Yellen Prepared For Victory Lap Before Congress: Moss, Wilson

a current FED chair, Janet Yellen is Dan Moss. He is economics editor and columnist for Bloomberg View, as well as Dave Wilson, who is our permanent bitcoin watcher and is watching the price sword. We've got a few other bitcoin watchers. I do have a bitcoin chart of the day out today. All right, we'll get to that in a second. Dan, I want to start with you, and I want to talk about Jannet Yellen with the gloves off. She has no longer going to be FED chair come

early next year. Do you think that she's going to get kind of feisty and say things that are sort of controversial today? She's not a particularly feisty person. Having listened to her in her role as vice chair, her role as chair before that in the Clinton administration when she was chair of the c A. She's not a boastful person, very humble person. But look, she wouldn't be human if she didn't think, here's my chance to do a victory lack all right, So what's she going to do?

Is she just basically going to go over the progress the FED did made under her control? Or is they're going to be possibly more of something more here? It depends what she's asked. I mean, there will certainly be an element of recapping where we've been, where we are nout. Don't forget she's still chair at this point until early February. She will be running the f O m C meeting

next month. J Powell yesterday tipped the committee's hands somewhat by saying the case was coming together not such a surprise. The famous Dots last published in September projected that. But look, there's a number of things that he didn't say that she may now feel free to address, Like what happens if we're here this time next year they've had their three rate increases that the Dots projected, and inflation still

is not close to two percent. What happens then now she's already observed that expectations of inflation might be starting to drift a little. So does the committee keep going even if inflation doesn't get back to target. Everything is predicated on inflation ultimately getting back to target. The other thing she could address is the other side of the mandate. You know, GDP has been bumping along give or take two,

for the better part of the last eight years. But if there's one thing that's consistently surprised, it's the strength of the labor market. The unemployed element right just continues to grind lower. It's not inconceivable that in a year's time the unemployment right in the United States, for all its flaws, could be around three point five. Is that the point at which Phillips starts curving? The models all tell them it's bound to happen at some point. What

is that point? Dave Wilson, I want to bring you into the conversation just to get your thoughts on what's going on in the markets right now. Looking at the SMP five hundred, we've got some winners Macy's, for example, Advanced Auto Parts, Nordstrom, Coal's viacom or moving higher. But Dow just seems to want to move up, and it is up more than a hundred points, right. I mean, there are plenty of winners today, no question, But one

thing that's interesting here. We are in the midst of a transition in terms of who's going to be running the world's most important central bank, and you've got financial stocks on its hair. They're higher for the second day, and the S and P five hundred, you're looking at a four and a half percent gain in the SMP five hundred Financials index, biggest for that indicator in a year. So people were really worried about where things were going to be headed from here. You wouldn't see that kind

of a move. I don't think. Let's get this in a perspective, And Dan, I wanted to bring you in on this, I mean J. Powell. Jerome Powell yesterday, uh, the upcoming likely FED chair come early next year, was very specific about the fact that he did not think that there were any too big to fail banks anymore in the US and the thought that regulations had been had gone a little too far and seemed to really

note a de regulatory push. I mean, is that what we're seeing in the market today, Dan, look he comes down on the deregulatory side of the Ledger, but he's not what someone like Elizabeth Warren would call a crazy de regulator. Look. J. Pale is from the centrist Republican tradition. He was original a George H. W. Bush Treasury of Pointe. This is not someone who's out there, you know, in the constellation where many House Republicans might find themselves in

the regulatory environment. And just to get back to Dave's point, I mean, no one is saying the economy is in poor shape. Probably one of the great stories of this year when we look back on it is twelve months ago people saying, ah yeah, new normal, mediocre global growth. Now, this term synchronized upswing appears to be everywhere, and we've heard this, but oddly we're not. We haven't heard that before. Well,

but I want to ask you how much. Also, this has to do with the tax plan, and I'm wondering what other sectors are going to be benefiting the most from the tax plan, which looks like it has a better chance of passing the GOP right now, given the fact that it would unleash a lot of money for these companies for them to buy back shares. Is that what we're seeing in some of these stymes. Well, there's no doubt that's part of the mix. That there are

a couple of points though. I remember reading somebody's commentaries like how many times can stocks rally on the same tax plan? That's one piece of it. Another one another one is you know you're comment about stock repurchases. You know, we're seeing companies increasingly move away from buy backs and towards things like capital spending because business is picking up. So you know, you have to wonder, you know, if indeed it all does come down and you have the

tax plan place and lower rates and you name it. Uh, you know, money coming in from overseas, potentially, where is it going to go? Is it going to go into shareholders pockets? Has happened a decade or so ago in large measure when there was a tax holiday, or is it going to be? Dare I say it different this time? Let me just also mentioned that, of course we're waiting for Federal Reserve Chair Janet Yelling to begin her t

stimony before the Joint Economic Committee in Washington. And just to come back to your point, Dave, about banks and

specifically regional banks, and then your thoughts as well. John Kennedy yesterday, Republican senator from Louisiana questioning Jerome Pale specifically about whether there was going to be some segmentation in terms of oversight, whether banks that are not huge, let's say money center banks, all that term maybe out of date now, banks such as and I'm just picking the list of stocks that are moving higher in the SMP

five hundred, Dave, sun Trust, Citizens, Huntington's Region, Zience, fifth third, BB and T Camerica Discover Financial. These are not what you would call too big to fail institutions. Will there be a lighter regulatory touch for these institutions and as a result, will they be able to enjoy the growth that they, at least at the moment, have said has been constrained because that they have been targeted with the same kind of regulations that big banks have have been

hit with. Oh, Pimmy, Ryan Kennedy's question really stood out because a lot of them were trying to bait him on tax correct and he was never going to be a surprised. Also, Republican from Louisiana, and I thought that he was one of the most sort of direct questioners about this particular issue, but is specifically community in regional banks. That's right, and his questions were quite pointed as well, I mean, amidst the plethora of the committee, this was

not a SoundBite type inquiry he was making. Look and Pale was careful not to commit himself. Remember the object of a Senate confirmation hearing is don't create a target for yourself and get through. Having said that, the mood music of Pal's response was pretty sympathetic in greed, yeah, I mean it's sympathetic to these banks. Correct that there

would be some kind of bifurcation that there was. Actually what he was saying is if there's something we can do that avoids you getting caught up in the net that's been placed around the bigger banks, then we're happy to look at it. And he really did sound sympathetic. But you know, again, the to be shut not a lot of meat real quick. We'd be remiss if we didn't also mention North Korea and what was going on there,

just briefly, Dave, markets don't care, do they. Well, it's something that you pay attention to, but you don't necessarily trade off at day in and day out, until there's something more specific that becomes a front and center issue for people. It'll be interesting to see whether Jenny Allen has asked about the complacency and markets that were currently feeling. We've been listening to Federal Reserve Chair Janet Yelling testify

before the Joint Economic Committee in Washington. We just heard from the chairman, pet Tiberry, the congressman from Ohio Republican who will be uh leaving Congressmen. Let I just say something. This room was almost entirely empty. This is the last time that Jenny Allen is going to speak before the Joint Economic Committee, and possibly the last time she testifies

ever as Federal Reserve Chair. And it was an almost empty room, a fairly sort of dry sort of overview of her tenure, but nothing really, uh particularly that stands out. But it was just sort of amazing to me. I mean, it sort of highlights how she's being viewed at this point as a lame duck in a way. Well, and except for her chairing the next f o MC meeting in December, this is perhaps one of her last official duties that will be at least in the public eye.

And we heard questioning from Texas Republican Senator Ted Cruz, as well as a variety of we had Carolyn Maloney, Democratic congresswoman from New York. I just want to point out that Pim Fox was really listening and keeping track of absolutely everyone, while well, I just thought it was interesting only in the sense that, well, you know what, let's let's be informed rather than talk about what's interesting. Let me bring in Chris Condon, Bloomberg News reporter who

covers the Federal Reserve. And Chris, thanks for being with us. I just wanted to ask you, you know, at the very beginning the chairman, Representative Congressman Tiberi. UM, he talked about small banks, and that picks up on a theme that was mentioned yesterday during the nomination hearings for Jerome

Powell to succeed Janet Yellen by Senator John Kennedy of Louisiana. Uh. And I'm wondering whether this issue of trying to make the regulatory environment for small and medium sized banks less onerous will will that be something that you believe will take take center stage? UM. There certainly is a lot of pressure on the FED on that. UM. Yeah, fair to say it's in center stage. Whether it's going to happen.

I have to save him. I've been hearing everyone say they're in favor of easing the regulatory burden on community banks for years in Washington, Democrats, Republicans, people at the FED, people at other regulatory agencies. So what's preventing it from happening. It just seems to well, first of all, if they wanted to do it legislatively, UM, they can never seem

to get their act together. UM. There seemed to be a lot of bipartisans support UM a while back when UH Shelby Richard Shelby was in charge of the Senate Banking Committee, but when he went to make some changes to UM legislation, he kind of he kind of reached too far to the point where Democrats would not get on board. So they never kind of carved this area out in a piece of legislation and say let's just do this for the community banks, which they know everybody

is in favor of. There's always somebody trying to chuck something else into the legislation. Now on the agency sides, you know, I I I'm not entirely an expert into in terms of the inter agents, the dynamic but there seems to be just a sort of dereacratic slowness to this. It does take a long time to agree to things. Um. Now, Randy Quarrels is the new vice chair for Supervision at

the FED. J. Powell will be the new chairman. The two of those guys are very close, and maybe they'll have a chance to speed things up, to put a little new energy into that that area where everyone seems to already agree. Yeah, well, I guess that we will see. Chris, thank you so much for joining us. Chris cond and

