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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordert. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg
Terminal and the Bloomberg Business app. Turning back to the Federal Reserve sources telling us our colleagues here at Bloomberg that a driving force behind the DOJ's decision subpoena the Central Bank is the Federal Housing Finance Agency Director Bill Pulty. Director Porty has been busy over the last week, some purchases of MBS and Focus as well. Director Poruty. Welcome to the program sir. You are cited in our story this morning. Just wanted to give the opportunity to respond
to it. But what was your role in the developside of a weekend.
The DOJ's outside of my purview, This is out of my purview. I don't know anything about it, and I would refer you to the DOJ bill.
You haven't been shy of sharing your thoughts on the Federal Reserve before, particularly over the last twelve months. You thought that the chairman would ultimately resign. He's standing firm. Do you think this push against the Federal Reserve is actually leading to unintended consequences and leading this fed to dig in.
My main focus, John has been on reducing mortgage rates to the extent that we can do it and increasing housing affordability. President Trump announced a huge thing last week when he decided that he was going to ban institutions from buying homes. Basically, the concept is that people should
be living in homes, not corporations. You know, we have a supply problem in this country, and obviously we're working on the demand side of things, because in some cases, affordability has gotten so tough that people don't even want to buy a home because of what Joe Biden did, and so we're reversing that. That's what we're focused on. We had a huge one to two punch last week. You saw mortgage rates moved twenty five base points lower on the news that Fanny and Freddie have started to
undergo a two hundred billion dollar mortgage bond buy. And I think you're going to see some very exciting things come out of Davos. With regard to the President on housing, in a couple in a week.
Director BOLDI, you were with the President this weekend, I believe, traveling with him on Air Force one from Washington to Palm Beach. Did you talk about the Federal Reserve with him this weekend?
Obviously I would never talk about anything that the President and I talk about. I would say this that the President is laser focused on housing affordability and reversing what has happened these last four years. You look at the average mortgage payment under Joe Biden, it's skyrocketed compared to
what it was under President Trump's first term. We are focused on bringing down not only the mortgage rates, but also the day to day cost in upkeeping homes, which has to do with you know, whether it be your ongoing expenses, mortgage insurance, etc. There are so many pieces to the cost puzzle that at the FHFA US Federal Housing we are working to reduce the costs bird and that Americans have.
I know that you've seen the report from our colleagues. I've also got calls last night about the subpoena handed to the FED and was told that you were part of it, pulling together a report that then went to the DOJ. I just wanted to go since from you, did the President know this was coming? The Treasury Secretary know this was coming? Have you had any of these conversations again.
On that matter, I'd refer you to the Department of Justice.
Okay, well, we'll wait to hear from the Department of Justice. When it goes back to the mortgage backed securities that you have been talking about. You already been purchasing about north of two hundred and thirty billion dollars of them last year. There is a cap. Do you expect to reach that cap this year?
I think all options are on the table. President Trump is a president who keeps all options on the table. We announced this historic two hundred billion dollar buyback of mortgage bonds. This is a huge deal, and you know we'll keep all options on the table. Look, we're doing our part of Fannie and Freddy. Most presidents didn't even know Fanny and Freddie existed. Obviously, your community in Bloomberg
and all of us in the private sector. We know the importance of Fanny and Freddy, but for the average day American, they don't understand because the presidents haven't made it a priority. Average Americans haven't understood that presidents had this authority until President Trump found this authority, which is basically to utilize these companies to be companies. Imagine that get people to show up back to work. You know, we had sixteen thousand people. We have sixteen thousand people
at the two companies. When I showed up on the scene and President Trump came into office, they were all working from home. We'd go to these big buildings, air conditioning, spewing everywhere, spending fifty million dollars a year on leases. Nobody was in these buildings. So we have turned around Fanny and Freddy. They tried to get President Trump to sell the companies, for the two companies together for one
hundred billion dollars. I think the valuation of the companies is anywhere between five hundred billion and some say up to a trillion dollars.
A lot of people are hoping that there is some sort of initial public offering O those companies are you preparing them for that at some point later this year next year.
