Bannon's Addition to NSC Raises Questions, Bloomfield Says

the National Security Council. Into Mooded, the Director of National Intelligence, off of that committee. I want to bring an Ambassador Lincoln Bloomfield. He's the chairman of the Simpson Center and he was Assistant Secretary of State from two thousand and one to two thousand five under George W. Bush, president of the United States at the time. Uh, Ambassador Bloomfield,

thank you so much for joining us. First, I just want to get a sense before we even start to talk about the implications, what does the National Security Council really do well? That does vary from president to president, but it was set up under a law in nine in order to coordinate military and non military activities better.

And so it's function traditionally has been a place where each of the cabinet departments in the national security community comes together, gives their recommendations, and usually the National Security Advisor is the one at the heading the meetings unless the President does it himself in major cases of emergencies, um and and to to hear their views and including their different views, see if they can resolve them and if they can't, and then they take it to the

President for decision. Can you recall specific meetings which you attended in which you learned something about out the operational maybe backstory of of the of the you know, small circle of people who are included in these meetings. Well, I was on the Vice president's staff for one year under Dan Quayle, and I would I would go to those meetings and sit against the wall. So there are people who can come in the room and and watch

the meetings if they're White House staff. The question is who has a formal seat at the table, And that's that's what this is about. So President George W. Bush, for example, did not allow his political counselor Karl Rove, to go to NFC meetings because he didn't I didn't want to send a signal that there was any politics involved.

So if asked Bloomfield, what's your impression from Steve Bannon being named to this, well, you know, uh, I testified last fall at a hearing that the House Foreign Affairs Committee held about the issue of the National Security Council and the size and the role. And frankly, the bottom line is that presidents get to decide who there eisors are.

This is the White House staff. So if the President Trump wants Steve Bannon to be at the table, uh, deliberating with the senior national security agency heads, that is his call he can. I mean, I think he's sort of deferred to the president whatever serves the president's purpose to to make the best decisions. So he has crossed a line that was not crossed by previous presidents. President Obama had David Axelrod come to some of these meetings, but he sat out, you know, he didn't sit at

the table and participate. But that's just a call that's been made. And if President Trump is relying on Steve Bannon to be his advisor across the board on these issues, then then I think that at the end of the day, people will defer to that how it works. But what about the on the flip side, President Trump's to Mooting, the Director of National Intelligence and the Chairman of the Joint Chiefs of Staff. Those I think are actually the

more interesting discussion. I mean, obviously people are fascinated by Mr Bannon, whom I don't know, and he's he's a person who's getting a lot of attention. We will see how how that plays out and what he what his

input is. But the Chairman of the Joint Chiefs, by law, was given the principal role of military advisor to the President under the Goldwater Nichols Law Reform Act of nineteen six and so the notion and so what the directive said was on those issues where they have business before the committee, they can come otherwise, not that I think that the impact there is whether you whether you get a really solid flow of the team around the president.

And this is usually run by the National Security Advisor. So General Michael Flynn is the is the national Security Advisor. This is his operation. So the question is what will be the chemistry if the people at the table keep changing Traditionally and I'm talking about decades. The first person that the National Security Advisor turned too is the intelligence person. Let's start with an intelligence update, what's the latest, what

do we know? Then the Secretary of State has the sort of Uh, the protocol leads, so the Secretary of State goes second or their deputies. And that's the way this has worked for decades. Uh. If key players like the military representative is not there, I think you're going to hear and already are hearing from members of Congress who say, wait a minute, um, the principal advisor of the military needs to be part of this team pretty

much at all times. It is national security. And you will hear from senior military as well, who feels that the voice of the professional military is essential and that whether the president agrees to it, agrees with the military advice or not, it's not the point. It's whether the president is hearing that advice. And as for d n I Congress created the Directorate of National Intelligence after nine eleven. They added a very what turned out to be two thousand people, a very big layer on top of the

other agencies. And know, if they aren't at the table, then you know, I'll just give a personal view. General Flynn regionally intelligence very closely, so I don't fear that President Trump will be uninformed about intelligence, but but not having the community's voice there at the table is going to raise some questions. So how many how much? So the question is how much friction do they want to

cause and how much? Thanks very much, Ambassador Lincoln Bloomfield, Chairman of the Stimpson Center, speaking about changes in the Trump administration's National security team. I want to learn more about our southern border neighbor, Mexico and potential opportunities there. Herrado Rodriguez, Managing director and portfolio manager at black Rock Financial Management, UM, thank you so much for joining us.

You were quoted in an article all about a week or so ago saying that you think that the Mexican PATO could be one of the best bets of We've certainly had an eventful a couple of days on the political front. Do you still believe that? Absolutely? At LISTA and good morning everyone. When you think about the Mexican economy, it is an economy that has been run relatively conservatively from an economic policy perspective. It is an economy that has the fiscal accounts in order, inflation has been uh,

sort of coming down. There is a big shock that the Mexican economy is facing because of a change in policy from the US administration, But so far it is an economy that has been adjusting very well. Using a textbook example, tighten on the fisical, raising interest rates on the monitor, letting the currency go. And we're getting to a point in which Mexican assets actually look very very cheap. The val do that they have accumulators quite significant, but

they uncertainty surrounding the US Mexican relationship. It is something that needs to be addressed before asset prices in Mexico start to perform. But from evaluation perspective, clearly Mexican assets are one of the most attractive trade for the months remaining this year. So here Ado. You served for more than a decade in the Mexican Ministry of Finance, last serving as the under Secretary of Finance and Public Credit.

I imagine you've had a lot of contact with Mexican officials and probably can get a better feel for just how elevated the tensions have become. Do you have a sense of how much what we're hearing is political rhetoric uh and sort of chest beating and how much really nearing a sort of tipping point into a very bad state of affairs between Mexico and the US. Well, there are there are two different dynamics here that we need to to understand better. One is just what the US

wants from Mexico. From a trade perspective. Mexico has been a good neighbor. It is a comparative neighbor. It is a neighbor that tends to sort of to engage and to compromise on different things. It has been a very fruitful relationship since NAFTA was signed. It was a very

fruitful relationship with the Canadians and the US. So it would be important to understand exactly what is it that the US would like if an institutional table was set up to basically modernize NAFTA, and there's a blueprint already for that, and it is basically the content in terms of um the sort of rules of origin for example that has been negotiated in the context of TPP intellectual

property and an addressing sort of dispute mechanisms. Now, on the other hand, you have a domestic political agenda, domestic political dynamics that the president of Mexico has a twelve percent approval rate all time load. There's a lot of pressure and if anything, these contentious issue against the US, it is something that is bringing the population together now because the two things are a bit uncertain. You're right

that we could get two different equilibriums here. I think that it's still the central scenario is one in which sort of reason prevails. Everyone has been benefiting from NAFTA, there's potential to improve that, and then an institutional table is set up with the Canadians, the US and Mexico, and that brings you to a more benign outcome for

asset prices in Mexico. But given what's been happening over the past few days, it is likely that we don't get there, and then the tensions actually increase and the positions radicalized. So again, it is a great value trade, but it is one that you need to be careful at this point. Mr Rodriguez honoring the theme of focusing on your purchase price of any investment, in other words,

the purchase prices. The most important function for some investors is the purchase price not only of the pace so but of certain Mexican assets at a point where you believe that long term investors will be significantly rewarded. Absolutely, But that is assuming that the reality of a Mexican economy continues to be in line of what it has been over the past. It's not it's the eleventh largest

economy in the world exactly. But but but one needs to understand that if we go the route over, say, radicalization of positions between Mexico and the US, there's a lot of value that could be destroyed and actually Mexican assets could go even weaker. So again, given the central scenario in which countries are able to channel these differences and the potential to revamp NAFTA, all of that is channel through institutional means. Absolutely, the answer to your question

is that the value of Mexican assets is significantly attractive. Well, so is it just the pace so that looks attractive or are there other Mexican opportunities the past will look even more so? Perhaps in the corporate sphere, the Mexican past with certainly top of mind here, and I would point to Mexican interest rates. There's been there's been an increase of more than two hundred basis points across the curve in Mexican bonds, and certainly when four point four

point one one for the Mexican tenure. Yeah, and and local currency bonds. I mean you can get bonds for eight percent, say out to ten fifteen years in the case of Mexico. You don't get that type of wheels in many places in the world, especially in economies that are wrong responsibly like Mexico. Is there anything that you would see to diffuse this situation rapidly or will it have to escalate before it's diffused? Give you back thirty seconds.

So what we're looking after the signpost is and has to be an announcement that the US, Canada and Mexico agree on a set up out of framework to revamp NaSTA, and then you get to the technical details and at that point it stops being an element of uncertainty. Thank you very much. Arado Rodriguez. He is Managing Director Portfolio manager for the Emerging Markets Group at black Rock Financial Management.

