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P&L: Fed Won't Be in a Position to Raise Rates in February · Bloomberg Intelligence

• 0:04
  Speaker 1: Welcome to the Bloomberg pm L podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether you're at the grocery store
• 0:16
  Speaker 1: or the trading floor. Find the Bloomberg pm L podcast
• 0:20
  Speaker 1: on iTunes, SoundCloud and at Bloomberg dot com. You know,
• 0:28
  Speaker 1: at this point in the cycle, the economic cycle, a
• 0:32
  Speaker 1: lot of people are calling for the reflation of the U.
• 0:35
  Speaker 1: S economy. Uh, and and I want to get a
• 0:38
  Speaker 1: sense of how much reflation we're actually seeing on the ground.
• 0:41
  Speaker 1: I want to bring in Ward McCarthy, chief economist at Jeffreys.
• 0:45
  Speaker 1: We got some data this morning, more signs that retail
• 0:49
  Speaker 1: sales are accelerating, that we are seeing uh, inflation keeping
• 0:54
  Speaker 1: keeping up in Europe. Word, do you think that people
• 0:59
  Speaker 1: are at a quickly pricing in just how much inflation
• 1:02
  Speaker 1: is going to increase this year? Well, I think that
• 1:05
  Speaker 1: people are coming to the realization that the deflationary period
• 1:09
  Speaker 1: is over. UM. I've been expecting inflation to accelerate really
• 1:14
  Speaker 1: for the past year or so, and one of the
• 1:16
  Speaker 1: key developments on that front was when the commodity markets
• 1:21
  Speaker 1: bottomed in February. So as far as the CPI is concerned,
• 1:25
  Speaker 1: I think we could see a three percent print them
• 1:28
  Speaker 1: by the third quarter of this year. What does that
• 1:31
  Speaker 1: mean that precious metals such as gold might benefit, Well,
• 1:35
  Speaker 1: that historically has been the case. I'm not a gold
• 1:40
  Speaker 1: bug myself, so I tend to focus really more on
• 1:44
  Speaker 1: the implications for um, you know, the bond market especially
• 1:48
  Speaker 1: you know it also the stock market. Um. But let's
• 1:52
  Speaker 1: see bad for the bond market, good for the stock market. Well,
• 1:55
  Speaker 1: I think it would be good for the stock market
• 1:58
  Speaker 1: because it would be an indication that businesses are finally
• 2:01
  Speaker 1: getting some pricing flexibility that that they have not had
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  Speaker 1: for quite some time. And of course the bond market's
• 2:08
  Speaker 1: going to price that end, especially at the long end
• 2:10
  Speaker 1: of the curve because of rising inflation and expectations. Where
• 2:14
  Speaker 1: there's a big debate that's raging among people who I
• 2:17
  Speaker 1: talked to, which is, at what point do you benchmark
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  Speaker 1: bond yields rise to such a degree that it no
• 2:24
  Speaker 1: longer works to go to stocks to sort of there
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  Speaker 1: is an alternative wage, or in other words, at what
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  Speaker 1: point do people say, look, I'm going to go back
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  Speaker 1: to bonds at least I'm gonna get three percent three
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  Speaker 1: and a half percent yields and going to get my
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  Speaker 1: money back. And will the rising yields start to actually
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  Speaker 1: hurt stocks, Well, I think we're are ways off from
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  Speaker 1: that actually happening. I think we're at the early stages
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  Speaker 1: of a rising rate environment. So even though rates right
• 2:51
  Speaker 1: now might look attractive relative to what we've had um
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  Speaker 1: over you know, a recent past, UM, the reality is
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  Speaker 1: that you would probably lose is um in a longer
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  Speaker 1: run because the bond prices are going to be falling
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  Speaker 1: and um. So it's I think a ways off before
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  Speaker 1: that's that's going to happen. What I think will somewhat
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  Speaker 1: moderate at least the pace at which interest rates rise
• 3:16
  Speaker 1: is the fact that we still live in a quey world. Um.
