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I'm Kayley Lines alongside Joe Matthew here in Washington where we're looking at Capitol Hill today and the divergence we're seeing between the two chambers and their paths, respective paths to trying to achieve the legislative agenda of President Trump. They're all trying to get to the same place. Pass greater tax cuts, extending the twenty seventeen tax cuts, providing more funding for the border and new immigration policy, energy,
more defense spending as well. It really is a question of how they get there, and the Senate is suggesting that you may not get there the way the House wants, which is in one big package, so they better carve an alternate route, and they are taking the first steps toward doing so today.
Something Lindsey Graham calls Plan B. Now that Donald Trump has endorsed the House plan, but maybe that skepticism is warranted based on what we're hearing in these conversations. Either way, we got a big voterama that's coming tonight. Jd Vance, the Vice President, spoke at Sea Pack a little bit earlier today, had this to say about the process.
So the Senate obviously has its own approach, and the President has been very clear that his preference is to put everything in one bill, and part of that is
just simple legislative strategy. I think the President has learned a lot about how DC works, and I actually talked to the President about this yesterday and he said to me, Look, it's very rare that you can get two reconciliation bills done in one Congress, which is why he thinks we've got to do a lot with that one big beautiful bill, that first reconciliation package that we're going to get through the House and the Senate.
Now, if you're with us on a daily basis here on balance of power, how many times have you heard this argument on both sides. We're just going to keep doing this apparently until like what the middle of March, that's when we run out of money. Joining us someone who's been in the middle of negotiations like these Patrick McHenry, former Republican congressman who, of course chaired the House Financial Services Committee and at one time held the speaker's gavel,
if only for a short time. Congressman, good to see you, welcome back. What do you make of all of this? Can you believe we're still talking about it? And is a Plan B actually going to be necessary?
No, there's a Plan B is always necessary in Washington. But look, the reconciliation process is to get around Senate rules and the need for sixty votes in the Senate to pass legislation. And it's been utilized before. But like you just said, and like the Vice President Vance said, is it's highly unlike you get two reconciliation bills out of the same Congress. It's very difficult to achieve that. In fact, it's a very difficult and high hurdle to
achieve one. So the president is now applying through his vice president to say he does have a view. Everybody wants Trump to President Trump to jump in and define the very particulars of a tactic. He doesn't care about that. He wants to get his policies enacted in whatever form they can be enacted, like any president, and he is his versed in the legislative politics on the procedural pieces
as any president. Right, even President Obama, who had served in the Senate, did not have a deep understanding nor experience with reconciliation until he became president. So these things are always secondary questions, not the primary question. The primary question is what is the policy you want enacted. You've heard from Secretary Bessett, You've got great news out of him today. You've now heard from the Vice President. They
have a view. They want one bill, they want to maximize that one bill, which means that one bill will not be fast, which is what Senator Thune, majority of Leader Thune was trying to achieve. And Senator Graham is saying,
let's get police he wins fast and show progress. And what you heard from the Treasury Secretary was what matters is the economy and our economic impact, which is what we need to get done fast and first, which means you get a big bill and it goes a little longer, but still faster than waiting for the fall for a tax book.
So I understand that this is ultimately about just getting to the end game, regardless of what mechanics have to
happen in both chambers to actually get there. But is the endgame that this administration, the President specifically, is outlining, actually realistic given the political reality in the House of Representatives specifically, where the Ways and Means Committee has four and a half trillion dollars of wiggle room essentially barely enough to just extend the twenty seventeen tax cuts and is being told spending cuts will have to be in place as offsets for any other tax policy you want
to pursue, be it eliminating taxes and social security or over time or lifting the salt cap. Are those cuts really there? Where would they be found?
Oh, they can be found everywhere. We did this.
Does it go to medicaid, which the President said he doesn't want to see?
Well, there's there's a lot of waste and a lot of government as the doge TikTok is going around. But let's step back when when the federal government is spending dramatically more than it's ever spent before, our debt is dramatically more than ever before, and our structural deficit is quite severe, especially we've had the worst deficits of our nation's history outside of war wartime in the last decade. This is the thing that needs to be fixed for
us to be economically prosperous for the long term. So you do need to get governmental savings, and you do need to have a restriction on the on the on the tax plane. We went through this in twenty seventeen for the original Trump tax cuts. You had to actually put a fence around the number and then contain policy within those within that fence. That was a Senate operation. Now you're seeing the White House in this game, and the Treasury in particular in this game to define what
that looks like. Because we have a map for treasuries and treasury auctions that will make your eyes water the volume and the dollar amount of indebtedness and this interest rate reset the American people are going to face for the cost of our government. So you do have to put you have do have to constrain these things and have government efficiency in order to in order for us to have a sustainable path on the budget going forward.