Federal Reserve reporter for Bloomberg. One thing that Chair Yellen was asked about was the tax plan currently uh sort of careening toward being passed by the GOP and joining us now is to lou Alrinapa, he's a White House correspondent for Bloomberg, and you wrote a story that I thought was really compelling. Uh. And Tolu, why don't you just lay it out for us regarding what you found when you looked at companies and what they might do the extra cash that they that would be freed up

from the tax cuts. Yeah. One of the most compelling arguments of the White House has tried to make about this tax bill on the corporate tax cut, is that basically the companies would take all of this extra money that they're going to get from lower taxes and plow it directly into higher wages and new jobs. They even put out a report saying that there would be an average wage increase of four thousand to nine thousand dollars.

So what we did was look at what the CEOs of these companies are telling their investors, and we're hearing a very different message. They're telling their shareholders that a lot of this money is going to go directly into share by backs and paying for dividends and uh, you know, sort of rewarding their investors, not necessarily paying for higher wages and rewarding their workers with higher wages and better jobs.

So that that disconnected something that we looked at, and it's sort of undercuts the message that the President has has been putting out as he's trying to try to campaign for this tax cut, saying that this is the way to create jobs and create wages. Instead, it does appear that a lot of these companies are going to use this money just to reward their shareholders and not necessarily give it directly to their workers or start uh,

you know, creating new jobs and reinvesting in plants. So that was sort of what we looked at in the story, and we highlight a lot of the commentary that we've seen from CEOs from a lot of major companies that have a lot of this money either piled piled up overseas or currently uh anticipating a very large windfall from a lower corporate tax rate, and they're already making plans or where they're going to do with the money, and it does not sync up with what the White House

is saying it's going to happen to lou I wanted to just throw you something and if it's not in your Bailey Wick, you know, please by all means say so. But you know, there's been a back and forth debate about what happens with Fannie Mae and Freddie Mack, and the Federal Housing Finance Agency is in discussions with the White House over what to do with more than seven billion dollars that is actually owed to the government at

the the year by Fannie and Freddie. Have you heard anything about these negotiations and any information about the sort of perspective that the White House has about the future of these g s s. Yeah, this is a little bit outside of my expertise, but I do know that with this current fighting going on with the Consumer Financial Protection Bureau, um, that's one of the things that the White House is looking at, sort of trying to figure out what to do when it comes to Fannie Mae

and Freddie mac. It does appear that the White House has struggled to sort of have a governing coalition that looks at, um, some of these major issues, how how involved the government should be in the housing market, how heavily involved the government should be with regulations. It's not something that we've heard the President talk about directly, so it's it's somewhat of a mystery to know sort of

what's going on behind the scenes. Um, But it isn't an issue that is going to be on the President's desk pretty soon, and we just haven't haven't heard very much publicly out what his position is going to be. To Luke, can you just give us a sense of what's ahead as far as the most controversial portions of the GOP bill that still have to be sold, as well as well as just sort of the schedule going

forward of passing the bill. Yeah, probably right now. What has emerged as the most controversial portion is this idea of a trigger in order to get a couple of the holdouts to vote for this, uh, this tax bill.

They they're working on some sort of trigger that would be sort of a backstop in case the growth project projections that have been put forward don't um don't come into fruition over time, then we would have some kind of trigger to return some of that revenue and make sure that the government doesn't end up increasing the federal debt.

There's a lot of pushback from a number of various conservative groups, a number of different senators who don't like the idea of automatic tax increases that could happen even

during a economic downturn. But sort of square ring that hole and making sure that you have those senators who are concerned about the deficit as well as those senators who are concerned about the idea of a trigger being able to appease both of those camps is going to be very complex, and they're working on that and sort of behind the scenes, and if they're able to do that, then we could see a vote as quickly as Thursday

on the Senate floor. Then they would go to conference and over the next few days the House in the Senate would try to work out even more of the issues that they have between the two houses. Some of the differences in the bill would have to be worked out before a final vote in a bill that would make it to the President's desk. Thank you very much for being with us. Always a pleasure to lou Alaripa. He is our White House correspondent for Bloomberg News and

thanks for listening. I'm pim Fox my co host Lisa Abramowitz. 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 fo Box. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo wits one Before the podcast, you can always catch us worldwide on Bloomberg Radio.