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  Speaker 1: But the b o J and the ECB SO US
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  Speaker 1: rates are still very attractive relative to overseas rates. So
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  Speaker 1: we'll continue to see institutional investors willing to buy the
• 3:31
  Speaker 1: US bond market even though prices are falling, just because
• 3:35
  Speaker 1: the rates are attractive to them. Uh. And that's especially
• 3:39
  Speaker 1: the case for life insurance companies that are really kind
• 3:42
  Speaker 1: of a box right now. With the liability streams going
• 3:47
  Speaker 1: forward that really are not a good match for their
• 3:50
  Speaker 1: asset streams. So there's sort of seems like they're competing factors. Here.
• 3:53
  Speaker 1: You have people who are sort of looking ahead seeing inflation,
• 3:56
  Speaker 1: saying yields over the longer term are going up from here,
• 3:59
  Speaker 1: and others like the life insurers that are saying we
• 4:02
  Speaker 1: need income. It looks more attractive in the US and
• 4:04
  Speaker 1: the rest of the world we're going to come in. Uh. Now,
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  Speaker 1: given these sort of competing factors, where do you see
• 4:09
  Speaker 1: ten year US yields ending the year and where do
• 4:12
  Speaker 1: you see them in eighteen months from now? Well, I
• 4:16
  Speaker 1: think the direction is higher. So a year from now,
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  Speaker 1: I don't think it's unreasonable to think that there'll be
• 4:21
  Speaker 1: a hundred a hundred basis points higher UM. But a
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  Speaker 1: lot of the magnitude of the increase is going to
• 4:28
  Speaker 1: depend on what the new administration actually gets done on
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  Speaker 1: its very ambitious fiscal plan. Uh. And I say that
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  Speaker 1: not only because the fiscal plan has the potential to
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  Speaker 1: significantly yet to growth UM, but it also has potential
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  Speaker 1: suits significantly add to debt supply, both on the treasury
• 4:48
  Speaker 1: side and potentially on the private sexes. Um side as well.
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  Speaker 1: So I think the direction is a lot clearer than
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  Speaker 1: the magnitude, But we'll get a better handle on that
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  Speaker 1: after the first hundred and two hundred days of this
• 5:01
  Speaker 1: new government. Basis points that would take us to three
• 5:03
  Speaker 1: point on the tenure. Well, you know, just before we
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  Speaker 1: get to these hundred days of the new administration, is
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  Speaker 1: a possible we're going to get a rate hiding early February. Oh,
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  Speaker 1: I don't think so. I think that the Fed is
• 5:18
  Speaker 1: sending us two messages, both at the December fo m
• 5:22
  Speaker 1: C meeting and more importantly, in the minutes that we've
• 5:25
  Speaker 1: seen since then. Uh, they made it clear that for
• 5:28
  Speaker 1: the first time they could see the potential for upside
• 5:31
  Speaker 1: risk to both growth and inflation, and as a consequence,
• 5:35
  Speaker 1: they may have to accelerate the normalization process, both of
• 5:39
  Speaker 1: raising rates and of shrinking the balance sheet. Now we're
• 5:43
  Speaker 1: beginning to see a debate, public debate. Yesterday President's Kaplan
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  Speaker 1: and Harker, for example, talking about how the FED should
• 5:51
  Speaker 1: shrink the balance sheet. Next week we'll hear from more
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  Speaker 1: doverage members like President's Dudley and Governor brainerd um So
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  Speaker 1: there's going to be I think a lengthy debate both