Well, we talk about one big beautiful bill that's going to take longer than say the fourteenth of March. Somebody's got to fund the government a month from now. A continuing resolution gets the freedom Caucus upset. Does that complicate the math in a final vote on reconciliation in the House.
So this idea that the Freedom Caucus has a view on a continued resolution, they don't like the continued resolutions that they don't want, and they like the ones that they want.
Them want to fire the speaker, Well.
Yeah, exactly, it just makes them dyspeptic, right, are more dyspeptic. And so it's not a firmly held conviction moral principle that we can't have a continued resolution. I think the odds are you're going to have a continued resolution. And second to that is a government shutdown. This is my view from outside. Look, I'm sure you know just my view. And then the third option is the funding for the rest of the year in a normal way. I think
that has the lowest change what's happening. Right, you have a higher likelihood of a government shutdown than a normal appropriations process. Given where Hill Democrats are and they are necessary for government funding reconciliation, Sands separate is a Republican only proposition. Government funding has to be bipartisan, requires sixty votes in the Senate. That is a difficult and mighty nasty beast.
Well, speaking of mighty nasty beats, I want to return to the conversation of the debt and deficit and your talk about efficiency, because we were hearing from Stephen Miller in the White House Press briefing about this notion of the Doge dividend of taking some of those savings that they're working so hard to find and just funneling it back to taxpayers, and I wonder what you think of that notion. Why not just put it all toward paying down the debt.
Well, I think they want to connect this back to the American people, and I think this is a visible manifestation of that goal. But I think the better way to explain this is that we need to peer down the cost of government to save the American people money. This is a literal way of showing that. I don't think it's the most effective way. I think we need to be more aggressive with the tax cuts. If there's a Doge benefit, that would be the way to see this.
The Republican voters want to check in the mail though, that the association of getting checks from the Biden administration For me, yeah, right. It brings you back to COVID. Why not pay off the deficits since that was the job, or is it in fact proof of performance?
You know what, I got my money back. That's why voted for Yeah. I think it's proof of performance. I think that's the motivation behind it. And so, stepping back from the literal mechanism of this, the point they're trying to make is that the taxpayer actually benefits. We have federal salaries that are much higher than the national media in salary for the American people funding the government. That's
out of whack. We have a federal government that has a highest head account we've ever had outside of wartime. That is out of whack. We don't have the ability to pay for government. Even if we double tax rates and double tax income or double tax income, we would still have a deficit. So we actually do need to pay down government spending. It is a priority for the American people, and they're just trying to manifest to They're trying to explain this to the American people that it
does matter to them. That's what I hear out of it.
I want to ask you about something else, Congressman, that has been dominating the news in the last several days, and that is the now started negotiations are at least very initial early talks to end the war in Ukraine, talks to which Ukraine itself was not invited, And we now have the President referring to Ukrainian President Zelensky as
a dictator. Do you see this as a means for negotiation, a setting of a different kind of stage to bring putin on side, or is this a signal that President Trump actually intends to not allow Ukraine to pursue the kind of deal that it wants to pursue.
Well, first, President Trump campaigned on this. This was a campaign pledge that he would end the war in Ukraine. Now I voted to arm Ukraine free people's wanting to remain free against oppression. I think it is a vital national interest in the United States. A land war in Europe does implicate the United States and the global economy. We have enemies abroad and we need to be serious
about it. And that's how I voted in Congress. The President campaigned on something different, though, and he said we'd bring it into the war. We don't have a means and a goal for success, and we need to have a view for what is this successful into the war in Ukraine now, so he's falling through on his pledge. Okay, the second piece of this information is what he said
about Zelensky. That is something new and different. This tells me that this relationship has been mismanaged by the Ukrainians such that Trump goes public with this, with this comment, that should be bring greater that that should that should really be a chilling effect for the Ukrainians that they have mismanaged this their principal ally and their principal funder, and the president being in a very bad way and
very bad view of President Zelensky. I think that is problematic for the Ukrainian people, and I think it's problematic for a successful into the war.
I suspect we're going to hear about this, maybe everything we've discussed so far less than two weeks. When Donald Trump is in front of a joint session of Congress, it's the State of the Union, without actually calling him that. In his first year back, you've been through a couple of these, and the last few were pretty chippy when you consider the decorum in the room. Marjorie Taylor Green, Lauren Bolbert yelling everyone remembers the the the images, Joe
Biden riffing with the Republican Conference. What are we in for when Donald Trump makes his return? Does the decorum shift? Are you gonna have Democrats yelling at the roster.
Shifts? It's this is look, this is fight club in America. This is this is Prime Minister's questions. Now, that's effectively what the state of Union is like because the jeering is like that. So that oh my gosh, it's two weeks from now, Joe. This is this is the reason why, like you have much must watch TV, right, we're all in this Trump era where each hour is different. This Joe Biden, it was like glacier's moving and glaciers melting. And I won't get into all the other jokes to
go along with that about the president himself. But but the era of Trump is such a fast paced place. So in two weeks we may not be talking about any of this stuff, that's right, but it will be wild to watch the super Bowl of politics now, absolutely.
And of course we'll have a cover for you here on Bloomberg.
By all means.
As this White House Press briefing, by the way, is still ongoing, and they're marking one month of Trump and office that's why all these characters are gathered.
Here one single month today incredible and what we've covered. Does this pace continue? For our course, it does four years?
Does this is? This is in the nature of Donald Trump and what he does the media cycle. It's it's amazing what he does. But to me on substance on policy, on substance on regulational law, you have to look to folks like Secretary Bessett on where where is the administration moving on these policy goals to get the economy right well?
And folks like the former Chair of the House Financial Services Commits, Congressman Patrick mcchenry here with us in our Washington, d C. Studio. Green is always to see you. Thank you so much for joining us.
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and den on Apple, Cocklay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa played Bloomberg eleven thirty.
Just down the river. If you squint your eyes, you see down by the Wilson Bridge. There there's there's that amusement park looking resort down there. That's where seapack is getting underway right now. You get on the big ferris wheel. You listen to JD. Evans this morning, it's like a whole day out with the family. Donald Trump will be the keynote there tomorrow and we'll talk more about that coming up as we consider the next step here when it comes to the Doge, and based on what we're hearing,
it's the Pentagon. In fact, the Doge has already showed up. The Defense Secretary is starting to dig into this now. Pete. Hegseth out with a memo you likely right about by now on the terminal that plans to reduce projected military spending by eight percent the next five years. And you wonder why Palenteer is dropping today, why the defense contractors have been ruggling on Wall Street. Some areas we're told will be spared. And we're joined by the expert on
all of this. He made his way over just to talk to us from the Pentagon. Tony Capassio, Bloomberg Pentagon reporter who had his hands on that memo last week, Good to see you.
Well, I had it hit yesterday, but we broke the story on it Friday. So that was last week, right, I didn't have the memo. Okay, I knew what the contents.
See how honest this guy is. Are we really going to see an eight percent cut? I thought we were about to get the first trillion dollar defense budget.
Yeah, so this is an interesting issue. It's not a cut in the classic sense that the Pentagon is going to lose the money, got it. It's going to be a shift. The original memo or the memo wasn't very clear on that. Then a major news organization yesterday, not Bloomberg, and played implied massive shifts in the spending cuts that hurt market. Last night, at about seven o'clock, they put out a statement saying, oh no, it's the The impact in fiscal twenty six will be about fifty billion dollars.
That's their eight percent. They put out a list of seventeen exempted programs that were among the biggest defense programs, like nuclear modernization from one Virginia class submarine. The one they didn't put out there for an exemption from these cuts is the F thirty five, the biggest defense program in the world. So I'd be a little nervous if I was an F thirty five Officionado.
So when you talk winners and losers, here there's one potential loser. Who are the winners.
The winners are missile defense, the shipbuilders, seeing junior enlisted pay rays. But we're talking. And then then there's military construction contracts for Indo Pacific and some of the other combat commanders. And then there's the drone makers autonomous one way drones. Those are winners. That would be Arrow Environment be one company that comes to mind. But the interesting thing is the loser parts. The Pentagon has until like the Tuesday to come up with these lists to give
to the Controller's office. There's interesting conversions here. Joe, the House Armed Services Committee about a week ago asked the services for lists of their obsolete programs that could be cut, and those lists are due like next early next month. So you've got this perfect storm of wow hask which a week leaked right away in terms of the programs, and then you've got this twenty five budget drill going on. So it's a perfect convergence of a storm for defense company.
