Latest / Bloomberg Intelligence / Harvard's Scott Says Brexit Could Trigger Market Panic (Audio)

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Harvard's Scott Says Brexit Could Trigger Market Panic (Audio) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York, Bloomberg even to Washington, d C,
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  Speaker 1: Bloomberg to Boston, Bloomberg twelve under to San Francisco, Bloomberg
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  Speaker 1: to the countries is at JAM General one, and around
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  Speaker 1: the globe the Bloomberg Radio plus dav and Bloomberg got gone.
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  Speaker 1: This is taking stock the battle for Britain's future. Our
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  Speaker 1: next guest says that departs are of the United Kingdom
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  Speaker 1: from the European Union could trigger a panic for financial markets.
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  Speaker 1: We've got details. That's all coming up. Hal Scott's he's
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  Speaker 1: a Harvard law professor, an expert on international finance and
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  Speaker 1: securities regulation. We must hear what he has to say
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  Speaker 1: because the leave vote once again is looking stronger in
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  Speaker 1: the latest polls from the UK. Let's get back to
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  Speaker 1: Charlie Pellett. Now he's in the newsroom of the polemic
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  Speaker 1: Business Flash and I think you very much, Kathleen. We
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  Speaker 1: around the world. I see d R dot org. Now
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  Speaker 1: the developing story Platinum Partners offices being rated by federal
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  Speaker 1: agents looking into the hedge funds operations after a manager
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  Speaker 1: at the firm was charged this month with bribing a
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  Speaker 1: union chief. This according to a person familiar with the matter.
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  Speaker 1: Agents from the FBI and the US Postal Inspection Service
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  Speaker 1: were at Platinum's offices in Midtown Manhattan this morning. According
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  Speaker 1: to the person who says the rate is separate from
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  Speaker 1: the bribery probe, stocks are fluctuating light volume amid fragile
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  Speaker 1: sentiment as Trader's way. The probability of the UK voting
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  Speaker 1: to remain in the European Union a day ahead of
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  Speaker 1: the referendum, an early climb for equities lost momentum after
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  Speaker 1: Brexit polls released today quelled optimism. John Writing is chief
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  Speaker 1: economist at r d Q Economics. Well Shirley Brexit vote
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  Speaker 1: is not about economic policies, much more about immigration and
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  Speaker 1: uh something that there's been Uh there is, I suppose
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  Speaker 1: in the English British psychea a deep seated distrust of
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  Speaker 1: of Europe. Fed X falling the most in five months
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  Speaker 1: after disappointing investors by not providing more specifics on how
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  Speaker 1: the four point eight billion dollar acquisition of Dutch shipping
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  Speaker 1: company t n T Express will affect earnings fed X
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  Speaker 1: down four point one percent, as MP lore by two
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  Speaker 1: to two thousand and eighty six or dropped there a
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  Speaker 1: point one percent, Gold down five twenty ounce to twelve
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  Speaker 1: sixty seven to drop also of point four percent and
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  Speaker 1: three thirty two on Wall Street. Now we'll look at
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  Speaker 1: other news from around the world. Charlie, Thank you from
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  Speaker 1: the Bloomberg news room. I Mark Crumpton. This news update
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  Speaker 1: is brought to you by the Jeep Grand Cherokee, the
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  Speaker 1: the bar with its luxurious interior and legendary four by
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  Speaker 1: for capability Drive one at our local jeep dealer. Today,
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  Speaker 1: campaigners pressed their eleventh hour appeals a day before the
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  Speaker 1: UK's landmark vote on membership in the European Union. The
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  Speaker 1: latest Opinion polls showed rival camps neck and Neck. An
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  Speaker 1: online survey published by Opinion showed what the company called
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  Speaker 1: a statistical dead heat, with forty percent of respondents for
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  Speaker 1: leave and for remain. More than a week after the
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  Speaker 1: mass shooting in Orlando, Florida, Governor Rick Scott is calling
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  Speaker 1: for more support of local businesses near the Pulse nightclub
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  Speaker 1: that have lost revenue. We gotta get her, get these
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  Speaker 1: businesses back to work so they can continue to employ
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  Speaker 1: the business of the people that that that they employ
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  Speaker 1: every day. House Speaker Paul Ryan joined fellow Republicans to
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  Speaker 1: unveil more of the House GOP's agenda. Speaker Ryan says
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  Speaker 1: replacing Obamacare is an area where they have been working
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  Speaker 1: on for some time. There are some longstanding principles you
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  Speaker 1: will see advanced. But what you're seeing today is the
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  Speaker 1: consensus by House Republicans on the best way to replace Obamacare,
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  Speaker 1: and that is a very important achievement in and of itself.
