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Trump allies fear blowback from Powell investigation · The Financial Exchange Show

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  Speaker 1: making a donation Today. Face is the Financial Exchange with
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  Speaker 1: Mike Armstrong and Mark Vandetti.
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  Speaker 2: Good morning, Welcome back to the Financial Exchange. It's Mike,
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  Speaker 2: Mark and Tucker with you on a Tuesday. It's an
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  Speaker 2: inflation report Tuesday. We got CPI this morning at eight
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  Speaker 2: thirty am. Banks are beginning to report earnings and further
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  Speaker 2: fallout from the DOJ investigation or grand jury subpoena of
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  Speaker 2: Jerome Powell, Federal Reserve Chair, and other proposals out of
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  Speaker 2: the White House recently, so we'll be covering that and
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  Speaker 2: a whole lot more today on the program, But let's
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  Speaker 2: start off with that inflation report.
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  Speaker 3: Mark. This obviously ties in to j.
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  Speaker 2: Powell and the Fed and their interest rate setting policy
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  Speaker 2: going forward, so let's kick things off right there. Eight
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  Speaker 2: thirty am, we received the report on CPI. This is
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  Speaker 2: the first normalized report we've gotten since the November one,
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  Speaker 2: which was by all rights just a dumpster fire mess
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  Speaker 2: of a report. It measured data later than as usual,
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  Speaker 2: it didn't have anything to compare a month over month on,
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  Speaker 2: and most people kind of threw it out and just said,
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  Speaker 2: let's give it a few months and see where we get.
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  Speaker 2: What were your I guess my question for you, what
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  Speaker 2: were your expectations or did you have any expectations going
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  Speaker 2: into this report about a bounce back inflation, because a
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  Speaker 2: lot's been written about, you know, an expectation of inflation
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  Speaker 2: rates bumping back up after maybe a false read in November.
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  Speaker 4: Some forecasters will use a sort of structural model to
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  Speaker 4: predict inflation, so they'll look at the change in unemployment
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  Speaker 4: and the change in other variables and use that to
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  Speaker 4: predict inflation. Those aren't particularly good when measured in terms
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  Speaker 4: of accuracy, you know, the gap between your forecast and anyway.
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  Speaker 4: So I would use a simple so called time series
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  Speaker 4: process that takes into account the last couple months change,
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  Speaker 4: which is exactly what we don't have. So I didn't
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  Speaker 4: even I just sort of do it as a hobby.
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  Speaker 5: Unusual hobby, I admit, yea.
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  Speaker 2: Some of us collect trading cards or go out with friends.
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  Speaker 4: Please just try to unsuccessfully forecast inflation for thirty years.
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  Speaker 5: To each just to Mike two eaches.
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  Speaker 6: On, ste Virgin make it salade.
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  Speaker 5: Yeah, pretty much, pretty.
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  Speaker 4: Much, two eaches on. So I didn't have anything to
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  Speaker 4: go with, so I didn't even bother. But I think
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  Speaker 4: that I think of the headlines I've seen Bloomberg's is closest.
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  Speaker 5: We're looking at Bloomberg on TV.
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  Speaker 4: And it's the it's the headline, and I wrote it
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  Speaker 4: the same way in my day job. Here uh headline.
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  Speaker 4: Inflation ticked up in December month over month point three percent,
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  Speaker 4: driven by a big jump in food prices point seven percent,
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  Speaker 4: again month over month, which if you annualize that, it's
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  Speaker 4: off the charts, I.
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  Speaker 5: Won't even do it.
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  Speaker 4: It's it's it's inconceivable. So that three percent is an
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  Speaker 4: uptick if you annualize point excuse me, point three percent,
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  Speaker 4: and you may see two point seven percent. Just to
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  Speaker 4: confuse things further, you may see inflation went up by
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  Speaker 4: two point seven percent.
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  Speaker 5: What do they mean by that?
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  Speaker 4: That's calendar year twenty twenty five, as opposed to two
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  Speaker 4: point nine percent in calendar year twenty twenty floor twenty
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  Speaker 4: twenty five.
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  Speaker 3: That's what it was. I didn't know that now, yeah,
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  Speaker 3: two point.
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  Speaker 5: Nine twenty twenty four.
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  Speaker 4: And if you look at core, which strips out food
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  Speaker 4: and energy, which some people like to do because the
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  Speaker 4: FED technically doesn't control those things, though some researchers would
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  Speaker 4: dispute that also they may not contribute to the trend.
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  Speaker 4: In inflation, though some researchers would dispute that core inflation
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  Speaker 4: came down from three point two percent year every year
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  Speaker 4: in twenty twenty four to two point six percent in
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  Speaker 4: twenty twenty five. Certainly welcome news. Not the two percent
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  Speaker 4: FED goal, but closer.
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  Speaker 2: I was gonna say, so, contextualize this, And I know
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  Speaker 2: it's always difficult to contextualize without wrapping everything else into this,
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  Speaker 2: like the government, especially for me, But like, take a
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  Speaker 2: snapshot of time and say, okay, we've got unemployment rate
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  Speaker 2: now I think at four point four percent and an
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  Speaker 2: annualized inflation rate at two seven. How would the average
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  Speaker 2: economic historian look at a moment in time like this
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  Speaker 2: using only those two variables.
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  Speaker 4: They'd be, first of all, outstanding. Now that sounds naive
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  Speaker 4: because unemployment could be going.
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  Speaker 5: There are other measures of the job. All right, you
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  Speaker 5: just said it's difficult.
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  Speaker 4: You're right, it's difficult to say anything without bringing in
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  Speaker 4: a lot of caveats. But snapshot and time very very good,
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  Speaker 4: you would think again, just snapshot in time, you show
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  Speaker 4: me those two numbers. Show those two numbers to any
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  Speaker 4: student in an economics class, and you ask them, what's
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  Speaker 4: the FED likely to be doing easing or tightening. You'd say, geez,
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  Speaker 4: inflation is above its goal. Unemployment is probably below the steadies,
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  Speaker 4: the natural rate of unemployment, the non inflationary rate. The
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  Speaker 4: Fed should probably be tightening right now. That would be
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  Speaker 4: the textbook response without the context that you spoke of, Mike,
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  Speaker 4: which is critical here.
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  Speaker 2: The painful items that you talked about. Inflation one, the
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  Speaker 2: food piece is clearly front and center for folks. It's
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  Speaker 2: probably a contributing factor to why the President started waving
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  Speaker 2: tariffs on some agricultural products coming into this country. Taking
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  Speaker 2: a look at some of the details there, again, month
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  Speaker 2: over month, it's estimated that food prices at home rose
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  Speaker 2: seven tenths of a percent in a month.
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  Speaker 3: That's a lot.
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  Speaker 2: Obviously, you annualize that, and you are at a very
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  Speaker 2: uncomfortable rate of inflation were that to continue. What you
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  Speaker 2: saw here, cereals, bakery products came in at six tenths
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  Speaker 2: of a percent increase. Meats, poultry, fish and eggs actually
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  Speaker 2: came let me make sure i'm looking at that right
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  Speaker 2: line came down slightly. Obviously, meat prices have been very
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  Speaker 2: high for an extended period of time, but fruits and
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  Speaker 2: vegetables up point nine percent, and then sorry, that's dairy
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  Speaker 2: is up point nine and fruits and vegties up half
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  Speaker 2: a percent. I know that that's getting a little bit detailed,
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  Speaker 2: but I do think people care about grocery prices only
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  Speaker 2: second to probably gas prices would be my guess. In
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  Speaker 2: the things that are right front and center for people
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  Speaker 2: to digest and get uncomfortable, well interesting, grocery prices maybe
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  Speaker 2: the second most cared about price that we consume on
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  Speaker 2: a regular.
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  Speaker 4: So it must be really confusing to people. It is
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  Speaker 4: to me in some ways. Why does the FED exclude
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  Speaker 4: those if those are the ones that are most conspicuous,
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  Speaker 4: that's precisely.
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  Speaker 3: Energy and food. They don't care.
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  Speaker 4: The fact that they change so frequently and can distort
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  Speaker 4: the trend in inflation is exactly why some researchers, and
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  Speaker 4: this came out of the experience of the seventies. There
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  Speaker 4: are better ways of getting a trend or underlying inflation today.
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  Speaker 4: That's precisely why they're excluded, because they're so erratic.
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  Speaker 2: Other big ticket items here utility gas service increased in
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  Speaker 2: price by four point four percent in a month. We've
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  Speaker 2: seen that gas prices tick up I'm wondering if there's
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  Speaker 2: some seasonal adjustment factor in there as well. But big
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  Speaker 2: increase there apparel costs jumping up six tenths of a percent,
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  Speaker 2: and transportation services of half percent. Shelter, which is talked
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  Speaker 2: about a lot because it makes up such a large
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  Speaker 2: piece of that core component, right, so we strip out food,
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  Speaker 2: we strip out energy because they're too volatile. When you
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  Speaker 2: strip those out, I think shelter accounts for what is it, like,
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  Speaker 2: twenty to thirty percent?
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  Speaker 5: Is it more that I can do it?
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  Speaker 3: Hold on, you can do that.
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  Speaker 4: I'm not going to.
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  Speaker 2: Shelter prices which have been still running three point two
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  Speaker 2: percent in the year of twenty twenty five. It ticked
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  Speaker 2: back up again in the month of December, up to
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  Speaker 2: four tenths of a percent increase, And so by and large,
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  Speaker 2: I think the conclusion that I would come to is
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  Speaker 2: many were anticipating. Many who run models that I don't
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  Speaker 2: fully understand, but you know, get published have been talking
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  Speaker 2: about expectations that have bounced back in inflation in December
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  Speaker 2: due to maybe some of the misreads in November. I
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  Speaker 2: will applaud this in so far as I don't think
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  Speaker 2: we really got that big bounce back.
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  Speaker 1: Right.
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  Speaker 2: We saw a two tenths percent increase in core prices.
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  Speaker 2: When you strip out that food and energy, and were
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  Speaker 2: that to be the annualized pace, you'd be quite happy
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  Speaker 2: with it. Unfortunately for the politicians out there. Yes, if
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  Speaker 2: you run, you know, core prices at two point four percent,
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  Speaker 2: that might allow the Federal Reserve to feel that they've
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  Speaker 2: accomplished their job and do their work successfully. But when
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  Speaker 2: you've got grocery prices increasing by nearly a percentage point
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  Speaker 2: in a month, when you've got home energy prices increasing dramatically,
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  Speaker 2: that creates conditions that people are not terribly comfortable with
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  Speaker 2: at a personal level, and it's still it affects how
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  Speaker 2: people feel about the economy.
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  Speaker 4: Mike, I think the only objective read on this is
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  Speaker 4: Inflation's okay. It's a little elevated, but it's okay. There
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  Speaker 4: could be a shock that sends it higher, sure or
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  Speaker 4: lower yep, but it's okay. It's tolerable. Unemployment is you
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  Speaker 4: can't talk about one without the other. They're intimately intertwined.
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  Speaker 4: The forces that push one up push the other down.
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  Speaker 4: In the short term, unemployment is low, but there are
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  Speaker 4: some warring signs in the labor market. It's it's just
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  Speaker 4: not clear how that's going to play out. If you're
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  Speaker 4: thinking about policy, I think the only reasonable that is
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  Speaker 4: supported by the evidence, that which is concrete. I mean,
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  Speaker 4: the only reasonable stance right now is do nothing. I'm
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  Speaker 4: in the I think the feses probably eased a little
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  Speaker 4: bit too much, given how elevated inflation is and how
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  Speaker 4: low unemployment is. But I can see somebody making a
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  Speaker 4: convincing counter argument. I wouldn't split hairs too aggressively over that,
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  Speaker 4: but I do.
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  Speaker 3: What I'm just thinking about.
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  Speaker 2: You know Stephen Myron's argument of you know, interest rates
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  Speaker 2: need to be a percentage point and a half lower.
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  Speaker 4: Well, he's he I know, he's carrying water for his boss,
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  Speaker 4: and he's doing it admirably.
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  Speaker 5: I guess if you're going to write his.
• 10:49
  Speaker 4: Review, if you were managing him, you'd say good job.
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  Speaker 4: It's not really a credible position, but we know where
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  Speaker 4: he's coming from. But I don't see how you could
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  Speaker 4: conclude unless you're a Trump administration puppet. And I don't
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  Speaker 4: mean that as demeaningly as it sounds, but they these
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  Speaker 4: guys are mirror in anybody who he appoints his FED chair.
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  Speaker 4: Unless you're a Trump administration proxy on the FED board,
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  Speaker 4: you probably want to, but you probably think, yeah, we're
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  Speaker 4: we're probably at neutral right now, maybe plus or minus
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  Speaker 4: twenty five bases a quarter of a percentage point.
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  Speaker 2: The one additional thing that I'll just point out about
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  Speaker 2: this year's inflation, which again Mark pointed out, for the
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  Speaker 2: calendar year of twenty twenty five, Americans experience an inflation
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  Speaker 2: rate of two point seven percent according to the Bureau
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  Speaker 2: of Labor Statistics. We are still getting a fair bit
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  Speaker 2: of help from energy prices. Those gas prices for the
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  Speaker 2: year fell another three point four percent, and I know
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  Speaker 2: we exclude it for purposes of the FED, but in
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  Speaker 2: terms of the real result on things coming down, a
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  Speaker 2: lot of that has been helped by those cheaper energy prices,
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  Speaker 2: and I think we'll all recognize fairly unpredictable in terms
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  Speaker 2: of where they go next. I think probably they stay low,
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  Speaker 2: and plenty of people in Texas are worried about that,
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  Speaker 2: But that is one of those items that can switch
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  Speaker 2: in the other direction and drive prices across the board higher.
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  Speaker 2: Given how energy prices seep into everything else. Let's take
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  Speaker 2: a quick break when we come back talk of the Fed.
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  Speaker 2: This is going to continue for quite some time. Want
• 12:18
  Speaker 2: to get Mark's take on Jay Powell's Sunday Evening video
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  Speaker 2: that he posted.
• 12:22
  Speaker 3: That's next here on the Financial Exchange.
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  Speaker 2: Well, in case you missed it, which would be pretty
• 13:29
  Speaker 2: tough to do, quite frankly, especially if you're a regular
• 13:32
  Speaker 2: listener to this show. There was a blow up between
• 13:35
  Speaker 2: the White House, the Justice Department rather and the FED.
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  Speaker 3: Over the weekend.
• 13:41
  Speaker 2: Sunday evening, FED Chairman Jerome Powell posted a two ish
• 13:46
  Speaker 2: minute video to x claiming that or indicating that he
• 13:52
  Speaker 2: personally and the Federal Reserve had received a subpoena from
• 13:55
  Speaker 2: the Department of Justice for a grand jury regarding his
• 13:59
  Speaker 2: testimony out Federal Reserve building construction and cost overruns. He
• 14:05
  Speaker 2: in no uncertain terms called this intimidation by the Department
• 14:09
  Speaker 2: of Justice to influence the Fed's policy, uh and very
• 14:14
  Speaker 2: much called it out in a way that I don't
• 14:17
  Speaker 2: know we've ever seen. You know, anyone living today has
• 14:20
  Speaker 2: seen the federal standards. There's no real precedent for the
• 14:25
  Speaker 2: budding of heads publicly that you are seeing between these two.
• 14:30
  Speaker 2: And you know, for some additional context here say what
• 14:35
  Speaker 2: you will about your own Powell and his you know,
• 14:38
  Speaker 2: leadership at the FED. Mark has been highly critical of
• 14:42
  Speaker 2: him over time. This is a guy that really, I
• 14:48
  Speaker 2: think one thing you can say he has been quite
• 14:50
  Speaker 2: good at has been dealing with changing administrations and avoiding
• 14:54
  Speaker 2: any topics of politics for the what is it now
• 14:58
  Speaker 2: eight years that he has been in charge of the
• 15:00
  Speaker 2: Trump put him there, since Trump put him there in
• 15:02
  Speaker 2: the late twenty tens, and so for him to go
• 15:05
  Speaker 2: out and do this is again precedent setting from the
• 15:08
  Speaker 2: Federal Reserve and very out of the norm for any
• 15:12
  Speaker 2: chairperson of the Federal Reserve, and j.
• 15:14
  Speaker 3: Powell specifically.
• 15:15
  Speaker 4: So again, I've never heard other than in what is
• 15:19
  Speaker 4: now distant history likes I think it was Johnson tried
• 15:23
  Speaker 4: to remove Stanton or something I'm talking about late eighteen six.
• 15:26
  Speaker 4: I've never heard of a president trying to remove an
• 15:29
  Speaker 4: appointee and getting public pushback from the appointee. Former for
• 15:35
  Speaker 4: every former FED chairman explain why FED independence is so.
• 15:40
  Speaker 4: To be clear, people don't view the charges, if there
• 15:44
  Speaker 4: are in d charges broad as legitimate. They view them
• 15:47
  Speaker 4: as a pretext for getting more control over monetary policy.
• 15:51
  Speaker 4: And by the way, that is that unbelievable. No, it's
• 15:53
  Speaker 4: not unbelievable at all. The president wants to control and
• 15:56
  Speaker 4: if you like him, you like this. If you don't
• 15:58
  Speaker 4: like him, this is a bad thing. But to control everything, sure,
• 16:01
  Speaker 4: that's just his nature. He wants to control monetary policy.
• 16:04
  Speaker 3: And we've made this point yesterday.
• 16:05
  Speaker 2: Say even if you are the big but here's the
• 16:08
  Speaker 2: point that I want to reiterate. Even if you are
• 16:11
  Speaker 2: the biggest President Trump supporter and believe he has all
• 16:14
  Speaker 2: the best ideas about the economy all the time, again,
• 16:19
  Speaker 2: we have to consider president here. Donald Trump will not
• 16:21
  Speaker 2: be president in three years. Somebody else will be. And
• 16:24
  Speaker 2: imagine for a moment that it's the person that you
• 16:26
  Speaker 2: think is least qualified to make financial decisions.
• 16:29
  Speaker 3: Nobody you don't want.
• 16:30
  Speaker 4: Nobody who thinks this is a good idea, is thinking
• 16:32
  Speaker 4: that far ahead or even understands monetary policy. No disrespect,
• 16:35
  Speaker 4: and I'm not there are people out there listening. I
• 16:37
  Speaker 4: don't get what you do. It's okay if you don't
• 16:39
  Speaker 4: get it, and you don't see why this is important.
• 16:41
  Speaker 4: But when every former FED chair, Wall Street executives, the
• 16:44
  Speaker 4: presidents own Treasury secretary promin, every former Treasury secretary save
• 16:51
  Speaker 4: one or two, every former head of the Council of
• 16:55
  Speaker 4: Economic Advisors, from Greg Manke and Glenn Hubbard on the
• 16:59
  Speaker 4: right to Furman and others on the left, when they've
• 17:03
  Speaker 4: all reiterated the importance of central bank independence. For if
• 17:08
  Speaker 4: you like low and stable inflation, central bank independence, a
• 17:13
  Speaker 4: central a FED like entity. We say central banks generally,
• 17:17
  Speaker 4: I just mean the FED. Independent decision makers are important,
• 17:21
  Speaker 4: just like you want independent Supreme Court justices to adjudicate
• 17:25
  Speaker 4: issues of great importance. You wouldn't want the president overruling
• 17:29
  Speaker 4: the Supreme Court. Now, the FED is not a separate branch.
• 17:32
  Speaker 4: Some of you might be saying Fed's not in the constitution.
• 17:35
  Speaker 4: You're absolutely right. It's not a separate branch. But Congress
• 17:37
  Speaker 4: created it. They created it to be independent. Congress gave
• 17:40
  Speaker 4: up its own money printing power authority, gave it to
• 17:43
  Speaker 4: an independent entity. They didn't intend for the President to
• 17:46
  Speaker 4: run it. But the Congress is not an executing body.
• 17:49
  Speaker 4: They don't have it like someone who can run the FED.
• 17:52
  Speaker 4: President's going to do that. That's what the executive branch is for.
• 17:54
  Speaker 4: So and the Supreme Court's going to ultimately decide this
• 17:57
  Speaker 4: this issue. So there's that legal angle. There's the if
• 18:00
  Speaker 4: you like low and stable inflation like we've mostly had,
• 18:03
  Speaker 4: Powell got it wrong in twenty famously yep in twenty twenty,
• 18:07
  Speaker 4: twenty twenty one. In early twenty twenty two, for that matter.
• 18:09
  Speaker 4: We were all very some of us were critical, and
• 18:13
  Speaker 4: I don't know if being critical, by the way, was
• 18:14
  Speaker 4: the right stance there. But so he hasn't gotten everything right.
• 18:17
  Speaker 4: But independence is probably crucial for low and stable inflation,
• 18:21
  Speaker 4: for high equity valuations. You'll like those high pe ratios.
• 18:26
  Speaker 4: You don't get those in an emerging market economy. You
• 18:28
  Speaker 4: don't get those in Hungary. You don't get those in
• 18:30
  Speaker 4: a Banana republic, and that's what we're in danger of becoming.
• 18:34
  Speaker 2: And even in other developed countries you are sharing with
• 18:39
  Speaker 2: me a chart. There's been some independent researchers who have
• 18:43
  Speaker 2: looked at the level of independence of the central bank
• 18:46
  Speaker 2: in the country compared to its longer term inflation rates,
• 18:49
  Speaker 2: and even developed nations that we would generally consider Italy,
• 18:54
  Speaker 2: it'll be Spain New Zealand, who have all had less
• 18:58
  Speaker 2: than independent central banks, have experienced on the long term
• 19:01
  Speaker 2: higher than average inflation than other countries with a more
• 19:06
  Speaker 2: independent central bank, like Switzerland, like Germany, and so there
• 19:11
  Speaker 2: are a lot of different factors that go into this.
• 19:14
  Speaker 2: We do need to take a quick break. Wall Street
• 19:15
  Speaker 2: Watch is coming up next. When we return. I want
• 19:18
  Speaker 2: to talk about practically in the short term how this
• 19:22
  Speaker 2: could lead to additional problems for President Trump specifically and
• 19:27
  Speaker 2: his next appointee at the FED. That's next on the
• 19:30
  Speaker 2: Financial Exchange.
• 19:41
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:44
  Speaker 1: TFE show. Breaking business news is always first right here
• 19:48
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:53
  Speaker 1: Stream Watch a complete look at what's moving market so
• 19:56
  Speaker 1: far today right here on the Financial Exchange Radio.
• 20:00
  Speaker 6: Busy day on Wall Street, where markets are in negative
• 20:02
  Speaker 6: territory after the December consumer Price Index came in line
• 20:05
  Speaker 6: with expectations of a zero point three percent increase last
• 20:09
  Speaker 6: month and held steady a two point seven percent on
• 20:12
  Speaker 6: an annualized basis. Investors are also keeping a close eye
• 20:16
  Speaker 6: on the drama surrounding the Justice Department's investigation into FED
• 20:20
  Speaker 6: shared Jerome Powell Land.
• 20:21
  Speaker 3: To top it all off.
• 20:23
  Speaker 6: We have these starts to fourth quarter corporate earning season
• 20:27
  Speaker 6: right now. The Dow is off nearly six tenths of
• 20:30
  Speaker 6: a percent, or two hundred and eighty three points s
• 20:33
  Speaker 6: and P five hundred down three tenths of a percent.
• 20:35
  Speaker 6: NASDAC down about a third of a percent, already four
• 20:38
  Speaker 6: points lower. Rusted two thousand also down three tenths of
• 20:41
  Speaker 6: a percent, tenure treasure reel down one basis point at
• 20:44
  Speaker 6: four point one seven five percent, crude oil down or
• 20:47
  Speaker 6: excuse me, up nearly three percent higher, trading just above
• 20:51
  Speaker 6: sixty one dollars a barrel. JP Morgan reported earnings in
• 20:54
  Speaker 6: revenue the beat expectations this morning. However, the bank's profit
• 20:58
  Speaker 6: declined seven percent last quarter, citing the two point two
• 21:02
  Speaker 6: billion dollar reserve link to its takeover of the Apple
• 21:05
  Speaker 6: card loan portfolio from Goldman Sachs. JP Morgan down by
• 21:09
  Speaker 6: three percent. Meanwhile, Delta reported mixed quarterly results, saying the
• 21:13
  Speaker 6: government shutdown knocked two hundred million dollars off its pre
• 21:16
  Speaker 6: tax profit in the previous quarter. CEO Ed Bastian said
• 21:20
  Speaker 6: the airline's earnings could jump more than twenty percent this
• 21:22
  Speaker 6: year due to robust travel demand, particularly among premium flyers.
• 21:27
  Speaker 6: Delta stock down nearly two percent. Elsewhere, shares in defense
• 21:32
  Speaker 6: contractor L three Harris rising three percent after the company
• 21:35
  Speaker 6: said plans to spin off its missile business backed by
• 21:38
  Speaker 6: a one billion dollar investment from the Defense Department, and
• 21:41
  Speaker 6: shares in health sciences firm Remedy rallying about seven percent
• 21:45
  Speaker 6: after it hiked its annual earnings guidance. I'm Tucker Silva
• 21:49
  Speaker 6: and that is Wall Street Watch and just a reminder,
• 21:52
  Speaker 6: you want to subscribe to our YouTube page. While you
• 21:54
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• 21:58
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• 22:00
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• 22:04
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• 22:09
  Speaker 2: So, Mark, I've been kind of brainstorming how this fight
• 22:15
  Speaker 2: between j. Powell and the Department of Justice, presumably the President.
• 22:21
  Speaker 2: We haven't seen much comment from the President on all
• 22:23
  Speaker 2: of this recently, but how all of this.
• 22:29
  Speaker 3: Culminates or makes.
• 22:30
  Speaker 2: Things more difficult for the White House and setting their
• 22:34
  Speaker 2: economic plan because, to be clear, the White House would
• 22:36
  Speaker 2: like to see lower interest rates.
• 22:38
  Speaker 3: They have made that clear. And J.
• 22:41
  Speaker 2: Powell's opinion right now is that they are utilizing the
• 22:46
  Speaker 2: Department of Justice, weaponizing it in order to influence his
• 22:49
  Speaker 2: decision to lower them.
• 22:51
  Speaker 3: Now again, I'm just putting out his stated opinion.
• 22:56
  Speaker 2: Maybe he's wrong, Maybe there is evidence of fraud by
• 23:00
  Speaker 2: the Fed in this construction, but I kind of have
• 23:03
  Speaker 2: my doubt. So let's run under that assumption that this
• 23:05
  Speaker 2: is not something that's easily cleared up. There are three
• 23:09
  Speaker 2: big ways that I think this becomes problematic, And you've
• 23:12
  Speaker 2: heard a few very public figures that matter to the
• 23:16
  Speaker 2: next few years of the economy stating their problems with
• 23:20
  Speaker 2: this one. Several outlets are reporting Scott Besson, Treasury Secretary,
• 23:23
  Speaker 2: has expressed his dissatisfaction with the DOJ's decision to move
• 23:28
  Speaker 2: forward with this. Senator Tom Tillis, a Republican from North Carolina,
• 23:32
  Speaker 2: has stated that he would oppose any FED nominee until
• 23:35
  Speaker 2: the legal matter is resolved, which would very potentially block
• 23:38
  Speaker 2: appointments the in the Senate for.
• 23:41
  Speaker 3: Future Federal Reserve picks.
• 23:44
  Speaker 2: So those have voiced there, you know, those individuals have
• 23:47
  Speaker 2: voiced their opinion. There have been many others as well,
• 23:49
  Speaker 2: but I view those two as fairly critical to policy
• 23:52
  Speaker 2: setting for the future.
• 23:53
  Speaker 3: So a few things here. One J.
• 23:55
  Speaker 2: Powell's term is up in me he will no longer
• 23:59
  Speaker 2: be the head of the Federal Reserve, the Chairman of
• 24:01
  Speaker 2: the Federal Reserve come May. So that does not yet
• 24:06
  Speaker 2: tell you, though, what his plans are for after there,
• 24:09
  Speaker 2: because he still can serve on the board for another
• 24:13
  Speaker 2: two years after And it was widely assumed that he
• 24:16
  Speaker 2: would be stepping down because you don't think about the
• 24:19
  Speaker 2: dynamics there, right. It would be you have this voting committee,
• 24:23
  Speaker 2: You'll have a new chairperson of the Federal Reserve, and
• 24:26
  Speaker 2: then you would also have a potential voting member who
• 24:29
  Speaker 2: used to be the chairperson of the Federal Reserve, who
• 24:31
  Speaker 2: many probably still look to as a point of influence
• 24:34
  Speaker 2: for what to do with policy. So many had assumed
• 24:36
  Speaker 2: that he would resign and no longer serve after this.
• 24:39
  Speaker 2: Does you know clearly he has taken issue with this?
• 24:42
  Speaker 2: Does this leave lead Jay to say, you know what
• 24:45
  Speaker 2: I was going to leave, I'm not going to because
• 24:47
  Speaker 2: I think my opinion here is critical to maintaining central banks.
• 24:51
  Speaker 4: I think that's why they need him off. They don't
• 24:53
  Speaker 4: want him to be a rallying point for the opposition
• 24:56
  Speaker 4: on the FOMC to Trump. The simple point to keep
• 24:59
  Speaker 4: in mind he is that Trump wants I know I
• 25:01
  Speaker 4: said this before, but I don't have a lot of bandwidth,
• 25:04
  Speaker 4: so I have to keep the ideas simple. Trump wants
• 25:06
  Speaker 4: complete power. He wants to sideline Congress. And you could
• 25:08
  Speaker 4: say you think this is a great thing or you
• 25:10
  Speaker 4: think it's a dangerous thing. I'm really not taking a
• 25:12
  Speaker 4: position there. He wants total control over monetary policy. He's
• 25:15
  Speaker 4: made that clear from day one. He said a couple
• 25:17
  Speaker 4: of weeks ago, Powell's going to get charged or sued
• 25:21
  Speaker 4: or something. Powell should get sued, I think is what
• 25:23
  Speaker 4: he said. He says he doesn't know this was coming.
• 25:26
  Speaker 4: Let's take him at his word. He didn't know it
• 25:27
  Speaker 4: was coming. It's a bad idea. Everybody's telling you that rain,
• 25:31
  Speaker 4: these prosecutors rain doj in. Mister President, this is a
• 25:34
  Speaker 4: bad idea, unless is there overwhelming evidence maybe that Powell
• 25:38
  Speaker 4: misrepresented the cost of the renovations to Congress he tried
• 25:44
  Speaker 4: to get Lisa Cook. If he hadn't tried to get
• 25:46
  Speaker 4: Lisa Cook removed and others removed on flimsy pretenses, I'd
• 25:51
  Speaker 4: trust this more. But he's been beating the drum for
• 25:53
  Speaker 4: this really since twenty nineteen, and there is very recent
• 25:57
  Speaker 4: precedent for them using untoward or questionable means to get
• 26:03
  Speaker 4: to get appointees various in various places they don't like remove.
• 26:08
  Speaker 5: So this is as simple as as that.
• 26:10
  Speaker 2: So step one, that first piece again, j Powell. This
• 26:13
  Speaker 2: might convince him that he should stay on and of
• 26:15
  Speaker 2: course he's stays a countering influence to the next pick. Two,
• 26:20
  Speaker 2: the Republican from North Carolina has just made the point that, hey,
• 26:24
  Speaker 2: your next pick to serve for the Federal Reserve is
• 26:27
  Speaker 2: now in danger because of this. I won't approve it
• 26:29
  Speaker 2: so long as this is still hanging out there. So
• 26:34
  Speaker 2: is there a delay in getting your next FED share
• 26:37
  Speaker 2: approved by the Senate and work through? I doubt it,
• 26:40
  Speaker 2: but maybe three. You do have to remember that this
• 26:44
  Speaker 2: Central Bank, it makes policy by a voting group of
• 26:49
  Speaker 2: twelve people, And so I do just openly wonder, right
• 26:54
  Speaker 2: if I am one of those other eleven and I
• 26:58
  Speaker 2: am seeing this play out, what is my reaction. Is
• 27:02
  Speaker 2: my reaction, Well, hell, I don't want to get sued
• 27:05
  Speaker 2: by the Department of Justice. I'm going to do what
• 27:08
  Speaker 2: the White House says, or I don't think there's any
• 27:11
  Speaker 2: middle of the road there. I think it's either I
• 27:13
  Speaker 2: acquiesce or hey, I take this job seriously, and I
• 27:17
  Speaker 2: think this is a credible threat to my to the
• 27:19
  Speaker 2: the Central Bank of the United States future. And so
• 27:22
  Speaker 2: I am going to make life a living hell for
• 27:25
  Speaker 2: the next FED chair and assume that anything they say
• 27:29
  Speaker 2: is being influenced by the White House, and I'm going
• 27:31
  Speaker 2: to oppose pretty much everything they say. I think this
• 27:33
  Speaker 2: is genuinely Even if President Trump is able to get
• 27:37
  Speaker 2: his next pick at the FED in and approved by
• 27:40
  Speaker 2: the Senate, you are potentially making it so you have
• 27:43
  Speaker 2: a very hostile voting board on what to do next
• 27:47
  Speaker 2: with intro.
• 27:47
  Speaker 4: I don't think that's going to change anybody's now impression
• 27:51
  Speaker 4: is to what the right balance to strike is between
• 27:54
  Speaker 4: inflation and unhealment. These people are career academics. Because we're
• 27:57
  Speaker 4: at me for the most part. Were at me, I
• 27:59
  Speaker 4: would say, you're very vindictive person.
• 28:01
  Speaker 2: Yeah, true, Were me, I would be looking at this
• 28:03
  Speaker 2: and saying, I have to assume that everything that comes
• 28:05
  Speaker 2: out of this next person's mouth is at the direction
• 28:08
  Speaker 2: of the White House.
• 28:09
  Speaker 4: Well, undoubted. Look that his pick to lead the FED
• 28:11
  Speaker 4: is already compromised. It doesn't matter who he picks. He
• 28:14
  Speaker 4: could put green Span back in there, and I would
• 28:18
  Speaker 4: doubt their independence. So the Fed's independence has already has
• 28:23
  Speaker 4: already been tarnished. It's a question of can it recover.
• 28:27
  Speaker 2: Let's take a quick break. I'm done with the FED
• 28:30
  Speaker 2: talk of the day. There will be plenty more because
• 28:34
  Speaker 2: like we said, this is pretty groundbreaking stuff for a
• 28:37
  Speaker 2: Federal Reserve chair to be standing up to the White
• 28:39
  Speaker 2: House in this way. Quick break. When we come back.
• 28:42
  Speaker 2: Bank earnings are out this morning. We'll be discussing those
• 28:45
  Speaker 2: in more next on the Financial Exchange.
• 28:47
  Speaker 1: Breaking business news as it happens only here on the
• 28:51
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• 28:57
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• 29:00
  Speaker 1: business news all morning Long. Base is the Financial Exchange
• 29:03
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• 29:27
  Speaker 2: JP Morgan reported earnings today. CEO Jamie Diamond says that
• 29:33
  Speaker 2: the economy remains resilient and doesn't appear to be worsening,
• 29:36
  Speaker 2: which is a bit of a breath of fresh air
• 29:38
  Speaker 2: coming from you know, hurricane on the horizon. Diamond, he's
• 29:42
  Speaker 2: been pretty dour on the risks to the economy over
• 29:45
  Speaker 2: the last few years, and now he's saying that all
• 29:47
  Speaker 2: is clear, which kind of makes me want to run
• 29:50
  Speaker 2: for the hills here. But in terms of big things
• 29:54
  Speaker 2: that move the needle here, if you weren't familiar, Apple
• 29:58
  Speaker 2: rolled out a credit card a few years They initially
• 30:00
  Speaker 2: partnered with Goldman Sachs, who turns out has no idea
• 30:03
  Speaker 2: how to run retail credit card businesses. They're pretty good
• 30:06
  Speaker 2: at investment banking and catering to multimillionaires, but offering credit
• 30:11
  Speaker 2: cards to the average Joe not what they are good at.
• 30:14
  Speaker 2: So JP Morgan acquired the Apple credit card program and
• 30:18
  Speaker 2: had to take a two point two billion dollar loss
• 30:21
  Speaker 2: for the quarter for potential loan losses related to those
• 30:25
  Speaker 2: credit cards. But overall revenue for JP Morgan increase seven
• 30:28
  Speaker 2: percent to forty five point eight billion. A lot have
• 30:32
  Speaker 2: been speaking about the banking sector and kind of a
• 30:35
  Speaker 2: new heyday that they are having right now in an
• 30:39
  Speaker 2: era of less regulation, higher spreads, big investment trading. JP
• 30:45
  Speaker 2: Morgan stock for the last twelve months up nearly thirty percent.
• 30:48
  Speaker 2: It's down today, however, about two and a half percent
• 30:53
  Speaker 2: in early trading.
• 30:55
  Speaker 3: So far.
• 30:55
  Speaker 2: We'll be hearing from just about every other major bank
• 30:57
  Speaker 2: as well, and so we'll be able to compare some
• 30:59
  Speaker 2: of the But again, I think nothing really concerning here
• 31:04
  Speaker 2: that I could tell from JP Morgan's earnings and their
• 31:08
  Speaker 2: outlook on where things go from here.
• 31:10
  Speaker 4: Mark, No, They're they're almost in a category of their own.
• 31:15
  Speaker 4: I mean, they've got asset management wealth management banking.
• 31:20
  Speaker 2: Bank America is the only one that I think you
• 31:22
  Speaker 2: know is even in the same ballpark.
• 31:25
  Speaker 4: Yeah, I mean there's a lot of overlap. I guess
• 31:26
  Speaker 4: with I'm not this isn't my it's not my sector.
• 31:29
  Speaker 4: In fact, I don't really have a sector in which
• 31:30
  Speaker 4: I specialize. But anyway, some of their the growth and
• 31:34
  Speaker 4: wealth management for JP Morgan, considering they're they're probably not
• 31:38
  Speaker 4: a household name there. Maybe they are in like New
• 31:42
  Speaker 4: York in that the the tri state area.
• 31:45
  Speaker 3: Yeah, people identify much more than jpre.
• 31:48
  Speaker 4: Yeah right right, But asset management grew by twenty percent.
• 31:52
  Speaker 4: Assets under management, I should say, grew by twenty percent.
• 31:55
  Speaker 5: Impressive.
• 31:56
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• 33:09
  Speaker 2: Restaurants and bars in the city of Boston are getting
• 33:13
  Speaker 2: a bit of a makeover in terms of the inner
• 33:15
  Speaker 2: workings of the liquor license laws there. So for decades,
• 33:19
  Speaker 2: the competition for liquor licenses across the Commonwealth of Massachusetts,
• 33:24
  Speaker 2: but specifically in Boston, has been intense. I remember stories
• 33:27
  Speaker 2: of people paying high six figures for liquor licenses in
• 33:32
  Speaker 2: order to be able to again capitalize on what is
• 33:37
  Speaker 2: usually the highest margin piece of a restaurant.
• 33:39
  Speaker 3: Business.
• 33:40
  Speaker 2: In twenty twenty four, the City of Boston really changed
• 33:44
  Speaker 2: that up pretty dramatically. They created two hundred and twenty
• 33:47
  Speaker 2: five new liquor licenses for Boston, specifically focusing on some
• 33:53
  Speaker 2: zip codes that are you know, less developed Mattapan, Roxbury,
• 33:57
  Speaker 2: Hyde Parkies Boston, for example, where much more of them
• 34:00
  Speaker 2: are going to go to. They change the process. You
• 34:02
  Speaker 2: can't just go and auction one off. When your business
• 34:06
  Speaker 2: goes under, you basically have to turn your liquor license
• 34:09
  Speaker 2: back over to the board. And I guess say this
• 34:13
  Speaker 2: to me, is approaching what I would consider to be
• 34:17
  Speaker 2: common sense approach to a market.
• 34:20
  Speaker 3: Right.
• 34:21
  Speaker 2: Previously they imposed this cap on how many could be issued.
• 34:25
  Speaker 2: You saw very predictable results as a you know, in
• 34:30
  Speaker 2: reaction to that liquor license is going for hundreds of
• 34:32
  Speaker 2: thousands of dollars. Instead, now they've pretty much created a
• 34:36
  Speaker 2: regulated but free, free er market where these things are
• 34:41
  Speaker 2: pretty much available and if you screw up and overserve
• 34:45
  Speaker 2: somebody and you know, somebody dies in a dui after
• 34:48
  Speaker 2: guess what, you're still going to lose your liquor license.
• 34:50
  Speaker 2: But there's not this massive competition for these you know,
• 34:55
  Speaker 2: finite goods of liquor licenses making their way through Boston,
• 34:59
  Speaker 2: which probably led to a whole bunch of corruption and
• 35:01
  Speaker 2: other problems over the years in the city of Oh my.
• 35:03
  Speaker 4: God, you want to make life more affordable, liberalized liquor
• 35:08
  Speaker 4: licenses just subject to some sort of perfunctory review.
• 35:13
  Speaker 5: Approve of them. I'm sort of liberty.
• 35:15
  Speaker 4: I'm a free market not job libertarians, So I still
• 35:19
  Speaker 4: I'm still exasperated by the fact that we charge.
• 35:22
  Speaker 5: For them, that we limit them. I drink, it's drinkings legal.
• 35:26
  Speaker 4: Why would you get there's a public safety, health, welfare,
• 35:29
  Speaker 4: and morals.
• 35:30
  Speaker 3: Sure, and if you are that wants to not allow
• 35:33
  Speaker 3: bars in your town, you are well within your rights
• 35:36
  Speaker 3: to do so.
• 35:36
  Speaker 4: But otherwise, it don't make them prohibitively expensive, because then
• 35:40
  Speaker 4: you're favoring certain classes of owners over Like any government intervention, Mike,
• 35:44
  Speaker 4: it just begets more stupid intervention and makes people on.
• 35:48
  Speaker 5: Balance worse off. The seemingly I shouldn't say any like
• 35:51
  Speaker 5: most forgive me.
• 35:52
  Speaker 2: I'm going to share one seemingly just crazy policy that
• 35:55
  Speaker 2: I've heard of in a town around here, and I've
• 35:58
  Speaker 2: never actually verified that these are the But if you
• 36:01
  Speaker 2: want to open a restaurant in this town, they require
• 36:05
  Speaker 2: you to have something like four times as many table
• 36:08
  Speaker 2: seats as you do bar.
• 36:10
  Speaker 5: Seats, okay, whatever.
• 36:12
  Speaker 2: Which again is such a just complicated regulation, but it's
• 36:16
  Speaker 2: effectively to design it so that you cannot create a
• 36:20
  Speaker 2: bar in that town, which again just imagine trying to
• 36:24
  Speaker 2: do business in that type of environment. Like, okay, I
• 36:27
  Speaker 2: have to design this space. I somehow have to fit
• 36:30
  Speaker 2: four times as money table seats as I do bar seats. Tucker,
• 36:33
  Speaker 2: I know you have family that run a restaurant, so
• 36:35
  Speaker 2: I don't know what their experience has been with all this.
• 36:37
  Speaker 2: But the other thought that comes to mind is, well,
• 36:39
  Speaker 2: what if I paid for one of these liquor licenses
• 36:41
  Speaker 2: for like six hundred grand and twenty twenty three and
• 36:44
  Speaker 2: now the thing's used to you know, completely worthless in
• 36:47
  Speaker 2: the free market because of these changes. So there's no
• 36:49
  Speaker 2: good way to implement these changes. But I'm with you, Mark,
• 36:52
  Speaker 2: if you want lower costs. We keep talking about all
• 36:57
  Speaker 2: these crazy policies like capping in interventions.
• 37:01
  Speaker 4: This is what I mean by it gets more intervention,
• 37:04
  Speaker 4: like you have to you have to intervene again to
• 37:07
  Speaker 4: correct the screw ups that resulted from your previous intervention,
• 37:11
  Speaker 4: and bureaucrats don't. And forgive me, I'm just gonna call
• 37:13
  Speaker 4: them all bureaucrats because they just don't seem to to
• 37:15
  Speaker 4: get that from the from the highest national level on down.
• 37:19
  Speaker 4: The solution to a problem government created is another government problem.
• 37:23
  Speaker 4: Cap credit card rates, prevent institutional investors from buying homes,
• 37:28
  Speaker 4: fifty thousand year mortgages.
• 37:31
  Speaker 3: Caps on grocery prices.
• 37:32
  Speaker 5: Oh my god, you can bet that's coming.
• 37:35
  Speaker 3: Well.
• 37:35
  Speaker 2: It came during the presidential campaign, as suggested by Kamala Harris,
• 37:40
  Speaker 2: so it was already there and it fits right into
• 37:43
  Speaker 2: the same purview Boston. I think at least taking a
• 37:46
  Speaker 2: step in the right direction here when it comes to I.
• 37:49
  Speaker 5: Guess we can.
• 37:50
  Speaker 1: Yeah.
• 37:50
  Speaker 4: I mean, at least the grateful they're not making it worse,
• 37:53
  Speaker 4: although sure there's some unintended consequence of this that we're
• 37:56
  Speaker 4: not seeing right now that it will make it worse.
• 37:58
  Speaker 2: Let's take a quick when we come back. A lot
• 38:01
  Speaker 2: more to cover in the second hour of the Financial Exchange,
• 38:04
  Speaker 2: including what are you going.
• 38:05
  Speaker 3: To see at a Super Bowl ad?
• 38:07
  Speaker 2: Specifically AI Next to the Financial Exchange