If you're a Lockheed, since you called them out, you're doing a lot of stuff right. You've got the f thirty five program. That could be a problem. But you're also making missiles that the Pentagon's going to buy more from. Does does that end up being a wash?
I don't think it's an awesome But Lockheed makes the Pack three along with the Wraith, and they make parts of it. They make the THAD missile, They're making the long the long range, the Loraz and the long range anti ship missile. But nothing makes up for the F thirty five. Last earlier this year, the Air Force projected that for fiscal twenty five they would buy forty eight F thirty five's and the total bill for the would be like thirteen billion dollars, including six billion in procurement
for F y twenty five. The rest of it's milk con and R and D and olly L. But it's a rich target if you're looking for a program that Elon Musk doesn't like.
Fascinating, not just the eight percent cuts here, and that's over five years. Apparently every year, over every year, we may see a dismissal of generals of flag officers. What are you hearing about.
That this is in the romance stage, really rumant stage. I don't have any insight into it, and it's so ruminant. I mean it's started with a tweet from some reporter and it said they're considering firing.
Understood, this is one of these This purge that we're seeing in other federal agencies is not landing at the Pentagon.
Well, it's landing in terms of probationary employees. It could be like saw I heard one figure like fifty five thousand employees. But the Night of the Generals isn't there yet. You know, you can say anything's being considered. You'll never be wrong if you say it's being considered.
Well, look, you talk about the bureaucracy you work, and I believe what is the biggest office in the world.
Correct, right, with good restaurants though too.
I'm sure most people don't know about that. But what I mean it's a building full of civilian bureaucrats as well. Correct.
Yeah, it's a it's a little minute. It's a mini city. After nine to eleven, they did a great job of putting making a better lit You can find a way a rattle, lot of user there's Kentucky that cut the lights, but now Kentucky Fried Chicken, Panda Cafe's there's a lot of light the Pana Express at the Pana Express.
Excuse how about that? I really need to come visit you over there.
Sometimes I don't know if you can be cleared to get in.
They wouldn't let me in the building. The war in Ukraine is supposedly winding down. I don't have any timeline for you on that, but you know the story about the talks. You see a ceasefire in place right now. Don't know how long that'll last. In Gaza. Do developments like these change our plans for procurement, for spending, et cetera. We were in the middle of multiple hot wars a couple of months ago. We might not be a couple months from now.
Now now, we're in the replenishment phase. They used many, any many missiles against the Hoodies in and in Iran last year. Expensive missiles, the SM six, the Navy's best. They's fired like eighty of those against Hoodie targets. Those are about four and a half million apiece. So we're in the replenishment phase for precision weapons and also the build up phase for one five to five millimeters shells. So you got to wonder, if there's a Ukraine cease fire,
let's hope that something does happen like that. We're going to have a surfit, a surplus excuse me, of one five to five shells and a capacity to build those. But we're in the replenishment phase. The big issue is going to be the into Pacific and how this replicator program plays out. It's cloaked in mystery. It's drones up the gazoo, so to speak, but it's supposed to be
in thousands in place by next August. I think that's where a lot of the Heckxit attention is going to turn to because he wants to focus more closely on China.
So these drone makers are the hottest thing going right now when it comes to kindagon spending.
I would think that people should take a look at them. Not that I'm giving an investments, but.
They're But the replicator program is something that you've identified here.
It's going to be a big deal. And then the command and control links for a replicator underwater drones. I mean those are areas that are they're not on the hit list, that they're kind of on the excluded list.
They they've been They've got carve outs here because we need to do some spending in that area to catch up, right, if you're an old line defense contractor getting back to this though, if you're a Raytheon, if you're a Lockeyed, that replenishment job sounds like a pretty lucrative year ahead.
It certainly does. A lot of this is made in an Alabama, in Troy, Alabama in those areas, the High Mars missile, the High Mars Carrier, the THAD missile, the Patriot which is split with Raythiana, I want to note, but now they have a good backdrop of missiles and fire control systems. The F thirty five though, is a huge part of their revenue. I think it was like twenty five percent locked excuse me for Lockeed. But the replenishment part, and he Hexit's Melmo does specifically singles out
for an exemption munitions. So this is a very constrained amount of what's left. And the interesting part the game in Washington will be what are those programs being cut?
Fascinating always to spend time with Tony Caposio in our remaining moment, are we going to get a new fifth generation fighter jet in this new administration? Something in the air or on the sea that we've never seen before.
No, No, maybe on the sea. We're going to see some underwater programs under what are drone programs? We haven't seen unmanned under man but I don't see the next generation. That was the endged program with g air Force put on hold.
Amazing. Great to spend time with Tony Capossio. He even brought the memo over with us, Panda Express, Kentucky Fried Chicken. What else do you have over there? De Pago, Baskinger Robbins. Really you guys reading ice cream over there too?
There's a good Lebanese to verna that just opened.
See how about it? All right, if you can get me in the building, I'd like to come see it first Clearances to Clearances with Tony Capossio. I'm Joe, Matthew and Washington. Glad you're with us here on the fastest show in politics. It's the Thursday edition We are Balance of Power.
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and five pm Eastern on Apple, Cockley and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
So we had the voice of Michael Bright, CEO of the Structured Finance Association here in Washington. Michael, welcome back. It's great to see you.
Yeah, great, Thanks for me.
I want to ask you about your take on Fanny and Freddie, which you've been writing a lot about and it's going to be a big story in a minute here in Washington. But first, your take on what we just heard here the consideration of elevated inflation and its impact on the contours of the bond market, the treasury market specifically. A lot of people think this looks like Janet Yellen's treasury more than what they expected from Trump.
What do you think.
I mean, this is going to be a challenge for them for a very long time. I mean, inflation is still sticky high, and the Fed can do you know, so many, so much. But if we got here because of too much spending, we certainly got here because of too much quantitative easing. I think, you know, everybody can look back at sort of that twenty twenty one period and say some of that spending, you know, probably contributed
to this. The Fed was wrong and thinking that it was transitory, and so it's been a long way out. They did get us down from nine on CPI to in the threes without really taking the economy and keeping it kept unemployment low. But you know, three four percent CPI is not going to cut it. You know, the Fed really needs to get it down below two to maintain their credibility. And so spending is going to be a big part of whether or not that's successful spending.
My goodness, well, we're about to have a grand debate over that right now. A lot of people are writing off the ear when it comes to interest rate cuts, are you among them?
They can't cut until it's credibly it's credible that CPI's heading down. I mean, because what will happen is that the Fed cuts rates and the market doesn't really believe that they have inflation under control. The longer term rates are just going to go up, so there's nothing that you can do. So inflation is the boundary condition on what the Fed can do. It really is their primary mandate. And so yeah, I've been bearish on the prospect for some of these rate cuts. I was actually wrong when
they cut fifty. I thought they should only gone twenty five. Then that they wouldn't only get twenty five. I think that was probably the right call actually, you know, because you saw longer term reach check up because the markets are to get concerned again about information.
Well, it's interesting. Another thing that people thought was a likelihood of Donald Trump won the election would be action on Fanny and Freddie. And it's something that you've been engaged in. Bill Ackman really got people's hopes up when he issued this was the end of December. His thoughts on this, sent out a series of tweets and said that they're particularly interesting today versus any other time in history.
As he wrote that there's a credible path for their removal from conservatorship in the relative short term and by that he means the next two years. Now, you say, fine, but not without reforms. And you've suggested in an op ed a series of reforms. Simply releasing Fanny and Freddy to the private world would, for instance, hurt lower end borrowers in your take, So what do you do about it?
Well, I think, look, this is a very complicated debate. So they've been in conservatorship fifteen years.
Imagine that's been fifteen years.
It's pretty crazy, right, But there there's reasons for that. I mean, ending it is going to be very, very complicated. So I don't think you can do it just by Congress, Congress acting on its own without leadership from the administration. Conversely, I don't think it's why to do it with administrative action only. There are things that need to be codified by Congress in order to get the system sort of
to the right place where it's going to be. So one of them would be of course, you know, we lived what I kind of called the big lie for a very long time, which was said that these bonds were not backed by the federal government, that the NBS, the mortgage backed securities they issue were not backed. If you look at a perspective prior to the financial crisis, it says these are not backed by the full faith
and credit of the United States. But everybody kind of assumed that they probably would be, but unclear about that, and so it kind of culminated at this one anecdote that I don't know if you remember, but during the two thousand and eight financial crisis is also coincided with the Beijing Olympics, and then Secretary of State John Pulson had to go and reassure the Chinese, we are going to back these companies up, I promise, please don't sell all the bonds that you own or you know, otherwise
US interestrates with skyrocket. That's a that's a risk that we'd be facing again if they are released from conservatorship only through administrative action. It's possible to Bill Lackman's point that this could be one of the confluence of administrative leadership on the issue. If it's coupled with congressional reforms, that would be very helpful. There's other things that Congress need to do as well, some of those I outlined.
Well, I mean, just but to begin with just to think that we're talking about this in this moment politically with a Republican majority of what could be one at some point by spring, is Washington really prepared to have a grown up conversation about this.
There's a reason it's taken fifteen years. Yeah, you know, there have been bipartisan legislative efforts that had some momentum but didn't get over the finish line. There would been purely administrative efforts. In fact, in the Trump one point zero administration, there were there was quite a strong push for that, I think because it was administrative only. You know, there was a negative market reaction that kind of put a pause on that. So is it likely in the
next two years. I disagree with the thought that it's like, okay, I think that we do have a unique alignment of administrative leadership and potential congressional willingness to do it, but it would need to be a bipartisan in my opinion, in order to really.
So this is just in case basically what you're laying out here. So let's talk about lower loan limits on mortgages they can guarantee you suggest sensible restrictions on the activities of GSS. Those two alone would be considered pretty major feats.
Yeah, that would be helpful.
So one of the premises that I'm coming to this with, and that is important to our market that we represent, which is serving a lot of private borrowers very well. So predominantly the private securitization market is serving borrowers that are above the loan limits of Fanny and Freddy conservatives sort of super prime jumbo mortgages, and those barbers are getting rates some times even lower than Fanny and Freddie rates.
But built into the law right now is that the GSE loan limits have to go up with home price appreciation. Now we've seen enormous home price appreciation and we've seen the loan limits continue to go up along with that. So you've got government sponsored enterprises backing loans of a million and a half dollars in a lot of areas.
As a lot of people argue, and I would be one of them, that this is actually contributing to the increase in home prices, that's making, you know, causing an affordability crisis.
So I think that.
It us Congress too, if these guys are going to come out of conservatorship to say, great, but we're going to have them focus more on their core mission as opposed to letting them, you know, juice up home prices at the super upper end of the market.
Does any arrangement if there's a congressional deal, which I think we're assuming here, otherwise none of this is probably going to be considered some sort of a supervisory or is there a probationary period following their release?
Well that that hopefully there'll be a lot of regulation, So you certainly need a strong regulator of them. You know, there are some idea that you could have charter authority to have more of them, so they are some of the bipartisan buils in the past suggested having several, you know, small, smaller gcs so that they could be resolved if there was a problem without it sort of taking down the market.
And then that leads kind of into the third point, which was, you really do need a credible resolution regime for anything if it's a private company. So if you're going to privatize them, again, I have some skepticism on the idea of a private government sponsored enterprise. It feels
a little bit oxymoronic to me. But if you're going to do that, and you want the market to believe that these are companies that could go insolvent, then you do need a credible resolution regime that says we could put somebody you know away while with the market continuing to function. And that really is where I think congressional you know, a stamp on the NBS itself that's well behind a bunch of private capital would be important.
I'm just glad to talk to somebody who's thought this through on the level that you have here. We're work time. It's been fifteen years. It's been fifteen years. Maybe not in the next two you say will it be before twenty go by? No, So we're just talking for the fun of it here always. Wow, that's Washington everyone. You just saw it in a real time Michael Brake. Great to have you back here. Check out when he was writing the op eds in the American Bank Correct CEO
Structured Finance Association. But we brought it to you right here on the fastest show in politics. We'll assemble our panel next, Rick and Genie. Right here on Bloomberg.
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Around this time yesterday, we were waiting for a judge's ruling on Eric Adams. It never came. District Judge dale Hoe did not make a decision and what was a ninety minute hearing after he instructed parties to be prepared to discuss why the corruption case against him, Eric Adams, that is, should be thrown out or not. So maybe where you left off on this whole story was Kathy Hokl, the governor of New York considering removing Eric Adams from office.
It's unclear whether that is going to happen. It is clear the walls are closing in. This is coming now from New York One. In a fascinating development in this whole saga, Kathy Hochel considering sanctions now against Eric Adams New York One, says. The governor's team developing legislation that would need city council and state legislative approval. Details still developing, expected to include legal limits on the mayor's power as executive.
But he just hangs out there living with these restrictions. Let's get the panel's take on this before we move on to some other topics. This is just breaking right now, and glad to say we have Rick and Jenie both with us today. Bloomberg Politics contributors Genie Shanzino, of course, democratic strategist and political science professor at Iona University. Rick Davis, republican strategist and partner at Stone Court Capital. Does this
sound realistic to you? How does Eric Adams continue running the city under sanctions if that's in fact Kathy Hokal's choice.