We are fully prepared to do whatever the President would like us to do on that matter.
We have been getting prepared.
We are prepared, just like we are with the institutional home buying ban, just like we are with home builders. We have a full set of things to do, and once the President decides what to do, we go about executing them.
Director Pulty, A lot of people on Wall Street were pretty excited actually about your purchases of mbs of mortgage backed securities and saying that this should like it should
be something that would bring down spreads. They were less excited about the idea of preventing institutions from buying single family homes, saying that it really do wasn't based in economics, considering that in certain regions in the country there's actually a glut of houses that this is not because of institutions that account for a relatively small portion of overall buyers.
What do you say back about.
The economic fundamentals behind this type of proposal and why it would bring down fordability and an increase the supply of houses, which is the ultimate issue that a lot of people.
Say, Well, it just makes economic sense.
You talk about supply, I mean, you kind of gave narrative there, but if you look at the economic supply of things, the fact is you have you know, big corporations buying using long term paper, using their balance sheets to scoop up homes in a supply shortage as we call it, and they're in some cases buying these homes for twenty thirty forty percent less than Americans are doing it. You know, President Trump was elected with a very very
popular mandate. You know, sometimes people don't remember because it was a year ago, but it was a landslide victory, and he was given a mandate to reverse these last four years of crazy inflation that happened under Joe Biden.
And so I think it's very.
Appropriate that we're doing everything that we can to reduce housing costs, and we're going to keep doing it, whether it's the institutional ban on buying, looking at all of the things that go into a home and owning a home. Americans need to own homes in this country, and we're committed to restoring that.
Director Bulty, did you study this in terms of this apply demand dynamic and whether it actually would reduce the cost of houses for individuals. Should there be a ban on single family housing, on instation's buying single family homeless because a lot of people in the markets who have supported President Trump's policies and thinking of Neildunna in particular, came out and said, this is faulty economics.
Well, of course, I've studied it. I've studied it my whole life. I mean, I grew up in the housing business. I grew up in the building business. I was on the board of Pulti Homes for four years. I understand what institutional buying does. It's very powerful. I understand why Wall Street might not like it, but we serve the American people.
We don't serve Wall Street.
And President Trump is laser focused on doing the right thing no matter who it affects in terms of their pocketbooks. At the Wall Street level, he has focused, laser focused on action, not talk like so many of these Democrats, like Elizabeth Warren. You know, for years she would talk about all institutional buying. She didn't do anything. Joe Biden didn't do anything about it. President Trump is doing something about it.
Elizabeth Warren wanted to see an effort like this. Do you think the president is taking cues from some of the more populist wings of the Democratic Party.
No, I think Elizabeth Warren's going to have to take cues from us or she's going to continue to look like a fraud because she says all these things and then she does nothing about it. You know, President Trump, he gets things done. He said, look, we're going to ban institutional buying, and then we're going about both on an executive action front as well as codifying and a legislation. I mean, the amount of momentum that we've had at
the legislative level from you know, different Congress people. I was at the Financial Services Committee the other night. People were ecstatic about this. I also talked with multiple US Senators, many who are vying to sponsor the legislation. So this is a very big deal, and I think it's going to happen.
Is the President going to declare a housing emergency in the United States?
That's entirely up to the president. I can tell you this. He is treating it with great urgency. He understands real estate very well. He understands the importance of keeping home prices up. He understands this issue very well. And we're working very well together, Secretary Turner, Secretary Best and Secretary Lutnik, the Vice President Susie Wiles. This is an all hands effort,
James Blair in the White House. I mean, this is an all hands effort to reduce the cost of home ownership and get people, not corporations, back in homes.
Stay with US, mul Bloomberg surveillance coming up after this, let's tent and at least a running officials saying they've secured full control over the country after mass protests lane to two weeks of upheoval and one hundreds reported killed. President Trump set for a key briefing on potential US involvement as soon as tomorrow. Joining us now is former City of US Intelligence official Nomen Rule. Now, I'm welcome to the program, sir. We've seen this in this country
many times over the last ten years. This felt different over the last week. How different is it?
It's quite different, and good morning.
The current nationwide protest in Ron continue to have reached a scaleon intensity that is unprecedented in the history of the Islamic Republic. Virtually every major city in town is experiencing some form of political protests against the government calling for regime change, not just complaints against the specific economic policy.
And what you have is the tactical government efforts to contain these protests through promises of economic reform have not satisfied the protesters, and increasingly coercive and violent responses by the government have not ended the protests thus far. And the result is that we've seen deaths. We've seen hundreds of protest or deaths. We've seen as many as forty to fifty to one hundred security force personnel be killed,
and we've seen thousands of arrests. So we're watching a very intensive, turbulent situation in Iran.
Nor absolutely horrific these images coming out of Iran. What makes this protest though, different than prior protests we saw.
We're watching basically a very compressed situation. So in the twenty twenty two to twenty twenty three situation, for example, the number of the tragic number of deaths, for example, that took place where it took place over a much longer period of time. The number of arrests took place over a much longer period of time.
So we're watching a compression of this.
And this is happening because the inflation, the collapse of the currency, the dissolution with the government, the failed policy, the impression it's built upon itself since twenty seventeen. So you've got an extraordinarily unhappy population that fills the government correctly so, feeling that the government is just unable to deliver.
And at the same time you have a government that is broken, it's trying to it's trying to satisfy a military that's taking a large portion of the budget, missiles, regional militias, a nuclear program that's brought it sanctions upon the government well at the same time trying to promise economic relief to a population and in the end it can't deliver.
And just the currency problem alone is extraordinary.
So when the time of the nuclear deal of the Iranian rio was twenty nine thousand, five hundred to the dollar.
When the recently fired central Bank.
Governor took office, it was about nine hundred and twenty thousand.
To the dollar.
In December, when the protests began, it was one point four to two.
Million to the dollar.
There's no reason to believe that this collapse will not continue further because the government is broken.
Norman Overnight, the Ron's foreign Ministry said that there is a communication channel between their foreign minister and mister Wickoff now open. The President told reporters that the Iranian leaders have reached out. He also went on to say a meeting is being set up, but we may have to act because of what's happening before the meeting. How should we read the president's comments seriously?
So let's take a look first of what is the likelihood that the president will conduct a military strike. If you look at us behavior and the President's actions, there is a high likelihood of a military strike. The President has conducted surge limited military action following a series of social media statements, a series of promises of action if specific behavior is not undertaken, diplomatic outreach, and military moves.
A lot of this has happened thus far, and the social media and the intensity that President's social media statements have increased. We've seen a visit of the Omani foreign minister to Iran which looked like a message one way or the other. Now we have the Iranian outreach, so why is that happening? Well, that offers the Iranian several advantages. First,
gives them a chance to tell their own population. Maybe sanctions are being lifted, so that might break the unrest unlikely, but it also might allow the United Tests, the United States of delay the United States attack. I don't think that's going to buy the much patience with the President normal What.
Could the US do with respect to military strikes that would be effective? I mean, how risky is this at a time we're already there as an incredibly explosive feeling in the region, and previous incursions have led to mixed results.
Frankly, I think it'd be unwise.
Do you give a lot of detail because the Iranians are going to be interested in that question as well. But US military power is vast. The Iranians have no capability to really defend against it, as we've seen in June. The press reports have talked about aerial attacks, other tools are available, and the Iranians are very susceptible to this.
The US has the means to deliver an extraordinary punishing blow against those units and personnel that would be involved in violence against protesters, and that's what the President has talked about, responding to those who have committed of violence and against peaceful protesters, deaths against peaceful protesters, and We've seen an extraordinary number of deaths in the last weekend.
Norman, we already have Venezuela with questions around who's going to lead it if there is some sort of strike that does imperil the Iranian leadership, Do we have a sense of who is going to take over and how intimately involved the US will be with that.
I've been working.
The Middle East other issues too long to make predictions on who will lead governments in the future, predicting elections of the Iranian people will no doubt choose their own leadership.
I would say that there is a deep.
Revolutionary guard network within the country and corporations and all aspects of the leadership.
If you were to draw upon the.
Existing system of society of who might follow, if the existing system remains in place, it's probably going to be drawn from that DNA. And that's the sort of DNA that would likely be willing to engage with the West and with the region in a circuit manner protecting Iranian equities, but it would engage with the West with US.
More Blindberg surveillance coming up after this. Towson Stock for Apollo writes the following the market reaction, this morning is very muted, which is talent investors that the key issue continues to be the incoming data. Tolson joins us now for more Torston, good morning, any nice tries is still going to ask you to have this tell me your thoughts this morning and your response response to what took place yesterday.
Eve nick I do think the market reaction is absolutely critical, especially the market reaction in long rates, the dollar, and also inflation expectations, and on all three fronts we've had a relatively muted reaction. So one conclusion is that the market obviously is looking at this and the reaction has been as you would have expected. That rates up a bit,
the dollar is down. We'll see inflation expectations if they go up a bit more throughout the day, but it's still relatively small compared to how much drama has been made of this over the last twenty four hours.
Is that a huge by signal essentially that this is a market that really believes in the institution of the Federal Reserve in the United States checks and balances in a way that encourages you to invest in the United States.
Because investors come to the US for two reasons. They come for AI, and they come for higher yield. And when they come for higher yield, of course it's because the rest of the world doesn't have great growth at the moment, and the level of uals for the FED is of course higher than what it is for the easy b and for a number of central banks around the world. So for that reason, foreigners come to clip a higher coupoon in bonds, and foreigners also come to
get AI exposure. So for that reason, this is not directly linked as such to the AI story, But what this could be linked to is of course the yield story.
If you begin to see the FED lower interest rates not for economic reasons, then the big question becomes with what would that mean for the steepness of yeal curve where is it foreign investors are investing, And if foreign investors are further out, then the risk is of course that the yeald curve preb be even steeper, and therefore foreigners would be getting an even higher level of yield
further out the curve. So there's a lot of issues around this question of why is it allar not weaker, namely because foreigners actually still like the AI story and they still like the higher coupong that they get in the US.
What would you have to see to suggest that the Cell America trade truly is starting to take off. The people are starting to take this seriously.
The dollar going down, because that, of course is ultimately the risk that foreigners will begin to say, well, we have less appetite for buying US assets. But the key issue continues to be that the US growth outlook continues to be much better than the growth outlook in Europe, much better than the growth outlook in Canada, Australia, Japan, because we have the AI Data center boom and energy boom of course expanding everything over the next level quarters. We have the one big boot of a bill. We
also have all prices lower. We also have the dollar now marginally lower. All those tailwinds continue to support GDP growth throughout this year. Let's not forget that the one big bit of a bill is going to add zero point nine percent to GDP growth according to the Congressional Budget Office in twenty twenty six. That's a very meaningful boost to GDP over the coming quarter. So that's why
the CONTENTUS expects. If I look at ECF, you go on my Bloomberg that the unemployment rate will peak just about now, and the tourment rate is about to go down over the coming quarters. That's a very important point when you think about the background for this story about what's going on with the Federal Reserve mose days.
When it comes to sell America, what about instead of the dollar depreciating, what about the fact that gold continues to hit a new record highs almost on a daily basis.
I do think that this is also a reflection of a broader thing, namely that there's also the issue, of course that central banks that are imposed with sanctions are now shifting away from dollars towards gold. You also have that many Chinese investors have been buying gold. They've been buying ETFs in China in a very significant way over
the last several quarters that we haven't seen before. So retail demand is very strong, and you also have because of sanctions, very strong demand, and of course inflation in the US. Let's not forget, which we normally, of course talk about, is that it's still not a two percent. It's still closer to three than it is to two, and that of course is the number one issue driving gold.
Most frequently named that if inflation is higher for longer and we have an economy that's about to get better because of the one big beautiful bill the AI and Data Center spend well, that raises the risk that there's also more upside risk to inflation over the next seven months.
Tolston GDP right now is tracking at world four to five percent.
Well, their land of at GDP now, as you know, is a very very high.
Pretty fantastic, and the last rate we had was pretty decent too, four to five percent. And the president's going after the Federal Reserve, the President's looking the camp interest rates, the credit card companies. The President's going after things that are one on the one hand, in home builders on the other hand, might help them. These are things we typically associated with GDP tracking closer to one or maybe a negative territory. What's gone wrong?
Well, I think a very important part of this discussion is that equity investors care about corporate earnings, and a few earning seasons have actually been pretty good, and corporate earnings still look pretty good if you look ahead. Contentious expectations are that earnings throughout this year will continue to rise.
So if corporate earnings.
Are still good, well, then equities likely to say, you know what, if earnings are still good and these things are not impacting the bottom line, well, then we should still, of course expect that equities could continue to do well.
Is really strang what's gone wrong for mainstream.
Well, credit and bond in bursters of course have a lot of these things, certainly because this begins to matter in a number of ten ways, especially of course when it comes to rates. So that's why it's more the bunt market that's paying more attention to these risks. But even the bunt market, the reactions today has had a
very very muted reaction. So that's why the conclusion here is as long as bunt markets and in credit markets continue to view this from a relatively complacent and benign perspective, then we should still be looking at this from the fundamental perspects.
Can we just partner markets for a moment, just throw markets over there. I just want to talk about the fact that we're generating four to five percent GDP growth and yet everyone seems to be terribly unhappy. What is so bad about this kind of growth? What is the character of this GDP growth compared to what it used to be? Like the jobless growth this time around, What has changed? What has gone wrong? Well under the growth that we're producing.
Yeah, So the key issue to that is, of course, is a key shaped outlook. Both for consumers we have high end versus low, and we also have for corporates are you in AI or not in AI? Those differences continue to drive that high end consumers spend continues to be strong, and AI, of course data center energy build out continues to be strong. Those things dominate the negative effect that might be coming from the lower leg of the key, and the label market is really mainly a
reflection of immigration. Remember in the last several years, twenty twenty two to twenty four, net immigration was about three million. The congressional budget of this is now predicting will be about five hundred thousand. That's why the Funeral Reserve produces a lot of papers saying that the equilibrium rate for non found pay rolls is no longer two hundred thousand like it was for several years now.
It's thirty thousand.
So that's why last Friday is number on non found payrolls.
It's actually a pretty good number.
When you take that into account that we actually.
Have had such a dramatic.
Declient so in behind you with fifty k.
Yeah, so fifty k is actually better than this Saint Louis estimate of equilibrium for non founday rolls, which is thirty thousand.
Again, so why is everyone so miserable?
Well, the stock market doesn't seem too miserable.
Cricket break against those people in the stockma understood.
So, but this is right if you think about, of course, consumer sentiment that's also been driven very differently according to where people are in the income distribution. But overall it's still very clear that the economy is actually still in
decent shape. And if you now have the tail who's coming from the one big beautiful bill again one percent according to the CBO in growth being added this year, you have still had data, say under spend out and you'll still have also, of course everything going on with lower dollar, lower oil prices, all that a really strong tail when the growth outlook for the next sevel quarters.
The American people filled the same way. Because the president's claim responding to something when it goes to downa Switzerland in a week and talks about this great affordability person Obviously he doesn't believe that the consumers in America see things the same way.
Well, of course, affordability is a little bit different discussion because it is correct and a number of differferends. Of course, home prices have not done particularly well. That's also of course, other areas with tuition, healthcare, cetera, where the discussion has been very important. But nevertheless, the wealth effect for consumers has been strong. Job growth has still been relatively decent.
At the same time, you know, actually saw wages go up on Friday, you still have a number of till wins that mean that on average, the US consumer the weekly data from red Book, Sametoor retail sales impressively strong, still telling you that in aggregate, the net effect of the key is still that the higher end of the key is dominating the oral picture for where the macro data is.
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