Former Treasury Official Skanke Says Fed Acted `Decisively'

rates down to zero. We got that second emergency cut on Sunday. Stephen Skanky, his chief economic advisor at keel Point, his former U. S. Treasury and White House National Security Council staff member, based typically in Washington, but joining us from Cape Canaveral, Florida. Stephen, really good to have you here with us. Steve, tell us a little bit about what you've seen from the FED so far. Logical makes sense and is it what we needed? Well? Carol, thanks

and sorry, it's great to be with you. And it's been interesting to watch the FED act decisively and preemptively over this this past week. It's interesting that what they did on Sunday night didn't seemed to please the markets very much when they sold off incredibly yesterday. Why did the market sell often your view, why did they? I think it was two things. That one is, Uh, the Fed took a lot of actions and it's hard to understand what all of them mean in a short period

of time. And because it was so was significant and happened on a Sunday evening, I think markets were afraid that maybe the freid the Fed was afraid of something that wasn't apparent to them. So it was really fearing what the Fed was fearing to uh, to be so preemptive on a Sunday evening. I think the second thing is that, uh, everyone is still waiting to hear what the fiscal support and stimulus is going to be. There's been a lot of talk about it. The House passed

to bill last Friday. UH, they continue to talk about it. Obviously, after the announcements and some of the comments made yesterday from the White House, the markets took a beat, a big dive after that. I think I got a concern that good discussion, but a more prolonged period from the

views of the policy managers of the White House. I think that folks have been expecting and no specific action on caring for consumers, supporting consumers, spending and doing the things that the government needs to do on the fiscal side in addition to what they're trying to do on the care side. Yeah, and and so Steve, let's talk a little bit about that. I mean, you've worked inside the Treasure you understand sort of all the levers that can be pulled. We have seen we were talking about

this with one of our colleagues earlier. We've really seen the Secretary of the Treasury step into this in a clear leadership role. The chief negotiator with the Congress, Stephen Manuchin, has been Is that something you expected? How needed is

that element? At this point? It's been very needed. He was He was very present in the negotiations last week with a House and with Speaker Pelosi, and they came to a good first step agreement and I think that that was well received and it got pasted on Friday.

But nothing happened with the Senate over the weekend, and there was a lot of conversation and the Secretary Manuchin was not part of the discussion yesterday, which focused on the epidemiology and care and testing UH and The President clearly said that you know this, this could continue with us through July and August, and I think he was being wise in saying that, but it was said with a little bit of imprecision, without sort of articulating that

might mean in terms of what the government could do the Congress from the White House on the fiscal support side of things. And so that was missed yesterday at markets. Markets closed in the midst of that. They kind of made it pay for that lack of detail, didn't they yesterday? They really did. They extracted a big price, uh, as a result of that lack of clarity on that point. Right, So, how what are you telling your team at keel point?

I mean, we're seeing lots of stories come out about you know, big Wall Street firms saying okay, Morgan Stanley Goldman declared global recession is underway. You know, um, how do you see it? What are you telling your team? Is it a case of it's it's two quarters and then we do bounce back pretty quickly once we get through it. How do you see it? Steve? It's going to depend significantly on on what happens in this next quarter and what we also see from U China's uh

dive in this uh this first quarter. You know, they're about two and a half months ahead of the rest of us. They really they really started to feel the effects and try to do something about this in early to mid January. UH. And and so here we are, I'll just say, two and a half months later, and they're starting to come out the other side. They're reopenings and factories, they're starting to refill the supply chain, and

and that's actually quite encouraging to see that. Steve, I want to pick up where we left off, which is this whole notion of understanding the rest of the world and specifically China. You know, Carol raised this possibility that we've heard from some of our reporting that you know, maybe China, as they tend to do, is gaming the data a little bit to show an improvement. How much do you worry about that, especially as you model out a global economic recovery from this virus. Well, we always

have to be concerned about that. And as you know, and as Carol pointed out, we're always looking at alternative indicators of Chinese economic activity. The rest of the world has typically has one estimate of China GDP growth and China has another one that it reports. But what I was, what I was mentioning earlier, is that even though no doubt there is, there is some amount of turning on the lights and trying to suggests that there's economic activity

when there's not there. There is also some anecdotal information that just floats by UM, some of which probably is credible, so maybe not, but indicates that there is a restarting of the production process and feeling this the supplying UH from China and to the extent that that's happening, that's just helpful information in terms of but dating what we might think to be the timeline of this cycle UH.