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  Speaker 1: within the UM, the walls of the f O m
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  Speaker 1: C and also for public consumption about how the FED
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  Speaker 1: is going to go about this. And I don't think
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  Speaker 1: there'll be in a position to either raise rates or
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  Speaker 1: start drinking the balance sheet by February. You know, there's
• 6:18
  Speaker 1: been some talk about the potential FED choices by President
• 6:23
  Speaker 1: elect Trump who would come in in two thousand and eighteen,
• 6:25
  Speaker 1: particularly for FED Chair Jenny Yellen. What have you gleaned
• 6:29
  Speaker 1: so far from some of the names that have been floated, Well,
• 6:33
  Speaker 1: they relatively high profile names. Uh, you know, John Taylor
• 6:38
  Speaker 1: was probably the first one to be circulated, but there
• 6:41
  Speaker 1: have been others since that time. I think the general
• 6:45
  Speaker 1: UM gist of the type of person that they will
• 6:48
  Speaker 1: be looking for as someone who's somewhat more rules based,
• 6:52
  Speaker 1: uh than we have seen UM in recent years. What
• 6:56
  Speaker 1: I think that no matter who comes in, they're going
• 6:59
  Speaker 1: to find out that, UM, you can be rules based,
• 7:02
  Speaker 1: but you're still going to want to have UM a
• 7:05
  Speaker 1: lot of flexibility and how you conduct policy. So I
• 7:09
  Speaker 1: expect Jenny Hillen is going to serve out this term. UM.
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  Speaker 1: She has uh, you know, really done a great job
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  Speaker 1: of taking the baton from Ben Bernake, and I think
• 7:18
  Speaker 1: she'll want to see her task through to fruition. Whether
• 7:22
  Speaker 1: or not, you know, she is appointed next year or not,
• 7:25
  Speaker 1: I think to a large degree will depend on how
• 7:28
  Speaker 1: the economy does this year and frankly, what actually has
• 7:32
  Speaker 1: done on the fiscal side. Thank you very much for
• 7:35
  Speaker 1: spending time with us. Ward McCarthy is the chief financial
• 7:38
  Speaker 1: economist for Jefferies and Company, speaking about the US economy
• 7:43
  Speaker 1: and the potential for interest rate increases. Lisa Bramwitz, do
• 7:59
  Speaker 1: you know what a medical village is? Well, we're going
• 8:03
  Speaker 1: to find out from John Lawerman. He is our healthcare
• 8:06
  Speaker 1: and hospital's reporter for Bloomberg News and he joins us
• 8:10
  Speaker 1: now from Boston to home to Bloomberg. You know, John,
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  Speaker 1: thanks for being with us and a wonderful story. And
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  Speaker 1: what if you just maybe begin by telling the anecdote
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  Speaker 1: that leads the story, because I think that really kind
• 8:25
  Speaker 1: of sets the scene for the details. Well, I went
• 8:28
  Speaker 1: to a hospital, Um, good morning. I went to a
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  Speaker 1: hospital out in Kingston, New York. That's uh, that has
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  Speaker 1: an operating room that was built I think about five
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  Speaker 1: years ago for I believe it was five million dollars
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  Speaker 1: um and it's never been used and they're actually not
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  Speaker 1: going to use it. Um It's going to be renovated
• 8:48
  Speaker 1: and the space, the entire hospital space, which I believe
• 8:51
  Speaker 1: is now hospital it only has about fift occupancy rate,
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  Speaker 1: and it's going to be renovated into what they call
• 8:58
  Speaker 1: a medical village, and it was I had never heard
• 9:01
  Speaker 1: the term before either, so I was really interested in
• 9:04
  Speaker 1: going out there and finding out what it all means.
