, and so you know, it really depends on
11:27
Speaker 1: the makeup of the Senate whether you're going to get
11:29
Speaker 1: a Biden presidency that would move forward with a lot
11:32
Speaker 1: of these grand changes, or whether you're gonna get a
11:34
Speaker 1: Biden presidency that's going to try and negotiate with Republicans.
11:38
Speaker 1: If you get a Democratic Senate that's probably north the
11:40
Speaker 1: fifty three seats, then you're gonna see, my opinion, a
11:43
Speaker 1: more progressive Biden presidency. If it's somewhere closer to let's
11:47
Speaker 1: say fifty fifty, or even if the Democrats don't take
11:50
Speaker 1: the Senate, then you're gonna get much more moderate Biden presidency.
11:54
Speaker 1: When will we expect to see changes, because you know,
11:58
Speaker 1: there won't be an inauguration for a few months, and
12:01
Speaker 1: at that point, depending on the makeup of Congress, there
12:05
Speaker 1: maybe still some barriers to anything that Biden wants to do.
12:09
Speaker 1: What would be in his first one days when it
12:11
Speaker 1: comes to the economy, So you know, Congress or Washington
12:15
Speaker 1: doesn't move fast, and so most politicians are sorry, most
12:19
Speaker 1: presidents try to get everything done within the first hundred
12:22
Speaker 1: days of their term because that's the momentum. Now, like
12:25
Speaker 1: I said before, there is a death ceiling coming up,
12:27
Speaker 1: we also have to get a stimulus bill. It. Let's say,
12:30
Speaker 1: if Biden wins, he's gonna want to do a stimulus bill.
12:33
Speaker 1: So that's going to take a lot of momentum away
12:35
Speaker 1: from things like, uh, potentially judicial reform, police reform. You know,
12:41
Speaker 1: I'm a banks analyst. You know, banks are probably not
12:44
Speaker 1: high on his priority. But uh so he's going to
12:47
Speaker 1: have to try and move fast. But the on the
12:50
Speaker 1: flip side, if he's dealing with the Senate that still
12:52
Speaker 1: has a filibuster, well, you know, the Senate Republicans can
12:56
Speaker 1: effectively block a lot of what he can accomplish. So
13:00
Speaker 1: that's the question is is is he going to try
13:02
Speaker 1: and move fast or is he going to try and
13:03
Speaker 1: move slow? Uh? And I really think it depends on
13:06
Speaker 1: the makeup the Senate. For things that rely on the
13:09
Speaker 1: Federal reserve for example, you know, Biden is not going
13:11
Speaker 1: to have much influence on the federal reserve. Chairman Powell
13:14
Speaker 1: is in his term until two. Vice Chairman Randall Quarrels
13:18
Speaker 1: for Banking and Supervision is in his term until late
13:23
Speaker 1: So the financial regulatory team in place outside of the
13:27
Speaker 1: Treasury Secretary is going to be largely a leftover from
13:30
Speaker 1: the Trump administration. So it'll be really interesting to see
13:33
Speaker 1: if there's a difference of opinion between what you get
13:36
Speaker 1: from the White House and what you get from the Fed.
13:39
Speaker 1: My guess is that they're probably going to be more
13:41
Speaker 1: on the same page. Nathan, what's the feeling within Washington
13:44
Speaker 1: about the House of Representatives? Are the Democrats in a
13:48
Speaker 1: meaningful risk of losing control of that House? No, So
13:51
Speaker 1: the Republicans need to net twenty seats to reach to eighteen,
13:55
Speaker 1: and the last polling numbers that you can find on
13:57
Speaker 1: elect go suggests that the Publicans would have to have
14:01
Speaker 1: a huge sweep to reach that number. Most of the
14:04
Speaker 1: races right now are are still on the Democratic side,
14:07
Speaker 1: So I don't think there's any expectation that the House
14:09
Speaker 1: can flip. Um. You know what I tell clients all
14:12
Speaker 1: the time is when you look at the House, just
14:14
Speaker 1: note this is where ideas get get generated. You know,
14:18
Speaker 1: the ideas that eventually could become laws usually get generated
14:21
Speaker 1: in the House of Representatives, and in this case, you know,
14:24
Speaker 1: there are certain bills that you know, House Financial Services
14:27
Speaker 1: Chairwoman Maxine Waters today will be discussing at the hearing
14:31
Speaker 1: with Secretary uh Minution and Sherman Powell on relief for manufacturers, restaurants, airlines.
14:38
Speaker 1: So these are good ideas that watched them because they
14:41
Speaker 1: could grow into something larger. Speaking of a let go,
14:44
Speaker 1: which is, by the way, a fantastic way of checking
14:47
Speaker 1: everything election relations on your terminal, E E C go,
14:51
Speaker 1: Nathan President from saying he's he's going to announce the
14:55
Speaker 1: U Supreme Court nominee Saturday, and Romney saying he would
14:58
Speaker 1: vote for Supreme gorgeous US this year. Is it a
15:02
Speaker 1: done deal at this point? Well, nothing's have done deal
15:05
Speaker 1: in Washington until President Trump actually, you know, until the
15:08
Speaker 1: vote actually occurs. Nothing's done deal. But uh, you know,
15:12
Speaker 1: the Democrats don't have much in the way of blocking this.
15:15
Speaker 1: You know, we've seen House Democrats float ideas like maybe
15:18
Speaker 1: we could have another impeachment that probably won't work. Uh,
15:22
Speaker 1: you know, so if they want to, if the Republicans
15:24
Speaker 1: want to hold a vote this year, they probably can. Uh,
15:27
Speaker 1: they probably can confirm. This is uh not the quickest
15:31
Speaker 1: that a Supreme Court justice will have ever been confirmed.
15:34
Speaker 1: But you know, what the Democrats do you have is
15:37
Speaker 1: this threat of what happens if we win the presidency,
15:40
Speaker 1: we win the Senate. You know, do we stack the court?
15:43
Speaker 1: Do we do away with the filibuster? You know, that's
15:46
Speaker 1: the nuclear option, if you will. Uh. And so you know,
15:50
Speaker 1: the responses that you've seen from Republicans publicly right now
15:53
Speaker 1: is that you know, they're not sure the Democrats would
15:56
Speaker 1: ever move forward with that threat. So you know, it's
15:58
Speaker 1: one of those things where there's not think they can
16:00
Speaker 1: really do to stop them, but they can vow to
16:02
Speaker 1: make the situation much more I don't want to say worse,
16:05
Speaker 1: but much different they win, alright, Nathan Dean, wonderful stuff,
16:11
Speaker 1: Thank you so much. That is Nathan Dean's senior government analysts.
16:17
Speaker 1: Our next guest, an investment banker and author who has
16:21
Speaker 1: written and focuses generally on the banking, mortgage, finance, fintech sectors.
16:25
Speaker 1: Chris Whalen joins us. We're thrilled. He's chairman of Whale
16:28
Speaker 1: and Global Advisors, author of lots of books. Included inflated
16:33
Speaker 1: how money and debt built the American dream and forward
16:36
Speaker 1: men from inspiration to enterprise. But today, wouldn't mind starting
16:40
Speaker 1: off Chris on the idea that we're getting a little
16:43
Speaker 1: bit more of a glimpse into how money flows, specifically
16:46
Speaker 1: shady money flows around the world. And it's absolutely with
16:50
Speaker 1: the help of financial institutions, all the ones we know
16:53
Speaker 1: and some we don't, but ninety financial institutions appearing in
16:56
Speaker 1: leaked documents this week, including Deute and JP Morgan. Your thought, well,
17:01
Speaker 1: wouldn't a dollar is to reserve currency? Vanni? It's hard
17:04
Speaker 1: to keep the bad people out. Um. The US government
17:08
Speaker 1: uses access to banking services, and the US dollar is
17:14
Speaker 1: a way of punishing bad actors and states and so
17:19
Speaker 1: banks have a very complex matrix they have to wade
17:22
Speaker 1: through to do business with foreigners, any foreigners, and a
17:27
Speaker 1: lot of them have just decided not to do it.
17:30
Speaker 1: Many US institutions will not do business with non US residents,
17:34
Speaker 1: So I think it's not surprising. It's been a problem
17:38
Speaker 1: for a long time. And many of those banks that
17:40
Speaker 1: are listed there are you know, providing services they think
17:44
Speaker 1: are okay. But in order to do diligence on these
17:48
Speaker 1: people and keep up with the lists of you know,
17:52
Speaker 1: banned persons, for example, requires a lot of focus and
17:55
Speaker 1: a lot of effort by banks, and they don't. They
17:58
Speaker 1: don't do a very good job, do they it. So
18:00
Speaker 1: you know, it's not surprising, is it. We've been reading
18:03
Speaker 1: about this for years. Do you want more head wind
18:09
Speaker 1: for some of the big banks to do with these days?
18:10
Speaker 1: I'm wondering, given where interest rates are, how low they are,
18:14
Speaker 1: and how the fetch your pal suggests that they will
18:16
Speaker 1: stay lower for much longer than maybe people initially anticipated.
18:21
Speaker 1: Is there a bowl case for buying these big money
18:24
Speaker 1: center banks. Well, we're still awaiting visibility, Paul on credit um.
18:31
Speaker 1: You know, the banks have certainly put a lot of
18:33
Speaker 1: money aside for future losses, and I expect that's going
18:37
Speaker 1: to continue all year. I think at the end of
18:39
Speaker 1: the day, we'll probably put aside more reserves this year
18:43
Speaker 1: than we did in two two tho nine, and the
18:46
Speaker 1: fourth quarter could be quite a mess in terms of
18:49
Speaker 1: taking assets to the curb and cleaning house. So, but
18:53
Speaker 1: to your question, is it time to buy them now
18:56
Speaker 1: that they're down, Well, they're not really down very much.
18:59
Speaker 1: JP is still one in a quarter times book. Um,
19:02
Speaker 1: I just published a note on cities study you know
19:05
Speaker 1: well below book, and that's just a reflection of the
19:08
Speaker 1: returns they generate. Um, the higher risk shops like City
19:12
Speaker 1: Capital one Goldman habitually trade below book because a lack
19:17
Speaker 1: of visibility on forward events, right, especially idiosyncratic events from
19:22
Speaker 1: investment banking engagements, right, which no one has visibility into.
19:27
Speaker 1: So you know, for me, yeah, there's some banks out
19:29
Speaker 1: there that are great value. I've been buying mostly the
19:31
Speaker 1: prefers when they've been selling off, because you know, buying
19:35
Speaker 1: an eight or nine percent coupon at par, which we've
19:38
Speaker 1: had an opportunity to do several times in the past year,
19:42
Speaker 1: is kind of nice, low beta. You know, it makes
19:45
Speaker 1: me happy. Um, I got out of most of the
19:47
Speaker 1: common I had some US Bank, but I just traded
19:49
Speaker 1: out of it because I think I can buy it
19:51
Speaker 1: again later on once we have a little more visibility
19:54
Speaker 1: on where the banks are going. Well, speaking of City, Chris,
19:57
Speaker 1: you've been negative on City for some time since, had
20:00
Speaker 1: a very toubled past, and in that note that you
20:02
Speaker 1: just reference, you talk about the new leader, Jane Fraser,
20:07
Speaker 1: who's going to be replacing like a Corbat in February
20:09
Speaker 1: of next year. And you say, you know, Corbat does
20:11
Speaker 1: leave behind the legacy of stability and rising equity values,
20:14
Speaker 1: but a little change in terms of focus or a
20:16
Speaker 1: new business direction for the bank. Will Jane Fraser be
20:19
Speaker 1: able to find one. I don't know. I think short
20:23
Speaker 1: term no. And and the recent Bonnie is that they
20:25
Speaker 1: traded away from their asset management business, selling that the
20:29
Speaker 1: mortgage Stanley and probably made sense at the time, but
20:32
Speaker 1: you know, my core Bat had to make up for
20:34
Speaker 1: a shambles that had gone on really from when John
20:37
Speaker 1: Reid left the bank in through the period of Sandy
20:41
Speaker 1: Wile and Bob Reubin and and bickram pandit and the
20:45
Speaker 1: bank was really in bad shape. So it's right now
20:48
Speaker 1: a two legged stool. You have capital markets, and you
20:51
Speaker 1: have essentially a subprime consumer business in the US, and
20:55
Speaker 1: then you have these little bits and pieces around the world.
20:58
Speaker 1: But you don't have a firm foundation for this bank
21:00
Speaker 1: in terms of core deposits or just the ability to
21:04
Speaker 1: to make money in the same way that a JP
21:07
Speaker 1: Morgan does. Right, they have a huge advantage because they're offshore,
21:11
Speaker 1: so there are facilities costs is much less in other
21:13
Speaker 1: US banks, but they still make less per dollar of assets,
21:17
Speaker 1: And to me, it's a business model issue. Vanni. I'm
21:20
Speaker 1: actually working on my next book. It's a biography of
21:23
Speaker 1: a very prominent mortgage executive. Great story, and it's a
21:28
Speaker 1: non bank story. Who's the mortgage executive to tell? So
21:31
Speaker 1: I'm not gonna say, I'm gonna tease you a little bit.
21:34
Speaker 1: It hasn't been announced yet, but it's it's almost finished.
21:36
Speaker 1: And the neat thing about it is it's a non
21:38
Speaker 1: bank perspective of the eighties and nineties and the two
21:41
Speaker 1: thousand's and who was their city? The city got the
21:45
Speaker 1: non bank fth host, the non bank culture of lending
21:49
Speaker 1: on unsecured no doc mortgages, all of that came from
21:53
Speaker 1: the nineties. In the in the eighties, people forget this.
21:57
Speaker 1: So that same culture is in city cities, part finance company,
22:01
Speaker 1: part global bank. Um. But if you look at their
22:04
Speaker 1: funding costs, it's significantly higher than the other big banks,
22:08
Speaker 1: so they're at a disadvantage. I kind of put them
22:11
Speaker 1: in the same bucket as Goldman. They have some business
22:14
Speaker 1: model issues that just make investors uneasy. Whereas they'll take
22:18
Speaker 1: a US Bank or Bank America or JP Morgan because
22:22
Speaker 1: they think they have a better handle on it right
22:25
Speaker 1: in terms of the surprise risk factor. Thanks Chris, Yeah, Joy,
22:32
Speaker 1: thanks so much for joining us here. I have a
22:33
Speaker 1: guess as to who this person is, and maybe Vonnie
22:35
Speaker 1: and album about it later. I do have a guess.
22:38
Speaker 1: Chris Whaling, chairman of Whaling Global Advisors, joining us. We
22:41
Speaker 1: appreciate his commentary as always, giving us his thoughts on
22:44
Speaker 1: some of these global investment banks, the head winds they're facing,
22:48
Speaker 1: from business model issues to reputational risk, just tremendous amounts
22:52
Speaker 1: of headways, but at some point there has to be valued.
22:57
Speaker 1: President Trumble is set to make a speed each in
23:00
Speaker 1: which he is expected to assail China over the coronavirus.
23:05
Speaker 1: To get a preview what we might hear, Jordan's Fabian
23:07
Speaker 1: Bloomberg News White House correspondent joins us, So, Jordan, give
23:11
Speaker 1: us a preview of what you think President Trump is going.
23:15
Speaker 1: His main argument will be in front of the U N. Yeah,
23:18
Speaker 1: And in fact, the President actually just wrapped up his
23:20
Speaker 1: remarks just a few minutes ago. His speech was very brief,
23:24
Speaker 1: just under ten minutes, unusual for this kind of address.
23:29
Speaker 1: But he, yes, as you said, he assailed China over
23:33
Speaker 1: the spread of the coronavirus, blaming the Chinese government for
23:37
Speaker 1: letting it spread outside his borders and taking a victory
23:41
Speaker 1: lap of source for the u S response, even though, uh,
23:44
Speaker 1: you know, by the numbers, the US has the worst
23:46
Speaker 1: outbreak in the world. You know. At times, the speech
23:48
Speaker 1: sounded uh like one of his campaign rallies, and it
23:51
Speaker 1: did seem like it was really intended for a domestic audience,
23:55
Speaker 1: coming just a few weeks before election day in November. Yeah,
23:59
Speaker 1: I mean, we'll kind of response does he expect from
24:01
Speaker 1: the General Assembly itself? For the individual countries, I mean,
24:05
Speaker 1: it's the United Nations, and China is very much a
24:07
Speaker 1: part of the United Nations. Yeah, of course. And you
24:11
Speaker 1: have China and other countries in Europe pushing for your
24:15
Speaker 1: return to this multilateralist view of foreign policy and more
24:19
Speaker 1: more cooperation between the great powers of the world. And
24:23
Speaker 1: but by contrast, you heard your President Trump, you know
24:27
Speaker 1: again sort of doing his go go to loan style
24:30
Speaker 1: in America first agenda, you know, talking about how he
24:34
Speaker 1: forged peace agreements recently between the U a e. And
24:39
Speaker 1: Israel and says that more of those types of agreements
24:41
Speaker 1: are coming. Uh those of course we're not really done
24:45
Speaker 1: within the UN framework, but it's something that the President
24:48
Speaker 1: personally took some pride in, so, you know, the president
24:51
Speaker 1: sort of against setting himself apart and sending a message
24:54
Speaker 1: to the world that he's not going to be afraid
24:56
Speaker 1: to rattle ruffle their feathers when it comes to center
25:00
Speaker 1: issues as foreign policy Jordan, What do most experts say
25:06
Speaker 1: was in fact the role of China in the coronavirus
25:09
Speaker 1: and this the global spread? Was there anything policy related?
25:13
Speaker 1: Was just simply lack of communication on the part of
25:16
Speaker 1: the Chinese authorities. What do we really know? Yeah, right
25:21
Speaker 1: right now, I think you know, we don't. We don't
25:23
Speaker 1: know a whole lot still about how the the origin.
25:27
Speaker 1: I mean, there's the speculation about this, you know, lab
25:30
Speaker 1: and Uhan, but we still don't know the full story.
25:32
Speaker 1: And I think that speaks to the criticism that we've heard,
25:36
Speaker 1: which is that China hasn't been as transparent as other
25:40
Speaker 1: countries might like about the origins and and also the
25:43
Speaker 1: operating in that country and how many infections are actually
25:46
Speaker 1: are uh, you know, the report of the note low number.
25:49
Speaker 1: The President has has said that number is higher. Uh,
25:53
Speaker 1: there's been some criticism of China for being slow to
25:56
Speaker 1: let in UH officials for the World Health Organization and
26:00
Speaker 1: American officials along with them, to come in in the
26:03
Speaker 1: early stages of the pandemic monitor what was going on
26:06
Speaker 1: trying to get a sense of how this virus was spreading.
26:11
Speaker 1: What about the idea that you know, the WHO has
26:15
Speaker 1: backed China as being transparent on on this, and it
26:20
Speaker 1: does appear that international agencies are not flocking to the
26:24
Speaker 1: U S side of things on anything. They're very much
26:27
Speaker 1: trying to stay neutral or even allow China the benefit
26:30
Speaker 1: of the doubt. That's right. And UH, there's been some
26:35
Speaker 1: real tensions between WHO and the US and the president
26:39
Speaker 1: out that he's planning to withdraw the US from the
26:41
Speaker 1: w h O. I think that would take place next
26:44
Speaker 1: year if if he is re elected, and so that
26:48
Speaker 1: there have been some some real tensions there. But again,
26:51
Speaker 1: you know, this is this is something you know again
26:53
Speaker 1: that the president seems to be doing for the methodic
26:56
Speaker 1: political purposes. His He ran on this agenda of again
27:01
Speaker 1: the America first, UH, with the American knows the way
27:05
Speaker 1: forward and critical multi later organizations like the Unitedations like
27:10
Speaker 1: the w h O. So when he was looking for
27:12
Speaker 1: a scapegoat when the outbreak in the US got very bad,
27:15
Speaker 1: you know, he turned his sights to the to China
27:18
Speaker 1: and the w h O and has been harping on
27:20
Speaker 1: those themes ever since. Can I just point out that
27:22
Speaker 1: China's Jumping is actually now delivering a recorded speech to
27:25
Speaker 1: the UN Assembly, so it will be interesting to see
27:27
Speaker 1: if there's any kind of response to what the President
27:30
Speaker 1: might have said or what kind of message she will
27:33
Speaker 1: will deliver right now, Jordan, thank you so much for
27:37
Speaker 1: joining us. We really appreciate it. Jordan's Fabian White House,
27:40
Speaker 1: correspondor for Bloomberg News, giving some reporting on President Trump's
27:43
Speaker 1: speech this morning to the United Nations. Thanks for listening
27:48
Speaker 1: to Bloomberg Markets podcast. You can subscribe and listen to
27:52
Speaker 1: interviews at Apple Podcasts or whatever a podcast platform you prefer.
27:56
Speaker 1: I'm Bonnie Quinn. I'm on Twitter at Bonny Quinn, and
27:59
Speaker 1: I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before
28:01
Speaker 1: the podcast, you can always catch us worldwide at Bloomberg
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