Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. Along with my co host Lisa Bramowitz. Each day we bring you the most important, noteworthy, and useful interviews for you and your money, whether you're at the grocery store or the trading floor. Find the Bloomberg p m L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. The c f p B has been under a lot of scrutiny. Recently Mcmlviney came in as the new head. The former head was pushed out, and this has become a sort
of fertile ground. I suppose you should say, uh, for debate around Consumer of Financial Sumer Financial Protection Bureau, thank you here to come on and weigh it on. This is Todd Ziwicki, Professor of Law at the George Mason University School of Law. He joins us from Fairfax, virgin and thank you so much for being with us. It's
great to be with you. So Todd, you wrote an up ed for the Wall Street Journal that caught my attention where you basically were saying, uh, that it is good for the CFPP to be loosening of on some of its restrictions and that will actually help the economy and consumers. Can you just sort of give us the broad brush of your argument. Sure, there's the big question
for CFPB is it's had a very controversial structure. As you know, it's been under court litigation for a while here, and we're still waiting to see whether it's going to
go to the Supreme Court or not. So setting that aside, I think that the interesting question going forward then is what does a Trump CFPB look like compared to what we've seen during the Obama administration when Richard Cordrey was the head of the CFPB, And Cordrey actually left in November and announced is running for the governorship of Ohio, And so that's what's kind of put everything into the air.
And when you look back over the past few years, I think it's really a story of um unintended consequences, which is I actually agree with the idea of streamlining and sort of creating one place for consumer financial protection in the federal government. That's based on both studying and also my experience at the Federal Trade Commission. But I think that what we've seen over the past few years
is wild. Consumer protection is very essential. While it can be good for not only consumers but also lenders, but also the economy by giving people confidence to be able to uh to to borrow, to be able to get
access to the products they need. At the same time, over the past few years, I think maybe the pendulum swung a little too far in one direction, and not just so much too much regulation, but regulation that I think wasn't very economically informed um and ended up restricting access to mortgages, restricting access to credit cards uh, and in particular hurting low income consumers and middle class consumers.
The most professor z a wiki. Uh d you agree that the cf p B dropped investigations into payday lenders that we're charging up to on loans? Well, what did they do? I agree with it? Yeah, I mean you agree that that happened, of course, Yes, Okay, they obviously dropped those investigations. UH. And I don't know anything more about why they did or did not. Okay, all right, I just wanted just so we're playing with the same
facts here now. The CFPP also decided, as part of this to drop an investigation into a company called World Acceptance Corps based in Greenville, South Carolina. You know about this. They happened to offer. They gave forty dollars to Mr mulvahney during his time as a lawmaker. Um, do you think that it makes sense to have someone who has accepted money running the organization from the federal government's point of view, that is supposed to be a fair and
impartial overseer. Well, obviously Mr mulveney is no longer in Congress, Um, and it's but he's running the CFPOP. Yeah, I mean what we have, I mean what we you know, you know obviously, I mean it's it's up to the president to appoint, right, uh return, But I'm asking you, do you think it makes sense to have someone running the Consumer Financial Protection Bureau who, when he was a lawmaker accepted and that was just from the one company. But
the estimate is that he accepted about sixty three dollars. Yeah, I think personally, I think that, uh that that I think that obviously mcmulveney is appropriately appointed. I think he's doing an excellent job. I think that to the extent that the decision is made by any president to appoint a politician, these sort of issues arise. So, for example, Richard Cordray was appointed after being Attorney General of Ohio.
He accepted a lot of money during that time from trial lawyers when he ran for office, and now he's running for governor and he's accepting money from trial lawyers and other people who have interest before the CFPP, I think to the extent that the decision is made to appoint somebody who's been in politics, that's partly what's what's going to happen, right, Uh, And you know, and it's
the same way with Elizabeth Warren or anybody else. And so I think, you know, that's what the democratic processes is for. And uh, and I'm not going to second guess that decision. And I have no inside knowledge as to why those investigations were opened in the first place
are closed. In the second part from Todd, I want to get into the concept of paid a lending because I think that the CFPB under Rob Cordrey was uh, pretty much not against it, but but they took a pretty harsh stance with these lenders basically that agreed to
accept someone's paycheck and charge them high interest rates. Um, you're arguing that they can be helpful for lower and middle income family is can you explain that, sure, yeah, and I and you know that what's going on with payday loans now is pretty well known and it's, you know, one of those difficult trade offs that's that's hard in life, which is people who use payday loans are people who
don't have access to better credit products. Are people either don't have credit cards or maxed out on their credit cards, they've got poor credits um. And the evidence is pretty clear that people who use it use it to deal with pressing expenses in life mortgage, insurance, payments, utilities, that sort of thing. And so we have is a situation in which we've got people with limited choices trying to
do the best the best they can. And I think there's two things that can draw from that, which is one is when we've got people already have limited choices, you should be very careful about denying them the choices
that they already make. So, for example, we know is that we're payday lending is banned by and large, a lot of people end up using bank over draft protection, which is off than more expensive or pawn shops, which are you know, force them to part with personal goods that they that they may need I think the way to think about it is to look at why is it that what is shutting off access from people to better credit products, whether it's bank accounts, whether it's UM
credit cards. And that's what I think is the the the unfortunate consequences that happened over the past few years, which is because of Dodd Frank, because of some other regulations, people in the lower income spectrum have found it more difficult to get credit cards, They've lost access to bank accounts,
they found it more difficult to get mortgages. And I think that's where focusing on UH financial inclusion and respecting people's UH ability to choose for themselves, I think is something that's kind of been lost in the shuffle, and I think should be waged more in the balance going forward. We gotta leave it there. Todd Zwicki is a professor of law at George Mason University School of Law based in Fairfax of Virginia. Let's bring in brook Sutherland now,
our mergers and acquisitions columnist for Bloomberg Gadfly. You can follow Brooke on Twitter at b L South s U t H. I imagine that's just short indeed, all right, so B l South. What is this about the U S Government issuing an interim order to block an investor meeting? And this has to do with the bid by Broadcom
to buy Qualcom for more than ten billion dollars. Yes, and so Sipious, which is the U S. Regulatory body that's charged with reviewing deals for national security risk says they want to take a look at this before Qualcom's annual meeting. That meeting was the puposed to take place on Tuesday. It will now be delayed for up to
thirty days while Siffius reviews this deal. And the reason why they're sort of intervening now, and personally, I think it makes sense is there was some concern about what type of message it might send or what sort of precedent it would send if sifias did not look at this deal. Because Broadcom is a Singapore based company and it's trying to move its location to the US, but it's waging this proxy fight as a means of hopefully getting board candidates on there that are more favorable to
its takeover bid. So some US lawmakers have said, could there be copycats who would look at what it's done and maybe think about a proxy fight is a way to gain effective control of a you over a U S company without ever having to go through a SIFIAS review, because typically sifia's reviews only happen when there's an actual deal. Well, Brook, you know, it's interesting because I believe that Qualcom requested this review. Well, so there's been some back and fourth
on that, So that is what Broadcom said. Qualcom is out with the statement, I think five minutes ago saying that Broadcom has you know, given to written, uh, you know, submissions to SIFFI as they've been engaged with the regulatory agency for several weeks. So the surprise element of this as it was conveyed by Broadcom may not entirely be accurate. Well, the reason why I ask is because I'm wondering how
much this further sours relations between the two companies. If there was some kind of uh encouragement, shall I say, from Qualcom side to have SIFIAS come in and add some pressure. Sure, I'm skeptical how much encouragement Qualcom actually gave in this um. You know, there's been numerous reports from from US and from other news organizations that Ciffiest members were already concerned, So I don't know if this just nudged them along the path that they were already on.
But I mean, look, there's no love lost between these two companies, and that's not unusual in a hostile takeover situation. I always laugh at these because you see these crazy press releases where they're calling each other liars and all this back and forth stuff, and then if a deal ever gets announced, it's like nothing's ever happened and they're
best friends. But um, look, I you know, I think that Qualcomm has obviously been very resistant to this idea with Broadcom, and they've made some valid points about their concerns, and Broadcom has really sort of been unbending and unwilling to sort of meat Qualcom in the middle or give any real sort of details, especially along the lines of antitrust risks. Isn't Singapore and ally of the United States?
It is, but you know, it's still a foreign entity, So I don't know, I understand that, but I mean, but I mean Singapore's and ally of the United States, it is. Yes, broad Comm is headquartered in Singapore. They want to move to the United States and established the domicile here in the US. Why other than the price
of the deal. Would this really be an issue? And why? Now? So, Broadcom m is sort of known for being a cost cutter, and it's known for financial engineer for lack of a better word, And so I think the concern among US lawmakers is that Broadcom would come in and significantly cut back R and D cost at Qualcom. They've sort of alluded to this idea of maybe winding down Qualcom's licensing business.