Yeah, Joe, you say sanctions, I think we're talking about Russia, and yet no, we're talking about the mayor of New York City. It's you know, it's astonishing. Apparently, if what we're hearing is to be believed, what they're really talking about is legislation that would go through the New York State Assembly, the Legislature, and the Senate and get approved by the New York City Council that would sanction and limit the power of the New York City mayor. I
think that this is a far fetched idea. I think it is an indication that the governor does not feel she is ready to try to take the step to remove him, and so I think that they are thinking of this as sort of a backstop. But it is highly problematic, and let's not forget New York City is facing an election for mayor this year. She didn't move when he was indicted. I'm not sure we have a good reason from her yet that she should move either to sanctions or to a some kind of removal at this point.
So, Rick, does this sound like Mayor Eric Adams keeps his job at least for now.
Yeah, I mean this is the most non action action I've seen taken by a chief executive of the state in a long time. And maybe you can just rack it up to democratic politics in New York. Genny would know more about that stuff than I do.
But this is this is nuts.
Either either think he's violated the law and done a deal with the Trump Administration's inappropriate and he ought to be removed, or leave him alone. Just what we need is more strings attached to run in the City of New York, by the by the Albany.
Oh great, great strategy. Governor.
My guess is she's just got those footsteps Andrew colemo on in the back of her mind. The idea that somehow she would elevate his chances of being mayor would absolutely destroyer. And that's too bad because instead of doing the right thing, she's got this convoluted mess that she's now going to expose to the voters and people of New York.
Wow. Well, I'm just loving listening to your instant reactions here, Genie. While this may be good news, I guess in the short term for Eric Adams, what does it mean for potential long term damage to the office.
There's so much potential damage to the office. And Rick is absolutely right. What about the people of the city of New York. We have had four aids to the mayor have resigned, as we know over the weekend. You know, New York City has over eight million people. It is a complicated Some people say it's the second hardest job in the country besides yours, Joe Matthew. And so you know, we're having somebody do this under indictment, under all of
this pressure. It is very, very tough to imagine. But I also think from Kathy Hochl's perspective, it is another and a long line of reminders to people that she doesn't seem to be able to exhibit the kind of strength that people want in a governor, the decisive action that people are hoping for. She is holding meetings, now, she's thinking about removal, now she's thinking about sanctions. I don't think either one is a good deal.
But here she.
Goes now throwing out another trial balloon. It is not good. By the way, today she has also deployed the National Guard because of a prison strike. And she's got Donald Trump breathing down her neck about congestion pricing. So Kathy Local has her hands full. But this is a really tough moment, and I don't think this makes sense.
Well, you know, I just wonder what the Trump effect is here, Rick, what do you think a day after the congestion pricing move. You know, he's pals with Eric Adams. Now that's why this case is being ordered to be thrown out despite all the resignations. Is Kathy Hilchel afraid of Trump?
Yeah, if she's afraid of Trump, then she ought to resign herself as governor of New York. She's got an obligation to serve the people in New York, as Genie said, and that includes everybody in New York City. She thinks something's wrong occurred, then she had to say so and act accordingly. If not, then then shut up and go back to Albany and see what you can do about saving your state, because it's got enough problems.
On its own.
Look, I mean, this is just another example of half measures trying to equate to managing a crisis. They have a crisis in New York City right now, and and and fomented in part because of what looks like a you know, sort of devil's bargain with the Justice Department to do the bidding of the you know, Czar of Immigration in New York City in return for getting off
a indictment. I mean, like that should be what we're talking about today, not this idea that somehow you're going to put strings attached to being mayor of New York. By the way, do those all go away if he doesn't win reelection?
I mean, like it's nuts.
They won't even get it done.
By the time the election occurs in New York City. And what chances do this guy have of getting re elected with the problems that he's created for himself.
Wow, this is Rick and Genie at their best here. I mean, we may as well go from one crisis to another. Can we call it a crisis? What's happening on Capitol Hill right now? We're walking up on a funding deadline here. We've got this massive agenda. Donald Trump wants in one big bill in the Senate. In meantime, is going ahead this afternoon with a two bill plan.
This is pretty remarkable, Rick Davis. Lindsey Graham, who you knew well in your years working in the Senate, says, yeah, the President prefers one big, beautiful bill, but you always need a plan B around here. Will he get credit for.