Where the United States is the in it compared to where China was and how they processed through maybe completely different. But it's one thing to think that you can come through the illness part of it in two and a half months that it is to think that it might be five or six months. And so the more we can get out of China that that gives us insight into that, the more it will be helpful to economic planners and throughly the financial markets and trying to gauge

is this going to be in the United States. A deep dive for economic growth and economic indicators and corporate earnings in the second quarter and then start to come out of it in the bard UM. I think it's pretty clear that earnings are going to suffer, certainly in the second and third quarter. Uh. Can they come out on the fourth Maybe It all depends on how quickly production and spending rebound, But those are things that we're watching for. You probably saw that consumer spending numbers came

in fairly positive for the month of February. That was encouraging. They were off a little bit because of auto sales and lower gasoline prices. The consumer competence numbers that came out a few days ago still from early March and UH and not fully reflecting what we're what we're experiencing, but but relatively positive. All to say that we're coming into this very challenging period of time with a pretty strong face. Do you feel like the financial markets accurately

reflect what's going on? Um? The financial markets have so much information coming at them. It's really hard to digest and act um in real time with all that we're seeing and experiencing, and that's part of what contributes to the markets being off twelve yesterday and up six today, And if you sort of go back, it's almost every other day or every other two days that we get

a rebound. And part of the rebound that we had today was just uh coming back to to a more logical point from over selling off yesterday and the information that comes in real time. I mean, yesterday the White House press conference with the President and and that other array of UH talnge and senior leaders in government was

happening in the last hour of the market. You know, how can you expect the market to process that, uh in a way that fully incorporates uh, the information that they're getting and that they just have a different perspective on overnight. Right. Well, and it's clear that also, and there's been a lot written by us and others about this, that you also have humans fighting machines in the market to to be honest, and and that is in part

accounting for a lot of these wild swings. You know, Steve, before we let you go, I just got to ask you. I feel like we'd be remiss if we didn't you help staff the White House, a National Security Council, you worked in the in the Treasury. What do you make of this administration's response. At this point, you've been in those rooms. You understand the high stakes, UH that are involved here. Where are we in terms of the administration's response.

I think the administration is is is struggling and what is a very difficult situation. We don't encounter these things

all the time. But but one of the things that I would say that I see that's different, UM, is the resources, the intellectual talent and capacity of the U. S. Government is extraordinary and well beyond what is for the most part, ever tapped into U And I do think if we if we just sort of look at it objectively, UM, the the leadership in the executive branch, I think was a little bit slow to get fully tapped into all of that talent and resources to as quickly as they

might have. And so we're a little bit slow out of the gate. And when when you saw the team that they had a read there yesterday, top talent that they but they may be started a little bit late and to and so they're an overdrive to UH to catch up. And that's just hard anytime you're in government and you're behind the you're behind the curve, and you've got you've got indicators that are just pummeling you daily, and and you're trying to create a sense of calm

when it's very hard to do that from behind the wave. Yeah, all right, we're gonna leave it there. Really enjoyed catching up the great perspective as always. Dr Steven Skanky is chief economic advisor for a keel Point Johns from Florida. He also worked in the Treasury and helps staff the

White House National Security Council. He knows what he's talking about, folks, and some really good insights in and Carol, I daresay a little bit of optimism there that maybe we're starting to get our arms around where we may go from here.