Bloomberg Wall Street Week: Pelosi, Froman and Summers

with David Weston from Bloomberg Radio. President Trump says we have to run the risk, and the markets appear willing to do just that. This is Bloomberg Wall Street Week. I'm David Weston. Welcome back. The Senate is back in session, and as much as Congress has done already to help the economy, there's more work left to be done, including assistance to state and local governments to help the most vulnerable to the pandemic. Unfortunately, they often include the poor

and people of color. But if there is to be another major move to shore of the economy, Speaker Nancy Pelosi wants to make sure it starts in the House of Representatives and we asked her why, Well, let me just say that I'm very proud that our first four bills on this subject have been all bipartisan, overwhelmingly bipartisan. UH. As we take up the fifth bill, we're following the path of what was in the other bills. For example, we had state and local in the first CARES bill.

Here's one and that is what we have in this bill. Honor our heroes, police and fire, healthcare providers, transit workers, teachers, all of the people who postal workers, all the people who make our system work and in many cases risk their lives to save other people's lives, and now they may lose their job because of the revenue loss as well as coronavirus costs that states and menuntipalities are are UH sufferings. A b that we if we are open up.

The key to opening up, to unlocking the lockdown is testing, test sting, testing, tracing, tracing, racing, treatment, treatment. We have to do that. It's science requires it. Everyone agrees that we have to. It's a health issue that is going to solve the fiscal of the financial UH issue as well.

And then third, we want to put money in people's pockets on our hero state and local testing, testing, testing, Uh, let's make sure that we address the disparities and all the rest by identifying really where this uh cruel virus is creeping out there. It's it's it's so scary. And then third, putting money in people's pockets. What do we do unemployment insurance, whether we do issues that relate to direct payments in the rest of that, that's what we have to do. Now. We had all three of those

in the previous bills. So this is not plowing any new territory. It's digging deeper. It's more money for example, state and local. It has the support of Republican and Democratic governors through out the country, also state of the municipalities and counties, bipartisan support throughout the country. It's a big ticket because we are it's a big challenge. It's

only for coronavirus. That is outlays and revenue loss. Now, there are some issues that we just don't that are philosophical that we haven't been able to crack, and that is food stamps SNAP, the SNAP program. For some reason, that's not something that we can get the other side to agree on. But we have to do it. In

American people know that we have to do that. Brookings Institute just put out of report that moms say that one in four children do not have any they have our food insecure, one in four children in our country. That it's always been a problem, more than one in five, one in six. Now it's exacerbated by all of this. So again, there's some issues that are traditional debates that we have, but they shouldn't be any question that we

would have now. Foot stamps, unemployment insurance, direct payments, so many of these things serve as a stimulus to the economy as well. So uh, but the secret the Chairman of the FED said, think big. Interest rates are so low, think big, And we're taking his guidance on that. Mad speaking, you said that for some reason you can't get the

Republican side to move on food stamps. Can they get you to move on some of the things that they want, such as payroll tax that's something President Trump keeps talking about, even capital gains tax. Are you willing to put on the table at least some adjustments and taxation. Well, let me just say this, if you want to compare the need for us to change the capital gains tax, which once again, once again UH ignores the fact that there are people in our country that are hungry, and that

there is some equivalence to that. I respectfully disagree. There are certain things that are urgent, the urgent to have a discussion of tax policy. Save that for another day and do it in a bipartisan way. But don't draw any lines in the sand. We're not he shouldn't. Do you have a sense at this point, I understand the plan isn't put together. You have a sense of how big this might be? How big is this bread box?

Do we think big? It would be big? Well, see, for example, when we went from UH state and local, that was how we embraced it before. Now it's state and local separate, and so it will practically doubled what we would be doing. And that's a big ticket item. We're doing that the testing in a way that has a strategic plan. That's what we asked them to do. In the last bill. We had testing, testing, testing, in our March fourth bill that passed the House that day.