I want to call upon Bloomberg Gadfly columnist Shira over Day to tell us a little bit about the technology industry and its response to the details of the executive orders that were signed over the weekend by President Trump regarding immigration. Yeah, so obviously the some of the tech industry executives and CEOs, and obviously those outside the tech industry too, are responding to the calls to restrict UM

immigration from some of those predominantly Muslim countries. The interesting thing to me was Sergey Bryant, is one of the co founders of Google and a billionaire, one of the richest men in the world, was spotted at protests at San Francisco Airport over the weekend, which I don't think you would see, you know, Lloyd blankfeind or Jeff m melt at immigration protests. Although the week is young. We'll see,

we shall see. We'll becoming the JFK ranks to see whether we see Lloyd blank find But in the meantime, shira uh, there was there's an interesting concern that some have that the worst for tech companies has yet to come, that basically VISA programs for foreign workers UM should be administered in a manner that protects the civil rights of

American workers. Is according to a draft proposal that we may be getting from President Trump Trump imminently, with the idea being that some of these tech companies couldn't rely as much on some of their international recruiting programs they have in the past. Right, So basically there's a there's a kind of grab bag of skilled worker visa programs that are employed not only by tech companies but by

many US corporations. The most kind of prominent one of these h one B visas, again, which are for skilled foreign workers in fields like engineering, and there's about eight five thousand of them issued every year. Uh, there is far more demand than there is supply, and the biggest users are the biggest companies. Granted those visas are outsourcing companies like Tata Consultancy and Accenture who hire engineers that that then work at again, tech companies, but also big

banks and retailers and other American companies. What's the advantage for the tech companies that hire internationally other than just having a bigger pool of talent. Is this a play to lower the cost of of employing people? I think the goal depends on who you ask. So these programs have been targeted before, both on the left by people like Bernie Sanders and on the right as basically away for American companies to hire workers from abroad. They can

pay less. Now, those companies who employ those uh those skilled worker visas say we can't find appropriate workers in the United States, that this is a global work force, or the the world is a global place and we need to be able to tap into the glow will workforce not just the people who live inside of the

United States walls. Is there any hint that the president's administration will in some way recognize the deficit that would occur in the technology industry if it was more challenging to stay in the United States, let's say after your term school or study. I think the most honest answer is, I have no idea that. Um, everything seems to be kind of being done by the seat of the pants, and it's a little bit hard to know what impossible.

If you are looking to make the system better to address the needs of technology companies, what would be one thing that you would suggest. I think that if you ask the tech executives, they would say, we want we want to be able to bring in more workers, and we want to be able to keep the large numbers of highly skilled, highly highly educated UM university graduates who are graduated from Harvard and Stanford every year, and our

citizens of China, in India and other places. I think there's a big desire to keep those people in the United States and starting companies and working for companies. So I think that's the number one fix or potential fix with this visa provision that is included in a draft of an order that President Trump was expected to sign. Correct, Can can the President enact something like this without any congressional sign off? Again, the honest answer is it's not

clear that. Obviously, UM Congress has been trying to work on various UM worker visa programs for a while, and I believe they're at least one kind of piece of legislation working its way through Congress. UM. Obviously, we've seen this White House already issue sweeping executive orders without input from Congress or without waiting for Congress, So this may be the same, and it's unclear exactly how it would work in practice. I believe it's worth noting that this

was at least described as a security measure. This is not aimed at the business community. We're looking at the potential ramifications for the business community. Because the suspension of immigration is from uh IS, because they describe it as countries with ties to terror including Syria, Yemen, Sudan, Somalia, Iraq, Iran, and Libya for a period of ninety days. It also calls for the complete suspension of Syrian refugees for an

indefinite period. And I just wanted to make that clear because the issue that perhaps the technology industry or any industry is focused on now is different, but maybe uh certainly come under the same heading. Correct, Is that? Yeah?

I think that's fair. I mean there's two issues one right, there's the executive order issue of the weekend affecting people from those particular kind of Muslim dominated countries and Syrian refugees, and and there's this issue of this draft order that maybe coming down the pike that our colleagues wrote about affecting worker visas. And those are obviously separate issues, but both deal with immigrants to the United States. Do the sense of which technology companies executives are have to have

the biggest voice into the White House? I don't know yet. It's been interesting to see, you know, Tim Cook, who's the CEO of Apple, isn't making the rounds in Washington in the last few days. The head of IBM is also influential the right. The CEOs of Oracle are also very influential. Um, but it's a little bit hard to

know at this point who has real influence. Because the reason why I ask is because we've heard a lot about the auto companies and the Detroit CEOs that have met extensively with President Trump, and you don't hear it as much with the technology companies. Yes, there was that one meeting, but beyond that, we don't have a clear sense. I think that's true. All this is a pretty young administration. Did not feel that way, but well it could be. You could say it's it's been Peter til Yes, good point.

