Bloomberg Businessweek Weekend - December 10th, 2019

you to Australia. Understand the implications of those bushfires. They're the massive amount of area that they have encompassed, what the tie is to climate change. Also take you to Venezuela where they have too many dollars. Well, yeah, go figure that's a problem. It's a country with an economy that's crippled quarter after quarter of declines, stifling inflation. They've attracted a lot of dollars. But as a result that

has certainly created a problem. And speaking of problems, it's been a longstanding one for the Catholic Church, and this of course a dealing with sexual abuse charges and claims and lawsuits. And what's interesting, they have kind of a two wrong strategy when it comes to dealing with some of those suits and as a result, those claims that are going out to victims not as high as they might have been. It's a terrific piece of reporting. Disturbing to say the least, but an important one for folks

to understand. Plus the hidden dangers of the great index fund takeover. You've got these funds in your four oh one k It's this week's cover story. First up, though, let's begin with those ongoing tensions between the United States and Iran. For more on that topic, Jason We spoke to Economics editor Peter Coy. He took a look at that escalation strategy that President Trump is using with Iran, taking us back into some history of similar strategies and how it really is a risky one, but it also

has some rewards. It's a strategy he's used all his life. Trump is famous for saying, if somebody hits you, hit him back ten times. It's hard. It's worked pretty well for him in the world of business and politics. The question is now will it work as well in the world of geo politics? And you know, so far, you could argue so good. Knocked off one of America's top

enemies with relatively small repercussions exactly so far. And the question is what happens next, because Iran certainly has other ways that can get back at the United States cyber war, terrorism and so on, as well as just more attacks in Iraq Um. But then there's also the downside for the US of the fact that Iran is pulling out of its commitments under the nuclear deal. It's it's going back to enriching uranium. Uh. The turn of public opinion

in Iraq await. Until very recently, the Iraqis were turning quite negative towards Iran. Now they're pivoting towards being uh wanting the US to get out. The Iraqi parliament had a symbolic vote to tell the United States to go home. So, you know, it's definitely a mixed bag whether this kind of strategy works well. And it's a geopolitical story, it's also a geo economic story in many ways. This complicates so many things when we think about trade, when we

think about just the relationships between all these countries. This is a crucial economic part of the world. Well for sure. Now, Trump would argue, and he did argue in his address to the nation. That the US is self sufficient in oil now close to it it was, still has some imports of oil, But that does not mean that the oil market does not matter. Matters for all the other countries that are buying oil, and the United States remains

sort of the world's policeman to some degree. And so it's a bad thing if suddenly the straight of hormones is blocked, for example, by Iran and oil can't get out. What I think is interesting and you really do look into this whole idea of the escalation strategy. You know, you're writing this story that Trump, the president, Trump is running into a dilemma that we've seen other US president's face. How to fight a foe who pokes and prods using

asymmetric warfare. This isn't your typical foe. That is fascinating. And you go back to Richard Nixon in the world in the Vietnam War vent. That was when the US was trying to decide what to do, whether they should go f after the Vietcong basis and Cambodia, which it did, expanding the war and raging US piece of activist and what Nixon said at the time was he didn't want the US to become a pitiful, helpless giant. That expression

has gained currency which still gets used today. Trump identically does not want the US to be a pitiful, helpless giant. It's also interesting too, and Peter, you've written about this before, you write about it again. This is the United States in a different position in a very different world, and that also contributes to this asymmetry that we're seeing. There's not a lot of precedent for the US acting in

this way in a world that is like this. Well, the you know, Trump is not your typical president for better or worse. Uh that there are people who love this kind of strategy. It's about time the United States stopped using treating other countries with kid gloves and like hit hard. And I talked to people who think that this could work. It could create have a deterrent effect on further Iranian aggression. Uh So the jury is out on this. And that's Peter coy are Economics editor taking

a little bit of a political bent this week. It was the lead of the politics section and a reminder candidly, and we talked about this with Peter that politics and economics inextricably linked in many ways, especially because so much of the interest in the Middle East is ultimately economic, be it oil, be it just sort of economic strategy

in many ways. Well, it really gets to Jason bottom line that the president, President Trump has positioned his moves against Iran as an attempt to really scare it into a more submissive stance toward the United States. But the result is could possibly have that opposite effect. And that's the game that we're playing right now, or the United

States is, and the administration is. And I also think what's interesting about this is we always look back to history for press in history for comparisons, and yet if there's one thing we have learned during the Trump administration is that history past performance, as they say on Wall Street, is not a guarantee of future performance. And you do

just wonder whether this time really is different. And the other thing I just want to get to is, and I think we have talked increasingly about these stories in the magazine about the United States as a global player, kind of backing off from the global stage. And you do wonder if ultimately U S forces are out of the area, out of Iraq in this case, what kind of power vacuum is left and who fills it if the United States is not there in some form or another.

So this story has been front and center, Jason, no doubt about. It's been in all of the news reports. But I also feel like the Golden Globes, you had so many actors and actresses bring attention to the fires, the devastating fires in Australia. Well, it's an amazing story and a really important one and a reminder of the fragility of the climate. Right now, who better to talk about that angled in air crossed and he joins us from our green team, So tell us what's going on

in Australia and the implications from a climate perspective. It's very difficult to dispel what's going on in the ground there and the incredible suffering. There have been two dozen deaths, and communities have been uprooted and have uncertain at least near term futures. When you take a step back, you see that this is a part of a problem we've been talking about for a very long time, and that's

climate change. And the fires aren't over right, the fires of this scale, which basically I've never been seen before, We'll go on for months. Uh, they've already been going on for three or four months, and Australia isn't even in its peak summer season yet. Uh, there's not a lot firefighters can do. They can try to contain them, protect people and property, but expect this to be in