We had testing in the most recent bill. We still do not have what the scientists tell us is necessary to reach out into the communities with a band of people to do the tracing so that we can rid ourselves of this plague, and that costs money. And then the direct payments, that's that's a big ticket item, and that's what we are working on now. Where do we get the most return for the best help to our

people who are desperate. People are desperate, they're heartbroken because of loss of life, threat to life, but so many of their aspirations professionally, businesses, a community involvement in the rest are so stifled by what's happening. And we really have to address that, and if we don't, it's going to cost us a lot more money. So this is a prevention in many ways. That was Speaker of the

House Nancy Pelosi coming up on Wall Street Week. This economic crisis has shown us some of the glaring inequalities in financial services in this country. We talk with MasterCard Vice chairman Michael Frohman about what can be done about those that. Next on Wall Street Week on Bloomberg This is Bloomberg Will Street Week with David Weston from Bloomberg Radio. When Congress approved checks to most Americans, some people got

their payments much faster than others did. And independent on whether they had direct deposit relations with the I R S. It pointed once again to the plight of millions of Americans who are unbanked or underbanked. We talked with MasterCard Vice chairman Michael Frohman about the nature of the problem and what can be done about it. About five years ago, MasterCard committed to bringing half a billion people who have been excluded from the financial system into the system. We

achieved that goal last quarter about nine months. I had a schedule and we decided that now more than ever, it's important to make sure people have access to the digital economy, so we doubled down. We've raised that goal now to a billion between now and also said it's really important to bring fifty million micro and small businesses

into the economy. And because it continues to be a gender gap when it comes to financial inclusion, women tend to lack about nine percent behind men in terms of being included, we're gonna we're gonna focus in particularly on reaching twenty five million women owned or women run businesses around the world. So, Michael, give us a sense of the geography first, I mean, how many of these are the United States? How many there are overseas because Massacret

of course is a global company. Well, you know, they're about a one point seven billion people around the world who were still excluded from the financial system. Most of them are in developing countries, but there are people right here in the United States and in Europe who were also excluded, people who are unbanked or underbanked. Their estimates as in the US is somewhere between thirty and forty million people who have no formal relationship to the financial system.

So a lot of what we're focused on, and when it will vary from country to country as it has over the last five years, is figuring out how best to reach them. Sometimes it will be through government disbursement programs, and for example, millions of people will get their economic payments from the government on one of our cards. Um Sometimes it will be working with with fin techs who have a capability of bringing people into the financial system that didn't exist five or ten years ago. Or it

will be partnering with other companies. We have a partnership with a group called Annoymans, which is a big coffee trading group, to help put their workers, for example in Mexico, on digital payments, and it means that the worker, the grower of the of the coffee, is getting more for her product than she might have gotten before because we've eliminated the need to go through middlemen and go through cash. Michael, you mentioned small businesses as as part of this UH.

It gives us a sense of what you're seeing with MasterCard by the extent of which small businesses are drawing down on their credit as a practicmounter, putting it on their credit card, or for that matter, just not buying things at all, maybe with reduced activity. Well, we're certainly seeing uh an impact here. People are focusing on essential purchases like groceries and and and pharmacy purchases. UH there's a big movement from brick and mortar to e commerce.

But even where people where there is brick and mortar, where people are going face to face, we're seeing a big rise and what we call contact with payments about growth around the world and people going and just tapping their card because they don't want to hand over their card to somebody, they don't want to handle cash, they don't want to have to put in a pin number, and so being able to just tap and go is a safe and secure way of making payments. Small businesses,

as you said, are particularly hit by this crisis. We've committed two hundred and fifty million dollars of products and services and financial support over the next five years too small and medium sized businesses to help them digitize, bring them into the e commerce environment, make sure that their transactions are safe and secure from cyber attack and from fraud. And that's going to be an area of continued focus

in the United States and around the world. Michael, One of the questions we're asking almost all of us right now is to what extent is this pandemic changing what we're going to be as opposed to just making us get there faster. Talk about the contactless payment is at some place we're going to get anyway, and to what

extent has that really been rushed because of this pandemic. Well, I think this crisis has underscore just how important digitization is for individuals to be able to transact, to to get payments from their government, for small businesses to be able to be in contact with their customers through through e commerce, and to to do transactions in some form

other than cash. So that trend was already underway, but I think this has accelerated it um and certainly in the United States, which had lagged behind a number of other markets when it came to contactless payments, we've seen a dramatic increase in demand for contact less. One of the things that we've heard a lot about from the major banks, in part is reserving for possible bad credit, because people are going to have a tougher time paying their credit cards off when they come do given the

fact they're losing their jobs. As a practical matter, what are you seeing at MasterCard and what adjustments are you making for that? So, David, I'd like to say that Apple is not a fruit, Amazon is not a river, and MasterCard is not a credit card company. It's actually the banks who extend loans, where the infrastructure, where the technology that makes the payments happen. And one thing that that we have MasterCard had been committed to is is

being a multi rail company. So we want to help people pay any way they want to pay, maybe that's on a credit card or a debit card, or account to account um or digitally. So we want to make sure we have now the capability were the only global multi rail company that can help people pay in any in any way if they want to, and if credit is not appropriate at the moment, then they can rely

on debit or account to account payments. But we're sometaly doing everything we can to help our our customers and their customers get through this crisis. Okay, last question, Michael, I want to draw from your experience as a the U s t R the United States Trade Resent, as

well as your experienced down master Card. Do you have any concern that as people are looking around the world and saying maybe globalization went too far, that maybe some of the about borders being put up in some places are not just for immigration, not just for trade, but could be actually for credit and for payment systems. Well, we do have a concern that that that people will

uh countries will resort towards nationalism, nativism, protectionism. Um. You know, governments have absolutely legitimate interests and concerns about about privacy, wanting to make sure that they've got the best possible

financial infrastructure in the country. But one thing that this crisis underscores, for example, is just how important that they're it is that there be really robust systems with cybersecurity protection with anti fraud protection and that you're able to see trends in data across countries so that you can, whether it's see i am AP for the World Bank or other institutions, take action to make sure you're addressing those who are most those are most vulnerable and being

having a global payment capability UH seeing having access to multiple countries allows that to happen. So we're very committed

to working with governments through this crisis. We're helping a lot of them both through our data analytics to understand the impacts of the COVID crisis and to our payment capability to help them disburse funds to small businesses and to individuals, and will continue to work with them as we come out of this crisis to ensure that they've got strong and secure payment systems UH in each country.

That was Michael Froman, vice chairman of MasterCard. Coming up on Wall Street Week, how technology is helping us remake our lives in the time of the coronavirus and how it can do a better job. That's next on Wall Street Week on Bloomberg. This is Bloomberg World Street Week with David Weston from Bloomberg Radio. This week IBM also announced new ways of using technology to support the enormous weight that we're putting on I T in this age

of social distancing. I talked with the new CEO of IBM, R Vin Krishna, about the way it is responsing to the needs of its customers, needs that none of us could have anticipated when we look at the pandemic and what's unfolding upon us. First, let's just have a lot of sympathy for those who are impacted by it. But then, as you have all shifted to remote work, the need for digital technologies, the need for cloud, the need for AI has accelerated. As you pointed out, our audience went

from thirty thousand to eighty seven thousand. I do believe that's a reflection of the acceleration that our clients are seeing in adopting these technologies. If we look at cloud, it's a great way to be able to reach your clients virtually, to be able to get all your employees connected back to the enterprise in a remoted, virtual way.

If you look at AI, it's about the only way to get the extreme automation to be able to handle the workloads that are going to be thrust upon us, and that's why we're making so many announcements at this conference in both those realms as well as the client interests that we can see with the with the people who are attending these sessions remotely. So let's talk about those clients, because you talk to them every day. We've

all become so dependent on this technology. What are the things you're hearing most of your clients about, what they need, what change they need, what have proven say and what are you trying to do to address those So so a couple David, just to make a point this thing.

So I'll be talking to the chief Digital officer for Anthem during the conference, and what they're talking about is how do they connect all their air clients, the forty million people who get healthcare, and how can they connect with them digitally and remotely, and how can they infuse those experiences with AI and how can they build them on a hybrid cloud platform so they can run them at scale and now them up and down depending upon

the need. So that's a great example of a client but it's the same story we hear from everywhere, whether from people in the airline industry, insurance, banking, telecom. It's about bringing hybrid cloud technologies so they can deploy the workload wherever it's it's fit for purpose, and then they can use AI to not only do extreme automation which helps take cost out, but to actually make the experience

even richer for all their end clients. And that's why we begin to see the infusion of both those technologies going forward. A quick example, one of the products we'll announce here is in the category we call AI for I and the product is called Watson AI OPS. Outages in I T cost the industry about two and sixty five billion dollars, but that's if you react after the fact,

that cost is still there. If we can begin to predict what may go wrong and be able to put it right in the workflow, right in all the collaboration tools, and fix it even before it happens, that brings huge power unlocking the potential of AI for our clients, and that is something we really really are excited about, in addition to the other hybrid cloud technology we're also bringing

out at this conference. So I'm gonna say those of us who are working from home and experience some of the glitches that happen are eager to have those corrected. When will that product be available will really redeem some of the situations that we have where our system goes down, there's some problem, we have to reboot it, things like that.

That product actually is coming out now. We're announcing it at the conference in May, and people can start purchasing it now for deployment in this quarter, meaning before before the month of June. So that is a great, great power. But it talked a little bit more on AI. If you look at AI and it's impact on COVID, something we're all unfortunately suffering from right now. But I look at medical research in India, I look at government services in Poland, I look at hospitals in the United States,

and these examples go across dozens of countries. We can all begin to use intelligent AI assistance to really take away in triage out a lot of information that people

are looking for. So in a hospital case, parents who are anxious about their children can interact with the AI assistant and be and that way you can take a thousand odd calls and take them out of the medical professionals hands, allowing the medical professionals to focus on the much more serious cases where the AI reacts with, Hey, this is serious enough that you should actually have a

person now interact. I think these are really useful examples to show how AI can go, not just an I T as you pointed out, David, where we all would like all of our infrastructure to stay up all the time, and we do believe the tools in the next month I'm going to help there, but also in terms of helping our citizens and governments and medical professionals be able to help everyone deal with COVID nineteen. So when you make a very important point, they're mentioning various countries where

this could be applied. The situation has been global when it comes to internet and digital At the same time, even before the pandemic, there were some countries that are trying to draw some borders when it came to data and when it came to some of the Internet's issues. Are you concerned Do you see any indications that the pandemic problems that we're seeing may actually increase the resistance two flows up data and information across borders. Look, David, Um,

I'll sort of begin with my perspective. Um. Of course, the economies are always going to and nasues are always going to try to advantage themselves. But when we step back, I think both global trade and the free flow of data have shown that the entire economy, the global economy, gets better and everyone benefits. I think it's a fault deliver. And people think about a win lose. It's not a sports game, but it's a win lose. It's a win win if you can agrease the size at the bar

for everyone. That was Arvin Krishna, CEO of IBM. Coming up, we wrap up the week with our special contributor Larry Summers of Harvard. That's next on Wall Street Week on Bloomberg. This is Bloomberg Wall Street Week with David Weston from Bloomberg Radio. We knew it was coming, and yet it's shocked us. Nonetheless, twenty point five million Americans losing their jobs in just one month, and every one of those jobs represents a family that has been appended. So it's

hardly any surprise. The President Trump has said that we must get the economy going again, no matter what, and he recognizes there are certain risks involved in doing that, even if it means certain health and certain loss of life. Potentially, it really seems an unthinkable choice really, but let's be honest with ourselves. We know that sooner or later we have to get the economy going again. We also know that's gonna entail some risk. The question is how much

risk and how best can we manage that risk? And so we begin with what we're told as a painful choice between tens of millions of people out of work on the one hand, and another hand, those whose life could hang in the balance. And to help us address that question, welcome now Wall Street Week special contributor Larry Summers of Harvard. He was, of course Secretary Treasury. Larry, thanks so much for being back with us. We've talked about this obviously, we want to be cautious and really

starting with starting the economy again. At the same time, when you see that many people out of work doesn't mean we have to get going. It conveys that we've got a need to do something. We've got to make sure those people are able to continue to live, which is why very very strong unemployment insurance it's fortified for this moment, is going to be absolutely essential, and why the Congress is gonna have to move to extend what's been put in place so that it's secure early there

for people. That's as long as necessary. It says that we need to move with all deliberate speed. But if we do it in a way that starts the pandemic up again, then in the end, the people aren't going to come back uh to uh their jobs because they're going to be afraid uh to go to work, and the people they served in stores or restaurants are gonna be afraid to go out of their houses. So we've really got to make a priority um out of UH

doing what's necessary to enable us to move forward. And that goes back to masking, it goes back to testing, and it goes back to contact tracing, and we're not spending as much on those things as we are on the relief efforts. And that's something that we're gonna need uh to fix if we want to be able to

have a viable economic recovery. Hope, David, is is not a strategy, and simply letting us open up in the hope that more people will be hired is probably a prescription for getting a second wallop uh from uh this virus. And that's not going to serve either economic objectives UH or moral objectives. But yes, We absolutely can't just accept this. It's no argument for fatalism, but it's an argument for

the right kind of economic strategy. But the first plank in that uh, right economic strategy is an aggressive health strategy, and unfortunately we're still not seeing that. So we heard from Larry Cudloud this week and said that as a PRACTICMTY, we will never have to shut it all down again because we've built up so much infrastructure since the epidemics first came here that we now have the wherewithal that even though there will be flare ups, the presidents of

that will be able to contain it. Does that sound right? Sounds like nonsense. It sounds like something he wishes is true. I mean, talk about contagion. The president's pensiant for confusing what is with what he wants to with what he would like to be true seems to be contagious to the people who work for him. Uh in uh the White House. Unfortunately, we don't even at this late date, we can track a presidential election every day, PEPSI contract,

the sale of Fredo's every single day. The government of the United States of America cannot track every single month or every single week the incidence of a pandemic. We don't have the data. We've got data on how many people have been tested positive, but since we don't have tests for most people, that data is telling us as much about how many tests there are as how many

people have the disease. It is incredible that in this age of data science, of social media, of information technology, of artificial intelligence, that the most rudimentary kind of tracking information is lacking, and that we are being thrown back on what was the fourteenth century solution to the play. Everybody go to the country and stay and stay in their own houses and not meet anybody they don't live with. UM. It is extraordinary to me, and I don't know where

it cut loose. I don't know what cud loose talking about. Show me some infrastructure that the administration has developed. They've turfed the problem to governors who have lacked the necessary UH resources, and some are doing UH better UH than others. But the stunning thing is the plateau ng of UH of this UH virus. And so yes, it's true, we're not gonna ever. I anticipate have another month when we

lose another twenty million jobs. But if we want the better half of those twenty million jobs to be coming back. We need to get on our horse and do something, so lurry. Everything you say raises the natural question why we have a lot of people in the private sector, of the public sector, even charities such as the Gates Foundation, who are devoted to this, Why aren't we fixing those problems. There's an obvious answer, and there's a deep answer. The

obvious answer is cust it incompetence. And we just got vast amounts of sort of inconceivable levels of incompetence at the federal level. And that needs to be said before anything complex uh is said. But there is a complex problem. Take the area of tests. If you thought about if you had a potential test that you thought was really good, it was cheap, that you saliva that could be mass produced, and you were thinking about producing it, you would need

to know one of two things. You would either need to know that your test was going to be selected and you had a high confidence that you'd be able to go into vast production with it, and then you'd be willing to do it. But if you thought that there are a lot of people trying and you might win the lottery, but more likely than not you wouldn't.

You'd need to know either that you were going to be insured for your costs if you didn't win the lottery, or you need to know that if you did win the lottery, you were gonna win some kind of massive surprise.

But in the decentralized system with fifty states that we have now, people thinking about developing those tests know that they won't get reimbursed for their costs if their thing isn't selected, and then if their thing is selected, they won't be allowed to make massive profits because of being moral to profit on a huge scale in the midst of a national emergency, And so the incentive to drive

something to completion just isn't UH there. And the way we're managing this, we need an aggressive program that encourages every development and reimburses people for their UH for their costs and when they don't UH, and provision for providing a big reward for people who develop ultimately successful vaccines. If we had that, we would be doing much better.

But look, to have any kind of environment for doing anything succeed, you need signals that have some character of constancy, some predictability, and no company could effectively manage a supply chain if it's CEO was announcing different things on odd number days and on even numbered days. And that's the situation that the federal government has us in right now. Yeah, Federal Approcurement program. It's a big goal. I'm not sure that we're headed in that direction necessarily right now. Larry

and I Suppo. You would take an awful long time to get it up and running as a practical matter, but it is an idea, and certainly we don't seem to be getting where we need to go right now. We need to get back and running and if we're gonna save some of these jobs, were losing so terribly of many of them. Thank you so much to Larry Summers. He's our special Wall Street Week contributor. He was, of course, university professor at Harvard, and he's former Secretary of the Treasury.

That's it for this edition of Wall Street Grief. I'm David Western. See you next week. This is Bloomber