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  Speaker 1: Also on Capitol Hill, rebellious House Democrats shut down the
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  Speaker 1: chambers legislative work today, staging a sid in on the
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  Speaker 1: House floor and refusing to leave until they secured a
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  Speaker 1: vote on gun control. Global News twenty four hours a day,
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  Speaker 1: powered by more than journalists and analysts and more than
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  Speaker 1: one d twenty countries From the Bloomberg News Room. I'm
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  Speaker 1: Mark Crumpton, Charlie, and we thank you again. Recapping equities
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  Speaker 1: lower twenty six minutes ago ahead of the close the
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  Speaker 1: SMP five hundred index down two points to two thousand
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  Speaker 1: and eighty six, a drop of one tenth of one percent.
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  Speaker 1: I'm Charlie Palaton. That's a Bloomberg Business flash the Brexit
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  Speaker 1: vote on Bloomberg Radio Brexit. If the UK does decide,
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  Speaker 1: does vote to leave the European Union, what will it
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  Speaker 1: mean for financial markets? Our next guest says it could
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  Speaker 1: trigger a panic similar what took place after the collapse
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  Speaker 1: of leban Brothers. Let's get right to how Scott, now
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  Speaker 1: professor at the Harvard Law School and someone who has
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  Speaker 1: written and been quoted and listened to UH in great,
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  Speaker 1: great depth on the US financial crisis. So we're very
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  Speaker 1: eager to hear what he has to say about what
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  Speaker 1: could be triggered by europe. How welcome back to the show.
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  Speaker 1: Very much so, UH, an expert on capital markets regulation,
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  Speaker 1: author of a new book that's coming out Connectingness and Contagion.
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  Speaker 1: What is the contagion that could go from this vote
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  Speaker 1: to the markets? Well, let me start by saying, I
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  Speaker 1: think the probability of having women repead or compasion or
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  Speaker 1: very very low. UH. Nonetheless, if it does occur to
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  Speaker 1: all have a very high impact. So we need to
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  Speaker 1: worry about it. It's just um. A contagion is basically
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  Speaker 1: something that there's an irrational panic of the steer of
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  Speaker 1: the unknown. I mean what happened with women as there
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  Speaker 1: was a shock to the system. No large finance institution
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  Speaker 1: can fail. Look at what we do with there. That's
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  Speaker 1: not going to happen. And it did happen, and that
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  Speaker 1: sent people rushing to the exits short term funding withdrawing
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  Speaker 1: from banks and importantly non banks when money market funds, etcetera. Uh,
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  Speaker 1: no short term funding available in the market. That was
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  Speaker 1: the heart of the financial crisis in two thousand and eight.
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  Speaker 1: So you never know when something like this can happen.
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  Speaker 1: And if there were a pullout, um, it could. It
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  Speaker 1: could be a shock and people said, I don't know
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  Speaker 1: what's going to happen next. Uh, I'm going to get
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  Speaker 1: my money out of banks or non banks. Hopefully that
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  Speaker 1: never happens, but it has in the past. Professor Scott,
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  Speaker 1: I'm wondering if you could draw on your experience in
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  Speaker 1: capital markets regulation and speak perhaps about, well, what happens
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  Speaker 1: on Friday, if indeed the United Kingdom votes to stay
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  Speaker 1: in the European Union, will we see a different kind
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  Speaker 1: of capital market structure in Europe. I don't think so. Um,
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  Speaker 1: you know, our Europe has been working at um improving
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  Speaker 1: their internal market. Uh, they have a big program to
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  Speaker 1: do that. But you know, the fact of the matter
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  Speaker 1: is that what integrates the financial markets in Europe is London.
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  Speaker 1: London is the key to Europe's financial markets. So that's
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  Speaker 1: gonna continue to be I mean, I think that's what
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  Speaker 1: people are worried about. If London gets out, where will
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  Speaker 1: the center of financial markets in Europe? Well, how this
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  Speaker 1: is you touch on a point that is not about
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  Speaker 1: panic and it's not about Brexit in crisis. It's also
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  Speaker 1: about the EU and certainly the euro Area. I guess
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  Speaker 1: that's what I'm referring to. That the ability to integrate
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  Speaker 1: the banks in terms of bailing out grease or you know,
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  Speaker 1: across the the area has been limited. Uh. Is there
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  Speaker 1: any argument that you can see from a financial standpoint
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  Speaker 1: at all for the UK to leave? Is there any
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  Speaker 1: benefit they would get from, you know, being outside the
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  Speaker 1: EU parameters but still maybe somehow able to remain the
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  Speaker 1: center of finance in Europe. Well, as you know, they're
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  Speaker 1: not part of the euro so they don't need to
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  Speaker 1: get out of the EU. That of the Euro, they
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  Speaker 1: have their own currency, uh, and they've been able to
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  Speaker 1: operate as the center of financial markets in the EU
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  Speaker 1: even with their own currency. So that give you, uh,
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  Speaker 1: you know, some um insight into how important UK financial
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  Speaker 1: markets are. UM. So I think that you know, if
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  Speaker 1: they what they're what they're concerned about is the level
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  Speaker 1: of European regulation and um it's very high. It's very bureaucratic,
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  Speaker 1: um and they have to deal with it. So a
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  Speaker 1: big argument for weave is we get rid of these
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  Speaker 1: pointy head you know, guys on the continent that are
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  Speaker 1: interfering on our free markets in the UK. I think
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  Speaker 1: it's totally ex aderated by the way. I think both
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  Speaker 1: sides are totally ex entering their consequences of a vote
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  Speaker 1: here because they want to win the vote. But I
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  Speaker 1: think there is you know, something to be said that
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  Speaker 1: the UK, by getting out of the EU would be
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  Speaker 1: free of some forms of financial regulation. But on the
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  Speaker 1: other side, trade wise, um, I think uh, politically wise
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  Speaker 1: good beople very bad for him, Tolly. Professor Scott, I'm
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  Speaker 1: gonna try to draw you on on an unrelated topic
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  Speaker 1: that has to do with negative interest rates. In Europe.
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  Speaker 1: Have you ever experienced negative interest rates? And what do
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  Speaker 1: you make of them? I've never experienced Sometimes god um
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  Speaker 1: uh you know, um it's one thing for um, the
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  Speaker 1: stead or potettos and actually doing I would say the
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  Speaker 1: Bank of Japan to say to a bank, you know,
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  Speaker 1: if you want to park money here, um, you may
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  Speaker 1: have to pay us to kick um. You know, it's
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  Speaker 1: just between the Bank of Japan and h Bank. Where
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  Speaker 1: it gets a little dicey is when that bank who's
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  Speaker 1: now paying the Bank of Japan to keep their money
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  Speaker 1: there sort of you're still with me here, Well, we
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  Speaker 1: go ahead and give you two seconds. Okay, it gets
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  Speaker 1: icy if they tell me that I have to pay
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  Speaker 1: a bank to keep my money with them, I'm gonna
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  Speaker 1: take it out of that back. Thank you very much.
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  Speaker 1: How Scott professor of Harvard Law School, joining us from Boston.
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  Speaker 1: This is Bloomberg Radio. The Big Vote on breakfast, will
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  Speaker 1: the UK vote to leave the European Union and what
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  Speaker 1: our stock markets braced for? And once we get past
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  Speaker 1: the vote, what should you be focused on? That's coming
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  Speaker 1: up now on Bloomberg Radio.