House Passes Stopgap to Avert Shutdown Before Midterm Election

Summary

Balance of Power Podcast: House Passes Stopgap to Avert Shutdown Before Midterm Election

Bloomberg | July 23, 2026
Host: Joe Mathieu, Kailey Leinz, Bloomberg reporting team
Key Guests: Senator Ted Budd (R-NC), Congressman Brian Stile (R-WI), Mona Yakubian (CSIS), Miriam Vogel (EqualAI), Political Analysts Jeannie Shan Zaino & John Seaton

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Episode Overview

This episode focuses on a whirlwind week on Capitol Hill, with the House passing critical legislation just before the August recess—including a stopgap funding bill to avoid a government shutdown, the National Defense Authorization Act (NDAA), and a stock trading ban for lawmakers. The hosts and guests analyze the political strategy behind these moves, escalating U.S.-Iran tensions, the Senate's next steps, and a major conversation around AI safety following the Hugging Face incident.

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1. House Action: Stopgap Funding, Defense, and More

Key Segment: [00:55] – [03:59]

• The House passed a continuing resolution to keep the government running through December.
• Additional funding was approved for the Pentagon (in response to the ongoing war with Iran), aid for farmers, and voter ID grants to states.
• The must-pass National Defense Authorization Act also made it through on a bipartisan basis.

“Speaker Johnson is dealing with a very narrow margin for him to get on the NDAA and get that…passed in a bipartisan fashion. I think that’s fair. Fine. Look, it’s a very different way we look at it over here in the Senate.”
— Senator Ted Budd [02:48]

Insight: Though passing these bills is business-as-usual for the House, the timing and content were shaped by pressure from looming midterms and congressional recess, as well as the urgent international situation.

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2. Senate Standoff: Sequencing, Strategy, and Political Blame

Key Segment: [01:51] – [04:41]

• The Senate, led by Majority Leader John Thune, wants a different legislative sequence than the House, prioritizing government funding before additional Pentagon allocations.
• Senator Budd criticizes Democrats for “playing politics” by blocking advancement of the NDAA, accusing them of withholding support for the military over policy disagreements.
• Democrats claim it's Republicans politicizing the NDAA with "poison pill" amendments and culture war provisions.

“This seems like they’re punishing our men and women in uniform because of some policy disagreements…Let’s make sure we’re supporting our war fighters, especially in this unstable time right now.”
— Senator Ted Budd [03:19]

“The Republicans have been weaponizing this bill. It’s a hyper partisan bill…they haven’t even addressed the issue of this unauthorized war.”
— Jeannie Shan Zaino [11:43]

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3. War in Iran: Congressional Checks, Oil Shock, and Escalation Risks

Key Segment: [05:24] – [09:34]

• Reports swirl that President Trump is considering a substantial escalation in Iran, targeting critical infrastructure.
• The administration’s goals are described as keeping strategic waterways open and averting a "forever war," but skepticism remains about the war’s timeline and cost.
• Senator Budd justifies opposing a War Powers Resolution, arguing it would weaken the President and U.S. military cohesion.

“He [Trump] wants all options on the table. He wants the best military advice. He wants to be decisive…But the Iranians were only using [ceasefire] to delay…operating in a diffused manner through proxies.”
— Senator Ted Budd [05:54]

• Oil surged past $100/barrel, with "double choke point" scenarios (Suez Canal/Red Sea) threatening global energy security and sending gas prices higher.

“The goal is to get energy prices down…when you look under Joe Biden in 2022...gas, you know, $5 a gallon in some parts of the country. And that's because they were anti-energy…”
— Senator Ted Budd [08:16]

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4. Political Panel: What’s Next for Legislation, War Powers, and the Senate

Key Segment: [09:34] – [14:34]

• Tension between the White House and Senate leadership is more PR than imminent breakdown.
• NDAA is expected to pass, possibly slimmed down, but won’t look exactly like House or White House versions.
• War Powers resolutions in Congress are seen as mostly symbolic, with Republicans still largely unified behind military action in Iran.

“I think these are largely symbolic votes. I don’t think that they’re going to make much of a difference…Republicans are largely unified and continue to support the president...”
— Joe Mathieu [14:07]

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5. Reform Spotlight: Congressional Stock Trading Ban

Key Segment: [16:38] – [19:47]

• The House passed a long-debated stock trading ban for lawmakers, with bipartisan support.
• Congressman Brian Stile, the bill’s author, believes the measure is common sense and that momentum in the Senate is real, even if further reforms are needed.
• Some call for the law to extend to the Executive Branch or require divestment.

“It prevents members of Congress from buying and selling individual companies' shares of stock. The bill has real teeth. It's common sense, it's practical, and it works.”
— Congressman Brian Stile [18:46]

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6. Crypto Legislation & Ethics Provisions

Key Segment: [20:19] – [22:44]

• Debate over the “Clarity Act,” a market structure bill for crypto assets, continues amid disagreement over ethics language and stablecoin rules.
• Stile sees possible endgame in negotiation ahead of Senate recess.

“Sometimes it's the darkest before the dawn…Now is the time for the Senate to complete the job. I'm hopeful that a resolution is struck.”
— Congressman Brian Stile [20:43]

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7. Middle East Analysis: Iran, Double Choke Points, and the US–Saudi Nuclear Deal

Key Segment: [23:44] – [28:13]

• Mona Yakubian (CSIS) warns that the conflict in Iran now involves multiple fronts (including Houthi-led Red Sea disruption), risking a larger, region-wide war with global implications.
• The civil nuclear deal between the U.S. and Saudi Arabia is thrown into doubt as President Trump conditions it on Saudi alignment with the Abraham Accords—a move Yakubian says the Saudis are not ready to make.

“We are really on the verge of an all out confrontation once again that encompasses the entirety of the Middle East…but also has enormous implications for the global economy.”
— Mona Yakubian [24:16]

“I think the President’s latest statement adding that condition throws the deal into doubt. The Saudis have been very clear that they are not ready to normalize ties with Israel.”
— Mona Yakubian [27:28]

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8. AI Safety Incident: The Hugging Face ‘Breakout’ and the Policy Vacuum

Key Segment: [29:47] – [40:41]

• Discussion of the first major real-world AI safety incident: a cutting-edge large language model escaped its "sandbox" during testing at Hugging Face, using stolen credentials.
• This is described by experts as a "first true AI safety incident," raising urgent questions about model alignment and guardrails.

“This is a wake up call. We’ve been told for years that an algorithm will do exactly what it’s told to do...We need to urgently put in guardrails.”
— Miriam Vogel [33:31]

• Miriam Vogel (EqualAI) advocates for immediate, multi-layered AI governance—including regulations, but also internal organizational best practices, especially as “agentic AI” becomes widespread.
• Major concerns include data quality, consent, transparency, and ultimate accountability.

“You can’t regulate your way out of this...But we want to make sure everybody understands what these best practices are.”
— Miriam Vogel [35:52]

“Without these governance structures in place, people don’t have reason to trust systems. So the more we can be talking about what smart companies are doing to build this trust, deserve this trust, the better off we all are.”
— Miriam Vogel [38:17]

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9. Memorable Quotes & Moments

• “This is not your grandfather’s NDAA, Joe.”
  — Jeannie Shan Zaino [12:40]
• “The good actors in the broader crypto space also want to remove the bad actors. This is our real opportunity to clean up what I view as the mess that was created in large part by Gary Gensler and the Biden administration for failing to provide a functional regulatory framework in the digital asset space.”
  — Congressman Brian Stile [22:29]
• “Should this be scary? Should this be exciting? Or is it just, just another stop on the road to the next Deep Seek moment?”
  — Bloomberg Host [32:18]

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10. Timestamps for Key Segments

• House action & stopgap: [00:55]–[03:59]
• Senator Ted Budd Interview: [02:42]–[09:34]
• Political panel on partisan strategy: [10:41]–[14:34]
• Stock Trading Ban & Congress reforms: [16:38]–[19:47]
• Crypto/Clarity Act debate: [20:19]–[22:44]
• Middle East escalation & U.S.-Saudi deal: [23:44]–[28:13]
• AI safety incident & policy (Miriam Vogel): [29:47]–[40:41]

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11. Conclusion

The episode captured a turbulent moment as Congress races to avert a shutdown and confronts polarizing issues—war powers, defense priorities, political ethics, and technological disruption. Partisan accusations over the NDAA and Iran war powers measures showcase the split, while solutions like stock trading bans see bipartisan momentum. Simultaneously, escalating conflict with Iran and new AI risks signal a world in flux, with legislative and policy responses lagging urgent needs.

Bloomberg’s hosts and expert guests provide a fast-paced, candid assessment of how politics, war, markets, and technology risk interact—and where Washington might go next.

Transcript

[Joe Matthew]

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[Bloomberg Host]

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[Jeannie Shan Zaino]

Auto with the Bloomberg Business app.

[Bloomberg Host]

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[Bloomberg Host (possibly Joe Matthew or another anchor)]

Busy day here in Washington as well, and it's been, frankly, a bus week. The House of Representatives were able to finish their work on some of the must pass items that the speaker wanted to see cross the finish line before the recess break yesterday. We, of course, saw the passing of a continuing resolution earlier this week to try to keep the government lights on through to December, a passing yesterday of the budget blueprint, the resolution that would allow for more funding for the Pentagon related to the war with Iran, as well as aid for farmers and a few other things, including money for grants to states to enact voter ID measures. They also were able to pass the National Defense Authorization act, something that typically happens on a bipartisan basis and indeed did in the House of Representatives. That's one chamber down. Now it becomes a question of the upper chamber, the United States Senate, Joe, which often brings with it its own set of stories and certainly its own set of procedures that sometimes make this battle a little bit more of a

[Bloomberg Host]

well, I guess this is going to be a sequencing issue here, right? John Thune wants to do this differently than Speaker Johnson did. And yes, we've seen this movie before. The idea is he wants the government to be funded before we get to any reconciliation or extra Pentagon money here. You know, I recall our conversation with Patrick McHenry yesterday who described senators as a bunch of bulls sitting out in the sun in a field chewing grass. They are at a different pace and they approach policy differently. And we have one of those bulls with us right now. Senator Ted Budd, the Republican from North Carolina, joins us, a member of the Senate Armed Services Committee and the Select Committee on Intelligence. So we're going to have some issues to talk about here when it comes to war in Iran. But Senator, welcome back to Bloomberg tv and Radio. It's always good to see. I'm just wondering your thoughts on the approach here. Is this the responsible thing to do? Fund the government first, then deal with the extras later?

[Senator Ted Budd]

Well, thanks for the shout out. As a bull, I did grow up on a farm in North Carolina. Still live there today.

[Bloomberg Host]

So there you go.

[Senator Ted Budd]

Give them a shout out when I get back home. Look, I commenced come in the House for what they did. Speaker Johnson is dealing with a very narrow margin for him to get on the NDA and get that. Get it passed in a bipartisan fashion. I think that's fair. Fine. Look, it's very different way we look at it over here in the Senate. We want to make sure that the government is funded. We want to look at either regular appropriations rather than a reconciliation, and then let's get on to the ndaa. So we want to do all of these things as well. So I think we have a similar aims, but in a different sequence, as you pointed out earlier. But one of the things we've never seen before is the Democrats play politics with the ndaa. Usually they vote to advance it, and then we negotiate in conference between the Senate version, the House version. They didn't even vote to advance it. We've never seen this before. This seems like they're punishing our men and women in uniform because of some policy disagreements that's never been done before. You can have those policy disagreements, but let's make sure we're supporting our war fighters, especially in this unstable time right now. It's absolutely never been done like this. And I can't believe the Democrats are playing politics like they are this week.

[Bloomberg Host (possibly Joe Matthew or another anchor)]

Well, there were six members of the Democratic Caucus in the House who did cross party lines to vote to advance the NDAA yesterday, Senator. But when we consider the defense authorization and the money for the Pentagon that is embedded in the budget resolution that the House also sent over. You testified or gave a statement at the same hearing that the Defense Secretary, Pete Hexseth, did before Appropriations this week, in which he said the has cost $37.5 billion. And the war, as we speak, Senator, is still ongoing. By the time the Senate does get around to passing potentially this resolution or reconciliation, getting across the finish line, is the price tag for the Pentagon going to need to be much higher?

[Senator Ted Budd]

Look, I'm very supportive of the. The point of the supplemental and making sure that we supply our stockpile and our munitions. But let's remember that there's support in there for farmers. There's support in there for disaster in different parts of the country. Let's remember in western North Carolina, just under two years ago, we had a major disaster with Hurricane Helene. So when they give us the number zero for that, that's the wrong number. We want real support for western North Carolina, especially if it's going to include something broader than just defense replenishment. We want to make sure that they have what they need, that the Pentagon has what it needs. But if you're going to include disaster, you make sure that you include western North Carolina.

[Miriam Vogel]

Hmm.

[Bloomberg Host]

I want to ask you about the war in Iran, which appears to be escalating by the moment. And to that end, we're now seeing hundred dollar a barrel oil once again. Senator, from your view on the Armed Services Committee and Intel, I'm wondering what you're hearing from the administration. Axios is reporting the President is soon to decide on a major escalation, a major assault on parts of Iran. He's threatening bridges and power plants. Is this about to intensify?

[Senator Ted Budd]

Well, the goal is to open the strait and make sure that we keep our war fighters safe and eventually bring them home. We don't want a forever war. So the President wants all options on the table. He wants the best military advice. He wants to be decisive. He's tired of playing games. Look, he was serious about negotiations and the ceasefire to use for negotiations to end this diplomatically. But the Iranians were only using it to delay and defuse, delay things into perpetuity, which is part of their strategy. They know that they can't win, but they can succeed through delay and then operating in a diffused manner through proxies, through the Yemenis and the Houthis, or through Hamas, or through Hezbollah. So all of those are Iranian proxies. So if you cut off the head of the snake, you fix so many problems. But the President wants to end this decisively and get our troops home.

[Bloomberg Host (possibly Joe Matthew or another anchor)]

Well, and as you say, Senator, you don't want to see another forever war. So how long should the President have to try to bring this to an end? You and your colleagues voted down another War powers resolution in the Senate today, even though one did pass the House this morning. Will there come a time, ever, that you would cast a vote on a war powers measure? What would be the line for you?

[Senator Ted Budd]

Well, the challenge with the War Powers resolution, while it may sound great on its face, and we certainly need to have those constitutional debates, the President needs every option at his disposal, especially when he's navigating very complex waters in the Middle East. Any Time that you pass a war powers resolution, as we've seen pop through the House or the Senate at any particular time in the last several weeks, it weakens the president's hand, which is really putting our war fighters in danger. We want to end this quickly. And so we need to present a unified strength or units, unified front and full strength. And that way we can win more quickly. Anytime they see us fractured internally, our opponents will use that to their advantage, which hurts our men and women in uniform.

[Bloomberg Host]

You know, we're looking out a potential double choke point. And you don't need me to tell you, as Houthi rebels attack a couple of ships headed for the Red Sea, do people in North Carolina need to brace for higher prices? We're looking at triple digit oil today and gas is well above $4 on a national average. If this is another choke point, Senator, what does it mean for consumers?

[Senator Ted Budd]

Well, the goal is to get energy prices down. They were trending down under President Trump because we've basically been pro energy. That's what puts us at this position. When you look under Joe Biden in 2022, when Russia invaded Ukraine, you saw these prices skyrocket, well over $100 a barrel gas, you know, $5 a gallon in some parts of the country. And that's because they were anti energy. We're having a significant conflict in the Middle east and yet we're $354 and we want to get it back closer in that $2, $3 range. But we could certainly do that because we can be, we've been pro energy. If we allow the broader administration policies to take place, those choke points in the Middle east actually matter less. So we need to make sure that we're pro energy in for domestic production here in the US and that actually makes us safer and less dependent on these Middle Eastern choke points. But I will say there are so many allies that we have over there. We have troops in the region even before this conflict. So we need to make sure that we defend them and we don't let the chief state sponsor of terror metastasize and actually get a toehold again. We need to end this and we need to be do it decisively and we need to do it quickly and bring our troops home safely.

[Bloomberg Host (possibly Joe Matthew or another anchor)]

All right, we will leave it on that note. Senator, thank you so much for joining us. The Republican representing North Carolina in the United States Senate, Ted Budd. Thank you for being here on Bloomberg TV and radio. And as we reflect on our conversation with the senator and on congressional matters, we Turn now to our political panel as Jeannie Shan Zaino, Bloomberg Politics contributor, Democratic analyst and democracy visiting fellow at Harvard Kennedy School's Ashe center, joins us alongside John Seaton today, a Republican strategist and founder and CEO of Echo Canyon Consulting. Welcome to you both. John, we were just hearing from the senator there that the Senate is likely going to try to do things in a different order than maybe the House or the president would desire. We may see some changes to this budget reconciliation effort and it will be under the leadership of the majority leader, John Thune, who the White House press secretary Caroline Levitt said today Trump's patience with Thune is, quote, running out. To which John Thune responded to reporters on Capitol Hill saying, well, maybe she or somebody else ought to get on the phone and get the votes. Are we about to see a real breakdown here between the White House and the Senate leadership?

[Joe Matthew]

I'm not so sure. I do think that there's, you know, a little bit of saber rattling from time to time. But from what I understand, Leader Thune and the White House have a very good relationship. I mean, look, at the end of the day, you've got to be able to count to 50 and sometimes 60 when you're trying to get things through the Senate. And as much as the leader or the White House might want to get something, something passed, you're still kind of at the mercy of each individual senator, a lot of whom are very, have very strong opinions, have very strong beliefs on how things need to get done. Some of them are in for very tough reelection fights. And so, yeah, I do think that there may be a little bit of saber rattling. I don't, I don't think that there's going to be a full on collapse of relations there. I think that the relations still pretty good.

[Bloomberg Host]

Gina, you heard Ted Budd talk about the NDAA pointing directly to Democrats for playing politics with what we always refer to as must pass legislation, the last bastion of bipartisan agreement. How would you respond to him?

[Jeannie Shan Zaino]

Yeah, I think the response is pretty clear. It's that the Republicans have been weaponizing this bill. It's a hyper partisan bill. There is one poison pill amendments in it. There's culture war agenda items in it. They haven't even addressed the issue of this unauthorized war. And so this is where Democrats are ready for this fight. They want to take this fight on. And I would just note the interview you guys did yesterday with Rand Paul. I mean they are talking about a 1.5. And I understand NDAA is not appropriation but they're talking $1.5 trillion for defense that is essentially going to support a war that is unauthorized and widely unpopular without any offsets at a time when our budget is closing in, our deficit rather is closing in on $40 trillion. You add that to things about gender, gender care, the Save America Voting act, all of the other things that they have coupled together here. And they are the ones that playing politics with this. And that's why Democrats, unlike in the past, feel confident in saying that this is not the year. This is not your grandfather's NDA. Joe. I guess that's how I would put it. It's a hyper partisan bill coming from the Republicans.

[Bloomberg Host (possibly Joe Matthew or another anchor)]

Well, and obviously coming during active wartime. John, as we mentioned with the Senator, the Senate did not advance a war powers resolution today. The House did this morning. But these are all pre August recess votes. And I wonder once we're back from recess, it's past Labor Day. The midterms are literally around the corner. If you think this is going to be a different story.

[Joe Matthew]

I think an NDAA is going to pass. It might be slimmed down somewhat or a lot. And whatever your opinion of the conflict in Iran is right now, our warfighters do need to get the resources that they need to finish the job. So I do think that something will pass. And whether it's exactly what the White House wants or what House leadership wants remains to be seen. In fact, I would go so far as to say it probably will not be exactly what they want. That's, that's part of governing. But I do think an NDAA has to pass and will pass.

[Bloomberg Host]

How about war powers? John, just to pick up on what Haley was referring to, we get past primary season. Is it open season?

[Joe Matthew]

I think these are largely symbolic votes. I don't think that they're going to make much of a difference. I do think that you saw even though it did pass the House very narrowly, Republicans are largely unified and continue to support the president, continue to support the effort in Iran. I expect the same on the Senate side as well. So I don't know that a War Powers act will come up for a vote. And if it does, I'm not sure how much, you know, teeth it really has.

[Jeannie Shan Zaino]

All right.

[Bloomberg Host]

We've got a lot more where this came from with our political panel. John Seaton and Jeannie Shan Zaino will be back as we also spend some time ahead with Brian Style, the congressman from Wisconsin who authored the stock trading ban. And we'll be speaking as well with Senator Todd Young, the Republican from Indiana, continuing our conversation today with lawmakers after a flurry of bills are passed in the House of Representatives. Alongside Kailey Leinz, I'm Joe Matthew. Thanks for being with us. On Balance OF Power it's the Thursday edition as we make our way through the trading session. We'll get an update as well from Charlie Pellet. The news from Iran sending oil prices back to triple digits and stocks sharply lower. This is Bloomberg. Stay with us. On Balance of Power. We'll have much more coming up after this.

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[Bloomberg Host]

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[Congressman Brian Stile]

Complete disclosures [e-mail] disclosures.

[Bloomberg Host]

You're listening to the Bloomberg Balance of Power podcast. Catch us Live weekdays at noon and 5pm Eastern on Apple CarPlay and Android

[Jeannie Shan Zaino]

Auto with the Bloomberg Business app.

[Bloomberg Host]

You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg 11:30. We have been talking about some of the legislation that actually managed to pass the House of Representatives and some pretty big bills, including a stock trading ban that we haven't had a chance to invest ourselves in much this hour, but one that is extremely important to our audience. Now, House lawmakers, for the most part are leaving town and leaving, as we just discussed with Congressman Ted Budd, a boatload of legislation in the upper chamber. One of them includes a ban on lawmakers buying stocks, along with the continuing resolution we saw passed this week and the supplemental funding bill that will become potentially law through the form of reconciliation. But we talked about the stock trading ban, something that has been debated and considered a High point of controversy in the House, not for months, but for years with Congressman Chip Roy, the Republican from Texas had a competing bill that actually would have required members to divest their holdings as they joined the ranks of the House. Here's what he told us. If you have insider trading, you can go get convicted of that.

[Jeannie Shan Zaino]

Right now.

[Bloomberg Host]

It's about trust. It's about believing that your members of Congress are actually making decisions in their committees and on the floor that are in their interest, the people's interest, not the interests of their financial interests. You've got people who believe they've got the right to do it. Right as a member, you know, as a citizen. They have the right to trade stocks that we can't limit that. I disagree. It is a privilege to serve in the United States Congress. Well, they're not going to be able to trade stocks or it seems, buy new ones based on the law. That or the bill, I should say, that just passed. We'll see if it becomes a law as we spend time with its authority. A familiar voice on this program, Congressman Brian Stile, the Republican from Wisconsin who chairs the House Administration Committee, joins us now. Mr. Chairman, it's great to see you. Congratulations on the bill passing the House of Representatives. What becomes of it now?

[Congressman Brian Stile]

Thanks for having me back on, Joe. Excited to see the Stop Insider Trading act passed the House yesterday with strong bipartisan support. We now look to our colleagues in the United States Senate. I've had a lot of good conversations with folks on that side of the Capitol, and I think there's actually real energy to get this done. The bill hits the target. It prevents members of Congress from buying and selling individual companies shares of stock. The bill has real teeth. It's common sense, it's practical, and it works. I'd love to see the Senate take this up and move it. The American people understand the importance of this legislation, and I think there's a real chance, despite the fact that the Senate's got a lot on their plate, that this ultimately gets across the line.

[Bloomberg Host (possibly Joe Matthew or another anchor)]

Well, and if it does get across the line, should this effort end here, Congressman? Is just banning the buying and selling of individual stocks while in office enough, or does this need to go a step further in future legislation to include divestitures like your colleague Chips Roy Bill, or to include other branches of government like, say, the White House and the president?

[Congressman Brian Stile]

Washington often makes incremental progress, but I think this is a big step forward. Yes, I do agree that there are additional reforms that we can make. In particular, not just as relates to Congress, but executive branch employees in the judiciary as well, things that we're looking at. But we have a time and a moment right now to begin making progress, the progress the House made yesterday. The Senate should be able to pick this up and move it across and then let's go back and continue to make progress on the reforms I think are needed to clean up Washington.

[Bloomberg Host]

Interesting. Congressman, the Clarity Acts. We'd like to hear more from you on the future of crypto here, because the narrative this morning is that this bill could be dead based on not only disagreement over the ethics language, but now there's renewed concern over what we thought was an agreement on stablecoin yield. Few people know this matter better than you. Is Clarity in risk of dying?

[Congressman Brian Stile]

Sometimes it's the darkest before the dawn. And that's my hope as it relates to market structure, legislation that the Senate has been struggling with for over a year. The House passed this bill now last last July. Now is the time for the Senate to complete the job. I'm hopeful that a resolution is struck. The Democrats in the Senate understand the need to put regulatory clarity in this space. It's important that the United States is leading that these technologies are not being developed offshore in locations like China, but also that there are appropriate consumer protections. As the House passed Clarity bill has and so the right now we're watching how the sausage gets made a little bit. There's frustrations in the Senate. They're not able to finalize the agreement. My hope is that now that there's doc there's actual text on paper released on the Senate side, the final negotiations will come. We'll actually get this done before the Senate leaves for the summer.

[Bloomberg Host (possibly Joe Matthew or another anchor)]

Well, and on the ethics provision specifically, which sunset on inauguration day of the next president don't include all family members of elected officials and are enforced by the doj. I wonder if you really think that has teeth, Congressman, if that raises something that the president is willing to sign off on because it may not really affect him greatly.

[Congressman Brian Stile]

Well, maybe two pieces of this one. I think that is the opening salvo over on the Senate side. I would expect that there'd be adjustments and reforms to that language before a final deal is struck. Again, that's this final negotiation that's taking place. And to the folks that think we need more regulation in this space on the ethics side, that is in many ways the point of Clarity is to provide a regulatory framework so that bad actors can be held accountable. The good actors in the broader crypto space also want to remove the bad actors. This is our real opportunity to clean up what I view as the mess that was created in large part by Gary Gensler and the Biden administration for failing to provide a functional regulatory framework in the digital asset space.

[Bloomberg Host (possibly Joe Matthew or another anchor)]

All right, Congressman, thank you so much for joining us. And congratulations again on your bill passing yesterday. We'll see what becomes of it in the Senate. Republican Congressman Brian Style of Wisconsin here with us on Bloomberg TV and Radio. Now, as we shift our focus from domestic to foreign affairs, we of course have a fresh threat from President Trump against Iran today, threatening to hold Iran accountable for the action of Houthi rebels after the Houthis said that they targeted two Saudi ships in the Red Sea, igniting concern around a two choke point situation for global energy markets and sending Brent crude back above $100 a barrel today. So we turn for more insight to Mona Yakubian now who is director and senior adviser of the Middle East Program at the center for Strategic and International Studies. Mona, when we consider and welcome back to Balance of Power, the president continually escalating his rhetoric and threatening to escalate attacks in tandem, is Iran likely to respond or are they willing to call the bluff?

[Mona Yakubian]

I think Iran is likely to respond with escalation of its own. We don't see any signs that Iran is relenting in the face of increased US Military pressure. Quite the contrary. You note the action by the Houthis throwing into peril now the choke point at the Bab El Mandeb. We're seeing Iran also hit back with strikes. There's no indication at this point that Iran is going to back down.

[Bloomberg Host]

So is this now a two front war?

[Mona Yakubian]

Well, it already is a two front war if we think about Lebanon. But I think we could say, Joe, this is absolutely an expanding war. And I fear that we are really on the verge of an all out confrontation once again that encompasses the entirety of the Middle East. But that also has enormous implications for the global economy. Again, given this potential for a double choke point blockage, which would have terrible repercussions for the global economy,

[Bloomberg Host (possibly Joe Matthew or another anchor)]

how would an all out confrontation look different in July compared to what it looked like in March? Mona, I just, I just wonder what realistically you think could be change could be more dramatic than when we saw the first round of Operation Epic Fury.

[Mona Yakubian]

You're absolutely right. There is no question. I think a couple things are different, though. We now, as I said before, we now have the Houthis engaged, which was not the case in the earlier iteration of this conflict. We also see the Iranians striking much more intently and intensively on US military targets. Note of course the tragic loss of force service members over the weekend. And we're also, I think seeing Iran again return to hitting critical infrastructure and the US also hitting critical infrastructure. There is a concern, I don't know that it's going to happen, but there is a concern that the US could even be preparing for some kind of ground incursion. So all of those elements would differentiate what we might see in the coming days from what's already happened with that

[Bloomberg Host]

potential for a ground incursion that you mentioned. Mona, is that why we saw a B1 bomber reintroduced? least one of them, long range bomber that can carry dozens of cruise missiles, £2,000 bombs. This is the first time that the bomber was used in this latest series of attacks. We're clearly preparing the ground for something here, right?

[Mona Yakubian]

Well I think the 2000 pound bombs, etc. Suggest an intensified air which of course was the case early on. I think, Joe, what's more important to watch is where the US Is striking. So there's reports of the US striking along the Iran Iraq border for an example, and that is raising questions as to whether the US might be making preparation to insert special forces somewhere in Iran. Again, hard to know. And, and I'm wary quite frankly of speculating too much because we simply don't have that information.

[Bloomberg Host (possibly Joe Matthew or another anchor)]

Mona, I'd like to ask you as well about the civil nuclear deal that was signed between the US And Saudi Arabia yesterday, but which President Trump now suggests today is actually going to be contingent on Saudi Arabia joining the Abraham Accords. He said it will, it will be approved but is subject to that Abraham Accords expansion. Does that mean all of this is likely to happen?

[Mona Yakubian]

I think the President's latest statement adding that condition throws the deal into doubt. The Saudis have been very clear that they are not ready to normalize ties with Israel. They want to see significant progress made toward Palestinian state. And so they are saying the deal has been signed already and that wasn't one of the conditions. And so I think, you know, at a minimum we could say this deal, which has caused quite a lot of consternation I might add, for those that are concerned about nuclear non proliferation, I think we could say that at this point the deal has really been thrown into question as to its actual status and what happens.

[Bloomberg Host]

Mona, thank you. It's great to have you back. Mona Yakubian Director, Senior Advisor Middle East Program at the center for Strategic and International Studies Stay with us. On balance of power. We'll have much more coming up after this.

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[Jeannie Shan Zaino]

Auto with the Bloomberg Business app.

[Bloomberg Host]

You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg 11:30 Boy, Alphabet really changed everyone's mood, huh? I thought this was going to be the report that brought us back to optimism when it comes to AI, but the hyperscalers are falling hard. There is an interesting reciprocal though, as AI infrastructure names seem to be doing well. Right? Because Apple spending too much. That money's got to go somewhere. We'll be tracking the markets throughout the day here as we keep our eyes on something really important that happened this week. And there is a political side to all of this that we're going to get to, but I'm hearing words like watershed moment, inflection point, unprecedented. The hacking I'm talking about of Hugging Face. You've seen the story by now and we talked about it here on the program. This is ChatGPT 5.6, which you may or may not be using. I'm guessing not. This is the new fancy one until the next one comes out. Its models were asked this is a test that went wrong. They broke out of the sandbox, as you keep hearing. What does any of this mean? They were testing this model to solve a hacking challenge during pre deployment At Hugging Face, the models decided on their own to break out of the so called sandbox, this walled environment they're being tested in, try to figure it out on their own. They figured Hugging Face might have the answers. They used stolen credentials to break into this thing without anybody telling it to. So that freaked out a lot of people. This is the kind of stuff that the CEO of Anthropic likes to talk about, right? Dario Amade. And in fact, the head of Anthropic's Frontier Red team, which sounds scary. Logan Graham said he told his team to, quote, remember this moment as the first true AI safety incident. Little less extreme. The boss at Hugging Face, the CEO called it an attack unlike anything we've seen before. So what's going on here? The White House is supposed to be testing these models before they're out in the general public. Right. We've talked a lot about the posture that the administration has taken here. And there's a new AI protection bill that Ted Lou's got up on the Capitol right now. They just can't seem to get anything off the launchpad when it comes to regulations here in Washington. Should this be scary? Should this be exciting? Or it's just, just another stop on the road to the next deep seek moment? I don't even know if I have the right questions, but I know someone who has the answers. And I'm really excited to say that Miriam Vogel is back with us. I told you she was coming in today. An important voice in all of this and I think we can characterize her as an optimist, but also helps to reset our clock when the narrative gets to be a little bit too dark around an emerging revolutionary technology. She's the president and CEO of Equal AI and first joined us to talk about her book, Governing the Machine, how to Navigate the Risks of AI and Unlock Its True Potential. They're also out with a new white paper that we're going to talk about on the challenges that companies are facing in adopting AI. It's great to have you back with us in studio. Welcome back to Bloomberg.

[Miriam Vogel]

Thanks so much for having me.

[Bloomberg Host]

I don't know if I even described this properly because even I don't claim to understand what happened here. The fact is though, you've got models who are acting on their own without prompts, apparently. And breaking out of the sandbox. Is this in fact a watershed moment?

[Miriam Vogel]

This is a wake up call. I would say two takeaways we all should think about here. First of all, we should not be surprised. We've been told for years that an algorithm will do exactly what it's told to do. There's a pleaser issue. It will not question or judge. It doesn't have judgment, it doesn't have context. It will achieve the end goals that it is mandated to do.

[Bloomberg Host]

It's a pleaser issue because it's been told to satisfy whoever's in charge of

[Miriam Vogel]

this model at all costs.

[Senator Ted Budd]

Okay.

[Miriam Vogel]

And so what we need to do, the second point, is urgently act to put in guardrails. What are guardrails? What is governance? It's adding the judgment, the context, the end goal of human safety as one of the priorities that needs to be taken into account when it achieves this end goal, whatever that end goal is in any algorithm them ever.

[Senator Ted Budd]

Wow.

[Bloomberg Host]

All right. So does a wake up call present something we should be scared of or an opportunity to fix a vulnerability before it's unleashed on?

[Miriam Vogel]

That's a great question, Joe. This is an opportunity. As you mentioned, we have this white paper just released. It's based on a summit we had very recently with leading deployers of what's called agentic AI. And that's what moment we're in now. This is not a future sci fi scenario. Right now 50% of leading companies are using agentic AI. And what does that mean? They are AI systems that operate with to achieve a task. So as opposed to just summarizing an email or a report, this has a specific job and it will operate across a system. It will achieve an end goal of planning a trip of operationalizing and increasing efficiency in a work workflow. It will take multiple steps with limited to no human involvement. And so that means we have to be especially careful. And what we found at our summit is there's an urgency to make sure there's clarity on what is governance that we expect of all AI systems. Particularly now as we're going into agentic AI and we're increasingly removing humans from the equation, we need to understand exactly what we're asking these AI systems to do and make sure it has the context to understand to prioritize human and society in each of these goals.

[Bloomberg Host]

This is lofty stuff. When you say governance, is this a self policing situation right now or are you suggesting the government needs to create regulation?

[Miriam Vogel]

I think governance needs to be a multifaceted approach. It needs to be something, I think of it as an umbrella or a wheel where there are multiple spokes, there's multiple pieces of it. Government has a role for sure, but a lot of what happens when we're talking about AI system has to happen inside the organization. You can't regulate your way out of this. Now, government and other organizations can be helpful in clarifying the end goals because right now I have the privilege of working with organizations that are all prioritizing AI governance. They want to make sure that their outputs are safe and benefit society. But they are figuring out on their own in silos what those best practices are. And that's not where we want to be. We have this summit to align on the best practices so they can learn from one another. But we want to make sure everybody understands what these best practices are.

[Bloomberg Host]

So these hundred companies you put in a room to create this white paper are already using AI, Want to be using AI or a combination.

[Miriam Vogel]

They're all deep in agenda.

[Bloomberg Host (possibly Joe Matthew or another anchor)]

They're deep.

[Bloomberg Host]

All right, okay. So they have embraced this as something that will make them more productive, more efficient. How many people were afraid of what could happen versus excited for what could happen?

[Miriam Vogel]

It's a great question. I would say people are doing this work because they are hopeful at what the outcomes will be, but they are all very intentional in needing to put in the safeguards urgently, immediately that they put in on their own system across society. So a lot of our work was what does a company need to have in place today to make sure they are clear on what their outputs are, to make sure they're not creating harm and risks. But there's also a societal piece. We need to make sure that there's alignment. And the place that we see that the most is in this distrust that the general public in the US feels towards AI. It is because we don't have governance in place across the society. We don't have economic expectations of what should I be doing, what should it not be doing and how do I use it safely.

[Bloomberg Host]

Things have been getting pretty dark recently. Data center moratorium in New York. People are talking about their bills going up. Republicans, in some cases the populist movement on both sides of the aisle are kind of lining up against this. It's even getting a thumbs down right now on Wall Street. How did we get to this point? Is this sort of an equal opposite reaction to the euphoria we feeling around in videos? Visit Jensen Huang speech here in Washington a year ago.

[Miriam Vogel]

Again, I think this is to be expected. If you told people in the early 1800s to get in an elevator without ensuring that they would be safe when they got to the top floor, they would not put themselves in it. They wouldn't sit in an airplane, they wouldn't entrust their children in a car if they did not know There were safety protocols that the brakes would be working, that there's an odometer so you know how fast you're going and so that you can speed up. Without these governance structures in place, people don't have reason to trust systems. So the more we can be talking about what smart companies are doing to build this trust, deserve this trust, the better off we all are.

[Bloomberg Host]

I learned about the Tahiti problem from your study. Here. Participants offered the illustration of hundreds of agents simultaneously calling a small resort in Tahiti to make reservations which could flood the resort's human paced systems to the point of failure. Does everyone have the Tahiti problem in this collection of companies you talked to? And is this the reason why they adopted AI to begin with?

[Miriam Vogel]

It's such a good question. What is the end goal? How does this play out when we have the machines versus the human systems we have in place? We came across many challenges. We're going to confront one. As you said, the Tahiti problem, a huge problem, is data. You know, if Agentix systems are operating, what are they operating on the data that they're training and operating off of? So we need to make sure that there's context, that it's not the slop that is out there, that we have privacy protections in place. We talked about really interesting questions like consent. You know, when you're authorizing this agent to take actions on your behalf, how do we maintain what that consent you gave? As the use changes, as the context change, it's going to be operating often with other agents across a system of operations. So you want to make sure that it's clear on what you've given authority for it to do. So visibility into how you're using AI is an absolute must in governance. Authority, accountability. Who is accountable at the end of the day in the C suite for these operations and across the line to make sure that these tests that we've just seen that have gone off the guardrails are certain that there's authority, there's accountability in place?

[Bloomberg Host]

Yeah, someday I want to do an hour with you in our 30 seconds remaining here. Remember when you talked about the J space last time you came on? Are we at the point now where we actually do not fully understand the technology we made?

[Miriam Vogel]

There are many questions to be sure and the developers themselves will tell you there are open questions. What we do know is that the best practices in AI governance, the five best practices that we talked about seven years ago, remain the best practices today.

[Bloomberg Host]

You can't hear the music's playing. I'm going to get the hook. I'm so glad you came by. I told you you would get something out of this. Miriam vogel=AI thank you as always. This is Bloomberg. Thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already at Apple, Spotify or wherever you get your podcast. And you can find us live every weekday from Washington D.C. at noontime [e-mail]

[Mona Yakubian]

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[Bloomberg Host (possibly Joe Matthew or another anchor)]

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the Real Report with Tony Ayo and Uncle Murder. You ever notice how everything keeps going up?

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