[Music]
This is Balance of Power live from
Washington DC.
From Bloomberg's Washington DC studios
to our TV and radio audiences worldwide.
Welcome to Balance of Power. Alongside
Michael Shepard, I'm Tyler Kendall.
Tonight, the pressure campaign on the
Fed reaches a new level with the DOJ
today signaling plans to potentially
investigate Federal Reserve Governor
Lisa Cook following allegations of
wrongdoing as a top official encourages
her removal. The latest from the White
House up ahead.
Plus, the president now defending his
decision to send National Guard into
Washington DC, suggesting he may even
join troops in their patrolling of the
district as early as this evening. We'll
discuss that story and more when former
Vice President Mike Pence joins us here
in just moments.
Also tonight, Texas is now one step
closer to redrawing its congressional
maps, setting off a redistricting
standoff with blue states like
California as next year's midterms take
shape in real time.
And we're live from Jackson Hole, one
day before Jerome Pal takes the stage at
the annual economic symposium. We brief
you what to expect and have live
reaction to the developing news around
Fed Governor Lisa Cook when Chicago Fed
President Austin Goulby joins us up
ahead. But we begin tonight with new
developments in the pressure campaign on
the Fed. More specifically, Federal
Reserve Governor Lisa Cook. The
Department of Justice now potentially
investigating Cook following accusations
of mortgage fraud. A DOJ official
signaling earlier today that Jerome
Powell should fire Cook despite the Fed
governor denying any wrongdoing and
putting out a statement saying that she
will remain in office. Federal Housing
and Finance Agency director Bill Py
spoke to Bloomberg's Roma Bostic a short
time ago. Here was his reaction when
pressed on the White House's role in the
Cook investigation.
At the same time, Bill, we also have
raised concern about whether this might
be a weaponization of your office, a
weaponization of the White House. And I
am curious if there has been direct,
I don't know, guidance from the White
House to pursue this.
We discovered this within the confines
of our uh charter that Congress has
given us. We continue to receive tips
within the confines that Congress has
given us. Uh, as I said, people can go
and email us. They can send us tips. We
encourage that to happen. Uh, and that's
how this was sourced.
Joining us, joining us now with the
latest from the administration is
Bloomberg's Kate Sullivan, who joins us
live from the White House North Lawn.
Kate, thank you for joining us. Uh,
Kate, give us a sense of the latest. We
are also hearing from Bill Py that this
is part of a widening angle on this an
question of mortgage fraud.
That's right. Right. So, I think what
we're seeing is, you know, this is part
of a broader pressure campaign. So, the
DOJ, as you mentioned, today signaled
that it was going to start an
investigation into Lisa Cook and is also
urging Jerome Powell to remove her from
the uh board of governors. But
importantly, Powell does not actually
have the legal authority to do that. The
only person who does have that authority
is the president. And even if that were
to happen, there had to be cause. You
know, Trump has been, you know, has
discussed the possibility of firing Cook
as we've reported, but as of right now,
that is not his preference. He would
like to see her resign instead. You
know, this is all over allegations that
uh Cook falsified bank records and
property documents in order to get a
more favorable loan, so committing
mortgage fraud. And Cook, for her part,
says, you know, she's not going to be
bullied into stepping down and intends
to stay at the central bank.
And Kate, another story that we're
tracking here in Washington is that
President Trump says that he may join
police and military here in the
district. What should we be watching out
for later tonight as this unfolds?
That's right. So Trump called into a
radio show earlier today and said that
he wanted to join police officers,
members of the military as part of a
patrol the DC streets tonight. So we
actually just a few minutes ago minutes
ago got a few more details on this. You
know, right now the plan is for the
president to motorcade to a law
enforcement staging point in the city
and then address uh agents who are part
of this DC operation. You know, I think
the outing is clearly trying to
highlight Trump's efforts, you know, his
quite stunning federal takeover of the
DC police and and the deployment of the
National Guard to DC. Um and really as
he makes a very aggressive and big show
to crack down on crime in DC.
All right, Bloomberg's Kate Sullivan, we
thank you as always for your reporting.
Joining us now for reaction to that and
much more, I'm pleased to say, is the
former Vice President of the United
States, Mike Pence. Vice President
Pence, thank you so much for being here.
Thank you both for having me on.
I I want to start with one of these top
stories that we're following today,
which has to do with the pressure
campaign uh from the White House when it
comes to the Federal Reserve. And now
you told Bloomberg television last month
that the president ought not to be able
to express himself when it comes to the
Fed, but I want to get your thoughts on
these latest allegations against Fed
Governor Lisa Cook. What's your level of
concern now, if at all, when it comes to
central bank independence as we see the
scrutiny widen?
Well, well, certainly I think it's it'd
be appropriate for Lisa Cook to respond
to the allegations that have been made.
I know the president's called on her to
resign, but um she has a right to defend
herself. I do I did read today that some
uh that uh federal home loan has found
more than 22,000 Americans that have
filed mortgages claims and two
residences at the same time. Uh and so I
think she should answer for that, have a
chance to answer for it. But what what I
hope is that uh the effort to push out
another member of the Federal Reserve
isn't just simply part and parcel uh of
an effort to get Jerome Pal, who our
administration appointed uh as a Federal
Reserve chair to to lower interest rates
or otherwise take action that uh that
would not otherwise be justified. I I
understand the president's frustration
uh with Chairman Pal uh and he's
entitled to speak out about that, but my
my hope is that uh these latest
allegations are not simply part of that
overall pressure campaign and uh can be
can be given the and afforded the due
process that they deserve.