If you remember, that's them selling it. But that and that's the one that's given them sort of all these issues with Apple. But that isn't that a strategic business decision? I mean, how does that end up being a sort of US political security decision. Yeah, So what I was getting to is, if you're cutting all of these costs, what the US is concerned about is that then hamstrings Qualcom in this race for five G technology. This is
the next front. What the US does not want to happen is Whahwei is the other big leader in this technology. They do not want Whahwei to have a virtual lock on five G. Wawe is a Chinese company the US wants to be a player in this. Qualcom is really one of its better bets, so they're wary of sort of giving control over that technology over this company to you know, as of now a foreign buyer that that
has sort of a reputation for for cutting costs. Well, I'm sure that the stag will end very quickly and neatly, so we'll never talk about it again. Brook Southerland, thank you so much for joining us. I'm sure we will be talking about it again. Hashtag sarcasm. Bloomberg m and A and industrial columnists with gad fly, and she's been incredibly busy. She weartes fabulous columns. Check them out online and you can see her on TV and she'll be back.
Does government spending discourage work? Here to help us understand this topic is Edward Lizier. He is an economist and he is also a Senior Fellow at the Hoover Institution at Stanford University, formerly Chairman of the Council of Economic Advisors from two thousand six to two thousand nine and as Chairman Chief Economic Advisor to President George W. Bush. Ed Lozier, thank you very much for being with us.
Maybe just speak a little bit about this notion that government spending discourages work and I offer that it's really in the context of a recent up ed piece that she was penned and published in the Wall Street Journal. Sure, well, the basic idea is this spending by itself doesn't discourage work. But the problem is that the more we spend, the more we have to tax. That's going to be true whether we tax now or whether we borrow in tax later,
and taxes reduce capital formation and work. So the problem is that if we spend a lot, we're going to tax a lot, and if we tax a lot, we're going to put disincentive effects on both capital formation and work. The easiest way to see this is that if you look at the data across say the G seven countries. Um I looked at it across all O E C D countries, which is a larger group than the G seven,
but the seven or the big ones. And if you look at the big ones, what you see is those countries that have high tax rates also tend to have much lower work hours. And that takes two forms. One is individuals work less per week given that they're working. But the main effect is that individuals are less likely to participate in the labor market. So if you look at the United States versus say, France, the French work about thirty percent less than we do per person in
the working age population. Professor Lazier, I think it's interesting the way that you phrase it, which is that spending, uh doesn't necessarily doesn't encourage people to work more. But isn't this really about the budget deficit? Isn't this really about sort of the need to plug some kind of gap in the financial situation of a nation. Yeah, so, so the way I think the easiest way to see it, because it is a little surprising that you know, in
some sense deficits don't matter. Uh. It's not so much that deficits don't matter, it's that, once we take spending into account, whether you finance that now or whether you finance it later is kind of a second order effect. The easiest way to think about that is, you know, suppose someone goes out and buys a home entertainment system
by spending their entire month's salary on it. Question is are they better off by paying for that now and depleting their entire earnings or are they better off borrowing and say, and paying it off over time. So not so obvious which one is better. What is obvious is they probably shouldn't have bought the thing in the first place. Ahead I'm sorry, I know, I'm sorry. I'm sorry to interrupt.
The reason why I was making that distinction is because when uh, the congress members who are passing the tax plan more arguing for it, they said, look, we want a smaller deficit, we want less spending. Yes, we're going to do this tax plan that's going to increase the deficit substantially. We just now need to go cut spending. And it was sort of this artificial distinction between spending and not collecting as much money. But you think it's it's a it's a real distinction. Well, no, I say,
let's put it this way. I think, uh, there are misstatements on both sides. So the Democrats who were saying, oh, gee, you know, this is terrible because we're increasing the deficit um probably didn't have that quite right, because it's not so much the fact that the deficit went up when we cut taxes. Again, that's not great, but that's kind
of a minor consideration. But on the other side, the Republicans also didn't have it quite right, because cutting taxes by itself, right, now without also cutting spending means that in the long run, growth is not going to continue
to be sustained. The reason that we get growth out of the current tax bill is because it is a plan that reduced the cut reduced the taxes on capitol, and almost all economists on again on both sides of the political spectrum, agree that taxes on capitol are the are the ones that are the most harmful to economic growth because capital can move. But neither side really had
it quite right. So the problem is, unless we get spending under control, we're still going to have to tax to pay for that spending, either in the long run or the short run, and that will affect both work and uh AN investment incentives. Ed Lozier, can I turn your attention to tariff wars and particularly the president's effort to impose tariffs on imported steel and aluminum. What's your response. Well,
I'm not an admirer of that policy. I have never thought that getting involved in tariffs is a good idea, even from the point of view of the country that imposes the tariffs itself without any repercussions from other countries. So I don't think that there's going to be much of an effect, much of a positive positive effect, even on the industry is directly affected, like steel, but certainly other industries that you steal as an input will be adversely affected. So on net, this is as far as
I'm concerned, this is a loser. Uh. It's just not a good idea to do it, even if there were not a trade war to follow. And of course, uh, you know other countries are threatening that they are going to retaliate. If that is going to happen, what do you perceive the effect will be on economic growth in the United States? Well, I think it will be negative. I do think that the reaction and as I always hate to outguess the market, but obviously the market's reaction
was pretty negative to this thing. Um, I don't think that the effect on economic growth will be as pronounced as as it appears right now from the dramatic movements in the market. There will be a negative effect, but I don't think it will be that large. Uh. We do have a precedent on this. The guy I served, President Bush, of course, impost steal tariffs early in his term, and that was followed by you know a few years
of pretty good growth. Now Of course, he did remove those tariffs a bit later, so one can argue that President Trump will have the same opportunity, but it was not that detrimental even in the short run. Edward Lizzier, thank you so much for being with us, really interesting ideas. Edward Lazier, labor economist and professor at Stanford University's Graduate School of Business, coming to us from Palo Alto, California. I'm Lisa Bramoy. It's along with my co host Pim Fox.
