Bloomberg Wall Street Week: Hubbard, Bair, Haass

with David Weston from Bloomberg Radio. United States got a new president this week in an inauguration unlike any other, with twenty five thousand National Guard troops called in prosecurity and hardly anyone in the audience kept away because of COVID. But it was more than just a change in administration. It was a change in philosophy and tone and approach.

This is Bloomberg Wall Street Week. I'm David Weston, Kennedy, London, Baines, Johnston, blue Son, George Walker Bush to solemnly that I will execute the office of President to the United States faithfully, that I will execute the faithfully. The President officer President

of the United States, faithfully, so help me go. Donald John Trump, do solemnly swear that I will faithfully execute that I will faithfully execute the office of President of the United States, the office of President of the United States. That was a glimpse of inaugurations past. This inauguration was like no other, without the hundreds of thousands of people on the mall because of COVID nineteen, but with thousand National guardsmen occupying the capital to prevent a repeat of

the riots from two weeks before. It did share with earlier inaugurations the attention of the entire world. And Richard has, President of the Council and Form Relations, thinks President Biden used it to start to rebuild alliance as it had suffered under his predecessor. At the back of every allies head is the concern over whether this divided country can be there for them, and also what comes in four years.

And to put it bluntly, how are they to understand where America is in the ark of its history, where the last four years the aberration and this is now the restoration of the normal, or will it turn out that the last four years were a harbinger? Will have four years of Joe Biden, but then we go then we're going to return to some version of Trump is

um with without demand. And that's the question mark that Mr Trump planted around the world, which I wonder if there's one place in which we shouldn't really expect too much of a deviation, because we did here in the confirmation testament from Tony Blincoln, and he seemed to indicate maybe they would be just as tough on China as President Trump had been. And by the way, Janet Yellen, the nominee for Treasury, also had some harsh things to

say about China. Oh, I think there'll be more consistency than than French there. David, You're exactly right. I think it reflects a shift in American thinking about China. It's a bipartisanship, much more critical, much more skeptical. But this is a very different China. This is sij and things China. It's more repressive at home economically, it's not evolved in ways that people expected or hoped for. That's stronger militarily,

it's much more assertive diplomatically. So I think you're going to get You're going to get a much more pushback from the United States. Richard, this is Rick Davis and Washington, and I wanted to get back to sort of the global point of view, because you're right. I mean, I've spent a lot of time traveling around the world and where there's a lot of questions, but heads of state over uh sort of what is the arc of the US?

And and obviously I think Biden leaned into that. President Biden leaned into that by talking about re engagement and and and by the power of our example I think was his quote. And and what would those examples be in the near term? I mean, what would you like to see this administration do, either through his cabinet, members of the president or the vice president, to actually try to get back in the game and re establish that

kind of global trust. Well, the biggest thing would be competence and progress versus COVID nineteen might be the single most important national security statement the United States could make. I think rebooting to some extent the American economy, American economic growth would be welcome. The demonstration that our politics, our institutions can hold you will have the United States

re enter various international arrangements. We left the Paris Climate Accords the World Health Organization, and there will be a big emphasis on simply talking to allies, to consultations, and that suggests multilateralism, which which basically puts an end to two things. It puts an end to America acting on its own in the world, which was something that Mr Trump stood for. And it also puts an end to

the bias towards isolationism. So this will be an administration that lean into diplomacy and foreign policy, and it will lean into a collective approach, and I think for the most part that will be welcome. So Richard Dubar Hacket expression from an old car commercial, as I recall, this ain't your father's world anymore. I mean, what gave rise to the post World War two structures doesn't obtain anymore. So it's not just a matter of going backward, right,

it has to go forward. Is there a vision? Does the Biden camp have a vision of how we can rebuild better? That's a great question, David. The answer is not yet. So I think the initial thrust of the administration would be what I would describe as repair things we've just been talking about, to stabilize the home front, to get the United States back on the playing field of international organizations and diplomacy to revive alliances. And then

you've got the heavy lifting. What will the United States do visa v Russia and China to manage those great power rivals? What will we actually do on climate? Can we structure the digital space, which is clearly essentially the wild West? What can we do so the world is better prepared for the next pandemic and is better able to deal with the existing one. So I think that's you know, there's a little bit of time there. That's why you gotta get everybody up to speed in their jobs,

got to get the inter agency system working. But I think the the idea of innovation, of moving forward, We're not going to know that for a few months, but that'll be the ultimate test of this administration's foreign policy. That was Richard Hayes, president of the Council on Foreign Relations and author of the best selling book The World of Brief History. Coming up. What the Biden administration means for the economy and for business. That's next on Wall

Street Week on Bloomberg. This is Bloomberg Wall Street Week with David Weston from Bloomberg Radio. President Biden's pick for Trayasury Secretary, Janet Yellen was one of the first of his cabinet nominees to have a confirmation hearing. In her three hour testimony to the Senate Finance Committee, the former FED Chair pressed President Biden's one point nine trillion dollar fiscal stimulus package as essential to fight the economic harm

being done by the coronavirus. Neither the President, Alex nor I proposed this release relief package without an appreciation for the country's different and economists don't always agree, but I think there is a consensus now. Without further action, we risk a longer and more painful recession now and longer term scarring of the economy later. Members of the Committee, these are very ambitious goals, and I know we will

need to work together. Yell and support for the President's stimulus plan met some resistance from Republican lawmakers, who expressed concern that the level of spending on top of what has come already could hurt rather than help. Here's South Carolina Senator Tim Scott. But the one point nine trade dollar package that has been presented to us is a package that focuses on some priorities that I think will actually hurt our economy as much as it would improve

our economy. Yelling also showed some potential continuity with some Trump administration policies, particularly in her tough stance on China, which she called the United states most important strategic competitor. We need to take on China's abusive, unfair, and illegal practices. China's undercutting American companies by dumping products, erecting trade barriers,

and giving illegal subsidies to corporations. But the Treasury Secretary nominee did not condone Trump administration suggestions that the country might benefit from a weaker dollar, saying that should be left strictly to the markets. I believe in market determined exchange rates. The value of the US dollar and other

currencies should be determined by markets. It's been only a dozen years since Congress had to bail out the economy from the Great Financial Crisis, and Sheila Bear was a key official in that rescue effort as head of the Federal Deposit Insurance Corporation. She says there will come a time to be frugal, but it is not now. Well. I didn't think she's right. You need to go big

right now. The country, the economy is still in serious trouble, and once again the people are beetting hit the hardest or low low income, low middle income families and the lion's share of the the assistance. You've got supplemental unemployment, you've got direct household payments. I think that's money well targeted and needs to be spent. Families need help, They're still struggling, and so I agree with her. So targeting, we talked about targeting A lives of Republicans talk about it.

We never seem to quite get there. I mean, it's a practical matter. Even the PPE and things like that, it appears that it's going to the top and at the bottom. What can we do better to make sure it let's get to the people who needed well. I think the shift of fiscal away from monetary policy is hugely important, notably as one point nine trillion does not include additional money to you know, backstop the Fed of its interventions. The Fed just not equipped to get money

to main street. They put money into financial markets. You know, wall streets were doing really really well since the Great Financial Crisis. Not so much for that lower eighty percent. Really that the people who work for a living and results rely on labor income, non investment income to live. So just the shifting back to fiscal that's a much better approach to get money actually in the hands of families.

And you know, direct payments is a very efficient way to get money out quickly, which is really what we need to do. You know, I need a lot of bureaucracy, there's no you know, there's all this debate about whether people earn it or not, or deserve it. You know, I kind of look at all the trades that have gone to Wall Street and I kind of have disdained for that. The lower eighty percent of the population, which is well, you know, which is where these payments will reach,

they've not done so well all right. It took them ten years to recover. They were finally just catching up, and we have this hit. So I think there's some inequities of the past being addressed with these payments as well. But at least we know where the money is going. It's going to households. They can spend it on consumption, they can pay rent, they can pay their bills, they can save some of it, they can budgers their emergency savings. Again,

I think that's money, well spent. So one of the things that this pandemic is really exposed is some of the racial and economic injustice across the country. The black communities and the Hispanic communities and for that matter, the Native American communities have really been particularly hard hit. Is there anything that either the FED or the Congress can do to really readjust that, to really target the assistance for the people that really needed that, is to say,

the minority communities. Yeah. So there's a lot of structural bias in our system. We need to, you know, fundamentally rethink policy. So the way for instance, banking my my neck of the woods, the way we think about risk and risk weate uh, you know, bank capital requirements, there's a lot out of racial bias built into the assumptions that we use. So I think that's another area where I hope Janet Ellen will take a fresh look. I hope to Fend and another bank regulators will take a

fresh look how we think about credit. I think there's there's a lot of systemic bias. And there's one example of where policies generally can have um, you know, things that were not even where I should be aware of but have not been, so that in addition to them just focusing on low income families where unfortunately minorities are disproportionately represented. I fear we're gonna have it. You know, we're going to be worsening our structural and employment problem.

You know, labor force participation is going again, job retraining, job growth, wage growth, job retraining. I'm I'm for you know, some kind of universal basic income to to provide some type of you know, based support for working families when we get through cycles like this that got something automatically to fault back on. There are a whole host of things. You know, let's face it, working families have been work

by both parties for way too long. And so I'm hoping that that Mr Biden and Janet Yelling and others of his team are really going to be refocused on this, and I think they are. So. One of the things that you focused on during the Great Financial Crisis were really the safety and security of our financial system. As we go through this crisis and you look from the outside, now, do you see places that you're concerned about the financial system?

I do. I think the the unbanked sector, excuse meb the non bank sector is a continuing source of turmoil. In last March, we had market disruptions, same suspects, right, money market funds, highly leveraged chedge funds, leveraged corporate et f s. The FAT again had to come in and provide a lot of quidity, a lot of bailouts. Whether that was right or not, I don't know. I just I do know that when we resort to bailouts as opposed to using regulation to prevent these unstable structures to

begin with, we just reinforced risky bad behavior. So we need a fisher cut bait. Stop the bailouts, let them go down, let the market funish them, new away with them, or start providing some meaningful potential supervision to present to prevent these unstable structures from proliferating. Maybe some combination of both. But the end bank sector, excuse me, think of the m bank non bank sector is definitely an area of

continued financial fragility. And I think again, Janet Yellen is chair of the Financial Stability Oversight Council, which has the authority, the cross cutting regulatory authority to deal with this. This I hope will be a high priority for her as well. That was Sheila Bear, former fdi C chair coming up to the President, Biden wants to increase the federal minimum wage to fifteen dollars an hour. But what would that do for the economy and what's it got to do

with the pandemic? We asked contributors Larry Summers of Harvard and Glenn Hubbard of Columbia. That's next on Wall Street Week on Bloomberg. This is Bloomberg Wall Street Week with David Weston from Bloomberg Brady. President Biden wants to raise the federal minimum wage to fifteen dollars an hour, a measure he included in his day one priority of passing

a stimulus bill to support the economy. People on both parties now recognized it's time to raise the minimum wage so hard working people are in at least fifteen dollars an hour minimum. A move to fifteen dollars an hour would be more than double the current minimum wage of seven dollars five cents, which hasn't been changed since two thousand nine. If passed, it would provide a pay hike to nearly four hundred thousand Americans who are earning minimum wage.

Here's ever COREPS co chairman and co CEO Ralph Schlastein. I mean a fifteen minimum wage basically gets you to the poverty line for a family of four. Until now, it's been the states leading the charge in raising minimum wages, with twenty nine states and the District of Columbia already taking action. Here's former Massachusetts Daval Patrick. All of the evidence historically is that the economy grows after the minimum

wage has been raised. It is not the burden that it is, and that it has been sort of told. Critics say that raising the minimum wage could come at the cost of millions of jobs. Like South Carolina Senator Tim Scott. The one thing that even the Congressional Budget Office recognizes is that by increasing the minimum wage to fifteen an hour, it could shut her somewhere around three point seven million jobs on the high end, a minimum of one point three million jobs in our economy. One

of those critics is Walmart CEO Doug McMillan. At a business roundtable event this week, the CEO agreed that seven dollars cents an hour is too low, but called for a higher wage that takes into account geographic differences and small businesses. Ralph Schlastin again well I think that the CEO of Walmart is UH making a sensible statement that one size fits all. UH isn't UH perfect. Some CEOs, like some states are not waiting for the federal government

to raise wages for workers. No matter what happens on the government level and federal level or the state level. We have companies and I see the signs and I see companies are coming forward. UM, we have to do what's the right, which is bringing the minimum which at least fifteen dollars to stop. That was Chobani CEO Hamdi Ulukaya. Regional differences in the cost of living and the timing of a potential hike in the minimum wage raises concerns

with some economists. Here's Doug holtz Ecan, the president of American Action Forum. I don't think it belongs in here. It's it's not stimulus, it's not relief. It gets in the way of recovery and the labor market. UH, and so I expect that to drop out. Our roundtable reaction

to arise in the norum wage were welcome now. Walter we contributors Larry Summers, who served as Treasury Secretary under President Clinton and then as Director of the National Economic Council under President Obama and Glenn Hubbard, who chaired the Council of Economic Advisors under President George W. Bush. Welcome to both of you. Larry miss Let's start with you. What would be the effects on the economy overall of arise to fifteen dollars an hour from the minimum wage?

I read from the CBO from the Congressional Wedro office that on the one hand, you'd lose one point three million jobs. On the other hand, you take a lot of people out of poverty. I think you would take a lot of people out of poverty. I think I'm balanced. It's probably positive. I worry less about job destruction, and I worry that employers will stop paying benefits when they

have to pay higher wages. I worried that employers will shift away from the most vulnerable and inexperienced workers towards uh workers with more experience and more education. And so I think I'd probably prefer to see a more gradual approach and a more differentiated approach to a major minimum wage increase. But if we're gonna have a major if we're gonna have a minimum the question is whether to do this or to do nothing. I would unbalance favor

doing this. So Glenn, is there a third alternative to address perhaps some of what Larry is concerned about. I've heard it suggested that the problem with the minimum wages essentially acts as attacks on the employer. A better way would be to get money into the hands of people who needed through increasing the earned income tax credit, because that's attacks on all of us that shared equally. It doesn't penalize you for employing people. Well, I think that's right.

I think President Biden got it right when he said people who worked forty hours a week should not be poor. That's a moral statement, it's an economic statement, but it's not a comment on the minimum wage per se. I would think that the e I T C and increased, particularly for childless workers who have not received much work support from the I T C. And President Biden has talked about that, and also big government support for training for community colleges. These are the kinds of things that

could help raise the wages of low wage workers. So a gradual increase in the minimum wage may on balance be fine if it's gradual and not and not all the way so fast. But I think of building bridges to the future for workers is a much better idea. That's Glenn Hubbard of Columbia and Larry Summers of Harvard coming up. Our conversation on the new Biden administration continues. That's next on Wall Street Week on Bloomberg. This is Bloomberg Wall Street Week with David Weston from Bloomberg Radio.

European Central Bank met this week and although I didn't surprise anyone and what it did, President Christine Lagard did warn the possibility of a double dip recession in Europe as a result of further shutdowns triggered by the pandemic and reinforcing amount of Laguard's warning, where p m I numbers showing further contracting and Yurozone and UK business activity in the month of January. We turn once again to our roundtable for a reaction to what we're seeing and

continued European economics offteness. So Glenn, I'll start with you. Is there anything that Madame Legard, for that matter, fiscally they can do over there? Is this all a matter of vaccinating people? Well, it's first and foremost of public health crisis, and vaccination is important and all of the prophylactics to fight the spread of the disease. But there are fiscal policy actions that need to be taken to sustain workers, to sustain firms during this period, so that

you don't have a K shaped recovery. Is the vaccine finally comes aboard. So I think for Europe, fiscal policy is going to be more important than just asking President Legard to do her jo. So so Larry's talking about how K shape recovery, I wonder if there's a different kind of case shape recovery if you take a look at China. China seems to be rebounding quite nicely, if we can say that about the pandemic. Europe is really struggling.

Maybe the US is somewhere in between. Are we seeing early divergence among the nations right now in recovering their economies from the pandemic? I think we are, David, And I think ultimately what historians may notice out of this moment is how much better Asia did than the West did. And they order of magnitude, and I mean that literally by more than a factor of ten, in some cases, by more than a factor of hundred differences in performance between Asia. Large parts of Asia and large parts of

the West. That's something that goes beyond Donald Trump versus somebody else as the head of state. And I think that's something that's going to get a lot of attention going forward. And I think that it's why, in addition to the human issues, um, what President Biden is able to do in the next three months is going to be so profoundly important. If there was ever a test of whether government by the people was effectively government for the people, it's in the ability to protect people from

a pandemic. And right now democracies of the United States and Europe are not looking particularly good relative to more authoritarian UH States, and I think that's a very profound question going forward. Glenn, do you agree with that, and if so, do you have a hypothesis about why there is that divergence. Well, I think it differs across countries.

But I think Larry is right. We do need to make sure that democracy is capable of coping with these major, major mobilization type challenges we have before, and we can do it again. I would also worry about emerging economies.

We've been talking about industrial economies Europe, China, United States, but the emerging economies have huge problems, both in public health and in economics, and require our attention to Okay, we wrap up every week with a quick Summer says around here with Larry Summers about what he thinks about various things. Let's start with a hundred vaccinations in a hundred days, which is the President Biden is committed to. It's not gonna happen or not, Larry, He's gonna overperform

significantly on that promise. It's we're almost out a million a day, and there's every reason to believe we can ramp up in the future. We will do substantially better than a hundred million vaccines in a hundred days. Let's talk about the U. S treasuries. We heard from Janet yelling again at our confirmation hearing they're considering at least the duration are we're gonna have a fifty year US Treasury bond before the Biden administration is over. That's a

long time. We're not going to have it anytime soon, because Janet's gonna learn what all her predecessors who thought about this learned that doing that would be a major gift to all the fixed income trading desks at all the head funds at the expense of taxpayers. Given the way it's likely to be priced, it would turn out to be a major set up for arbitrage opportunity. So

it won't happen anytime soon. And finally, Larry, we had a remarkable to r at the very end of the week, the company named game Stop that they actually had to stop trading twice during the day. It shot way up, I mean way way up. And apparently it's because there was an army of Reddit users who all marshaled together and go against a short seller, and basically I couldn't see any change in the underlying company at all. Uh As social media are gonna really do damage not only

to our political system but to our market system. I suspect our market system will survive social media, but God, this points up the need for as we used to say in the Treasury in the nineties, a regulatory system is modern as the markets, and there's always uh a need to regulate bucket shops and to regulate various ways and would retail investors are taking advantage of And we're in a situation where there are where it's an old theme and an old story, but there are new ways

of doing it. So I'm glad that we're having an administration and a set of financial regulators. I was glad about the appointment of people like Michael Barr at the Controller of the Currency UM that will Gary Ginstler at the SEC, that UH will be committed to regulating where regulation is necessary. But Larry briefly here at the end, I must say, I'm surprised. I thought if there was gonna be a regulatory body in sarch of social media,

it would be the FTC. It could be maybe Department of Justice, than I trust, maybe it'll be the SEC actually has to regulate social media. Look, I think there are a whole set of issues that are outside my expertise on you know, inflammatory tweets, on monopoly power in social media platforms, in privacy issues that are the FTCs

UH remit. But when I look at things like what happened it read it, that's a kind of dysfunctional market, and I think that's something the SECS get to have to UH pay a lot of attention to, just as day, just as there were a whole set of practices that produced balloon bubble stocks prior to the nineteen Thank you so much to Wall Street. We continues Larry Summers of Harvard and also Glenn Hubbard of Columbia. It's time now

for a look ahead on global Wall Street, David. Next week brings us a virtual Davos, and we will hear from more government and corporate leaders on the global outlook with Joe Biden in the White House. And here in Asia, we have a busy week of Ernie's ahead. From Japan, more than four hundred companies listed on the Topics report, including prominent tech players Spanic and Tokyo Electron, along with Tokyo Disney operator Oriental Land. South Korea's lineup includes Senday

Motors and Tesla battery supplier LG Chemical. Will also get results from India's largest lender, the State Bank of India, which will give us clues into the recovery ahead of the Indian parliament kicking off its budget session on Friday, Danny thanks Sophie. In Europe, there are increasing fears about a double dip recession. We got data on Friday that showed the economy in the Euro Area is slipping further

into a contraction. You have more lockdowns hurting the services sector and at the same time regisit increasing delivery delays hurting the manufacturing sector. How the government responds to this over the next week is going to be crucial, and their plans on how much longer economies will continue to be lockdown. Scarlett Thanks Danny. Week two of Joe Biden's presidency, they bring more executive orders and updates on his one

point nine trillion dollar COVID relief plan. The pandemic has generally been a big positive for tech, and their latest earning support will likely show the spoil industry giants Apple, Facebook, and Microsoft all expected to indicate that the trend will continue well into The Federal Reserve holds a two day meeting. Chairman j Powell expected to stress the need to wait and see on how physical support and the vaccine rollout

shape up before making any changes to its outlook. And we get an initial read on fourth quarter economic growth with GDP probably slowing to a four point three percent rate. David BECKAVERDEO thanks to Sophie, Danny and Scarlett. Finally, one more thought. It's not easy being president. You have the

weight of the free world on your shoulders. You have a pesky Congress that gives you a tough time over just about anything you want to do, and you need to protect the country from possible attack at any time of day or of night. But the job is not without its perks. You get a big house, you get a seven forty seven is your personal airplane, and a limo so big that they call it the Beast. And of course you do have four million employees committed to

giving you anything you want. Right, Well, not so fast. It turns out that all those people charged with keeping you safe have their own ideas about what you can and cannot do. So when President Barack Obama took office, he fought for two months to keep his BlackBerry. Sure. He ultimately got his way, but only after a two month battle. And when he got his precious BlackBerry back, he could only reach a small circle of people, and even those couldn't forward any of his messages. And now

it's President Biden's turn. His simple pleasure is getting on his peloton and working out every morning to get the day started right. But there is a problem. The peloton connects to the internet, letting you get inspiration from your favorite trainer and compete with others on the leaderboard. Well, the secret service is none too happy with the idea of foreign adversaries getting access into the new president's innermost sanctum,

not to mention his exercise routeam. I'm sure President Biden will get some version of his beloved peloton back at some point point, but we shall all take heart that even though we can't protect untold government computer assistance from Russian hackers, we can make sure they can't get at one lonely peloton now located at Pennsylvania Avenue. That does it. For this episode of Wall Street Week, I'm David Weston. This is Bloomberg. See you next week. One of three

adults has pre diabetes. That means it could be you, your best man, your worst man. Take the risk test that do I have pre diabetes? Dot org to know where you stand. Brought to you might be ad counsel and it's Pre Diabetes Awareness Partners.