Mr. Vice President, we'd like to turn to
another topic we've been covering very
closely this week. Of course, that is
the question of the president's effort
to end the war in Ukraine through a
settlement between Vimir Zalinski, the
president of Ukraine, and his Russian
counterpart. You have met Vladimir Putin
before. Do you believe that President
Trump is perhaps putting too much trust
in the Russian leader and his
willingness to end the war?
Well, well, first I have met Vladimir
Putin
and it's clear to me that Putin doesn't
want peace. Putin wants Ukraine.
And uh I commend President Trump for
continuing to pursue peace uh in Ukraine
today. It's he's he is quite frankly
surrounded u by a lot of isolationist
voices in and outside the administration
that frankly would have uh would have
cut Ukraine off a long time ago. And so
I'm grateful the president has stayed
after it. I'm grateful that he renewed
military uh support and I commend him
for meeting with President Putin and
meeting with President Zilinsky and our
European allies. But Michael, I think
one thing is missing uh and that is I I
believe the time has come for the United
States Senate to enact those strong
secondary sanctions against Russia and
send them to the president's desk. I
believe that would strengthen uh the
president's hand. Uh with a waiver
authority that are that are that are
built into those sanctions, the
president could implement them or not
implement as he saw fit. But my deep
conviction uh having studied Vladimir
Putin and having spoken to him and told
him things he didn't want to hear. Um
Putin's not going to stop until he
stopped. So while while the president
continues on one hand on a vigorous
track of diplomacy,
I I think the time has come for the US
Senate to put on the president's desk
those strong secondary sanctions that'll
make it clear to Vladimir Putin uh and
to the Russians uh that unless they
choose the pathway of peace through
diplomacy uh we will continue to provide
military support and we will pass the
kind of secondary sanctions that will
literally break their economy. What
about so-called secondary tariffs
against China? Would you be in favor of
the administration moving towards that
against Beijing like we've seen them
take against India even if some of the
argument has been that they haven't done
that yet because they don't want to risk
the trade talks that are happening right
now with China? Well, I I have to tell
you that the secondary sanctions uh
against China and other countries that
are essentially fueling the Russian war
machine,
sanctions at 500% would have a
devastating effect on the Russian
economy. Now, I I have plenty of reasons
to support uh strong tariffs against
China. During our administration, we we
changed the national consensus on China.
We imposed $250 billion in tariffs and
we brought China to the negotiating
table for that phase one trade deal in
2020. But so I think I think we we have
to be really strong on China after years
of trade abuses. But otherwise I I
believe we ought to be pursuing free
trade with free nations. We ought not to
be we ought not to be cheering on $150
billion dollar in tariff revenue that's
ultimately paid by American consumers
and American businesses. but rather we
ought to be looking to lower tariffs
with free nations around the world even
while we stand firm with places like uh
China.
We do want to get to trade, but I have
one other for you when it comes to
Russia because a large part of the
discussion this week has been around
security guarantees, but we've had
reporting here at Bloomberg News that
there are doubts growing about what
those guarantees can look like because
Russia wants to have a say in what those
guarantees are going to be. What is
feasible in your view? What can the US
push for here when it comes to
guaranteeing Ukraine's future,
particularly when we know that this will
likely be led first by Europe, but then
with the United States backing?
Well, the president has taken NATO
membership off the table,
uh, which he he's entitled to do, but I
I I don't know why the United States has
given um the Russians veto authority
over who joins NATO. That's that's our
security alliance. But be that as it
may, I think the security um uh
commitments that we should make should
reflect NATO. They should be in a sense
uh uh like article 5 where the United
States provides whatever is appropriate,
not boots on the ground uh but uh the
kind of strategic support uh that's
necessary to ensure that once Vladimir
Putin is stopped that he doesn't go
forward at all. If if I can come back,
the reason I'm so confident and so
adamant about the Senate needing to move
these secondary sanctions is because it
was back in in 20 uh uh 19 that uh that
President Erdogan sent the tanks across
the border into Syria. Uh they were they
were raging down on top of our Kurdish
allies. Uh, and President Trump put me
on a plane on Air Force 2 and sent me to
Turkey to negotiate a ceasefire. And
what I would tell you and your viewers
is in that negotiation with President
Erdogan, what was persuasive to him was
the fact that President Trump had given
me a series of sanctions that would be
imposed on members of Erdogan's
government unless he agreed to a
ceasefire to allow us to evacuate our
allies from the border region. As you
remember, we we secured that ceasefire.
Uh our our Kurdish allies were able to
evacuate uh safely. And that's why I
really do believe that it would
strengthen President Trump's hand if
when the Senate comes back uh one of
their first acts would be to send those
those secondary sanctions, that tough
bill to the president's desk, let him
sign it, uh implement it at his choosing
with the waiver authority. But I really
do believe that at the end of the day,
we've got to we've got to have that that
hand reached out in diplomacy uh and
negotiations, but the other hand
reminding reminding Vladimir Putin and
the Russians that there will be severe
consequences as the president said there
would be um if the path of diplomacy
fails. Mr. Vice President, we wanted to
move on to uh domestic politics and
those questions and that includes
redistricting. It's been a big topic
this week, of course, with what's
happening in Texas and California. As a
former Indiana governor, would you
support that happening in the Hooser
State? And what will be the long-term
implications of this wave to redraw
congressional maps?
Well, Michael, as a former Indiana
governor, I'll support what the current
Indiana governor decides is appropriate
with our general assembly. you know, the
Constitution um gives the states the
authority to set the time, place, and
manner of elections, and I respect that.
I I also understand the the frustration
that um uh that the president and many
Republicans have felt. I mean, there
were states, the president and I, the
two times we ran together, won 35 40% of
the vote, and yet the congressional
delegation from that state is more like
20% or less. some states where we
enjoyed 35% support, there are no
Republicans in Congress. You know,
there's an old saying that that what you
sow you reap. Um, and the
heavy-handedness of many Democrat
legislators and governors over the years
has set into motion this pathway. So,
I'm I'm going to let the people in
Indiana and other legislators uh make
those decisions, but at the end of the
day, it'll be the American people that
decide. Well, no matter what happens
when it comes to 2026
2028, we know the economy is going to
remain a top issue for American voters.
And this week, US soybean farmers said
that they were near a quote trade and
financial precipice and cannot survive a
prolonged trade war, particularly when
it comes to China. I've learned that
Indiana is a top five soybean producing
state. Are you concerned about farmers
and do you think that this
administration is planning enough ahead
to protect US farmers?
I'm I'm I I believe no I believe that
trade means jobs and in our
administration whether it was in
negotiations with Canada and Mexico or
in that the strong stand we took with
China imposing tariffs. It was always
about about about lowering trade
barriers and ending subsidies and uh
ending trade abuses.
Well, my concern about, and I think it's
a concern of many farmers in Indiana and
all across the heartland, is that what's
emerging from this administration
are broadbased unilateral tariffs that
are being imposed on friend and foe
alike. And that's that's uh that's not
leverage, that's industrial policy. Uh
and and I believe you know that history
shows and and even somebody that knows a
little bit about economics knows that
American companies and American
consumers pay American tariffs. I mean
some of some of countries around the
world that export to us will will take a
small reduction uh of their price but in
the main Americans pay that cost and uh
it's particularly meaningful for farmers
who understand that uh when there's
tariffs that are imposed on on imported
agricultural goods here they also always
result in retaliation uh by those
markets around the world. So again, my
my belief has always been that uh that
free trade with free nations, let's
stand strong on trade abusers like China
around the world, but but let's look to
lower uh tariffs, lower non-tariff
barriers, and that way we'll win in the
city and on the farm.
Mr. Vice President, you brought up
industrial policy, and we wanted to ask
you about uh some headlines that we have
seen and broken here at Bloomberg News
about some industrial policy moves. This
includes the possibility that the US
government may take a stake of up to 10%
in Intel Corp. The iconic American
chipmaker, as well as take a 15% cut of
sales of Nvidia AI chips to China. Were
those kinds of ideas on the table during
your time in the first administration?
And do you think these things are a good
idea or a good strategy?
Uh th this was not uh a strategy that we
employed during the Trump Pence years.
And I I have great concerns
about having u the US government uh take
a position in uh with a golden shares in
nippon steel or uh or ju just the the
latest discussions about taking a
percent of intel. Now the Nvidia
agreement is even more problematic. I
mean we have export controls in place to
protect our national security. the
limitations on the ability of Nvidia to
sell uh mic you know to chips to China
uh was on the basis of our national
security simply taking 15% of those
sales doesn't serve our national
interests or our national security I
would argue and so I I I think we need
to take a step back uh on all of this
I'd encourage the administration
uh and uh if if I was speaking to the
president I'd encourage him to it's It's
time for us to think twice. Stateowned
enterprise is not the American way. Free
enterprise is the American way. And and
a refereed private sector with less
taxes and less regulation has created
the most prosperous economy in the
history of the world. And if we stay on
that path, that'll always be true.
Mr. Vice President, the last minute that
we have with you, we do want to ask you
about news of day. I would love your
thoughts about President Trump's
decision to call in the National Guard
to to Washington DC. Do you think that
this was the right move?
I strongly support uh the president's
decision um to use his authority under
the Constitution and even consistent
with the Home Rule Act uh to really
bring safety back to the streets of
Washington DC. I know there's a lot of
debate about statistics um but uh you
know honestly if Washington DC was a
state it'd have the highest homicide
rate in the country. I mean 1600
violent crimes this year alone in a city
this size is just astounding. And I I
think I think the residents of this city
uh and people around the country
appreciate the president taking the
steps that he's taken to to create
safety on the streets of our nation's
capital. And I'm I fully support efforts
by the president to provide resources
uh for states uh and local communities
to make every city and every town in
America safe.
Former Vice President Mike Pence. Thank
you. We'll be right back.
This is Balance of Power on Bloomberg TV
and radio. Alongside Tyler Kendall, I'm
Michael Shepard. Joining us now with
rare reaction to our conversation with
former Vice President Mike Pence and
more is this evening's political panel,
Lester Mson, principal of international
practice at BGR Group and Republican
strategist alongside Democratic
strategist Janae Wartell, a partner at
Ark Initiatives. Thank you both for
joining us. Jana, I wanted to start with
you and get your impressions of what the
vice president had to say in particular
on the redistricting question because it
has been such a hot topic for
Republicans, but now even more so for
Democrats.
Well, I think what's important to
understand about this fight is that this
is not a fight that we thought we would
be in right in August of 2025. This is a
10-year redistricting cycle. And so
we're all really caught by surprise,
especially Democrats, with the fight
that we're having right now with the
with the Texas state house. I think
what's important to look at here is why
are Republicans bucking the law, bucking
tradition and president to engage in
this battle? Why? Because President
Trump said, "Hey, find me five seats in
Texas." I think that if this is not
handled properly by the Texas
legislature, this is going to be a guide
book for other states to try the very
same thing.
Buster, what do you make of this? Is
this the right move by Republicans here
if they're trying to gain some sort of
advantage when there is such a narrow
majority we know going into 2027
who said, "Hey, politics, it ain't
beanag." You know, this is hard ball
politics. Uh Chris Matthews somewhere is
very proud of the Republicans for
fighting like hell. Uh this is it's all
fair game. I don't think it's against
the law. It may be unprecedented. That's
true. Uh to do it kind of mid decade
here, but this is this is a political
power play. Both parties do it. Uh, it
was a little ironic for me as a Chicago,
former Chicagoan to see the Texas
Democrats go to Illinois to try to make
a point about the evils of
gerrymandering. Illinois is the most
gerrymandered state in the country. It
is a work of art by Democrats to exclude
Republicans from the House of
Representatives. So, uh, for political
theater, that was pretty good for me.
And back to you, Jana. When it comes to
the redistricting question though, are
we hitting a slippery slope? uh will
this become a race to the bottom then uh
and it ultimately becomes something that
turns off voters even more already if
you can imagine that
this is about having a level playing
field in elections. This is about
representatives not choosing their
voters and instead voters choosing their
representatives. And when you have a
fight like what's happening in Texas,
what this says to other states is you
you too can power grab and choose your
choose your voters and not have your
voters choose you. And so I yes, I agree
it's a slippery slope and I think that
what Democrats are doing in fighting
back here is important because they are
fighting on behalf of the voters so that
the voters have a voice in choosing
their elected representatives.
And Lester, I do want to continue the
conversation here when we were
discussing with Vice President Mike
Pence and shift focus just a little bit
because we did talk to him pretty
extensively there about the impact of
tariffs. And we got some new tariff news
today actually, including that the US
and the EU made at least one step closer
to a deal. They put pen on paper when it
came to getting down some of the
logistics. But one of the headlines on
our terminal is that the vice president
said tariffs are ultimately paid for by
Americans. Do you think this White House
is doing a good enough job when it comes
to messaging what is really the
centerpiece of their economic plan?
Well, I think I think you you're
highlighting the one issue where there's
a real difference between former Vice
President Pence and the current
administration, which is on trade
issues. He's very much a traditional
Republican as as frankly I am. He wants
to see free trade. That's a good thing
for America in the long run. It's what
builds up our industries. The current
administration doesn't see it that way.
They want to use tariffs as a way to
kind of manage all of these bilateral
relationships. It hasn't been quite as
damaging to the economy as a lot of us
thought, frankly. And I think there's
been some modest gains in the in the
diplomatic arena by using tariffs to get
things the US wants. But in the grand
scheme of things, undermining free trade
is not a good thing. I agree with the
former vice president. Uh and I think
it's just a difference with the current
administration. Jana, on the trade and
economy question, is this shaping into
something that Democrats can piece
together heading into 2026?
Well, I think what this dynamic is is
laying out is really playing using the
economy as a political football, and
that's what the Trump administration is
doing. Consumers, American consumers,
are going to bear the brunt of these
tariffs at a time when Republicans
really can't afford for their policies
to be more unpopular. we look at this
this big ugly bill that the Republicans
have passed and are standing behind.
This is unpopular messaging for them.
And so when I think you look at what
Democrats should really be doing in the
offense here is pointing to how this is
going to impact American consumers.
Tariffs don't work. A lot of these deals
that have they've tried to ink using
these tariffs haven't really come to
fruition yet. So we haven't even seen
the full brunt of the effect impact of
these tariffs. Of course, tariffs have
really dominated the conversation when
we're talking about the future path of
monetary policy and the Federal Reserve,
and we've been covering it all day here
on Bloomberg about this White House's
pressure campaign now extending to Fed
Governor Lisa Cook. Lester, what do you
make of perhaps the needle that the
administration's trying to thread here?
Is it even that when it comes to ramping
up this criticism of the Fed? because we
asked the vice president about it and he
sort of walked the line there since he's
previously said the president has his
his own right to talk about his opinions
when it comes to the Fed.
Yeah, I think the president does have a
right to talk about the Fed, but the Fed
should be independent. I think it's very
creative. I'm trying to be positive
here. It's very creative of the
administration to use federal housing
regulators to target political opponents
or at least people who disagree with
them on economic policy with some of
these charges which seem and I agree
with the vice president the she should
come forward and defend herself, explain
what's what's happened. She certainly
has that right. Uh it's a little
concerning to me that we seem to be
weaponizing so many organs of government
for political purposes, but frankly I
put as much blame on the previous
administration for that as I do on this
one. Uh, Jane, how would you respond to
that uh uh point on the prior
administration weaponizing uh government
uh in that way? And specifically, do you
see the Fed's independence at stake here
in this fight?
I agree that the the Fed being
independent is incredibly important. We
can't create this partisan football that
we're throwing around with the
relationship with the Fed. I think
what's important here is to recognize
and when we look back at the previous
administration, I don't recall at all um
uh former President Biden having such an
adversarial relationship with the chair.
And so I think what you know what for
for all the the recriminations of how he
dealt with this situation, I think
Donald Trump has a more marketked
adversarial relationship with the Fed.
And I think that tension creates really
instability in how we think about the
role of the Federal Reserve and that it
should in fact be independent.
Very quickly, Lester, just to get your
thoughts on some breaking news as we're
watching to see President Trump uh make
his way to stand with uh the troops that
have been deployed here in the district.
We heard Vice President uh Mike, former
Vice President Mike Pence say that he
supported this decision. Where do
Republicans fall on the messaging to
this? because there has been uh some
pretty big blowback.
Yeah, I I'm pretty close to where the
vice president is. I think it is a good
move, generally speaking, for the
administration to bolster law
enforcement in the district. When I was
a young person, I left the district
because uh crime became very close to me
and I had to move to the suburbs. I
didn't want to. Uh I was kind of forced
to by the circumstances. This this seems
very reminiscent of that to me. I think
they can do it in a way that isn't so
provocative and in the face of people
who disagree with them and do it in a
way where people where more people will
support this initiative because you
really do have to have the support of
the people who actually live in the
district to do this the right way.
All right. And you do see on your screen
there for our radio listeners uh troops
in Washington DC waiting for President
Trump's arrival later tonight. We're
going to have to leave it there with our
panel but this was such a great
conversation. and Lester Mson Jon
Wartell. Thank you both so much for
joining us here today. Now, the
uncertainty around tariffs continues to
impact uh the markets uh today as we
lead up to Jackson Hole. And we heard
earlier today how analysts reacted to
all of this movement on Bloomberg
surveillance.
You can't go up every day. Uh and we've
got a great catalyst for for bears uh
skeptics and nervous investors to take
profits without FOMO right now uh or
fear of missing out. With that kind of
uncertainty, what happens is you get
some turbulence in the market.
The retailers surprise to the upside. Uh
and so the real question is when will
the tariff uh effects take place and be
found in those numbers? We see this as a
as a the beginning of a process that has
been very very slow and continues uh in
the months ahead. The softening of the
labor market, the softening of the
economy,
the market sentiment for the second half
of the year, we think is already pretty
bearish. So if you look at forecasts for
growth, for inflation, there's sort of a
stagflationary bias.
This is a stagflationary environment.
You're going to have some demand
destruction, but a big chunk is going to
be supply.
Now for a closer look, we turn to power
moves with Bloomberg's Vonnie Quinn, who
joins us live from world headquarters in
New York. Vonnie, it's good to see you.
It's a big day tomorrow. How are markets
positioning ahead of Fed Chair Jerome
Powell's highly anticipated speech at
Jackson Hall?
Well, for sure, Tyler, you heard many of
our investors that have been on all day
really just talking about all of the
caveats that are out there, all of the
fragilityities that might be in this
market, and you did see stocks off
today. So the S&P 500, for example, was
down 4/10en of a percent. You had the
NASDAQ 100 down about a half a percent.
Tech stocks bearing the brunt, and it's
been really a week-long slide. So
definitely investors have been taking
risk off the table. Sure, thinner
liquidity at the end of August, but
Jackson Hole does have something to do
with it as well. Take a look at the tech
stocks as well. You had Nvidia down
about a quarter of a percent even as
analysts have been upping their price
targets before next Wednesday's earnings
report. You obviously had Palunteer
which was down for most of the session
did finish the session in the green also
had Intel down 2% and Tesla down 1.2%.
So the tech stocks have been bearing the
brunt of it. If you look at year to date
for example though the S&P 500 is still
up 8.3%. So ask any of those investors
that you heard talking there and they'd
be very happy with that kind of return
in any given year. Right? It's the
question is what happens from here? Does
the rally stall out or do things get
worse? and investors are definitely
hoping for some signal tomorrow. So, for
example, the Jackson Hole Symposium,
which is run every year by the Kansas
City Fed, it usually has a theme. This
year, the focus is on structural changes
in the labor market. But the Fed chair
does give a speech at 10 a.m. You'll be
able to watch it live on Bloomberg.
We're doing a special around it. And in
that speech, investors are looking to
see, will the Fed chair talk more about
the labor market? Will he talk about
inflation? Will he skew hawkish? It
appears that investors have been taking
some bets off the table for a September
rate cut. Now, to be sure, twothirds of
investors, about 65% money market wise,
pricing in a 25 basis point come
September 17th. Will the Fed chair go
there? Will he say anything that will
give this market any kind of a signal
about what the Fed is thinking in terms
of tariffs and their impact on
inflation, about the fragility in the
labor market? And that's part of the
problem. The data are signaling several
crossurrens. You even saw today in
Walmart, for example. So that stock was
down 4 and a half% today at misprofit
estimates. Though things were quite
healthy at Walmart because as we know
the even the high-end buyer has been
trading down. But I want to point to
something that the the CEO Doug
McMillian said. He said that they have
actually been raising rates just a very
little bit every single week prices on
their goods passing them on to consumers
because of the tariffs. And he literally
said that that's going to keep happening
every week until the end of the year. So
that's just another signal for the Fed
chair to parse.
Bloomberg's Vonnie Quinn, thank you. As
markets brace for the full impact of
tariffs, businesses are being forced to
consider whether to absorb the costs or
pass price hikes onto their consumers.
That includes the iconic Arizona Iced
Tea 99 cent can, a price the company
says is becoming harder to maintain.
Joining us now on Balance of Power on
Bloomberg TV and radio is Don Voltagio,
co-founder and chairman of Arizona
Beverage Company. Don, thanks so much
for being with us. Don, I guess that is
really the question. How long can you
hold out on keeping that price level?
We're going to keep trying to hold it
and um we've been doing it for 30 plus
years and we don't want to get
sidetracked by this recent tariff effect
and we're hoping that the tariff effect
will settle down and the people who are
taking advantage of the tariff situation
uh get backed off by some government
officials. uh and the people who are
involved in the supplying of aluminum
are pushing along a tariff on aluminum
even though most of the aluminum is
recycled in America. So I think that's
unfair and I don't think that's what the
administration wanted.
Don, can you just give us a little bit
more insight? Any numbers that you can
put on when it comes to the cost that
you are absorbing so that it doesn't get
passed on to the consumer? Well, you
know, the Midwest premium, which is the
uh was was put in place in the 80s uh to
cover the cost of freight from the coast
into the middle of the country, uh used
to be a nickel to 8 cents a pound, now
it's close to 70 cents a pound. Uh a lot
of that is due to the tariff effect.
Even though a lot of the aluminum is
collected from recyclers in America and
um and used in a lot of aluminum
products, uh the good news about
aluminum, it's recycled over and over
again. It could be done thousands of
times. An average can could be uh used
and used and used. So the the power of
aluminum is the fact that it's very
recyclable. And the fact is a lot of
it's being collected in America due to
recycling programs and uh being reused
to make containers. uh but the effect of
the tariff shouldn't be applied to the u
recycled metal that's collected in
America but in fact it is so there's
manipulation happening and hopefully
that can be resolved uh the other side
of it as well is uh you know some of the
aluminum is smelted in Canada uh because
a lot of the smelters in America closed
up because of the cost of energy versus
the cost in Canada and um and hopefully
um some of the things that go on with
generating ating power could be looked
at as well. You know, we we're reducing
the price on plastic because the price
in crude has dropped pretty dramatically
over the last 6 months. So, we're
reflecting that cost savings by giving
the consumer a lower price on a product
that went up a while ago and now it's
coming back down. So, right now, our
intention is to hold the price on cans
as long as we can. If something uh uh if
this kind of thing continues and other
effects might happen like uh cost of
transportation, then we'll have to take
another look. But right now, we're
holding the price.
Uh Don, we've seen a number of other
CEOs and business leaders visit the
White House, lining up outside to talk
to President Donald Trump and his aids
about tariffs and trade policy. Have you
had any engagement with the
administration? And of course, keep in
mind that President Donald Trump is
known to be fond of soft drinks himself.
Well, I have not had any conversation
with anyone, but I'm here and willing to
have conversation if they want to be uh
uh educated about what in fact's going
on. A lot of things that are
unintentionally happening. I think uh
you know, I think the average American
likes to the idea of making more things
in America and keeping business close to
home. Uh but some things just can't
happen here in America. Like, you know,
we're in the coffee business. They're
not growing many coffee beans in
Brooklyn or Manhattan. And bananas and
mangoes and all the fruits that we use
come from countries where they grow. Uh
to put a a tariff on those kind of
things that can never be made here is
kind of foolish because it ends up
affecting the consumer and the consumer
is going to have to pick up the tab. I
don't think the White House wants that.
I don't certainly want it as a marketer
uh because I don't think Americans need
another price increase on a drink like
ours or anything else for that matter.
All right, Don Vatagio, co-founder and
chairman of Arizona Beverage Company. We
thank you so much. And we do want to
bring you some breaking news here on
Bloomberg television and radio.
President Trump is at the US Park Police
and Aostia operations facility. He's
addressing police and members of the
military about the latest uh state of
Washington DC. Let's listen in
because it's never happened before in
five months because really it's a five
month even though we're here seven but
we started five months ago in terms of
investment and we have because they see
what's happened to our country. We're
going to be over 17 trillion trillion
with a T dollars of investment. There's
never been anything close. If we did
one trillion in a year, and we're
talking about over a fivemon period,
maybe six months if you look at it, but
seven over 17 trillion dollars. We're
building plants, auto plants, AI plants,
all sorts of plants all over the
country. I'm giving them the right, Lee
Zeldon's done a fantastic job. We're
giving the right to build electric
plants. They become almost like a public
utility because we have old grids. We
have a lot of stuff that's old. we
wouldn't be able to compete with China
AI. And now we're totally leading the AI
race and the artificial intelligence.
It's a big deal and it's the hottest
thing there is for probably in 354
years. It's a lot of people don't know
what it is. Just trust me, it's very
hot. It's big. But they need massive
amounts of electricity. They need more
electricity than we have right now in
the whole country servicing everything.
In other words, we have to at least
double it up to be uh competitive and to
be leading. And we're more than doubling
it up. And what I'm doing is I'm letting
all of these very rich companies and
they've got nothing but they got a lot
of money and they want to invest it in
the United States and they're building
big plants, but they're building
electric plants with it. I said, "You
build your your building, and these are
buildings that cost 30, 40, 50 billion
dollars when you include everything
that's inside, all the technology." I
said, "I'm going to let you build
electric plants to fire your own
electricity. And anything that you have
left over, you sell it back into the
grid." So, all of these big factories
that are being built are building their
own electric plants, fired by oil and
gas. They're not fired by wind, by the
way, because wind doesn't work, but we
won't say that. It destroys everything.
It looks terrible. It's it's a very
expensive form of energy. And we're not
doing the wind. We're going back to
fossil fuel. I hope not too many of you
people are going to be upset, but we
have to go back to what works. We can't
be foolish. Uh but we are uh we're
building massive electric plants all
over the country.
Then they sell it back into the grid.
But we're building numbers that nobody's
ever seen. We're auto plants. We have
many auto plants going up. Whereas
during the last four years, as you know,
we had like none. We people weren't
investing here. So where they weren't
investing and they were leaving. But I
just finished by saying this. So I was
with the king of Saudi Arabia. I was
with all of the NATO leaders a couple of
weeks ago and they are putting up not 2%
but 5%. They said 5% of GDP. That's a
lot of money. They'll have trillions of
dollars put up. They were putting up
two, but they weren't paying it. Now
they're putting up five, and they're all
paying it. And they all said the same
thing. They said, "One year ago, your
country was dead. We never thought it
was coming back. And now you have the
hottest country anywhere in the world."
These are the leaders of other
countries. The prime ministers and the
presidents, all every one of them said
essentially the same thing. Said we had
a dead country. And we were. We felt
that way. And we were. And this place
was emblematic of it with the crime, the
horrible crime. And you know, I I watch
these phony reports. Oh, we were on the
way back. They weren't on the way back.
They were It was worse than ever just a
short while ago. But now it's going to
be I think now, right now, it's better
than it has been in years. And in a
couple of weeks, it's going to be even
far better than that. And everybody's
safe now. Everybody feels safe. And
they're all coming in. And people are
now coming in. They're making
reservations to come in. They want to be
in Washington DC. One of the things
we're going to be redoing is your parks.
I'm very good at grass because I have a
lot of golf courses all over the place.
I know more about grass than any human
being, I think, anywhere in the world.
And we're going to be regrassing all of
your parks, all brand new sprinkler
systems, the best that you can buy, just
like Augusta. No dou It'll look like
Augusta. It'll look like, more
importantly, Trump National Golf Club.
That's even better. But, uh, we're going
to look we're going to have all brand
new, beautiful grass. You know, like
everything else, grass has a life. Do
you know that grass has a life? You
know, we have a life and grass has a
life. And the grass here died about 40
years ago. So, we're going to be
rebuilding all of your parks and it's
going to happen fast. It's going to go
up like a miracle. So, you do the job on
safety and I'll get this place fixed up
physically and we're going to be so
proud of it. At the end of six months,
but let's say at the end of a year, uh,
this place will be maxed out in terms of
beauty. You'll have all new surfaces.
You'll have all new medians.
Everything's going to look beautiful. A
lot of your signs are going to be taken
down. They've been up for 40 years. They
look like hell. They look like they're
barely standing up. They're falling off
the off their holders. And we're going
to have all new everything. And I want
to just thank Doug for doing such an
incredible job. You've been
unbelievable. You're popular guy. No,
he's an amazing guy. He's an amazing
guy. Everybody love. We love you. And
his wife is so incredible. But thank you
very much. I appreciate it. You've been
listening to President Trump address
members of the military and police at
the US Park Police and Aostia operations
facility here in Washington DC after he
deployed the National Guard here in the
district. He touched on his efforts to
try to address crime even amid some
criticism about how he's been going
about it that we did just speak to Vice
President Mike Pence who gave his uh
full support of what the president is
doing. Now Michael Shepard, it was
pretty interesting to hear though
President Trump expanded beyond crime.
actually touched on something that we
focus a lot on here at Bloomberg, which
is investment. Some headlines crossing
at the terminal for you. President Trump
saying that we're leading the artificial
intelligence race and that we have to
increase electricity capacity to lead
AI. A conversation that we had just here
yesterday on balance of power.
Well, that's right, Tyler. We really
heard a wide range of things from the
president in terms of uh his appearance
just now. It's not just public safety.
He used this moment to talk about
investments in AI, data centers, trying
to draw companies here to the US to
build plants and touting this effort. He
doesn't miss a moment or an opportunity
to lean into that when we see him uh
either uh at the White House speaking or
out in public. It's really something
that is has become part of uh his
sticktick for lack of a better word. And
uh you know even if it may be a little
bit out of context, it's very much of a
theme for the president as he's out
there. But of course, he did close in
his remarks on public safety.
Right. Of course. And as I mentioned, we
did speak to Mike uh former Vice
President Mike Pence about all of this
and we wanted to bring up another topic.
Here's what he had to say on whether or
not President Trump's pressure campaign
to uh raise allegations against Fed
Governor Lisa Cook threatens the
independence of the central bank.
What I hope is that uh the effort to
push out another member of the Federal
Reserve isn't just simply part and
parcel uh of an effort to get Jerome
Pal, who our administration appointed uh
as a Federal Reserve chair to to lower
interest rates or otherwise take action
that uh that would not otherwise be
justified. I I understand the
president's frustration uh with Chairman
Pal uh and he's entitled to speak out
about that, but my my hope is that uh
these latest allegations are not simply
part of that overall pressure campaign.
These comments as monetary policy
leaders descend on Jackson Hole, Wyoming
for the Kansas City Fed's annual
economic policy symposium. And that's
where we find our Bloomberg's Michael
McKe who's joined by a special guest,
Austin Goulsby, president of the Federal
Reserve Bank of Chicago. Hey, Mike.
Thank you very much, Tyler. And we
welcome you, Austin, to thanks for
stopping by here.
Uh, we're talking about interest rates
uh there, the vice president. Uh, what's
going to happen September 17th?
Well, it depends. Um, I for sure it
feels to me like it's a live meeting.
uh as you know before April 2nd before
we got some uncertainties coming on the
policy side I believed that we had
pretty stable full employment that
inflation's coming down to target the
economyy's looking relatively solid and
that it made sense for rates to come
down a fair bit more from where they are
right now
in the interim we've had mixed messages
we've had some
inflation reports that came in milder
than we expected. And I was feeling good
because I thought if the tariffs kind of
stay in their lane and imported goods
are only 11% of the economy, there is a
real sense in which maybe we never left
the golden path. It threw a bunch of
dirt in the air as I described. So you
couldn't see the road there for a bit,
but maybe we're still on it and it'll be
fine. the last inflation report that
came in where you saw services inflation
which is probably not driven by the
tariffs really start shooting up is a
danger that's that's a dangerous data
point. I'm hoping that that's bit of a
blip. So I think we still have a fair
bit of information that we're going to
get before September or the whole fall
to determine what's what path we're
going to be on. Well, live meeting
implies that you could perhaps cut
interest rates. Are you leaning in that
direction?
Look, as you as you know, I don't like
tying our hands ahead of time, but I
like
I want to get I want to get all this
information. It's particularly important
given that we've been getting some mixed
signals
and I want to hear what my colleagues
have to say going into September or
November, December, going into next
year. The most important thing is to
figure out the through line. And the
through line is either we're still on
path to get rates down a fair amount.
You know, let's let's say the the SCP
dot plot where they ask all the members
of the FOMC, where do you think rates
will settle eventually? That's 100 basis
points plus below where we are now um
for at the median. And what will
determine whether we can get back on
that path of of rates coming down is
going to be do we think inflation is
under control. We've been 4 and 1/2
years above the inflation target. I
thought and and we made a lot of
progress and I thought coming into this
year we were in a decent spot that that
you could make the case we're headed
back to 2%. I still hopeful that that's
true but I'm a little
as I say in the last report there are a
couple of little warning signs and
how we are going to react to a
stflationary direction shock that is
something that is driving down
employment and up prices at the same
time that's always a a very difficult
spot for the central bank
I think Tyler and Mike have a question
for
Thanks, Mike. Mr. Goulby, it's Tyler
Kendall here in Washington, and I want
to ask you about questions surrounding
the Fed's uh independence. We just had
FHFA Director Bill PY on Bloomberg
television today. He said he's not going
to let up on his campaign when it comes
to allegations of mortgage fraud,
including against Fed Governor Lisa
Cook. Do you support Cook's decision not
to resign? And do you think that this
pressure campaign from the White House
has hurt the Fed's credibility?
Look, I I I run the Chicago Fed. We're
regional bank. I'm not going to get in
the middle of Twitter kurfles or
whatever's happening. I know that long
before I was ever at the Fed, I was an
economist. and economists are pretty
close to unanimous that having a central
bank that is independent of political
interference is critically important to
the operation of the central bank. And
the reason that they're unanimous about
that topic is because if you just look
at places where that's not true, where
the government can order the central
bank to cut interest rates, inflation is
higher, growth is slower, unemployment
is worse, and if we don't have a an
independent central bank, inflation's
coming back. So I I think it's
absolutely critical that we maintain
independence from political
interference.
President Goulsby, I wanted to come back
to the broader question of the economy
and inflation too because uh earlier
this month we saw tariffs start to
actually take effect and be enforced and
we may have more coming still on drugs
and semiconductors. Uh where do you see
this impact playing out across the
economy and how soon will do you expect
to see businesses start to pass these
costs along to consumers?
That's kind of the critical two
questions about tariffs are how much are
they going to drive up prices and how
long is that price increase going to
last. So there is an argument that in
pure theory if it was a oneandone tariff
that'd be a one-time increase in the
price level and then as an inflationary
impetus it would be transitory. But as
soon as you use the word transitory, you
want to be a little careful. That's only
for a oneanddone tariff. And this hasn't
been won and it doesn't seem like it's
close to done. So we can get on a cycle
that is inflationary. And if the tariffs
are applying to intermediate goods, that
is parts, components, supplies, things
like primary metals, semiconductors,
things that go into the cost of
production for US manufacturing. That is
one way that tariffs jump out of their
11% of GDP lane and start making me more
nervous because now it ceases to just be
an increase in the prices of the tariff
affected goods. Now those tariffs are
raising prices in the goods the
industries that are using the tariff of
affected goods and we saw in co the
bigger that is the more it's affecting
the supply chain and disrupting it the
longer and more persistent that can
last. So those are kind of the the
questions floating around that that
we're grappling with.
Austin uh I want to go back to the the
White House versus Fed situation for a
moment. The administration has alleged
mortgage fraud against three people.
Democratic Senator Adam Schiff,
Democratic Attorney General of New York,
uh, Leticia, uh, and, uh, and then now,
uh, Lisa Cook. You were the chairman of
the, uh, Economic Advisors Council of
President Obama. You're a Democrat. Are
you worried that they might come after
you?
I uh, I I didn't know where you were
going with that. As I say, I'm here
member of the FOMC. The the law is quite
clear of what should determine interest
rates. It's the FOMC and we're supposed
to be looking at stabilizing prices and
maximizing employment. You become a
sworn member of the Federal Reserve,
you're out of the politics business.
You're out of the elections business.
So, I'm trying not to get distracted
from the basic thread of we must figure
out where we are on those dual mandate
grounds when setting the interest rates.
And that is what we should be basing the
interest rate decisions on. It shouldn't
be about power politics. It shouldn't be
about what somebody said about somebody
else on Twitter. We go into that room
and we take the job very seriously.
Austin Goulby, thank you very much for
joining us. the president of the Chicago
Federal Reserve. We'll send it back to
Mike and Tyler.
Bloomberg's Mike McKe and Chicago Fed
President Austin Goulsby. Thank you
both.
To learn more about everything you've
heard tonight, make sure to check out
the Washington Edition newsletter on the
terminal and online. Thanks so much for
joining us here on Balance of Power.
We'll be back tomorrow alongside Michael
Shepard. I'm Tyler Kendall. Keep it
here. This is Bloomberg.