the news for months. You know. It's interesting. That's just stating this story that talks about that the bushfires that have burned a combined area twice the size of Swiss Switzerland, and as you mentioned, they're not done yet. So just to get an idea in terms of size and scope. It's not only that, but think about last I guess more than a year ago now the California fires and those absorbed so many people's attention, caused so much devastation in this country. And also we spoke last year in

two thousand nineteen about terrible fires in Brazil. The Australian fires are more than twice as much as the California two thousand eighteen and the Brazil two thousand nineteen fires combined. And so how does this play into the climate picture? I mean, what are the direct ties or even the indirect ties that we can draw from this devastation. It's pretty straightforward. The two thousand nine was the hottest year in Australia on record, which goes back about a hundred

and forty years. Globally, it was also the driest year in Australia on record, and those are the two things you need to have a bad fire season. They knew months and months ago that it was going to be a terrible fire season just because of what two thousand nineteen was like in Australia and also what the last thirty years have been like in Australia, which is depending on what part of the country, we're talking about a

ten or fifteen percent trend toward drier conditions. I think most of us, I think it's safe to say, who are you know reading about this? And folks that are reporting on it are saying it's climate change. And yet from what I understand within the country that they're not necessarily saying it's climate change. Is that correct? The political leadership, the Prime Minister has not embraced the vast element of

these fires, that is cimate change. Uh. That is a kind of political behavior we've seen for in Australia before we see it in the United States, we see it in other countries. It's not uh. Based on factually tenable positions, you cannot say that climate change is not happening and be correct. It is human caused and it's an increasingly important factor in everyday weather. What kills me about this story?

And I just have to bring this up because this story kicks off and talks about a report that was released back into Live two thousand seven. I think about the New York Times that did reporting decades ago, right, was it about climate change? And there were things that could have been done to prevent where we are today.

So it's not like, oh my god, we all woke up and said, look what's happening to our climate, Like there has been a lot of research and reporting done for decades that this is where we were headed and here we are today. I think it's it's we is uh is a is a word that you no, I'm serious. That really deserves some scrutiny here, Like, we as a human community, led by scientists who study what's going on,

have known about this for a really long time. We people who get up and have families and have jobs and are just trying to get through the day do not know it's it's an issue climate change, It's an issue. It's complicated, or at least until the last few years, it's been complicated. Um. So I think there's a lot of people who are still waking up and realizing that this issue is not like any other issue. Uh. There is a scale and an inevitability or inertia to this

issue that's different and worth noting. The problem is, and you guys pointed out fossil fuels still make up of our total energy consumption. That's not likely to change anytime soon. We hear about automakers and everybody working on it and other you know. Uh, but he's working in terms of alternative energies. But that's the stark reality of where we

are and unless we change that. And you guys point out in the story that there's the technology out there to do it, it's just not being either embraced or enacted fast enough. Yes and no, like we do. We do have the tools. And the story of the last ten years has been absolutely breathtaking and fascinating to watch. And that's the decline in the cost of solar power in the last ten years, decline in the cost of

wind power in the last ten years. Uh. And there's even there's even really hopeful signs in UH in many nations already. There's a really I wish I had it, really dramatic depiction of the United Kingdom's energy use historically, and the vast majority of it is coal. And so this chart is UH most of it is just black representing coal. And then what you see in it over the last twenty years, UM is this vast use of coal goes down to almost nothing as gas comes in,

as renewables come in, as nuclear comes in. So great Britain has done a really remarkable job in a very short period of time almost making coal disappear. And this is the country that lad the our foray into fossil fuels fifty years ago. That's Eric Roston and I have to say, Jason, you and I've been talking about this story all week long. It's devastating to see the fires

and the magnitude of these fires over in Australia. And the point is, and I still am stuck on that that statistic that these fires um a combined area twice the size of Switzerland. They're continuing to burn, but that's what we're talking about. They are huge, well in the implications, you know, you and I have been following this, as you say, all week, you know, both online via social media. You know, you flagged a tweet that noted that a

billion animals have been killed. You know, you've had a couple of dozen people who have been killed in all this, and yet the ramifications go far beyond that in many ways, in terms of the economy, but also the geography, the topography of this continent. This story one line in it.

You know, we talked about climate change, and we hear about academic studies and so on and so forth, but they say, what's what's crucial about what's happening here is that you're getting the real life feel for just how bad things might become because of climate change. Right, it's front and center and you can't ignore it. So really really trouble, and you do wonder if behavior does start to change with big examples like this, we'll see. So one story in the economic section that we wanted to

bring to everybody's attention. It's about a country we're talking about, Venezuela, that has attracted a lot of US dollars. You and I were talking about this and the introducer I know because I read this story. I read the headline. I was like, wait, what is happening here? Because dollars usually a pretty good thing for most people in the world. But leave it to Venezuela to figure out, you know, a way to make it. It's unbelievable what's going on? So tell us about the excess of dollars and the

consequences of editor Christina a little blad here. Thank you, you're welcome. Well, there's some good, uh you know things have come from it, which is I mean, basically people are gravitating to the dollar because you know, the believer just you know, keeps like losing its value. It like basically depreciate it almost against the dollar last year. So, um, you know, everyone from like you know, like haircutters to you know, people selling popsicles you know, on the street

now want to take dollars. The problem is, though you cannot open dollar accounts in Venezuela. Banks are not allowed to, so there's nowhere to stash your money. So we talked to this woman who's in an insurance business who wraps her dollars in a plastic bag and taps them to the inset of her toilet tank in her office. Um, so there's a big concern that this is going to spark another wave of crime like the one that Venezuela saw at the end of the ninety nineties, which is

pretty severe. Help me understand something first. Let's talk about the bank situation. So like, if I go to a bank in the US and I have a foreign currency, can't they change it and deposit it? Well? But nobody but see, nobody wants to change their dollars into believers because it's worth nothing. Yeah, because like you know, a week later, like you so do you want to keep your dollars? But you know, very it's very few countries are banks really like in the business of opening foreign

currency accounts. So people are hiding them truly, like as you said, under their toilet seat or in their mattresses. And you're talking in some cases thousands of dollars, right, I mean, some banks are allowing people to put them in their safety deposit box. But imagine how you'd have to take out many right after a while if you're a business trying to share dollars that the safe and you have people, you know, trying to get the dollars

out of the country. Even there are limits on what you can do so you have an anecdote in the story about someone who sent I believe his wife and daughter each with his other thousand dollars. Right, is the is the limit that you can bring into the yes without declaring it to custom So right, so you went right under. Yeah, he has a bank account in Miami, but he wasn't able to you know, wire the money

in there. So Christina, my question is why doesn't Venezuela just adopt the US dollars, especially since it's been in some regards a stabilizing factor for the country. Right as a means of transaction, it has, but politically it's a radioactive option. I mean other countries have done it though it's true, but I mean the US has sanctioned Venezuela. I mean this these are this is basically like the US is kind of, you know, diplomatically at war with

this country. So it would be a loss of sovereignty, sovereignty that would be unacceptable to the Madua regime. At the same time you know that the government has has actually I mean Moudas publicly said that, you know, dollar informal dollarization has been good for Venezuela, you know, because it has provided more price stability it has, you know, there's an incentive now to save and invest that there doesn't exist with the believe it is right, so it's

sort of it will stay in a gray area. A lot of other countries actually tolerate this, you know, and there's countries in Africa and other places that haven't formally dollarized, but you know, tolerate informal dollarization. There was during the economic section. It's about a country hoping to attract a sports industry and Jason, it has to do with kind of making over its image. It's also about diversifying its economy.

We're talking about we're talking about Saudi Arabia Politically, it's been in the news a lot over the last couple of years, not in a good way. Economically, it's one of the most fascinating stories across the globe. The de facto ruler uh Deputy Crown Prince Mohammed been Salmon. He is trying to change the culture and the economics of the place. Christina Lynn Blad she oversees the economics coverage. This is a fascinating story. We were talking before we

came on air. I really love the richness of this pun intended because this is a very tangible way that the kingdom is trying to move itself into the modern era. That's right. So they have a blueprint called Vision for how to diversify the economy, and part of it is to boost UH kind of Western style entertainment, So everything from music concerts to sports events, and the sports events is something that they've been leaning very hard on in in this last year, and already in the year, we've

had a very busy calendar. Wee. In December there was a big boxing match UH, and then last weekend it was the beginning of the Dakar Rally, which Saudi Arabia is hosting for the first time UM. And then they're going to be a series of UM soccer exhibition matches that they've cut a hundred and thirty million dollar deal with Spain's Federation Soccer Federation for that. And that's Christina Lynn Blad talking about Venezuela and then Saudi Arabia. I

really liked the Saudi Arabia story. I mean in part because I've spent a fair amount of time in the UAE. I've spent some time and cutter as well, sort of seeing the transformation of those economies, what the rulers and that's what they are of those countries and emirates have been able to do, attracting a lot of big name brands and in this case, big brand athletes in some cases. And yet it's also a reminder that it's not so easy.

Money doesn't solve every problem. Yeah, it's a really interesting story. Black Rock Vanguarden, State Street. They have a mass trillions of dollars under management, Jason. They hold by eight percent of all Index money, and that's why they become known as the Big Three. They've got a nickname, that's what insiders call it. But it's a real thing in a lot of ways, and owing a lot to the extraordinary power,

at least on paper, they hold. But we want to look into what that power actually means, how they're using it, and how it might be differently construed. Any Massa helped write the story. It's in this week's Business Week. She's in New York. Hi, Hi, how's it going right? This is really important for people to understand, in part because literally everyone listening to or watching this touches these estment

firms in some way or another. I would imagine exactly Index funds have just enjoyed explosive growth over the past decade or more, especially in the wake of the financial crisis, when investors have realized, hey, it makes a lot more sense in a lot of cases to just put my money in a passive index product and just track markets

that way instead of paying for active management. And over time, you've concentrated a lot of first of all assets and second of all voting power then um through the shares that they own in the big three that you mentioned, And we want to get into that concentrated power in this kind of common ownership by one entity or just a few entities. But remind us, I mean when index funds kind of came on the scene, they've been around for a few decades already, we've all thought what a

great thing, right, lower fees is as good for investors. Yes, they are unquestionably a great innovation for investors, and investors who are trying to just make the smart financial decision may well decide it makes a lot more sense to own index funds than pick individual stocks or pay for

someone to pick individual stocks for me. And then what happens is the in the index fund firms like black Rock Vangarden, State Street have the voting rights for all the companies that are underlying UH those index products, and as a result, they've amassed a ton of voting power in each of these UH companies that they own well and throughout some some numbers. I thought this was really striking. Um combined, the Big three own what about of Apple of City groups of it. I mean you're talking about

that's a big position, that's right. So if you put together all of their ownership stakes on average for SNP five companies, the Big three own about two of those companies. Now, what they say is that they're never going to vote as a block. They're not coordinating how they vote in matters like um, you know, board elections or M and A deals, um. But it's just a striking kind of

consolidation of power in some ways. And I think that what the academics and diivists say on this is that you just have to watch that trajectory and monitor how that power is being used. They're also managing the retirements of a lot of the companies that they ultimately have

stakes in, right, That's one thing that's come up. So you've you've seen various academics come at this from different angles, and one question is how are they How are their interests and stewardship initiatives, uh clashing or do they clash? And that is one thing that's come up in academic papers for sure. What the firms say is that they have these stewardship divisions which are tasked with going out to individual companies and talking about any kind of issues

that might affect their industry. Yeah. Well, I mean think about it, right, So you have these Big three and they're managing their retirement plans and at the same time they hold a lot pretty significant position in those shares, so you do wonder, you know, might they possibly vote on matters that might a piece management, right, because they also have they want their retirement business. Right. I mean, this is all kind of complicated and and kind of

interesting relationships. Yeah, there are some interesting nuances. And one thing that's kind of funny to consider is that academics come at it from two different ways in in uh, these two different angles. So there's one camp that says, look at all of this voting power that black Rock Vangarden State Street have a mass, does that mean that they could one day sway votes? One way or another

in a way that's worrisome. Another camp says, look at how big these fun companies are and how many different individual stocks um they hold, and are they two hands off? And that's what black Rocks Barbara Novik has called the Goldilocks dilemma. Are they doing too much? Are they doing too little? I think black Rock would argue they've got it just right, but you've got all kinds of angles well,

and that too little piece. I have to say, when I was reading your story, that was the one that really jumped out to me and I thought was such an interesting and important twist on this, which is we worried so much or we talked so much about like they have this in an amount of power, they could make all these things happen, but they could essentially just allow things to happen because they are ultimately passive. So it's not just what they vote for, but it's what

they might not vote for. Just feel like it's cool, keep doing your thing. And that's where you've seen some nonprofits and academics say they vote too much for the status quo at companies or they couldn't possibly have the resources to devote to a stewardship division to really closely understand each individual company. The you know, black Off, Vanguard, State Street would push back against that and say that they've only been increasing their stewardship efforts. But that is

one one camp of criticism. But and I do wonder about, Like, I guess what we're concerned about is whether or not Black Rock or State Street or Vanguard, you know, when it comes to matters such as an m an a deal right, or executive compensation or so and so forth for competition of the board or anything. But what kind of research has shown that you know, that they're voting more in favor of the companies and maybe against you know, things that might hurt workers or employees. Like what do

we know there? Yeah, there are different academic kind of studies of their voting records and UM and actually the same goes for nonprofits too. There is a nonprofit called Majority Action that put out a study of UM climate change related shareholder proposals specifically, and that found that black Rock and vand Guard tended to vote UM less in favor of shareholder proposals related to the environment. Now, UM so,

so that's one camp of criticism. For example, that they're not doing they're not voicing concern enough, they're not voting for active change enough. Um. What what they would tell you is that they view it kind of as a situation where um, different shareholder proposals aren't always created equal um. But they they've definitely come under attack for that. So how could this change, like what's in the works either from a legislative perspective from a regular tory perspective, that

could alter this picture at all. So regulators are definitely taking note of it, and right now it's pretty much in a monitoring phase. But the FTC, for example, has um voice that they are taking a look at the issue, just trying to keep tabs on it and understand it as well as they can. And it's for sure a conversation that's going back and forth in Washington. But speaking of voices that have been concerned, Jack Bogel, shortly before he passed away legendary when it came to index funds,

right van guard exactly, he had some words of caution. Yeah, you couldn't think of a bigger proponent for index funds than Jack Bogel. But even he before he passed away, voiced in the Wall Street Journal, He wrote this op ed that said, I don't necessarily think that this concentration of power is in the best interest UM, and that this has gone very far beyond UM. You know what

he originally envisioned when he invented index funds. He came up with somewhat he some proposals, basically, and one of those was around transparency and and just the heightened responsibility that comes with this role that index fund firms now play well. And it does feel like that, Noha, I'm glad you said the word responsibility because we are at

this moment. I think back last year to the Business Roundtable and everything that's going on around big questions of who's responsible for what, who ultimately needs to benefit from certain things. It can't just be for the bottom line, it can't just be for the benefit of shareholders. And it feels interesting at least to me that, you know, one of the voices sort of raising a lot of these big questions is Larry Fink, the CEO of black Rock, right.

I mean like he's very much in the public conversation about all of these things related to shareholders and employees

and companies exactly. You can see that the index fund firms themselves have really been taking it seriously, especially as the scrutiny has grown, both from activists, from academia um even from in some case regulators, and Larry think with his annual letters, has really tried to be a voice in that question of how corporations should behave and what standards we should hold for them, and ultimately who should

be holding them accountable. And it just goes back to the central premise of this, which is you have nominally passive investors who have huge stakes and and ultimately, at least on paper, a lot of power. Whether they use it or whether they don't use it becomes one of

the biggest questions here. And I think one of the main takeaways is even if not every theory exactly fits together, there's a general anxiety growing among all these different parties about what it just means for the market, what it means for corporate America. And I think there's a broader theme also going on. It happened, it's happening with technology, just you know, when there's a concentration of power, and

we're seeing this certainly with the Big Three. And I think you guys give us a little bit of a history lesson taking us back to standard oil, which I think is really important, you know, because John d had certainly concentration of power when it came to the industry. Yeah, we were like, but you know what I mean, like, we are looking at this when there's too much power concentrated among one or just a handful of entities exactly,

and we try to highlight that comparison. Big tech, in a similar way, has come has come out with so many innovations that have changed people's lives for the better, and is now facing more scrutiny as a result of the power that they have. And I think you're seeing a very similar thing happen in financing. That's any massa, Jason, You and I have been talking about this cover story

all week long. This idea of concentrated shareholder power, about common ownership, it really speaks to in many ways kind of antitrust perhaps concerns. We get worried when there's too much power by anyone entity or institution, And so we're looking at that, and what does it mean that black Rock Vanguard in State Street hold about of all index money, What kind of power does that give them? The story

that keeps on giving. The latest chapter has to do with the great escape of former Nissan chairman Carlos Gone. It's not very difficult to the conclusion you're going to die in Japan? Are you gonna have to get off? This was not about justice. This was, as I felt, I was a hostage of a country that I have served for seventeen years. And then that, of course was Carlos go On, the former head of Nissan and Renault. He held a lengthy and detailed press conference and Q

and A with reporters in bear Route. Let's get into it because at that press conference in Beirut was Bloomberg News senior reporter Matthew Campbell. He joins us on the phone, and first of all, we were rivetted. Jason talked about sitting in his car just listening to it. I had it downloaded, so I could, you know, listen to it on my way to the train and through my train ride. Set the scene for us. What was it like being in that room? Yeah, Caroly was, as you can imagine,

a bit of a zoo. Quite a lot of reporters, Jos fling to get in. Uh. There were many more on the street outside who hadn't been let in. This is the first time that Going had appeared publicly to speak publicly since his arrest. And this is a guy who, when he was at the top of Nissan and Renault for for twenty years, was really never far from a microphone. So he was clearly ready had a lot bottled up, ready to get off his chat. And so, Matt, knowing the story as well as you do, you and the

team have done some phenomenal reporting there. What jumped out at you? What did you walk out of their thinking? Oh wow, I didn't expect that, either in tone or in substance. Well, in terms of the tone, Jason, I think I was a bit surprised by how digressive a lot of it was. It was not perhaps the most organized appearance. There was clearly a lot that Go and

wanted to cover, which is understandable. But if you hadn't followed this very closely, and I have most people haven't, you could have really lost track of what was going on. So I don't I don't know if it was the most effective format for him to deliver his message, but if his goal was to get back out there and get back into the news, he certainly has done that. Yeah, no doubt about it, but it was it involved a screen behind him right, and power point or slides and

so on. I do wonder too, Matt, if it answered some questions, are really you know, created a whole new round of questions. I think Caroline did answer some questions we got from going the names of some of the people he feels are behind what he characterizes as a plot against him, an effort to end his tenure at Nisan, to prevent some of the plans he had for that company.

We got some interesting statements from him about why he came to Lebanon, about what he sees going forward as as a possible route to clearing his name and addressing these allegations. So there were there was some incremental news, but we didn't have was a smoking gun or any

any truly dramatic revelation. You know, it was interesting that listening to it, and again I didn't listen to it nearly as closely as you did there in the room, but it was notable how much he seemed to essentially say, look how poorly this company has done since I've been gone, And that tells you all you need to know about how important I was. And maybe why they set me up in this way. I felt like he was looking for shareholder pressure here a little bit, Yes, certainly, and

I think he'll probably find some shareholder pressure. There's no question Nissan and to some of con Reno have been in a really tough spot over the last year. I mean, how much of that is is due to growing to absence versus being due to just general headwinds in the industry, I think is quite debatable. But it looked go and portrayed himself for a long time as the indispensable man, the person without whom neither of these companies could succeed, and he he would argue that his absence is proving

his case. So now what, Like, I just wonder, what's going to happen next in this story? Um, you know, in terms of the legality of it, Um, I know, I think Japan wants to get him back in the country. So I don't know, Matt, you know the story inside and out like no other. So what happens next? Well, he is now in Lebanon. He is a citizen of Lebanon, and as a matter of policy, Lebanon does not extradite citizen, so he is safe here at least as far as

anyone knows. Uh. There is some talk that he's sort of side step today, but that I think we will see resurface that he could be tried in Lebanon, or that he wants to be tried in Lebanon, because I think, you know, life is a fugitive is not what he's looking for. He wants to clear his name, but he wants to do it in a country where he deems the trials fare. So that could be Lebanon, or I suppose it could be elsewhere, but that that's gonna be a big question in the next few weeks. And that's

Matt Campbell joining us from Beirut. Our man on the ground, so busy this week. What a tale. And he was in the room for that press conference. You and I were both riveted. You are literally like on the train listening on your mom advice. I was sitting in my car at the train station. I think I missed a train because he went on and on and on. What a scene. Yeah, absolutely, And the story isn't over. It is about for him saving his legacy, but the charges

are still out there. There's so much still yet to be known. Matt Campbell is going to be all over it, but we'll get the latest from him. According to one source, Catholic church leaders paid out about seven fifty million dollars from the early nineteen eighties through two thousand two. And yet Jason as this story in the magazine Explorers, America's Catholic churches are shifting assets and they're finally for chapter eleven, it's all about avoiding uh, the paying out of more

money to settle sex abuse claims. It is an incredibly disturbing story, but a very very important one and really takes us into the inner workings of the church and the business like way that they have approached this. Editor Dan Ferrara joins this. He worked on this story very closely. Took a long time to sort of get all this reporting out. Josh Saul wrote this story. Uh, Dan, take us in here and help us understand the sort of

broad strokes before we dive into the details. Well, the churches, um uh, they declare bankruptcy and because sexy, these claims are going to overwhelm them, right um and and declaring bankruptcy is probably appropriate thing to do. They're they're the way they explain it is like if we declare bankruptcy. It creates an order to the process. Uh, imagine if they didn't do that, and then the first, the first big claim could wipe them out and no other victims

could get would have access to any money. So that it makes sense on that level, like do declare bankruptcy. What the story us also examining, however, is steps that precede the bankruptcy, and that the church sayes they're not about anticipating the bankruptcy, but steps that precede the bankruptcy, which which diminished the size of the church's estate. So the bankruptcy will typically there's there's no there's no heart

and fast rule. But if if I say, a bankruptcy ends up, um, if if sect of these victims end up splitting half the church's remaining a state, um, then the church that has a has a has an interest

in minimizing the size of that estate. And this is what's interesting and I think most people listening, I think about you know corporate America, right, you know, people file you know Chapter eleven, so that there is an order to the process, and so that you know, creditors are are as many creditors are given, you know, a bite of the pie. That's and these these victims infect our creditors.

That's that's that's their status. So we understand that. But as this story so well, you know, points out that there's two to two points to it. And the big thing is these assets that are transferred and reclassified and you talk about these archdioces, right that move these assets to parishes, and so that money is no longer part of that settlement pool. The legal but tell us a little bit more about that. It's legal, but it is

it isn't act. What is in dispute in bankruptcy proceedings, like the churches will say that certain assets like UM funds of money, UM real estate is the single largest one. So it's well, that doesn't actually belong to the arts diocese. That belongs to the individual parishes and therefore it's not

legitimately part of the estate. Well, in a lot of instances, the money was moved from the archdiocese to the individual parishes in anticipation of or preceding the bankruptcy and right, so then the used to be part of the archdiocese

and that it's moved off. So the lawyers are trying to representing the victims are trying to drag those same properties back into the archdiocese estate because the lawyers on the other side are essentially arguing that the church did this in anticipation of these very lawsuits and are seeking

to minimize the estate. They're definitely seeking Yes, that's that's definitely an argument that they're making, and whether or not they say you did an anticipation of it, they are saying, like, let's be realistic about about who actually controls these things. So they may be in the name of the parish, but if the archdiocese has has control, then they say that that that represents ownership. I feel like, you know, so many things were going through my head when I

was reading the story. I was thinking about, you know, a couple that gets divorced, right, and you know, one of the partners moves assets before they start to go through divorce proceedings, so that that's not considered part of the marital assets. Like it almost feels like to that extent to you know, it's an analogy that one of the one of the one of the victims used because

it happened in his own life. Well, there's one stat in the story, and I think Bloomberg business Week actually did a review of court filings by lawyers for churches, Catholic churches and victims over the past fifteen years. It shows that the U. S. Catholic Church has shielded more than two billion dollars in assets from abuse victims in

bankruptcies using these methods. So now lawyers are going after that or tell us like what's what's happening happens on a case by case basis and an archdiocese by archdiocese basis, like how often is it happening? Is a lot of archdioce that are doing this well? I think the story says that that I think a half done under seven states had sort of an open window, like there's there's no setu of limitations applying to sex clergy abuse cases.

More recently, a number of states have have have removed the statu of limitations and um New York State, for example, did it in last summer and the churches UH A number of churches immediately filed bankruptcy for like, well, this is coming bankruptcy is the only is the only option at that point. Many of those states, many of those archdioce He's had prior to that reclassified assets class and

reassigned assets. So, Dan, I want to talk about a key elemented this story, which is a thread that actually pulls through the entire abuse scandal, which is sort of who knew what when in many cases and who is ultimately implicated in the decision making. Setting aside the culpability around the actual abuse and the cover up of abuse, this story documents some very senior church officials all the way up to the Vatican who essentially were involved in

making these decisions. That seems like a key part of this piece, the decisions around bankruptcy, around sy allocation. There's a dispute. Lawyers for the victims say that the lawyers for the church are saying, we we we'd like to whatever whatever they're talking about, well, we'd let left to run that past the bishop, or we'll have to run that up up to the Vatican. And the Vatican is saying this stuff is all done at a local level. It's not us. That's editor Dan fer Our talking about

Josh Saul's story and Jason. This is another one that has really stuck with us throughout the week. Absolutely, I mean, it's hard to get through it in some ways, especially

if you have any association with the Catholic Church. It's very clinical what they have done, candidly in terms of shifting assets and legal legal as far as we know, Uh, there are lawsuits ongoing in a number of jurisdictions, as Josh and Dan layout essentially saying you have hidden money that should be paid out to victims of this abuse that was perpetrated over decades. Uh. It's a really important story.

It's not been told to this point, and I think will change and move the conversation and and hopefully bring some different scrutiny to to what's going on. Absolutely, hey got to hide. It's a nice tune to walk us into the next segment. Jesse Westbrook overseas our financial regulations coverage at Bloomberg. He joins us on the phone from our d C bureau. And this is a really important story though, and kudos to you and your team for

putting this out there. Help us understand what went on with private equity companies or private equity back companies buying ads amid this discussion around drug or around medical billing. Yeah. So so the backdrop of this, Jason, is surprise medical billing. UM. A lot of people don't know this, but if you have an emergency, you go to the doctor, you you may have situations at the hospital where all the doctors who treat you aren't actually covered by your insurance. There's

no transparency into this. You have no idea UM so often or or not often. But what can happen is you get a ten dollar bill in the mail that you're insured won't cover and you're on the hook to pay it UM. So everyone agrees in Washington that this is, you know, a huge injustice, huge problem. But it turns out that a couple of powerful Wall Street companies, Blackstone and KKR, own companies that are that do this UM, and they are you know, very have a big stake

in it not happening. So they funded this massive ad campaign more than fifty million dollars spent last year. It was a dark money campaign, which is a term we use them down here in Washington, where the people paying for a campaign don't disclose that they're paying for it UM. They sort of come under innocuous names of of made up groups. In this case, the group was called Doctor Patient Unity UM. So this irritated a lot of lawmakers,

and that's sort of where we are now. It also irritated the White House, which you know, really rebuked the private equity firms over this. Well, there's a lot at stake right for black Stone and KKR time, Yeah, I mean tons of money. They they they bought these companies for a combined valuation of like sixteen billion dollars. So if those investments go south, um, it would not be

good for black Stone and KKR. Well, what I find so remarkable about this, Jesse, going back to something you said just a few minutes ago, is everyone in Washington agrees. How often do you ever ever say that at this point? And when you and I were talking about this earlier, I mean, David Weston made this point too, that this is not just Democrats running for president who are like

private equity, you guys are the worst. This is the administration, the Republican administration and key Republicans in Congress who are saying this is not good and it's not right. Well, that's that's that's fascinating that you bring that up, because I think that you look, I mean, there there is obviously among demock progressive Democrats, they want to make a boogeyman out of everything associated with Wall Street and that actually makes probably a lot of people cynical about some

of the arguments. It's like, oh, they're just going after the Wall Street again. That obviously resonated a lot after the financial crisis, but you know that that that song is getting a little old. Um But what's interesting about this is, you know, sort of private equity firms, they sort of can't get out of their own way. I mean, they're obviously rich and powerful, but you're you're opening yourself up to obvious criticism by you know, profiting in this way.

I mean, I'm not going to stand here and say whether it's right or wrong, but you can see why it irritates people. Um So, for an industry that is in the cross here as principally with progressive Democrats, you think that you would want to avoid sort of bringing more pain onto yourself by getting into the surprise medical

billing racket. That's Jesse Westbrook are Financial Regulation team leader at Bloomberg News joining us from Washington, and this story was among the most right on the Bloomberg terminal and it really speaks to and something that's come up on the campaign trail, the presidential campaign trail about private equity. It's becomes such a big force when it comes to the financial and investment markets and arena and there's concerns about their lack of transparency, and that's kind of what

this speaks to. Well, it's become important in politics and finance, also important for consumers, and that is what really brings this story home. We're talking about surprise medical billing. These are bills that go to you and me, to everyday people, and understanding where the money is coming from, but also understanding where the money is coming from, trying to influence legislators lawmakers in terms of changing the law, in terms

of changing the regulations. And let me tell you, we're just getting started in terms of the political scrutiny around private equity. And what's interesting about this story is it seems like there are politicians on both sides of the aisle that agree that this is egregious, that it's happening in terms of you know, uh, patients, consumers being builled when they didn't expect it, and yet they still haven't

been able to get anything done. Well, as we joked with Jesse Westbrook simply saying the phrase, everyone in Washington agrees you sort of stop right there and say wait what Yeah, not exactly. So we hear increasingly how everyone is spending on experiences, travel specifically, So if you're wondering where to go, we've got the god for you. We absolutely do a lot of different places to go, maybe some off the beaten path, maybe some not as far away as you think. Nikki Eckstein is here with us.

She put it together. She does it every year, So let's start there. How do you even tackle a project like this? This is not something you can rush through deadline, Oh definitely not. This is a year long project. As soon as this one goes to bed, I start on the next year's version. So I'm already working on twenties funny one. This is you know, all year long, we're trawling for hotel news, culture news, museum openings, exciting different

developments that are coming on the horizon. And then we're pairing that with data insights from Google, from our trusted travel experts around the world to put together an authoritative guy that tells you not only when where to go, but when to go and why. That's what I love about this. But what I also love is that you respect kind of established places that maybe have a new twist on them, but you also embrace the new. Absolutely.

There's nothing to say that we can't go back to Paris every year and love its total But for the record, Paris is not on this year's list. It was on last year's list. But a classic that's on this year's list, I would say, is Budapest. And I think most people that think about Budapest think about going on a river cruise, and so this year we're saying, don't cruise there, do a land trip. The hotels that are opening in the city, the city center are really spectacular and pushing Budapest into

a new level of luxury. There's one that's called the Mattilda Palace being opened by Luxury Collection that is literally the city's answer to Buckingham Palace. So staying in Budapest is suddenly going to become very posh. Were before it was a little bit less. So all right, so let's stay in Europe. You also mentioned northern Italy again not that off the beaten path, but you have a little bit of a twist here. Well, sure, I think Italy

has been trending. I mean Italy is always trending. Let's not lie but southern Italy in particular has been very busy for the last few years. We're saying go north. We're saying, do the Dolomites, the mountains that hug the Austrian border. We're saying, do Milan, a city that people go to for work but never really like put it on their bucket list per se. It's becoming a really vibrant city with art and galleries beyond the fashion that

you already know and love. We're also saying, spend more time on spas, health wellness, hiking in this northern region, and then eat really well. Because chef Massimo Butta and his wife Laura, who run the number one restaurant in the world, they have opened a hotel in the countryside outside of Moden and it is number one on my bucket that minutes. Just a couple of weeks ago, I had an interview with Heavy Looks and they are I know them personally and they are the most wonderful hosts

that you could ever imagine, so you must um. I thought it was interesting too, is that there were several references to James Bond, and I think one of them was the Ionian Islands. I think it was either estates or stuff that has been in that have been in Bond movies. Absolutely, so the Ionian Islands are not necessarily on everyone's radar. People go to make a nose in Santorini, which are in a different island chain in Greece. However, we say that the Ionian Islands are more interesting and

better in some ways because they're less crowded. Macnose and Santorini have gotten famously, very very crowded during peak seasons. They also suffer from something called the meltem, which is seasonal winds. In the Ionian Islands, you get more consistently better, more pleasant weather, and then you can stay in places like villas and estates where Bond movies have been shot. Actually, now you can run them through agencies like Red Savannah.

That's fun. Yeah. So, for the record, it was Hector Gonzalez's mansion in for your Eyes only for the heavy for the heavy duty Bond fans. I'm not I'm not a heavy duty Bunch fan, but I tell you Jamaica, where what new Bond movie is being shot, the one that's coming out in April, um this one. This is a place where a lot of sorry we're a lot of Bond movies in the past have been shot and again now with the release in April of No Time

to Die. Um. This is also where Levin Letter I was shot, so there's some like interesting connections between those two movies. And some of the hotels are being renovated where the movies were shot in the past, so it's exciting there. Talk to us little bit more about the beaches. That's what I love, and I thought what was interesting was Mozambique. Mozambique is super high on my wish list all of the sudden, It's just catapulted there for thanks to a resort that's opening that is going to be

I forgive me an advance for this price tag. It will be a night. We will all go bankrupt staying there, but I will not go there. It's called you can go. You can tack it onto a safari for one or two nights. Consider yourself robbed in bankrupt but loving every second. Places to pay them. I know Kisawa Reserve. They're actually running an eco center for biologists to come and study marine wildlife and sustainability. So your money will go to a good cost. Talk to us about the Riviera and Niarite.

That was one that really struck me again, totally another beach. Right, yes, so everybody knows everybody knows Cabo, right, everybody knows Cancun and Tuloom. So Riviera ny it is the next or let's say, the fourth corner in that square west coast. It's west coast set a little south of Cabo. If if you could draw kind of a straight line, it's it doesn't really work that way, but let's pretend it does. Um. It's kind of close to Porto Biarta and there's a

very very large multi use development. So part condo's residence is golf, all of that stuff that is christening the destination as Riviera ni E to become the next big thing. And there are a number, quite a large number of luxury hotels going in, including a Rosewood one and only Oberge brands that are destinations on to themselves. So nice, um, hey, talk to us little bit about if you're interested in maybe checking out some ruins, right, there's a few places

to go. Sure, absolutely, So I'm really excited. This is not what you'll expect me to say. But Guatemala, um No, So, Guatemala has some ancient ruins. I mean, we know that Central America, Mexico, all the way down to South America there is full of ancient ruins. Guatemala is no exception. What's interesting is that the ruins there are still in the process of being excavated after about twenty years of progress. They're really cool to see now, but you can go

and visit with the archaeologists and they're huge, huge. I mean we're talking to Cola is like the biggest known ruin around there, and the ruins that are being excavated now are significantly larger. And Cairo is on the list as well for ruins and a new museum I believe opening up much anticipated. This is the Grand Egyptian Museum. Yes, the gem if you will um. The Grand Egyptian Museum

has been many years in the making. It has been chronically delayed, but it is finally truly opening, and this is something that travelers have been waiting with bated breath. People who are interested in antiquities will be so relieved to hear that Caira's museums, which previously were not air conditioned, did not house the entire collections. All of those problems are now being solved as these beautiful world treasures are

being put into a world class space. All right, I want to talk a little bit about the United States stuff a little bit closer to home National Parks, but also the finger Lakes right up the road from US. Stunning, stunning, It's an easy drive from New York City. And you know, we think about the Hampton's, we think about the Hudson Valley,

I see, think about the finger Lakes. This year there are more than a hundred wineries and the wine is actually good, good enough to get James Beard Award nominations, which is like the Oscars of the food world. Right, and um, not just that, but there's some really beautiful hotels that are opening up, some by Brooklyn based designers, which give it a cool edge that it didn't previously have.

Uh and out West. Start with Yosemite Emity. I get asked constantly, I'm going to Yosemity, where do I stay? And I always draw a blank, not because I can't think of a place, but because they really don't exist. It's this weird phenomenon, and part of it it's but that's what's nice about it right now, it's you can't

develop inside of national parks for a reason. But the problem is that then they become very congested because people have to drive from wherever they're staying a few hours away, and the parks become congested in the middle of the day because everyone drove in to see the thing that they wanted to see. Now you can stay overnight in nice places right on the border of the park and get in before everyone else, before all the traffic clogs it up. Is it r VS? Though? Is it RVs?

It's better, it's converted air streams. Was a place called Auto Camp and it's they've actually done a really nice job of making the inside feel pretty plushed. And then there's a couple of other ones under canvas does these really cool tents that are certain like really properly serviced like a real hotel. Lamping glamping, but like really like people say glamping sometimes and it's any basic this is legit,

all right. Talk to me about West Hollywood. I love this. Yeah, It's a really cool obviously like sort of corner of the city. So much going on there. It's what less than two square miles of a neighborhood, and it's just full of so many delightful things to do and see, and we decided to christen it all on its own as a place to go. That's partially because so many hotels are opening there. We've got the one hotel, We've

got an addition. Um. And then there's the Michelin Guide, which obviously is a wonderful authority for where to eat, has actually paid much closer attention in the last year to West Hollywood, doing out a pair of Michelin stars to sushi games on Nodera if that's your scene. Um. There's also a lot of stuff happening kind of on the fringes of the neighborhood. The Academy of Motion Martridge Museum is finally opening, so you can really base yourself in West Hollywood and never go more than a mile

radius and and have an awesome trip. I know I need a little nature, I think, is what I'm saying. Great to see you. Thank you. That wraps Uploomberg business Week's Weekend podcast. Thanks so much for joining us. I'm Jason Kelly and I'm Carol Masser. Be sure to tune into Bloomberg Business Week Radio Live Monday through Friday now from two pm to six pm, all street time and

you can't catch us live during that time. Get our daily podcast for your ride home or whenever you want to listen, and get that wherever you download your podcast and Jason of course. Now you can also watch our radio show. Our daily radio show live on YouTube. Just go to YouTube and search on Bloomberg Global News talking Global Domination. Here Carol, you can get this week's edition of the magazine on news stands now. The world is ours.

We'll be back next week at the same time. This is Bloomberg