Tyler Kendall (2:37)

So we had heard earlier from the Denmark prime minister and defense minister saying that the country is ready to bolster its own defense in the region in what was apparently a bid to try to satisfy some of President Trump's concerns. Because it probably is worth pointing out that on balance of power. Last week we spoke to so many experts who actually did tell us that the US Is a little bit behind the curve when it comes to the Arctic in comparison into Russia and China. But many of them are saying that there are other ways to go about this besides for threatening the use of military force. So the idea that Denmark could expand its own defense resources doesn't seem to be enough for the president. So now we're talking about some other potential options that could be on the table. There's different reporting, including from Politico, including from our own analysts at Bloomberg Economics, that say that this could range perhaps an economic cooperation pact where the US could have expanded access to mining critical mineral. We know that there are some large oil deposits in Greenland that the US May be interested in, or it could be perhaps expanding US Assets in the region, if that's something that President Trump wants to pursue. But what I find most fascinating about our reporting today is this meeting is happening between the foreign ministers of Denmark, of Greenland, Vice President J.D. vance and Secretary of State Marco Rubio are reporting indicates that Vance's presence in this meeting was actually alarming to Denmark because according to people familiar Marco Rubio behind the scenes has been a little bit more conciliatory to concerns from our European allies. But Denmark views J.D. vance as a more unpredictable character in all of this.

Joe Matthew (4:20)

Really something. And following his visit to Greenland, he had some pretty tough remarks on that visit many months ago. It's interesting here there may be an answer on Capitol Hill with the presentation of a bipartisan bill in the Senate designed to keep the American military from occup NATO territories. To think that that's even being written in legislative form is remarkable. Tyler, I want to ask you before we get to Congresswoman Haley Stevens about Iran as well. The president's been on truth. Social help is on its way in all caps, speaking to antigovernment protesters. And we know he's being briefed today on military options for Iran. Are we really seriously considering strikes?

Tyler Kendall (5:01)

Well, this comes after we had reported that the US Was moving military staff out of the region, officials telling Bloomberg on Wednesday that there had been some redeployment of personnel in Qatar and around other American bases in the region. Now, we had reported over the weekend that the president was briefed on a range of potential military strikes and a senior official said that he was seriously considering authorizing a military attack. We'll have to see where this ultimately goes. There's a few options on the table that might not be lethal force. We also know that he was briefed on options for a cyber attack. A cyber attack. Then earlier this week, the White House press secretary, Caroline Levitt, did say diplomacy was still on the table, that there could be these talks. But of course, President Trump posting again saying that he was calling off all meetings between the US And Iran, which is now leading to these big questions about what's going to happen next.

Joe Matthew (5:54)

Remarkable. Once again, a remarkable moment. We're in. Tyler, thank you so much for putting that together so effectively for us. Bloomberg Washington correspondent Tyler Kendall with us live in Washington. As we add the voice now of Congresswoman Haley Stevens. The Democrat from Michigan is with us live from Capitol Hill. Also a Senate candidate and congresswoman. It's great to see you. I hope your year is starting off well. I have to ask you just to start about what we were just discussing here with regard to Greenland and Iran. There are war powers bills in both chambers. Do you support them? Do you worry about the president's designs on Greenland or a potential next round of strikes against Tehran?

Haley Stevens (6:33)

I do support war powers resolutions and Article 1 in the Constitution. I also support innocent people in Iran protesting for their freedom. We want to see Congress brought in to these discussions and any decisions that would get made, particularly given that there's a lot of volatility, from a NATO ally to Iran to other areas around the world. I sit on the Select Committee on Strategic Competition with the Chinese Communist Party as well. We know that China and Russia, they're watching. And our moves are going to have global ramifications.

Joe Matthew (7:22)

Yeah, I'm glad you mentioned China because I have yet to mention Venezuela. And there are a lot of folks who think that the president's actions in Venezuela are, in fact, a very productive bank shot against Beijing, the biggest buyer of Venezuelan oil. Does the US Intervention in Venezuela actually have an ancillary benefit when it comes to dealing with China?

Haley Stevens (7:46)

Well, we have to see how it plays out. Certainly, the administration has taken the steps to go it alone. They have been trying to bring in American energy companies, doesn't necessarily look like they have a deal. But at the end of the day, China that we're competing with, and we know this in Michigan very well, we want to have a strong industrial base. We want to have strong manufacturing. And all we've gotten from this administration is nine, ten straight months of declining manufacturing jobs and productivity.

Joe Matthew (8:25)

Well, speaking of manufacturing, the president of the United States was in your state yesterday. He swung through Detroit to make a speech on the economy which touched on some of the other issues that we're talking about as well, including the Fed chair. And then he went to tour a Ford plant. And I know that it's one that's close to your heart as not only someone who's been so deeply involved in the auto industry, having worked with the Obama administration and the Great Recession and representing an area teeming with auto workers. We saw the president talk about the auto industry and share some time with auto workers there. I can ask you about the one he flipped off a little bit later on, but I'm just curious when you consider the backdrop of tariffs and the state of our economy, how concerned you are about the auto sector right now, because we've actually been seeing some pretty great advances for these companies.

Haley Stevens (9:15)

Well, we're also seeing rollbacks on investment. There's been headline after headline that has revealed that the investments coming into our industrial base for manufacturing is being pulled back. Is someone who worked in the Treasury Department during the Great Recession on that auto rescue. I will tell you it's very eerily similar to the things I heard back then to today. People saying, oh, we made it through the Great Recession, we can make it through this time of uncertainty. And it's, it's one thing if a very, very few are seeing a bigger paycheck, but at the end of the day, it's our workers who are paying more. Erratic tariffs are attacks. There are tax on consumers, there are tax on small to mid sized manufacturers. We have this administration giving billions of dollars to Argentina when we should be helping these small to mid sized manufacturers and their workers, folks who I know very well who are paying a huge cost because of these tariffs because they're operating like a tax and they're not being implemented. Well, they haven't been, it's been erratic, it's been chaotic. We didn't know what happened. Way this administration was going to go day after day. And now the President yet again is taking a victory lap. And yeah, you know, he's given the middle finger to manufacturers and workers multiple times over and proof's in the pudding. We see it in the data.

Nora Melinda (10:44)

Joe.

Joe Matthew (10:45)

Well, it's not a coincidence that he went to your state to talk about the issue of affordability, Congresswoman. He of course won Michigan. And I'm wondering how you think this issue plays for voters in Michigan and an issue that he refers to at times as a Democratic hoax.

Haley Stevens (11:02)

Well, I'll tell you what. I'm offering real policy solutions for Michiganders each and every single day, for their pocketbooks and for their jobs. I've authored good legislation that says no tariffs on groceries because blanket tariffs on imported food is causing the cost of your grocery bill to go up. It is costing you real dollars. Same thing with a bill that I've authored to offer a real industrial policy solution for our dependency on China for critical minerals. I call this bill Unearth America's Future Act. Loan guarantees, tax credits, create jobs, lower cost. That's how we get things done. And that's real.

Joe Matthew (11:47)

How about capping credit card fees and interest rates? What did you think of that? Donald Trump on the phone with Elizabeth Warren this week, meeting somewhere in the middle, uncapping interest rates on credit cards. Is that something you'd support?

Haley Stevens (12:01)

Well, there's a lot of great Democratic ideas that we'd like to see this president support. First and foremost, extending the ACA subsidies and making them permanent so people can afford their health care. That is something that I hear from Michiganders around the clock. Credit card debt is very real. It has ballooned to 1.2, $1.3 trillion. That's because the grocery bill is going on credit cards. So let's talk about proven strategies to lower cost, create jobs, and grow our manufacturing economy. That's what I'm doing every single day for the people of Michigan.

Joe Matthew (12:35)

Just a minute left, Congresswoman, with all of that said, you're running for the Senate and there's an important bill in the Senate, the Moreno bill, that would extend those ACA subsidies for two years, but with some restrictions. That's different than the clean extension that passed the House. Is it something you would support?

Haley Stevens (12:53)

We need to see this legislation get passed and sign into law. The Senate should take up what we passed in the House. It was bipartisan. It was a step in the right direction. It was actually a very bipartisan bill. So we'll see what the Senate comes back with. But I want to give Michigander some relief. It's also why I'm fighting so hard for their Medicaid and Medicare. The certainty that folks need to just go about their their everyday lives. Michiganders know I'm always going to have their back when it comes to dealing with health care costs, their jobs, and our sound, good economic policy. I'm not going to be a rubber stamp for this administration like Mike Rogers. I'm going to be a fighter.

Joe Matthew (13:32)

Good to see you, Congresswoman. Let's do it in person next time. Thank you for coming back to see us here on Bloomberg TV and radio. The Democrat from Michigan and Senate candidate in the battleground state of Michigan. We assembled our political panel quickly for their thoughts on this. And we're going to talk to Republican Congressman Brian Stile coming up next this hour. Adam Hodge, Bloomberg Politics contributor, Democratic strategist managing partner at Bully Pulpit International, alongside Republican strategist Maura Gillespie, bluestack Strategy's founder. It's great having you both with us here. Maura, as a longtime creature of the House, I'm wondering your thoughts on what you just heard and whether, in fact, we should anticipate a deal to extend or revive Obamacare subsidies.

Maura Gillespie (14:16)

You know, I think you heard a lot of members, you know, who went home to their districts and really listened to their constituents and they recognize the pains that many Americans are feeling in terms of the word affordability. Right. You know, and so when it comes to health care costs, they have risen. And so they do need to address it. And I don't think that Republicans can stand by simply the idea that Obamacare isn't working. And while that may be true, it doesn't take away the pains that Americans are feeling in terms of cost. And so they do need to be showing a good faith effort to negotiate and to work with their colleagues across the aisle to get something done that is both a long term solution and a short term solution. So it's something that needs to be really focused on. And I don't think they can get away with simply ignoring it any longer. And so I think the congressman there is right to point that out.

Joe Matthew (15:07)

Is the momentum here for this, Adam Hodge, or is this a waste of time for lawmakers?

Adam Hodge (15:13)

I mean, Joe, we talked about this a little bit last week. I thought maybe you'd get 20 votes for the bill. We ended up with 17. That's stronger than I think people were honestly expecting. And it does give some momentum to prove that there is bipartisan support for, for a clean three year extension. Maybe we end up with a two year clean year extension. But I think the Republicans, if they're smart, wouldn't give Democrats another bite of the apple to put this over their head and keep beating this drum because it has been, no question, it has been incredibly effective as a tool for Democrats to paint the Republicans as not dealing with affordability issues. 1.4 million fewer people sign up for Obamacare in the last year. That's a real problem for the White House people have higher costs.

Joe Matthew (15:59)

A real number.

Adam Hodge (16:00)

That's a real number.

Joe Matthew (16:03)

All right. Our panel is going to stay with us. We're going to talk with Republican Congressman Brian Style of Wisconsin. And then we'll bring back Adam Hodge and Maura Gillespie as we try to figure the way forward here on subsidies and on a stock trading ban. We'll have that next right here on Bloomberg. Stay with us on Balance of Power. We'll have much more coming up after this. This.

Michael McDermott (16:25)

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Joe Matthew (17:13)

The potential for a new compromise stock trading ban for lawmakers on Capitol Hill. This is a big story for our audience and certainly for the lawmakers we talk to on a daily basis here on Balance of Power. Thank you for being with us on the Wednesday edition. It all comes together in the House Administration Committee. An important markup here as the committee considers this bill to bar lawmakers from trading stocks and putting it on a fast track after this was announced by the chairman of that committee, Brian Stile, the Republican from Wisconsin, joins us right now live from Capitol Hill. Mr. Chairman, it's great to see you back on Bloomberg TV and radio. This is an important moment here knowing that the the existing legislation, the stock act, is rarely enforced. This legislation you've brought forward has more teeth. It would, however, not require members to divest all of their holdings if they were elected and brought into Congress. Is that the biggest difference between these other bills?

Brian Stile (18:16)

There's a lot of proposals that have come forward to prevent members of Congress from profiting off of insider information. A lot of them have collected a lot of dust. The legislation that I introduced that we passed out of committee earlier today, we have commitments of from leadership that that's going to come to the House floor in the near future. What it does is it prevents members from profiting of insider information using key three key steps. 1. Members of Congress, after being elected won't be allowed to buy new individual shares of stock. An individual that comes in with shares in their portfolio, they may hold them, they may sell them, but if they sell them, they're required to provide 7 days advanced notice that prevents them from being able to profit off of insider information. It has real teeth associated with the bill.

Joe Matthew (19:01)

You've seen the reaction from some Democrats, including Alexandria Ocasio Cortez. She says the real bipartisan stock trading bans bill is already ready. Do not buy this scam bill being put forward by the wealthiest members of Congress. If Luna won't move the discharge petitions text referring to the separate piece of legislation, then we can start a clean one next week. She says the majority of members and Americans support a clean stock trading ban. We have the votes on it. Don't fold now. Congressman, how would you react to her?

Brian Stile (19:34)

Well, I think it's disappointing that some members of Congress are walking away at the final hour. That said, I think when we bring it to the House floor, we're going to see overwhelming support for this common sense piece of legislation. We have strong bipartisan support and support from members like Anna Paulina Luna, who's been a champion of this broader issue for a long time. This bill strikes the balance. I think it does two key and important things. One, it does prevent members from being able to profit off of insider information, but it also makes sure that individuals who've had successful private sector careers are still able to come to Congress. I think it's important that we have an array of members that come to Congress. But once they're here, I think the American people deserve to know their member of Congress is not day trading stocks. If you want to trade stocks, you go to Wall street. If you're coming to Washington. I think these are reasonable and appropriate and necessary restrictions to place upon members.

Joe Matthew (20:28)

And you think allowing members to keep their existing investments when they arrive in Congress does not bring an added risk or any preferential treatment in committee hearings and so forth?

Brian Stile (20:40)

Well, I think the key here is that we want to make sure individuals are still able to to come to Congress who've had successful private sector careers or maybe people just later in their life who've saved up for retirement and made a decision to invest their retirement funds in individual stocks. What we want to do is prevent them from trading to profit themselves, utilizing information that they gained when they came to Congress. The seven day advance notice does that. In many ways it mirrors what a lot of publicly traded companies have for their C suite executives. A10B51 plan. We did this and drafted this in a slight parallel to make sure that we're preventing even the appearance of impropriety by members once they arrive here. And then we put real teeth in the bill to enforce it.

Joe Matthew (21:28)

If this clears the committee, does it go to the floor?

Brian Stile (21:31)

Well, it cleared committee just a little bit ago, and we have commitments from Speaker Johnson and Leader Scalia that they're ready to move this to the floor quickly. I think as this builds momentum and comes to the floor in the weeks ahead, we're going to see more and more people coming on board supporting this legislation because it makes sense, it's common sense, and it actually has real substant teeth to enforce it.

Joe Matthew (21:55)

Congressman, I want to ask you, as a member of the Financial Services Committee as well, your thoughts on this investigation into Jay Powell. The market has given this a bit of a yawn so far, and it's unclear exactly where this is going. Do you worry that the chairman of the Fed is a criminal?

Brian Stile (22:13)

I don't have the confidential details of the investigation, but I can say two things. One, if anybody knows about lawfare, it's President Trump. And I think if he determines that somebody inside his administration is engaged in a form of lawfare, he's going to hold them accountable for that. I think the second point is that I can say for sure that in many ways this causes a distraction on our ability to reform the Fed. Chairman Powell was scheduled to come before the House Financial Services Committee to to face tough questions from both sides of the aisle. And I think that that missed opportunity now that this investigation is taking place is a missed opportunity for the American people. The sooner the investigation resolves, the sooner we can get on with the work of making real and substantive reforms of the Fed and asking the tough questions I think the American people deserve to know the answer to.

Joe Matthew (23:04)

I'm glad you mentioned that, Congressman. So, as you understand, there'll be no Humphrey Hawkins testimony this year.

Brian Stile (23:10)

That is my understanding is now that there is an open investigation at some level by the United States Department of Justice. And again, I don't have those confidential details, but as reported, that Chairman Powell would not be coming before committee to answer questions while an open criminal investigation is ongoing. Again, the sooner that is resolved, the sooner we can get on with the work of real and substantive oversight, because I do think there are real reforms that we could make at the Fed to the benefit of the American people.

Joe Matthew (23:40)

Congressman style, I've got to ask you in a remaining moment or two about crypto. We've talked about the Clarity act before and there's a big moment about to take place here in the Senate. But questions, I guess they're grinding through this 278 page market structure bill because there are concerns about returns, rewards, I guess I should call them when it comes to stablecoin, Some the old line banks have restrictions. They can't do what for instance, a coinbase could do in that realm. Will there be a deal on this or if the stablecoin component came out of this bill, would it still be able to pass?

Michael McDermott (24:16)

Pass?

Brian Stile (24:17)

Well, there's two key pieces of legislation as we as we all know. The stablecoin legislation was passed and signed into laws the Senate now is navigating. The House passed Clarity act, the market structure legislation. There are a handful of senators are trying to get a second bite at the apple to finalize the tax that was in stablecoin, which passed earlier. The oldest game in the book. My hope is as Senate banking goes to mark up tomorrow, that what we do is we focus on moving through clarity market structure which is so absolutely essential and hopefully any deal or resolution that is needed is completed because getting market structure across the line is so essential to make sure that digital asset companies are investing and innovating in the United States rather than abroad.

Joe Matthew (25:01)

Got it. Congressman, it's great to have you. Let's stay in touch on this. I know it's something you've been working on for a long time and it's very important to our viewers and listeners when we consider the impact on the crypto market. Congressman Brian Style, the chairman of the Administration Committee, Republican from Wisconsin, it's always great to see you. Let's assemble our panel for their take on this conversation, much as we did for Democrat Haley Stevens, Adam Hodges back, Bloomberg Politics contributor, our Democratic strategist, Bully Pulpit International, and Maura Gillespie, Republican strategist, Bluestack Strategies. Maura, what's your thought on this stock trading ban? We've been down this road a lot of times to the point of having one already on the books that many people call unenforceable. Will this one pass if it gets to the floor?

Maura Gillespie (25:46)

I think it seems pretty common sense for a policy position for members to message on now to actually follow through and do as the law says. That seems to be somehow a problem for some of them, which it shouldn't be. I think as a, as a voter, you don't want the members of Congress who are making policy decisions that affect the stock market to then benefit off of it. That just seems corrupt. And so to enforce a law that should be, again, as I said, a common sense piece of legislation certainly needs to have more teeth on it. And I'm hopeful that members who say that they support this will actually abide by it. I think that there was a message out there from Senator Mark Kelly who put it pretty succinctly by saying, you know, talk is essentially, I'm paraphrasing here, talk is pretty cheap. You could just go ahead and stop trading stocks now. You know, you don't need to have this law in place to be doing it because it's the right thing to do, essentially. So I hope members who are supporting this are also keeping that in mind.

Joe Matthew (26:42)

Yeah. God knows, self policing is another approach, Adam, or do you share concerns that many Democrats have that incoming lawmakers would not have to divest their holdings?

Adam Hodge (26:54)

Well, I think it's not just the divestment, but it's also a couple other issues. The fact that members of Congress's families aren't included in this seems like a pretty big loophole to me, but also it seems excessively focused on equities when we know members of Congress are privy to insider information across a whole range of financial instruments. Right. Not just equity. So that to me feels like a bit of a gap. But I think Moore was onto something here. There is a real distrust among the American people that members of Congress go to Washington and still fight for them. And this stock trading ban or members being able to trade on insider information just eats away at the credibility that members of Congress have. And it's why you've seen part of the Congress's popularity with the American people plummet. They think that you're out on the take, you're not really there to solve their problems. They're going to be less likely to have confidence in Congress's ability to solve the big things that actually affect their lives. So that's why I think not only from a messaging standpoint but from a actual policy standpoint, getting a real bill with with teeth and transparency is critical.

Joe Matthew (28:02)

Now we learned something pretty interesting in that conversation with Brian Style, confirming what we had heard earlier this morning from the chairman of financial services, French Hill. Jay Powell is expected now to not appear for his twice annual testimony on Capitol Hill. Maura Gillespie, the old Humphrey Hawkins testimony, if you're old enough to remember when we called it, that this is just one of the side effects, one of the elements of fallout from this investigation. We've got less than a minute. How important is it that this hearing will not occur?

Maura Gillespie (28:37)

Well, I think it just shows you the severity of the situation. And I'm curious to watch what happens with, you know, again, having an independent Federal Reserve is so critical to not only our economy, but how our dollar does. And I do think that not having this briefing that members more or less rely on to keep a sense of what's going on, it just shows you that this is a massive mistake by the Trump administration to target Jerome Powell like this.

Adam Hodge (29:02)

Massive.

Joe Matthew (29:02)

Interesting. I can't imagine Jay Powell is going to miss that testimony. Adam Hodge, Maura Gillespie, many thanks to both of you for walking us through both of these interviews with Brian Stile and Haley Stevens. We'll have much more ahead as we sit down with Doug Rediker to consider the economic fallout of all this on Bloomberg. Stay with us on Balance of Power. We'll have much more coming up after this.

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Joe Matthew (30:51)

The banks get earnings season rolling. Charlie, thank you for setting the table for our conversation with Nora Melinda, who joins us as well from world headquarters in New York Bloomberg Markets correspondent Nora this is an interesting inflection point with the markets. I know we're we're not having a lot of fun today, but pretty darn close to their highs of the session S&P 500 just a couple of days ago at an all time closing high. How much at risk for a pullback are we as we get further into earnings season?

Nora Melinda (31:20)

Well, it's interesting because this is the first back to back losses for 2026 if we think about what we're on track for as we head toward today's close. But a lot of the attention has been on the banking sector as we've been speaking about. Of course they tend to mark the start of earnings season. More broadly. We've been hearing from JP Morgan just yesterday we did get some results out of Wells Fargo, bank of America, Citigroup, all reporting and what we're really hearing is a lot of spending.

Tyler Kendall (31:46)

Really.

Nora Melinda (31:47)

That's what the focus has really been on about bank expenses. Of course we know we think about the fact that Wells Fargo it had a profit miss we also did have severance costs that drove up expenses, about $612 million on severance payments alone. And we're going to be hearing about more and more job cuts, not just exclusive to Wells Fargo. So you're really seeing that being the broad based focus that a lot of traders are dissecting right now in this moment. But if you kind of flashback about last year, in the year prior we did see double digit gains on the year for the KBW index, which of course tracks a lot of those banking stocks. So it's also you were seeing a bit of a rotation into that group. So the question is whether or not we're going to see some sort of pullback there as we head further into 2026.

Joe Matthew (32:30)

We get the big investment banks tomorrow, right? Goldman and Morgan Stanley, are those the exceptions here? Animal Spirits, an IPO pipeline that looks better than it has in a few years.

Nora Melinda (32:41)

Well, we're certainly going to be keeping an eye on the initial public offerings that come through this year. Of course, if you just flashback to 2021, we did see really, really robust market when we think about those that are debuting to the market. But there's going to be a lot of attention and focus as we really start to see some of those deals really trickling through, especially as we think about those names that are debuting to market. So there will certainly be a lot of attention as we continue to parse these big names that are coming out during this bank earnings season.

Joe Matthew (33:10)

All right, Nora, we thank you. We'll be thinking about this tomorrow when we get the next batch. Norma Linda live in New York here on Balance of Power. Thanks for spending part of your Wednesday with us. I'm Joe Matthew in Washington here on Bloomberg TV and Radio. As we consider the messaging from President Trump and we understand he could be speaking to reporters a short time from now, we may get a follow on what we heard yesterday in Detroit, the affordability speech when we heard not so much about how to get to prices, but more about the way the market works or shouldn't be working according to the president of the United States. Consider the CPI data we saw yesterday. He didn't talk as much about that. Listen to what he said.

Michael McDermott (33:51)

In the old days when you had good numbers, interest rates would go down. When you had good numbers, the market would go through the roof. That's the way we're going to make it again. That's the old fashioned way. That's the right way.

Joe Matthew (34:02)

Today, if you announce great numbers, they raise interest rates to try and kill it. So you can never really have the kind of rally you should have.

Michael McDermott (34:10)

What happens and what we want, we're going to have a lot of great months, a lot of great quarters. I want the market to go up.

Joe Matthew (34:19)

And I think most people would agree. We're going to try to get into the economic messaging and evolving message that's coming from the administration on this week that we learned of a criminal investigation into the Fed chair and of course saw those CPI numbers with a good friend of the program. Doug Rediker is back with us, founder, managing partner of International Capital Strategies and former member of the executive board at the IMF. Mr. Rediker, welcome back. It's great to see you.

Michael McDermott (34:43)

Thanks, Joe.

Joe Matthew (34:43)

I hope your year is starting out well. The president doesn't like the way it's going here for the markets, but I don't know how far you need to go back to a world in which a hot economy resulted in lower interest rates.

Michael McDermott (34:55)

I think what we saw President Trump say is I want growth. I don't believe that there's a connection between growth and interest rates and inflation that most economists would say is kind of a starting point.

Joe Matthew (35:07)

Yeah.

Michael McDermott (35:08)

So if you take away that limitation, then in the president's mind, lower interest rates, faster growth, good for everyone. Markets respond, everything fine. I'm not sure the world actually works that way. And I don't think the markets necessarily think that's how it all works. But that's, I think what the president's.

Joe Matthew (35:25)

Thesis is or ever have Stephen Myron today says we still should have 150 basis points and cuts this year. What would happen to the economy if the Fed actually did that? Would, would we have the 5% growth the president says? Would we have. Have 10% inflation?

Michael McDermott (35:42)

I mean, I think that's an unknowable question because I don't think the FOMC would ever go for that.

Joe Matthew (35:46)

Yes.

Michael McDermott (35:46)

Right. They are reasonable, seasoned people from right, left and center of the political spectrum, but they're all rational actors are not going to do something like that if you end up in a world in which we are dropping interest rates. The Fed is dropping interest rates 150 basis points. That presumably means we've got a big.

Joe Matthew (36:03)

Problem like deep recession.

Michael McDermott (36:04)

Right. Not that happy days are here again. Let's just add fuel to the fire because fire is good. Fire sometimes burn things down too.

Joe Matthew (36:12)

Well, that is very true. We can talk about creative destruction on another day. Doug Rediker. But tell me about this idea of Jay Powell facing a criminal investigation and no longer able to deliver his semiannual testimony before Congress. Who's that going to help?

Michael McDermott (36:27)

Yeah, that's a really interesting dynamic. I'm not sure that the U.S. attorney for the District of Columbia fully appreciated when she apparently moved ahead with this.

Joe Matthew (36:35)

How about it?

Michael McDermott (36:35)

I think the story that's really interesting is, number one, the Republican Democrat establishment and global support that Chairman Powell has received. I mean, it's been really quite extraordinary to see the almost universal support he has received. I don't know if the US Government decision, and I say it that way because we don't know who actually made the decision really contemplated this response, nor what your question suggests, which is now Chairman Powell says, I'm sorry, I can't comply with my Humphrey Hawkins requirements because I'm under investigation.

Joe Matthew (37:08)

Wow.

Michael McDermott (37:08)

So there are all of these, you know, if you don't have a formal process, whether it's for this decision or any other.

Joe Matthew (37:14)

Yeah.

Michael McDermott (37:14)

The unintended consequences start to mount up and this is just one of them. But it does mean you've got a Fed chair who's going to be less transparent, not more.

Joe Matthew (37:22)

Well, I know the President doesn't like him. He called him a jerk yesterday. He wants lower interest, interest rates. But a lot of people saw that CPI report yesterday and said, you know what, this proves that Jay Powell has been on the right side of history.

Michael McDermott (37:33)

Again, I want to say it's Jay Powell and the fomc because although the Chairman obviously has the power of the Chairmanship the committee itself, I mean, there have been one or two dissents, fair enough. But in general, this has been a committee in FOMC that has been broadly supportive of the direction Chairman Powell has been taking the Fed and for good reason. I think actually if you looked at this objectively, then you've got inflation that is not where they want it to be, but coming down, it's plateaued a bit. So they're a little bit concerned. Unemployment is a concern. It's a real concern, not based on interest rate policy, but based on the productivity gains and the unemployment concerns, largely out of AI and the other technological advancements. So the Fed is saying we don't know, but we have a dual mandate. We're going to take that seriously and we're going to act accordingly. And as you say, the figures we've seen so far have kind of supported the Fed's policies.

Joe Matthew (38:24)

Well, so we can add even more uncertainty. The reason we first called you a couple days ago to join us today is there was a decision day for the Supreme Court and it was expected that today might be decision day on the President's tariff regime. We still don't know what's going to happen to these so called reciprocal tariffs tariffs. The Fed doesn't either. So in the end still can't really draw a real conclusion. Right?

Michael McDermott (38:49)

Yeah. And I think that a lot of us think that the tariffs are illegal under ipa, but we don't know what the rationale the court will ultimately decide. So they could split the baby and you could have something that is on one side ruling that they're unconstitutional. But the refunds become a more tortured process, could take years. We just don't know a lot of what is and isn't going to be an ultimate decision by the court. And if we don't know it, I don't think the Fed has any greater insight than we all do. So you're right. This is a huge amount of money. It's a huge policy that impacts every aspect of the American economy. Fiscal, consumer spending, corporate earnings, and we just don't know.

Joe Matthew (39:30)

Well, there are a lot of lawyers who are about to make a lot of money. A thousand companies have preemptively sued the administration, famously Costco, but there are many others. And you wonder if there's no refund mechanism, if that will all just simply ride on the lawsuits from companies against the White House.

Michael McDermott (39:47)

Well, it's a thousand big importers, but there are probably millions of actual claims.

Joe Matthew (39:54)

Good Lord.

Michael McDermott (39:55)

And so what you've got are a number of the bigger importers, Costco and others that preemptively filed a claim to protect their rights under certain possible rulings. So there are certain scenarios where if you filed, you get the claim, but if you didn't, you didn't. So what are you going to do? You're going to hire a lawyer, you're going to file a claim. So it's very uncertain. But I want to just throw one other thing in on the tariffs, please, which is in the world of affordability, where the midterms were in January. But we're already talking about the midterms and affordability is the mantra that everybody's talking about. There is a scenario. I'm not saying this is what Trump is going to do, but there are some people who say if the tariffs are rolled back, then will he go for the more aggressive follow on statutory authorities to keep those tariffs on, or will he kick the can a bit? Because if you remove tariffs.

Joe Matthew (40:42)

Yes.

Michael McDermott (40:42)

You actually by definition lower prices.

Joe Matthew (40:45)

That's right.

Michael McDermott (40:46)

And so actually, would that not be in his political interest, even if he's tariffman?

Joe Matthew (40:51)

Yes.

Michael McDermott (40:51)

And I don't think think he's going to do this, but I'm throwing it out there that who knows, even if he goes section 122, which means he has 150 days, at the end of the 150 days, does he really continue down an aggressive tariff path or does he back off, bring some price pressures down and hope it helps the Republicans in the midterms?

Joe Matthew (41:09)

Well, this is. You're asking all the right questions here because there could be a very lengthy investigation for any number of justifications that might coincide after the midterms. Right. And prices are somehow lower between now and then. By the way, Producer James telling us Polymarket now has a 33% chance. SCOTUS rules in favor of President Trump on tariffs, up 10% this week. This idea that more time means favorable to Trump, you don't buy it?

Michael McDermott (41:33)

I don't and I don't because they are. The court is already ruling on a very expedited basis.

Joe Matthew (41:39)

Yeah.

Michael McDermott (41:39)

So we had always said it'll probably be January or February.

Joe Matthew (41:42)

Yep.

Michael McDermott (41:43)

Everybody got all excited and thought it was going to be the first week of January. Now the second week of January. We're sticking to where we were. It was going to always be probably early January or February if it rolls off. If it doesn't get decided by February, then I do think we can read into it that there is a more greater likelihood it will be a very complicated decision that doesn't necessarily go against the administration if they kick it to June. But I don't think that's going to be what happens.

Joe Matthew (42:09)

Boy, a lot of reporters are going to be chewing their fingernails between now and June. Take me to Davos next week. No, I mean, really, the president is going to try to deliver this domestic message on affordability before a skeptical crowd, I think we can admit at Davos, with tariffs and Greenland in the air, never mind Ukraine, how does this land?

Michael McDermott (42:30)

So I think the question will be, does he do what he did in Pennsylvania, which is announce a big speech on affordability and then give very little time to affordability and just go off on a riff? I don't know why he would pick the Davos forum to give a speech on American domestic affordability. So the question will be how much does he actually stick to the script? Or with the great and the good of the international community sitting in the audience, is he going to just feel compelled to deviate to Greenland, to NATO, to whatever strikes him, Which I think is probably more likely going to be the outcome. But I think if he sticks to the script, which would be rare for him, it's probably a missed opportunity because the audience won't be focused on it and it's the wrong audience to deliver that message anyway.

Joe Matthew (43:18)

Yes, that's right.

Michael McDermott (43:19)

So I'm not sure who's advising him on it, and I think he probably will deviate from it.

Joe Matthew (43:22)

Fascinating. We've only got 30 seconds left. Are there going to be deals made at Davos, or is this just a chance for us to all get together and talk about big ideas?

Michael McDermott (43:31)

I think this is going to be a rather dysfunctional Davos because there'll be people who say it's all about Trump, then there'll be people who say it's not all about Trump. Then there'll be people who know it's all about Trump, but will argue that it's not about Trump. And so it's really going to be all about Trump. But the last thing I'd say is whatever the conventional wisdom in Davos is, is almost always wrong.

Joe Matthew (43:52)

Fascinating. We got to do this way more often. The great Doug Rediker I'm delighted you came over. A Founder Managing Partner, IT International Capital Strategies. 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 podcasts. And you can find us live every weekday from Washington, D.C. at Noontime Eastern@Bloomberg.com.

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