It in the end, probably not. My guess is no good deed goes unpunished on Capitol Hill, and this is going to go into that category. You know, we'll see what happens. We know that the House of Representatives is not a reliable partner. They don't have enough of a margin to guarantee outcomes, and so I think the idea is, so let let let both these flowers bloom and see
what comes of it. I think that's probably as best an option as you can get when you have the President United States trying to make legislative strategy for these guys and and frankly tying them up quite a bit after saying whatever you guys, bring me works for me. Don't know what changed Trump's mind, but it has caused a lot of trouble on Capitol Hill.
Well yeah, you know, so, enter Senate Democrats, Genie. This means it's time for the voter rama, and it's going to be a late night, if not an early morning. Maybe they're still underway at this time tomorrow, but we're expecting a lot of amendments. This is part of the pleasure of working in the Senate here, and I bet Rick has many scars to show for the late nights when it came time for voter rama. Schumer's going to strategy here, what's it going to be?
Well, I think they are going to try to put up so the Republicans have to take as many hard votes as they can force them to make. You know, the fascinating thing here, I think is for all the distractions that Donald Trump presents and just I guess today is one month. I can't believe it. One month he's been in office. Seems like an eternity. But the most important thing that can define his presidency is going to
be what we're talking about now, which is legislation. For all the eos and all of this stuff that he has been doing, it can all be easily overturned or relatively easily overturned by whoever comes in next, whatever Democrat next gets in office. But legislation is much harder. So this is really where the rubber meets the road. And that's why I think we see the President saying to the House, you know, we want you and Senate, we want you as this backup, so all of you keep
going full steam ahead. The reality is, though, is that it is going to be very tough to get either one of these bills through, and so of course the Democrats in the opposition are going to play that up as much as possible, and you know, Chuck Schumer does have a game plan. But this is all really about the Republicans at this point.
Yeah, you wonder what John Thune is in for and how he can control all of this later on. But as I consider the Republican majority leader and his challenges ahead here, Rick, the news about Mitch McConnell today is worth mentioning. Says he's not going to seek the honor of serving in the Senate an eighth time. His current term will be his last. What does this tell us not only about his career, but the makeup of the upper Chamber.
Yeah, I think it's kind of one of the last tumblers to fall from a Republican party that was really born out of the nineteen eighties, the Reagan Revolution, And there aren't many of those stormtroopers left, and Mitt McColl's obviously one of them. Also, the Senate will be losing, you know, one of its master strategists, somebody who you know led the Republican Caucus for the longest time in history. Uh and and was was relatively successful in that endeavor.
So uh, it'll it'll change the institution. And and frankly, you know, it's kind of an interesting dynamic. He's an outspoken critic of Donald Trump's and yet probably one of the things that will be remembered most is his unwillingness to support a second impeachment, which you know, killed it in the cradle in the United States Senate. And uh and likely that will define some of his tenure as a senator. So it's a it's a passing of the torch.
There's no question the chamber is moving more MAGA uh in its complexion rather than the traditional GOP and this will this will make a big lurch in that direction.
That's very well put, Genie. What can John Thune learn from Mitch McConnell. How does he chanre Mitch McConnell in shepherding through this budget resolution?
Yeah, I'm not sure he wants to channel Mitch McConnell at this point. You know, I think what Mitch McConnell ending shows is that the party has moved away, far away. As Rick was just talking about from where he was, and you know, he was elected in nineteen eighty four. When you talked to freshman in college today, many of them were born in like two thousand and six, two thousand and seven, and oh, but nineteen eighty four to
them sounds like seventeen fifty two. So you know, Mitch McConnell has been there a long time and the party has quite frankly moved on. So so there are things that any of us can learn. But I think, you know, from the democratic perspective, there is still a lot of animosity towards Mitch McConnell for what he did. For instance, with Merrick Garland, he really for Republicans and conservatives shaped the Supreme Court for democrats, he ushered in the loss
of really critical liberties and rights. So you know, it is a very mixed legacy. But he did give a very emotional speech on before today, that's for certain.
Well, we all feel really old now, Genie, I mean really Van Halen nineteen eighty four. Come on, guys, our signature panel, Rick Davis and Genie Shanzano. Thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already. At Apple, Spotify, or wherever you get your podcasts, and you can find us live every weekday from Washington, DC at noontime Eastern at Bloomberg dot com