• 9:06
  Speaker 1: And basically, this hospital, uh, the the parent that owns it,
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  Speaker 1: they've decided that they're going to make it into an
• 9:15
  Speaker 1: outpatient center and they're doing that for a variety of reasons,
• 9:19
  Speaker 1: but it's mainly because they want to figure out ways
• 9:23
  Speaker 1: that they can continue to serve patients. A lot of
• 9:25
  Speaker 1: patients actually who come through their emergency room where they're
• 9:27
  Speaker 1: very they're very expensive to take care of, and they
• 9:31
  Speaker 1: want to UM care for those patients. And an outpatient
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  Speaker 1: setting is opposed to inpatient, So impatient that somebody spent
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  Speaker 1: a night in the hospital. Outpatient that somebody walks into
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  Speaker 1: like say an office, something gets caring, that goes home
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  Speaker 1: usually the same day, not always, but almost always the
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  Speaker 1: same day. That's what outpatient U usually refers to and UM.
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  Speaker 1: So they're uh, they're converting this hospital there there, it's
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  Speaker 1: no longer going to be a hospital. They're moving its
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  Speaker 1: services into another facility that's just a couple of blocks away.
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  Speaker 1: And it's really a part of a trend that's going
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  Speaker 1: on all of the country where hospitals UM are are
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  Speaker 1: closing UM and UH. But even more than that, services
• 10:12
  Speaker 1: and hospitals are moving out of hospitals into other settings. Well, okay, John,
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  Speaker 1: this has been going on for more than a decade,
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  Speaker 1: right where you've had this consolidation of hospitals and this
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  Speaker 1: sort of move to UH. As procedures are done in
• 10:27
  Speaker 1: an outpatient way, people are taking care of for less time.
• 10:30
  Speaker 1: People's hospital stays have been shortened by better technology. UM.
• 10:35
  Speaker 1: Is this sort of closure of some of the hospitals
• 10:37
  Speaker 1: problematic or is this just the natural evolution in medicine. Well,
• 10:42
  Speaker 1: it depends on you know, you talk about evolution. UM.
• 10:45
  Speaker 1: Sometimes evolution has UH, it can have a very tough
• 10:50
  Speaker 1: impact on you know, particular populations. And UM. I'm not
• 10:55
  Speaker 1: saying that this is the case in in in in
• 10:57
  Speaker 1: the community that I've visited, but in many communities where
• 11:00
  Speaker 1: hospitals closed uh, there aren't hospitals nearby to take care
• 11:05
  Speaker 1: of people. UM. Rural hospitals are the most vulnerable to
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  Speaker 1: being closed. They're smaller, they uh, they draw in smaller
• 11:14
  Speaker 1: patient populations. UM, they have a less uh diverse suite
• 11:20
  Speaker 1: of services to offer. So there their patients more likely
• 11:23
  Speaker 1: to be sent to big city hospitals UM for uh
• 11:28
  Speaker 1: more complicated procedures. Procedures might that might provide more money
• 11:32
  Speaker 1: to hospitals, UM might provide more revenue. And so these
• 11:37
  Speaker 1: are the ones that are most um vulnerable to you know,
• 11:40
  Speaker 1: to uh to to having tough financials and to closing
• 11:44
  Speaker 1: and UM. But it but it's it's it's not just these.
• 11:48
  Speaker 1: I mean there are hospitals as well in big cities
• 11:51
  Speaker 1: that are consolidating getting smaller. There's hospital uh that we
• 11:55
  Speaker 1: wrote about in the story UM in New York. Actually
• 11:59
  Speaker 1: that's the Mount Sinai exactly right right. UM they've decided
• 12:04
  Speaker 1: to really scale down the size of one of their
• 12:08
  Speaker 1: facilities and uh really ramp up the procedures that they're providing.
• 12:13
  Speaker 1: That doesn't mean that people in New York City are
• 12:15
  Speaker 1: gonna have enough hospital beds. Obviously, there's hospitals everywhere in
• 12:17
  Speaker 1: New York. But but it it but it does UM
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  Speaker 1: in many communities, it does remove the nexus of the
• 12:25
  Speaker 1: local healthcare system. Thank you so much. It's really a
• 12:29
  Speaker 1: fascinating story. John Lawerman, healthcare reporter for Bloomberg, talking about
• 12:33
  Speaker 1: the dwindling number of hospitals. To learn more about today's
• 12:49
  Speaker 1: earnings results from major banks, I want to bring in
• 12:51
  Speaker 1: Allison Williams, Senior financial research analyst for Bloomberg Intelligence. Allison,
• 12:57
  Speaker 1: thanks for being with us. I'm looking at JP Morgan's.
• 13:00
  Speaker 1: The shares are up about one and a half percent.
• 13:02
  Speaker 1: Let's go over the details of JP Morgan. What stood
• 13:05
  Speaker 1: out to you, uh in the in the report? So
• 13:09
  Speaker 1: I think for JP Morgan just in general solid quarter
• 13:13
  Speaker 1: and UM you know, costs basically right on target. That's
• 13:17
  Speaker 1: the key thing that investors look for UM from a
• 13:19
  Speaker 1: go forward rate thick trading, which tends to be a
• 13:22
  Speaker 1: little bit more fleeting, uh coming in also better than expected.
• 13:26
  Speaker 1: And so while that can be volatile, it can be
• 13:29
  Speaker 1: important because it is UM you know, a decent chunk
• 13:33
  Speaker 1: of their revenue and in looking for sort of optimism
• 13:37
  Speaker 1: for earnings estimates to help sort of justify share UM.
• 13:40
  Speaker 1: The share price moves analysts are going to be looking
• 13:43
  Speaker 1: for what is the run rate for revenue going into
• 13:46
  Speaker 1: next year. So JP Morgan beat analysts expectations with debt trading.
• 13:51
  Speaker 1: Bank of America did not. While they had a pretty
• 13:53
  Speaker 1: big increase, Uh, they did not. They did not beat
• 13:57
  Speaker 1: Why So I think what's difficult a lot of times
• 14:00
  Speaker 1: with the investment banks. Right as we saw Bank of
• 14:03
  Speaker 1: America miss um you know, sort of a twelve percent
• 14:06
  Speaker 1: gain um I think it was, and then you know
• 14:09
  Speaker 1: JP Morgan having this huge numbers percent gain. And so
• 14:14
  Speaker 1: from just a simplistic perspective, someone might look at that
• 14:17
  Speaker 1: and say, oh that, you know, JP Morgan's gaining share.
• 14:19
  Speaker 1: But I think a lot of times what it has
• 14:21
  Speaker 1: to do with is how are these banks positions, what
• 14:23
  Speaker 1: are the products that there strong, and then how did
• 14:26
  Speaker 1: those products perform? So JP Morgan, you know, just the
• 14:29
  Speaker 1: biggest and fix the biggest in rates, which was a
• 14:32
  Speaker 1: good business of rising volatility in that business. Bank of
• 14:35
  Speaker 1: America one of the areas that they're very strong in
• 14:38
  Speaker 1: is the municipal bond business, which, as we know, UM
• 14:41
  Speaker 1: had a very tough quarter. If you look at the
• 14:43
  Speaker 1: outflows in the in in the latter part of the
• 14:46
  Speaker 1: quarter following the election presidential election, you saw those really
• 14:52
  Speaker 1: driving overall bond mutual fun outflows so UM and that
• 14:55
  Speaker 1: really relates to some of the concerns around tax policy.
• 14:58
  Speaker 1: So obviously that's not good for trading, and that may
• 15:02
  Speaker 1: have been one of the areas that was more negative
• 15:05
  Speaker 1: for Bank of America Wells Fargo earnings of a dollar
• 15:09
  Speaker 1: three versus estimates for a dollar what about their mortgage
• 15:12
  Speaker 1: lending business. So I think for Wells Fargo, you know,
• 15:18
  Speaker 1: they earn more from the mortgage banking business than peers
• 15:20
  Speaker 1: around UM eight percent. And I think one of the
• 15:25
  Speaker 1: things that investors were sort of expecting this quarter is
• 15:27
  Speaker 1: to see UM, you know, what happened with their accounting.
• 15:30
  Speaker 1: We had this huge interest rate move, so we did
• 15:32
  Speaker 1: get some of that, But what people are tend to
• 15:35
  Speaker 1: more focus on is the origination side of the business,
• 15:37
  Speaker 1: right because that's cash, whereas UM you know, the other
• 15:40
  Speaker 1: part of it is accounting. We did see UM you know,
• 15:43
  Speaker 1: volumes coming in that the gain on sale sort of
• 15:47
  Speaker 1: coming down. I think investors had expected that. Again, what's
• 15:50
  Speaker 1: going in the market. We've seen a Cutton pipeline. Some
• 15:52
  Speaker 1: of that though is season also some of it's the
• 15:54
  Speaker 1: rate rise UH some of its seasonal in that business. UM.
• 15:58
  Speaker 1: I would be remiss if I didn't mention black Rock,
• 16:00
  Speaker 1: the first big S manager that also reported earnings UM.
• 16:03
  Speaker 1: They reported disappointing revenue gain even as they reported record inflows.
• 16:11
  Speaker 1: This just sort of highlights the difficulty with the E
• 16:13
  Speaker 1: t F industry that is very low cost UM. Do
• 16:17
  Speaker 1: you think that black Rock is going to have to
• 16:18
  Speaker 1: cut more people at this point? So black Rock, UM,
• 16:22
  Speaker 1: you know, they actually did come into the their quarter
• 16:24
  Speaker 1: actually came in a little bit better, helped by the
• 16:27
  Speaker 1: expense side, and they actually did have some UH cuts
• 16:30
  Speaker 1: earlier in the year, which was which was sort of
• 16:32
  Speaker 1: unique for them. That's just not something UH in general.
• 16:35
  Speaker 1: But you know, they basically they positioned that more as
• 16:37
  Speaker 1: a sort of longer term positioning. As far as the
• 16:42
  Speaker 1: revenue trend that that you're speaking of, I think we
• 16:44
  Speaker 1: did see black Rock kind of come in back in
• 16:47
  Speaker 1: October and make some feed cuts to some of their
• 16:51
  Speaker 1: E t F s and that's really been successful in
• 16:54
  Speaker 1: garnering a lot of flows and to the extent that
• 16:57
  Speaker 1: you know that is a scale business. Black Rock and
• 17:00
  Speaker 1: Vanguard UM just taking in a ton of money in
• 17:03
  Speaker 1: that business. Uh, and that's not a people intensive business.
• 17:07
  Speaker 1: It is lower margin into a low, lower few revenue margin,
• 17:11
  Speaker 1: but has a huge benefit from scale. Thank you so much,
• 17:15
  Speaker 1: Alison Williams. Always wonderful to hear from you to make
• 17:17
  Speaker 1: sense of all of the earnings that we're getting out.
• 17:20
  Speaker 1: Alison Williams, she uh knows everything there is to know
• 17:24
  Speaker 1: about the finance industry and she'll be busy next week
• 17:27
  Speaker 1: as well, because we have earnings from City Bank and
• 17:29
  Speaker 1: a variety of other banks. Yeah, it'll be interesting to
• 17:31
  Speaker 1: see whether they beat as well at following in JP
• 17:34
  Speaker 1: morgins footsteps, Alison Williams, Senior Banks analysts for Bloomberg Intelligence.
• 17:50
  Speaker 1: Chrysler plunged more than sixteen percent yesterday. Today it's rebounding
• 17:54
  Speaker 1: a little bit. Shares are up a little bit more
• 17:56
  Speaker 1: than four percent. This is after emissions by elatitions. Accusations
• 18:01
  Speaker 1: were lodged against Chrysler, and traders are trying to figure
• 18:05
  Speaker 1: out what this will mean and how much this will
• 18:07
  Speaker 1: cost the company. I want to bring in Jamie Butter's
• 18:10
  Speaker 1: who covers autos for us at Bloomberg News. He is
• 18:13
  Speaker 1: speaking to us from Detroit. Jamie can you make sense
• 18:16
  Speaker 1: of this. Why are people kind of going back to
• 18:18
  Speaker 1: Fiat Chrysler. Well, they're really trying to sort out what's
• 18:23
  Speaker 1: going on because it is so unusual. Um, you know,
• 18:26
  Speaker 1: the automakers can modify, you know, it requires a lot
• 18:30
  Speaker 1: of programming for anything as complicated as you know, a
• 18:33
  Speaker 1: diesel engine and uh uh filtering that has to go
• 18:37
  Speaker 1: with it and how they operate and extreme heat and
• 18:39
  Speaker 1: cold and various environments. So sometimes they put the software
• 18:44
  Speaker 1: pieces on and sometimes the e p A UH has
• 18:49
  Speaker 1: questions about them, and typically they argue them out and
• 18:51
  Speaker 1: then get it solved. And according to the FCA's view
• 18:56
  Speaker 1: is that we're still trying to sort out whether this
• 19:00
  Speaker 1: is okay or not. And you're calling a press conference.
• 19:03
  Speaker 1: And so when you see the press conference as an investor,
• 19:07
  Speaker 1: you're thinking, oh my god, this is serious. This is
• 19:09
  Speaker 1: like Volkswagen. But in the Volkswagen case in September, I mean,
• 19:14
  Speaker 1: the regulators had already extracted a confession out of Volkswagen.
• 19:18
  Speaker 1: You know, it took eleven meetings between the California Air
• 19:20
  Speaker 1: Resources Board and VW before they finally came back and said,
• 19:24
  Speaker 1: we don't have any more explanations. You caught us with
• 19:27
  Speaker 1: the defeat device, and uh, you know, christs are saying
• 19:31
  Speaker 1: this is in no way a defeat device. These are
• 19:32
  Speaker 1: just regular things that we're trying to discuss and make
• 19:36
  Speaker 1: sure that we're all on the same page about. And
• 19:38
  Speaker 1: so they're the company is very frustrated, and investors, of course,
• 19:43
  Speaker 1: they're kind of in the dark. They see this initial
• 19:45
  Speaker 1: signal that makes them think, you know, this could be
• 19:47
  Speaker 1: as terrible as Volkswagen. Uh, and then they hear the
• 19:49
  Speaker 1: company saying this is really nothing. Uh. You know, some
• 19:54
  Speaker 1: skepticism about companies saying that that an issue involving maybe
• 19:58
  Speaker 1: the Justice Department as well as the e p A
• 20:01
  Speaker 1: is nothing. But you know, certainly, with the being the
• 20:05
  Speaker 1: final days of the Obama administration, there's some sense that,
• 20:09
  Speaker 1: like with the p A ruling on mileage today, there's
• 20:12
  Speaker 1: some efforts to put the Trump administration into a difficult
• 20:15
  Speaker 1: position or or for the e p A to demonstrate
• 20:18
  Speaker 1: their value and their necessity to the incoming administration. Well, Jamie,
• 20:24
  Speaker 1: and this is serious stuff because not just the VW
• 20:27
  Speaker 1: executives have been the target of the Justice Department, but
• 20:31
  Speaker 1: we've learned today that three Takata executives have been charged
• 20:34
  Speaker 1: in the United States as part of that criminal case
• 20:37
  Speaker 1: to uh mislead federal regulators over the manufacture of those
• 20:43
  Speaker 1: faulty air backs. So there are potentially serious consequences. Yeah. Absolutely,
• 20:48
  Speaker 1: we're seeing you know, really aggressive enforcement out of Washington.