I neglected to mention. Peter Tiald obviously has been a close advisor and advisor to Trump, co founder of PayPal. He like an Australian citizen. When citizen yes, and he's also an immigrant, distribute said the Teal's originally emigrated from Germany. Well, Sarah, thank you so much for joining us, Sirah Overday, who covers the technology sector for it. Let's move forward though, with Justin st Justin is our Bloomberg government reporter and

he joins us. Now, Justin, let's get the sort of agenda. What is scheduled for today as far as the cabinet nominees. Yeah, so we are inspecting, but but aren't positive that we're going to see Rex tellers in the Secretary of State Um have his sort of final vote in in the Senate. That it's expected that he's going to fly through and likely fly through today, especially after winning the sport of

some key Republicans, including Mark Rubio. But Minority Leader Chuck Schumer, Um, the top Democrat in the Senate, UH said Monday that he's hoping to ask for delay on the confirmation vote, citing the sort of chaos stemming from from the Muslim ban um or the extreme betting band, depending on who you're talking to. U that the unrolled over the weekend and obviously caused some chaos at airports and across the country.

You know, one thing that was a little bit played down as a result of getting overshadowed by the Executive Order on Immigration that President Trump signed was the decision to elevate Steve Bannon to National Security Council and to remove some other national security officials from that post. Do you have any color on what was behind that or

what the implications are. Sure? Yeah, I mean, I think it is interesting to just show a bit of the consolidation of power that Steve Bannon, who's the former chairman of Right bart Um now at a top aid both in the campaign and the White House to Donald Trump some of his power. It does make sense in the context that when Bannon was introduced he was UM sort of referred to with as a co chief of staff

with with Ryn's previous that they'd have similar roles. The chief of staff typically serves on on the NFC, but it is UM somewhat unprecedented to have a purely political figure on the staff. George W. Bush Passilly excluded people under Obama. David X rod Will sit in on a couple of those meetings, but wasn't there regularly, and so

UM this is a change. The other sort of aspect of this is that UM one of the people who had their roles a little reduced was the Director National Intelligence, Mike Flynn, who's UM the National Security Advisor, has said that he wants d n I, which is the body that kind of coordinates all the different intelligence agencies together,

to have a reduced role. And and that's interesting because Mike Flynn was actually fired by President Obama's Director of National Intelligence a couple of years ago, and so he has I think some residual animosity towards that body and is looking to reform um the way that intelligence works in the Trump administration so that people like him UH can succeed in the way that they didn't or he

didn't in the Obama administration. One other thing that we've heard out of President Trump's camp this morning was that he intends to revamp Dodd Frank in a very big way.

I want to bring in Nathan Dean of Bloomberg Intelligence to give us more of a sense of what this potential rollback might look like, especially in light of Treasury Secretary nominee Steve Manusian's comments last week while he was being UH when he while he was testifying in front of Senate saying that he did not intend to completely eradicate the vocal rule. So I think what this means

is that they're going to be studying the existing regulations. UH. They're going to spend a couple of months, three or six months looking at the REGs UH and trying to look at ways that they can increase liquidity. UH, they can actually maybe make it cheaper to lend money. But I think you're going to see a targeted look at regulations. SEC Chair nominee J. Clayton, for example, He's going to

have carte blanche to look at this. But if you look at regulations that are governed by the FED or the Consumer Financial Protection Bureau, Uh, those are still led by Obama era appointees. And so Janet Janet Yellen at the FED, for example, you know she's going to remain in office still two thousand and eighteen. She may not abide.

But what by what President Trump wants to do in terms of regulation or rolling back dot Frank, Hey and Nathan, can you just elaborate on on who Clayton is, what his background indicates about what he's likely to be like as uh as the head yep. So, Jay Clayton uh from Sullivan and Cromo has done a lot of work with Wall Street, Uh, not so much on financial regulation more I P O M and A activity. Our take on that is that he speaks the bank's language, but he's not a Dodd Frank Uh. Uh not a lot

of experience in terms of Dodd Frank. So what we expect from the nominee when he comes in and we expect him to be confirmed. UH, is that they're going to spend some time three to six months not putting any new regulations out that we expect the a sec

to follow uh Donald Trump's executive order on that. So we don't expect any new rags, but we expect to see him talking to the industry, talking to a lot of bankers about what they see as ways that they can roll back legs uh, and then eventually pushing the agency to um move forward on that. Yeah, Nathan Dean, thank you so much. Bloomberg Intelligence government analyst there on Dodd Frank and Justin Sank before I say goodbye, just in a couple of seconds. It's the mood like right

now in Washington. I think it's a little chaotic. Everybody is trying to figure out what the priorities of the Trump administration are and how they're implementing some of these executive actions because obviously it's not being communicated extremely well right now. Thank you so much. Justin Sink, Bloomberg government reporter in Washington, d C. Thanks for listening to the

Bloomberg P and L podcast. You can subscribe and listen to interviews at iTunes, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm out there on Twitter at pim Fox. I'm out there on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio