Latest / Bloomberg Intelligence / CFPB’s Regulation Rollback Creates Financial Inclusion: Zywicki

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CFPB’s Regulation Rollback Creates Financial Inclusion: Zywicki · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
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  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
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  Speaker 1: or the trading floor. Find the Bloomberg p m L
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  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. The
• 0:32
  Speaker 1: c f p B has been under a lot of scrutiny.
• 0:36
  Speaker 1: Recently Mcmlviney came in as the new head. The former
• 0:40
  Speaker 1: head was pushed out, and this has become a sort
• 0:43
  Speaker 1: of fertile ground. I suppose you should say, uh, for
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  Speaker 1: debate around Consumer of Financial Sumer Financial Protection Bureau, thank
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  Speaker 1: you here to come on and weigh it on. This
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  Speaker 1: is Todd Ziwicki, Professor of Law at the George Mason
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  Speaker 1: University School of Law. He joins us from Fairfax, virgin
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  Speaker 1: and thank you so much for being with us. It's
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  Speaker 1: great to be with you. So Todd, you wrote an
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  Speaker 1: up ed for the Wall Street Journal that caught my
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  Speaker 1: attention where you basically were saying, uh, that it is
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  Speaker 1: good for the CFPP to be loosening of on some
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  Speaker 1: of its restrictions and that will actually help the economy
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  Speaker 1: and consumers. Can you just sort of give us the
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  Speaker 1: broad brush of your argument. Sure, there's the big question
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  Speaker 1: for CFPB is it's had a very controversial structure. As
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  Speaker 1: you know, it's been under court litigation for a while here,
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  Speaker 1: and we're still waiting to see whether it's going to
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  Speaker 1: go to the Supreme Court or not. So setting that aside,
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  Speaker 1: I think that the interesting question going forward then is
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  Speaker 1: what does a Trump CFPB look like compared to what
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  Speaker 1: we've seen during the Obama administration when Richard Cordrey was
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  Speaker 1: the head of the CFPB, And Cordrey actually left in
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  Speaker 1: November and announced is running for the governorship of Ohio,
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  Speaker 1: And so that's what's kind of put everything into the air.
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  Speaker 1: And when you look back over the past few years,
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  Speaker 1: I think it's really a story of um unintended consequences,
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  Speaker 1: which is I actually agree with the idea of streamlining
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  Speaker 1: and sort of creating one place for consumer financial protection
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  Speaker 1: in the federal government. That's based on both studying and
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  Speaker 1: also my experience at the Federal Trade Commission. But I
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  Speaker 1: think that what we've seen over the past few years
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  Speaker 1: is wild. Consumer protection is very essential. While it can
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  Speaker 1: be good for not only consumers but also lenders, but
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  Speaker 1: also the economy by giving people confidence to be able
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  Speaker 1: to uh to to borrow, to be able to get
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  Speaker 1: access to the products they need. At the same time,
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  Speaker 1: over the past few years, I think maybe the pendulum
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  Speaker 1: swung a little too far in one direction, and not
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  Speaker 1: just so much too much regulation, but regulation that I
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  Speaker 1: think wasn't very economically informed um and ended up restricting
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  Speaker 1: access to mortgages, restricting access to credit cards uh, and
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  Speaker 1: in particular hurting low income consumers and middle class consumers.
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  Speaker 1: The most professor z a wiki. Uh d you agree
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  Speaker 1: that the cf p B dropped investigations into payday lenders
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  Speaker 1: that we're charging up to on loans? Well, what did
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  Speaker 1: they do? I agree with it? Yeah, I mean you
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  Speaker 1: agree that that happened, of course, Yes, Okay, they obviously
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  Speaker 1: dropped those investigations. UH. And I don't know anything more
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  Speaker 1: about why they did or did not. Okay, all right,
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  Speaker 1: I just wanted just so we're playing with the same
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  Speaker 1: facts here now. The CFPP also decided, as part of
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  Speaker 1: this to drop an investigation into a company called World
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  Speaker 1: Acceptance Corps based in Greenville, South Carolina. You know about this.
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  Speaker 1: They happened to offer. They gave forty dollars to Mr
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  Speaker 1: mulvahney during his time as a lawmaker. Um, do you
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  Speaker 1: think that it makes sense to have someone who has
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  Speaker 1: accepted money running the organization from the federal government's point
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  Speaker 1: of view, that is supposed to be a fair and
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  Speaker 1: impartial overseer. Well, obviously Mr mulveney is no longer in Congress, Um,
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  Speaker 1: and it's but he's running the CFPOP. Yeah, I mean
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  Speaker 1: what we have, I mean what we you know, you
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  Speaker 1: know obviously, I mean it's it's up to the president
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  Speaker 1: to appoint, right, uh return, But I'm asking you, do
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  Speaker 1: you think it makes sense to have someone running the
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  Speaker 1: Consumer Financial Protection Bureau who, when he was a lawmaker
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  Speaker 1: accepted and that was just from the one company. But
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  Speaker 1: the estimate is that he accepted about sixty three dollars. Yeah,
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  Speaker 1: I think personally, I think that, uh that that I
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  Speaker 1: think that obviously mcmulveney is appropriately appointed. I think he's
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  Speaker 1: doing an excellent job. I think that to the extent
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  Speaker 1: that the decision is made by any president to appoint
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  Speaker 1: a politician, these sort of issues arise. So, for example,
• 4:54
  Speaker 1: Richard Cordray was appointed after being Attorney General of Ohio.
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  Speaker 1: He accepted a lot of money during that time from
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  Speaker 1: trial lawyers when he ran for office, and now he's
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  Speaker 1: running for governor and he's accepting money from trial lawyers
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  Speaker 1: and other people who have interest before the CFPP, I
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  Speaker 1: think to the extent that the decision is made to
• 5:12
  Speaker 1: appoint somebody who's been in politics, that's partly what's what's
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  Speaker 1: going to happen, right, Uh, And you know, and it's
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  Speaker 1: the same way with Elizabeth Warren or anybody else. And
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  Speaker 1: so I think, you know, that's what the democratic processes
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  Speaker 1: is for. And uh, and I'm not going to second
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  Speaker 1: guess that decision. And I have no inside knowledge as
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  Speaker 1: to why those investigations were opened in the first place
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  Speaker 1: are closed. In the second part from Todd, I want
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  Speaker 1: to get into the concept of paid a lending because
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  Speaker 1: I think that the CFPB under Rob Cordrey was uh,
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  Speaker 1: pretty much not against it, but but they took a
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  Speaker 1: pretty harsh stance with these lenders basically that agreed to
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  Speaker 1: accept someone's paycheck and charge them high interest rates. Um,
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  Speaker 1: you're arguing that they can be helpful for lower and
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  Speaker 1: middle income family is can you explain that, sure, yeah,
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  Speaker 1: and I and you know that what's going on with
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  Speaker 1: payday loans now is pretty well known and it's, you know,
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  Speaker 1: one of those difficult trade offs that's that's hard in life,
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  Speaker 1: which is people who use payday loans are people who
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  Speaker 1: don't have access to better credit products. Are people either
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  Speaker 1: don't have credit cards or maxed out on their credit cards,
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  Speaker 1: they've got poor credits um. And the evidence is pretty
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  Speaker 1: clear that people who use it use it to deal
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  Speaker 1: with pressing expenses in life mortgage, insurance, payments, utilities, that
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  Speaker 1: sort of thing. And so we have is a situation
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  Speaker 1: in which we've got people with limited choices trying to
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  Speaker 1: do the best the best they can. And I think
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  Speaker 1: there's two things that can draw from that, which is
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  Speaker 1: one is when we've got people already have limited choices,
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  Speaker 1: you should be very careful about denying them the choices
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  Speaker 1: that they already make. So, for example, we know is
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  Speaker 1: that we're payday lending is banned by and large, a
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  Speaker 1: lot of people end up using bank over draft protection,
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  Speaker 1: which is off than more expensive or pawn shops, which
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  Speaker 1: are you know, force them to part with personal goods
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  Speaker 1: that they that they may need I think the way
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  Speaker 1: to think about it is to look at why is
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  Speaker 1: it that what is shutting off access from people to
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  Speaker 1: better credit products, whether it's bank accounts, whether it's UM
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  Speaker 1: credit cards. And that's what I think is the the
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  Speaker 1: the unfortunate consequences that happened over the past few years,
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  Speaker 1: which is because of Dodd Frank, because of some other regulations,
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  Speaker 1: people in the lower income spectrum have found it more
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  Speaker 1: difficult to get credit cards, They've lost access to bank accounts,
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  Speaker 1: they found it more difficult to get mortgages. And I
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  Speaker 1: think that's where focusing on UH financial inclusion and respecting
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  Speaker 1: people's UH ability to choose for themselves, I think is
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  Speaker 1: something that's kind of been lost in the shuffle, and
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  Speaker 1: I think should be waged more in the balance going forward.
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  Speaker 1: We gotta leave it there. Todd Zwicki is a professor
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  Speaker 1: of law at George Mason University School of Law based
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  Speaker 1: in Fairfax of Virginia. Let's bring in brook Sutherland now,
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  Speaker 1: our mergers and acquisitions columnist for Bloomberg Gadfly. You can
• 8:22
  Speaker 1: follow Brooke on Twitter at b L South s U
• 8:26
  Speaker 1: t H. I imagine that's just short indeed, all right,
• 8:31
  Speaker 1: so B l South. What is this about the U
• 8:34
  Speaker 1: S Government issuing an interim order to block an investor meeting?
• 8:39
  Speaker 1: And this has to do with the bid by Broadcom
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  Speaker 1: to buy Qualcom for more than ten billion dollars. Yes,
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  Speaker 1: and so Sipious, which is the U S. Regulatory body
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  Speaker 1: that's charged with reviewing deals for national security risk says
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  Speaker 1: they want to take a look at this before Qualcom's
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  Speaker 1: annual meeting. That meeting was the puposed to take place
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  Speaker 1: on Tuesday. It will now be delayed for up to
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  Speaker 1: thirty days while Siffius reviews this deal. And the reason
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  Speaker 1: why they're sort of intervening now, and personally, I think
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  Speaker 1: it makes sense is there was some concern about what
• 9:13
  Speaker 1: type of message it might send or what sort of
• 9:15
  Speaker 1: precedent it would send if sifias did not look at
• 9:18
  Speaker 1: this deal. Because Broadcom is a Singapore based company and
• 9:22
  Speaker 1: it's trying to move its location to the US, but
• 9:24
  Speaker 1: it's waging this proxy fight as a means of hopefully
• 9:28
  Speaker 1: getting board candidates on there that are more favorable to
• 9:31
  Speaker 1: its takeover bid. So some US lawmakers have said, could
• 9:34
  Speaker 1: there be copycats who would look at what it's done
• 9:37
  Speaker 1: and maybe think about a proxy fight is a way
• 9:40
  Speaker 1: to gain effective control of a you over a U
• 9:42
  Speaker 1: S company without ever having to go through a SIFIAS review,
• 9:45
  Speaker 1: because typically sifia's reviews only happen when there's an actual deal. Well, Brook,
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  Speaker 1: you know, it's interesting because I believe that Qualcom requested
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  Speaker 1: this review. Well, so there's been some back and fourth
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  Speaker 1: on that, So that is what Broadcom said. Qualcom is
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  Speaker 1: out with the statement, I think five minutes ago saying
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  Speaker 1: that Broadcom has you know, given to written, uh, you know,
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  Speaker 1: submissions to SIFFI as they've been engaged with the regulatory
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  Speaker 1: agency for several weeks. So the surprise element of this
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  Speaker 1: as it was conveyed by Broadcom may not entirely be accurate. Well,
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  Speaker 1: the reason why I ask is because I'm wondering how
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  Speaker 1: much this further sours relations between the two companies. If
• 10:26
  Speaker 1: there was some kind of uh encouragement, shall I say,
• 10:30
  Speaker 1: from Qualcom side to have SIFIAS come in and add
• 10:33
  Speaker 1: some pressure. Sure, I'm skeptical how much encouragement Qualcom actually
• 10:39
  Speaker 1: gave in this um. You know, there's been numerous reports
• 10:41
  Speaker 1: from from US and from other news organizations that Ciffiest
• 10:44
  Speaker 1: members were already concerned, So I don't know if this
• 10:47
  Speaker 1: just nudged them along the path that they were already on.
• 10:50
  Speaker 1: But I mean, look, there's no love lost between these
• 10:52
  Speaker 1: two companies, and that's not unusual in a hostile takeover situation.
• 10:56
  Speaker 1: I always laugh at these because you see these crazy
• 10:59
  Speaker 1: press releases where they're calling each other liars and all
• 11:01
  Speaker 1: this back and forth stuff, and then if a deal
• 11:03
  Speaker 1: ever gets announced, it's like nothing's ever happened and they're
• 11:06
  Speaker 1: best friends. But um, look, I you know, I think
• 11:09
  Speaker 1: that Qualcomm has obviously been very resistant to this idea
• 11:13
  Speaker 1: with Broadcom, and they've made some valid points about their concerns,
• 11:16
  Speaker 1: and Broadcom has really sort of been unbending and unwilling
• 11:21
  Speaker 1: to sort of meat Qualcom in the middle or give
• 11:23
  Speaker 1: any real sort of details, especially along the lines of
• 11:26
  Speaker 1: antitrust risks. Isn't Singapore and ally of the United States?
• 11:31
  Speaker 1: It is, but you know, it's still a foreign entity,
• 11:33
  Speaker 1: So I don't know, I understand that, but I mean,
• 11:35
  Speaker 1: but I mean Singapore's and ally of the United States,
• 11:38
  Speaker 1: it is. Yes, broad Comm is headquartered in Singapore. They
• 11:42
  Speaker 1: want to move to the United States and established the
• 11:44
  Speaker 1: domicile here in the US. Why other than the price
• 11:49
  Speaker 1: of the deal. Would this really be an issue? And why? Now? So,
• 11:54
  Speaker 1: Broadcom m is sort of known for being a cost cutter,
• 11:57
  Speaker 1: and it's known for financial engineer for lack of a
• 12:00
  Speaker 1: better word, And so I think the concern among US
• 12:03
  Speaker 1: lawmakers is that Broadcom would come in and significantly cut
• 12:06
  Speaker 1: back R and D cost at Qualcom. They've sort of
• 12:10
  Speaker 1: alluded to this idea of maybe winding down Qualcom's licensing business.
• 12:14
  Speaker 1: If you remember, that's them selling it. But that and
• 12:18
  Speaker 1: that's the one that's given them sort of all these
• 12:20
  Speaker 1: issues with Apple. But that isn't that a strategic business decision?
• 12:23
  Speaker 1: I mean, how does that end up being a sort
• 12:25
  Speaker 1: of US political security decision. Yeah, So what I was
• 12:29
  Speaker 1: getting to is, if you're cutting all of these costs,
• 12:31
  Speaker 1: what the US is concerned about is that then hamstrings
• 12:34
  Speaker 1: Qualcom in this race for five G technology. This is
• 12:37
  Speaker 1: the next front. What the US does not want to
• 12:40
  Speaker 1: happen is Whahwei is the other big leader in this technology.
• 12:43
  Speaker 1: They do not want Whahwei to have a virtual lock
• 12:45
  Speaker 1: on five G. Wawe is a Chinese company the US
• 12:48
  Speaker 1: wants to be a player in this. Qualcom is really
• 12:50
  Speaker 1: one of its better bets, so they're wary of sort
• 12:53
  Speaker 1: of giving control over that technology over this company to
• 12:57
  Speaker 1: you know, as of now a foreign buyer that that
• 13:00
  Speaker 1: has sort of a reputation for for cutting costs. Well,
• 13:03
  Speaker 1: I'm sure that the stag will end very quickly and neatly,
• 13:05
  Speaker 1: so we'll never talk about it again. Brook Southerland, thank
• 13:07
  Speaker 1: you so much for joining us. I'm sure we will
• 13:09
  Speaker 1: be talking about it again. Hashtag sarcasm. Bloomberg m and
• 13:12
  Speaker 1: A and industrial columnists with gad fly, and she's been
• 13:16
  Speaker 1: incredibly busy. She weartes fabulous columns. Check them out online
• 13:20
  Speaker 1: and you can see her on TV and she'll be back.
• 13:37
  Speaker 1: Does government spending discourage work? Here to help us understand
• 13:41
  Speaker 1: this topic is Edward Lizier. He is an economist and
• 13:44
  Speaker 1: he is also a Senior Fellow at the Hoover Institution
• 13:47
  Speaker 1: at Stanford University, formerly Chairman of the Council of Economic
• 13:51
  Speaker 1: Advisors from two thousand six to two thousand nine and
• 13:56
  Speaker 1: as Chairman Chief Economic Advisor to President George W. Bush.
• 14:00
  Speaker 1: Ed Lozier, thank you very much for being with us.
• 14:03
  Speaker 1: Maybe just speak a little bit about this notion that
• 14:07
  Speaker 1: government spending discourages work and I offer that it's really
• 14:11
  Speaker 1: in the context of a recent up ed piece that
• 14:15
  Speaker 1: she was penned and published in the Wall Street Journal. Sure, well,
• 14:19
  Speaker 1: the basic idea is this spending by itself doesn't discourage work.
• 14:24
  Speaker 1: But the problem is that the more we spend, the
• 14:27
  Speaker 1: more we have to tax. That's going to be true
• 14:30
  Speaker 1: whether we tax now or whether we borrow in tax later,
• 14:34
  Speaker 1: and taxes reduce capital formation and work. So the problem
• 14:39
  Speaker 1: is that if we spend a lot, we're going to
• 14:41
  Speaker 1: tax a lot, and if we tax a lot, we're
• 14:43
  Speaker 1: going to put disincentive effects on both capital formation and work.
• 14:49
  Speaker 1: The easiest way to see this is that if you
• 14:51
  Speaker 1: look at the data across say the G seven countries.
• 14:54
  Speaker 1: Um I looked at it across all O E C
• 14:56
  Speaker 1: D countries, which is a larger group than the G seven,
• 14:59
  Speaker 1: but the seven or the big ones. And if you
• 15:01
  Speaker 1: look at the big ones, what you see is those
• 15:03
  Speaker 1: countries that have high tax rates also tend to have
• 15:08
  Speaker 1: much lower work hours. And that takes two forms. One
• 15:11
  Speaker 1: is individuals work less per week given that they're working.
• 15:15
  Speaker 1: But the main effect is that individuals are less likely
• 15:18
  Speaker 1: to participate in the labor market. So if you look
• 15:21
  Speaker 1: at the United States versus say, France, the French work
• 15:25
  Speaker 1: about thirty percent less than we do per person in
• 15:27
  Speaker 1: the working age population. Professor Lazier, I think it's interesting
• 15:30
  Speaker 1: the way that you phrase it, which is that spending,
• 15:34
  Speaker 1: uh doesn't necessarily doesn't encourage people to work more. But
• 15:38
  Speaker 1: isn't this really about the budget deficit? Isn't this really
• 15:40
  Speaker 1: about sort of the need to plug some kind of
• 15:43
  Speaker 1: gap in the financial situation of a nation. Yeah, so,
• 15:48
  Speaker 1: so the way I think the easiest way to see it,
• 15:51
  Speaker 1: because it is a little surprising that you know, in
• 15:53
  Speaker 1: some sense deficits don't matter. Uh. It's not so much
• 15:56
  Speaker 1: that deficits don't matter, it's that, once we take spending
• 16:00
  Speaker 1: into account, whether you finance that now or whether you
• 16:02
  Speaker 1: finance it later is kind of a second order effect.
• 16:05
  Speaker 1: The easiest way to think about that is, you know,
• 16:07
  Speaker 1: suppose someone goes out and buys a home entertainment system
• 16:11
  Speaker 1: by spending their entire month's salary on it. Question is
• 16:14
  Speaker 1: are they better off by paying for that now and
• 16:16
  Speaker 1: depleting their entire earnings or are they better off borrowing
• 16:20
  Speaker 1: and say, and paying it off over time. So not
• 16:23
  Speaker 1: so obvious which one is better. What is obvious is
• 16:25
  Speaker 1: they probably shouldn't have bought the thing in the first place.
• 16:29
  Speaker 1: Ahead I'm sorry, I know, I'm sorry. I'm sorry to interrupt.
• 16:31
  Speaker 1: The reason why I was making that distinction is because
• 16:34
  Speaker 1: when uh, the congress members who are passing the tax
• 16:38
  Speaker 1: plan more arguing for it, they said, look, we want
• 16:41
  Speaker 1: a smaller deficit, we want less spending. Yes, we're going
• 16:44
  Speaker 1: to do this tax plan that's going to increase the
• 16:46
  Speaker 1: deficit substantially. We just now need to go cut spending.
• 16:49
  Speaker 1: And it was sort of this artificial distinction between spending
• 16:53
  Speaker 1: and not collecting as much money. But you think it's
• 16:55
  Speaker 1: it's a it's a real distinction. Well, no, I say,
• 16:58
  Speaker 1: let's put it this way. I think, uh, there are
• 17:02
  Speaker 1: misstatements on both sides. So the Democrats who were saying, oh, gee,
• 17:06
  Speaker 1: you know, this is terrible because we're increasing the deficit
• 17:10
  Speaker 1: um probably didn't have that quite right, because it's not
• 17:13
  Speaker 1: so much the fact that the deficit went up when
• 17:16
  Speaker 1: we cut taxes. Again, that's not great, but that's kind
• 17:20
  Speaker 1: of a minor consideration. But on the other side, the
• 17:23
  Speaker 1: Republicans also didn't have it quite right, because cutting taxes
• 17:27
  Speaker 1: by itself, right, now without also cutting spending means that
• 17:31
  Speaker 1: in the long run, growth is not going to continue
• 17:33
  Speaker 1: to be sustained. The reason that we get growth out
• 17:36
  Speaker 1: of the current tax bill is because it is a
• 17:39
  Speaker 1: plan that reduced the cut reduced the taxes on capitol,
• 17:43
  Speaker 1: and almost all economists on again on both sides of
• 17:46
  Speaker 1: the political spectrum, agree that taxes on capitol are the
• 17:51
  Speaker 1: are the ones that are the most harmful to economic
• 17:54
  Speaker 1: growth because capital can move. But neither side really had
• 17:57
  Speaker 1: it quite right. So the problem is, unless we get
• 18:00
  Speaker 1: spending under control, we're still going to have to tax
• 18:04
  Speaker 1: to pay for that spending, either in the long run
• 18:07
  Speaker 1: or the short run, and that will affect both work
• 18:09
  Speaker 1: and uh AN investment incentives. Ed Lozier, can I turn
• 18:13
  Speaker 1: your attention to tariff wars and particularly the president's effort
• 18:18
  Speaker 1: to impose tariffs on imported steel and aluminum. What's your response. Well,
• 18:24
  Speaker 1: I'm not an admirer of that policy. I have never
• 18:28
  Speaker 1: thought that getting involved in tariffs is a good idea,
• 18:32
  Speaker 1: even from the point of view of the country that
• 18:35
  Speaker 1: imposes the tariffs itself without any repercussions from other countries.
• 18:39
  Speaker 1: So I don't think that there's going to be much
• 18:41
  Speaker 1: of an effect, much of a positive positive effect, even
• 18:44
  Speaker 1: on the industry is directly affected, like steel, but certainly
• 18:48
  Speaker 1: other industries that you steal as an input will be
• 18:51
  Speaker 1: adversely affected. So on net, this is as far as
• 18:55
  Speaker 1: I'm concerned, this is a loser. Uh. It's just not
• 18:57
  Speaker 1: a good idea to do it, even if there were
• 19:00
  Speaker 1: not a trade war to follow. And of course, uh,
• 19:02
  Speaker 1: you know other countries are threatening that they are going
• 19:04
  Speaker 1: to retaliate. If that is going to happen, what do
• 19:08
  Speaker 1: you perceive the effect will be on economic growth in
• 19:12
  Speaker 1: the United States? Well, I think it will be negative.
• 19:15
  Speaker 1: I do think that the reaction and as I always
• 19:19
  Speaker 1: hate to outguess the market, but obviously the market's reaction
• 19:22
  Speaker 1: was pretty negative to this thing. Um, I don't think
• 19:25
  Speaker 1: that the effect on economic growth will be as pronounced
• 19:29
  Speaker 1: as as it appears right now from the dramatic movements
• 19:33
  Speaker 1: in the market. There will be a negative effect, but
• 19:35
  Speaker 1: I don't think it will be that large. Uh. We
• 19:38
  Speaker 1: do have a precedent on this. The guy I served,
• 19:40
  Speaker 1: President Bush, of course, impost steal tariffs early in his term,
• 19:45
  Speaker 1: and that was followed by you know a few years
• 19:48
  Speaker 1: of pretty good growth. Now Of course, he did remove
• 19:51
  Speaker 1: those tariffs a bit later, so one can argue that
• 19:55
  Speaker 1: President Trump will have the same opportunity, but it was
• 19:59
  Speaker 1: not that detrimental even in the short run. Edward Lizzier,
• 20:02
  Speaker 1: thank you so much for being with us, really interesting ideas.
• 20:06
  Speaker 1: Edward Lazier, labor economist and professor at Stanford University's Graduate
• 20:10
  Speaker 1: School of Business, coming to us from Palo Alto, California.
• 20:14
  Speaker 1: I'm Lisa Bramoy. It's along with my co host Pim Fox.
• 20:17
  Speaker 1: This is Bloomberg. The voters in initially in Italy have
• 20:36
  Speaker 1: had their say and it has actually produced a bit
• 20:39
  Speaker 1: of a muddled result, although populist five Star and the
• 20:43
  Speaker 1: League are vying for power right now here. To help
• 20:46
  Speaker 1: us understand what's going on in Italy is Dan leaf Green.
• 20:49
  Speaker 1: He is our Milan bureau chief for Bloomberg. Dan, thanks
• 20:52
  Speaker 1: so much for being with us. Tell us what are
• 20:54
  Speaker 1: what are the election results and what do they mean? Well,
• 20:58
  Speaker 1: the election results basically that there's a hung parliament, which
• 21:03
  Speaker 1: which was expected. The polls before a blackout fifteen day
• 21:08
  Speaker 1: blackout period UM showed that that was likely. I'd say
• 21:11
  Speaker 1: that there are two surprises. Um. One is the you
• 21:16
  Speaker 1: know the strength the increase in popularity of the five
• 21:21
  Speaker 1: Star UH anti establishment party, and I think the surprising
• 21:26
  Speaker 1: UM showing by the Populist League UM, which is part
• 21:32
  Speaker 1: of Silvio Berlusconi's alliance. UM, they actually outpolled Berlsconi's fort
• 21:37
  Speaker 1: Staliate party and I don't think anyone had predicted that. DAN.
• 21:42
  Speaker 1: As we head into it will inevitably be weeks, uh
• 21:45
  Speaker 1: possibly longer of negotiations as Italy tries to create a government.
• 21:49
  Speaker 1: Can you just explain to us how does this all work?
• 21:52
  Speaker 1: How does their government work? Because there's six hundred or
• 21:55
  Speaker 1: more members and they have to agree on some kind
• 21:57
  Speaker 1: of coalition to make it work. Yeah, it's UM not surprising.
• 22:02
  Speaker 1: It's a complicated process. But UM. On the upside, Italy
• 22:07
  Speaker 1: has done this before. Only five years ago in the
• 22:10
  Speaker 1: previous national election there was a similar result and it
• 22:14
  Speaker 1: took about two months to put together a government. This
• 22:17
  Speaker 1: time again, the Italian president UM really is the key figure.
• 22:23
  Speaker 1: There are a number of bureaucratic things that have to
• 22:26
  Speaker 1: occur over over the coming weeks. UM. That is, they
• 22:30
  Speaker 1: actually have to swear in the new parliament, They have
• 22:32
  Speaker 1: to elect the two speakers in the Chamber of Deputies,
• 22:36
  Speaker 1: Lower House and and then the President of the Senate.
• 22:40
  Speaker 1: Then the Italian President will actually start formal talks with
• 22:45
  Speaker 1: those leaders about trying to find a solution. He basically
• 22:48
  Speaker 1: gives a mandate. He picks uh someone to try and
• 22:52
  Speaker 1: form a government. UM. So all of that probably that
• 22:56
  Speaker 1: that preliminary bureaucratic um step. Those will probably take about
• 23:01
  Speaker 1: three weeks to a month before the Italian president actually
• 23:05
  Speaker 1: asked someone to form a government. Can you tell us
• 23:09
  Speaker 1: about the Five Star movement? Who is John Roberto Casta
• 23:12
  Speaker 1: Leggio and his son Yes, Um basically Um Cassa Lejo
• 23:20
  Speaker 1: was who who passed away about a year ago, I believe, UM,
• 23:23
  Speaker 1: and then his son sort of took took over. Um.
• 23:28
  Speaker 1: Were the inspirations, if you will, of this movement that started,
• 23:32
  Speaker 1: you know as a as a big internet um, you know,
• 23:36
  Speaker 1: populist following UM without a particular ideology, UM picking up
• 23:41
  Speaker 1: you know, disenchanted voters from both you know, the left,
• 23:44
  Speaker 1: right and center. UM. They chose for this election as
• 23:50
  Speaker 1: their prime minister candidate Luigi di Mayo, very young, early thirties,
• 23:56
  Speaker 1: UM guy without any government experience and likes to wear
• 24:00
  Speaker 1: a suit and tie, you know, casting a very you know,
• 24:04
  Speaker 1: serious businesslike image if you will, um as as their candidate. Um.
• 24:10
  Speaker 1: The problem is, while they improved on their performance you
• 24:14
  Speaker 1: know from five years ago, years ago, and got close
• 24:17
  Speaker 1: to of the vote, Um, they still don't have a
• 24:21
  Speaker 1: majority and hence we're in this situation of political gridlock again.
• 24:27
  Speaker 1: So Dan, you know, Berlusconi as soon as the comeback kid,
• 24:30
  Speaker 1: and it was sort of shocking to see him re
• 24:32
  Speaker 1: emerge on the scene after being banned from politics for
• 24:35
  Speaker 1: a number of years. But it seems like we have
• 24:38
  Speaker 1: seen that he is not as resilient as he had
• 24:41
  Speaker 1: been in the past, at least that seemed to be
• 24:42
  Speaker 1: the message sent by voters. No, Um true for me,
• 24:46
  Speaker 1: that was the biggest surprise of this vote. Um. I
• 24:48
  Speaker 1: think everyone was expecting that Five Star would be the
• 24:51
  Speaker 1: biggest single um, you know, most popular party, but I
• 24:55
  Speaker 1: am no one. I don't think had forecast that Berlsconi's
• 24:58
  Speaker 1: party would actually come in second place, and in his
• 25:03
  Speaker 1: alliance there um, you know, he just he invested so
• 25:07
  Speaker 1: much time in this, you know, obviously having the advantage
• 25:10
  Speaker 1: of owning some commercial television networks in Italy. You know,
• 25:13
  Speaker 1: he was campaigning um very strongly the age of eighty two.
• 25:18
  Speaker 1: He had heart issues last year. UM, and he was literally,
• 25:22
  Speaker 1: you know, all over the map, going from from north
• 25:25
  Speaker 1: to south, an experienced campaigner again. UM. A bit of
• 25:30
  Speaker 1: a surprise that he ended up only a sort of
• 25:33
  Speaker 1: a junior partner in this alliance that he's um that
• 25:36
  Speaker 1: he put together. Dan Liefgren, thank you so much for
• 25:39
  Speaker 1: joining us and I'm sure we'll hear from you again
• 25:41
  Speaker 1: as we follow the weeks or longer negotiations for Italy
• 25:45
  Speaker 1: to form a government. Thanks for listening to the Bloomberg
• 25:50
  Speaker 1: P and L podcast. You can subscribe and listen to
• 25:53
  Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.
• 25:58
  Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm
• 26:01
  Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.
• 26:05
  Speaker 1: You can always catch us worldwide on Bloomberg Radio.