• 20:52
  Speaker 1: And some of it is a backlash to the financial crisis,
• 20:57
  Speaker 1: where you know, the overall health of the U. S
• 21:00
  Speaker 1: economy in the world economy was put in danger and
• 21:03
  Speaker 1: and you know, and no one was really prosecuted. No,
• 21:06
  Speaker 1: none of nobody who UH led to the financial meltdown
• 21:10
  Speaker 1: was prosecuted for that. And so there's been this greater
• 21:13
  Speaker 1: effort to you know, go after the bad guys and
• 21:15
  Speaker 1: make sure you get the executives are held accountable the
• 21:19
  Speaker 1: same as as other people might be. But in but
• 21:22
  Speaker 1: in some of these cases it's uh, I mean, it
• 21:25
  Speaker 1: definitely raises mistakes for what maybe, to Mr Marconi's view,
• 21:30
  Speaker 1: would have been just an administrative, you know, set of
• 21:33
  Speaker 1: meetings in a normal circumstance. Jamie, Um, you flicked at this.
• 21:36
  Speaker 1: The Environmental Protection Agency they announced that it's keeping vehicle
• 21:40
  Speaker 1: efficiency standards intact through the model year. How significant is
• 21:46
  Speaker 1: this for automakers? It's huge. You know so if you
• 21:50
  Speaker 1: you know, the Obama administration set out these long term goals,
• 21:53
  Speaker 1: but they agreed to a mid term review presumably would
• 21:57
  Speaker 1: hit the middle of the term. Would be kind of
• 22:00
  Speaker 1: when he's seventeen, and the standards get much steeper, much
• 22:06
  Speaker 1: quicker from for vehicles that are categorized as light trucks,
• 22:13
  Speaker 1: which is predominantly pick ups, SUVs, and minivans, which happened
• 22:17
  Speaker 1: to be where the Chrysler makes all their money and
• 22:19
  Speaker 1: then some so you know, they make jeeps, they make
• 22:22
  Speaker 1: ram trucks, they make they used to make the town
• 22:24
  Speaker 1: and country and now they have a new minivan called
• 22:26
  Speaker 1: the PACIFICA. You know, it's hugely important to the Chrysler,
• 22:29
  Speaker 1: but also to afford Chevy uh you know, GM, Jams,
• 22:33
  Speaker 1: brands and others. So uh, you know, they were looking
• 22:37
  Speaker 1: forward to a mid term review where they could state
• 22:40
  Speaker 1: their case and explain that while they've been able to
• 22:43
  Speaker 1: produce sufficient vehicles for the last four years, uh, you know,
• 22:47
  Speaker 1: getting that much more efficient would be very difficult and
• 22:49
  Speaker 1: very costly, that's the industry's view, and regulate. The E
• 22:53
  Speaker 1: p A and and others say, you've done just find
• 22:56
  Speaker 1: so far and there's really nothing to worry about it,
• 22:58
  Speaker 1: no reason not to lock in these rules. And so
• 23:01
  Speaker 1: you know, Mr Marconi spoke at length about this on
• 23:05
  Speaker 1: Sunday saying, you know, this was supposed to be a
• 23:07
  Speaker 1: regulatory review and instead we got an adjudication. You know,
• 23:11
  Speaker 1: they didn't feel like they got to make their case,
• 23:13
  Speaker 1: and the e p A just uh rammed it through
• 23:17
  Speaker 1: and and try to put this in place, and it'll
• 23:20
  Speaker 1: told it will be much more difficult for the Trump
• 23:23
  Speaker 1: administration to have a review. I know you're gonna be
• 23:27
  Speaker 1: following this for us. Jamie Butters is our US autos
• 23:30
  Speaker 1: reporter Bloomberg News, joining us from our bureau in Detroit.
• 23:40
  Speaker 1: Thanks for listening to the Bloomberg pan L podcast. You
• 23:43
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• 23:47
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• 23:51
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• 23:54
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• 23:57
  Speaker 1: can always catch us worldwide on Bloomberg Radi