This is Bloomberg. The voters in initially in Italy have had their say and it has actually produced a bit of a muddled result, although populist five Star and the League are vying for power right now here. To help us understand what's going on in Italy is Dan leaf Green. He is our Milan bureau chief for Bloomberg. Dan, thanks so much for being with us. Tell us what are what are the election results and what do they mean? Well, the election results basically that there's a hung parliament, which
which was expected. The polls before a blackout fifteen day blackout period UM showed that that was likely. I'd say that there are two surprises. Um. One is the you know the strength the increase in popularity of the five Star UH anti establishment party, and I think the surprising UM showing by the Populist League UM, which is part of Silvio Berlusconi's alliance. UM, they actually outpolled Berlsconi's fort Staliate party and I don't think anyone had predicted that. DAN.
As we head into it will inevitably be weeks, uh possibly longer of negotiations as Italy tries to create a government. Can you just explain to us how does this all work? How does their government work? Because there's six hundred or more members and they have to agree on some kind of coalition to make it work. Yeah, it's UM not surprising. It's a complicated process. But UM. On the upside, Italy
has done this before. Only five years ago in the previous national election there was a similar result and it took about two months to put together a government. This time again, the Italian president UM really is the key figure. There are a number of bureaucratic things that have to occur over over the coming weeks. UM. That is, they actually have to swear in the new parliament, They have to elect the two speakers in the Chamber of Deputies, Lower House and and then the President of the Senate.
Then the Italian President will actually start formal talks with those leaders about trying to find a solution. He basically gives a mandate. He picks uh someone to try and form a government. UM. So all of that probably that that preliminary bureaucratic um step. Those will probably take about three weeks to a month before the Italian president actually asked someone to form a government. Can you tell us
about the Five Star movement? Who is John Roberto Casta Leggio and his son Yes, Um basically Um Cassa Lejo was who who passed away about a year ago, I believe, UM, and then his son sort of took took over. Um. Were the inspirations, if you will, of this movement that started, you know as a as a big internet um, you know, populist following UM without a particular ideology, UM picking up you know, disenchanted voters from both you know, the left,
right and center. UM. They chose for this election as their prime minister candidate Luigi di Mayo, very young, early thirties, UM guy without any government experience and likes to wear a suit and tie, you know, casting a very you know,
serious businesslike image if you will, um as as their candidate. Um. The problem is, while they improved on their performance you know from five years ago, years ago, and got close to of the vote, Um, they still don't have a majority and hence we're in this situation of political gridlock again. So Dan, you know, Berlusconi as soon as the comeback kid, and it was sort of shocking to see him re emerge on the scene after being banned from politics for
a number of years. But it seems like we have seen that he is not as resilient as he had been in the past, at least that seemed to be the message sent by voters. No, Um true for me, that was the biggest surprise of this vote. Um. I think everyone was expecting that Five Star would be the biggest single um, you know, most popular party, but I
am no one. I don't think had forecast that Berlsconi's party would actually come in second place, and in his alliance there um, you know, he just he invested so much time in this, you know, obviously having the advantage of owning some commercial television networks in Italy. You know, he was campaigning um very strongly the age of eighty two. He had heart issues last year. UM, and he was literally, you know, all over the map, going from from north
to south, an experienced campaigner again. UM. A bit of a surprise that he ended up only a sort of a junior partner in this alliance that he's um that he put together. Dan Liefgren, thank you so much for joining us and I'm sure we'll hear from you again as we follow the weeks or longer negotiations for Italy to form a government. Thanks for listening to the Bloomberg
P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio.