Bloomberg Talks
00:00:02 · Ralph Schlosstein, Isabelle Lee, Dani Burger
[00:00:02] S0: Bloomberg Audio Studios. [00:00:04] S1: Podcasts. Radio. [00:00:06] S2: News. Pleased to say that joining the show now is Evercore Chairman Emeritus Ralph Schlosstein. He is also the co-founder of BlackRock and former Deputy Assistant Secretary of the Treasury in the Carter administration. Ralph, no one we'd rather talk with this morning. You're an entrepreneur, you're a business person, you've had experience in government too. You have constant conversations with CEOs. For CEOs who are waking up in America today following a blue wave, what if anything changes for them? [00:00:33] S0: I think a number of things. Number one, I think the vote last night was a vote for centrism, a vote for checks and balances, a vote for a less volatile world, and obviously a vote for paying attention to the needs of of the vast majority of American people who are, in their minds and in reality, paying too much for their lives. For the CEOs, I think number one, it bodes for a pretty good economy. I really believe that. And historically, if you look at divided government, Congress being in one party's hand, the presidency in another. Those have been periods of some compromise, economic growth, and good for markets. And one other thing, if you're sitting there, and this affects obviously Evercore's business particularly, If you're sitting there thinking about that big strategic deal that you want to do, I think it's reasonable to conclude that the regulatory environment will be a little more receptive over the next two years than it might be after that.
00:00:33 · Ralph Schlosstein, Isabelle Lee
[00:00:33] S0: I think a number of things. Number one, I think the vote last night was a vote for centrism, a vote for checks and balances, a vote for a less volatile world, and obviously a vote for paying attention to the needs of of the vast majority of American people who are, in their minds and in reality, paying too much for their lives. For the CEOs, I think number one, it bodes for a pretty good economy. I really believe that. And historically, if you look at divided government, Congress being in one party's hand, the presidency in another. Those have been periods of some compromise, economic growth, and good for markets. And one other thing, if you're sitting there, and this affects obviously Evercore's business particularly, If you're sitting there thinking about that big strategic deal that you want to do, I think it's reasonable to conclude that the regulatory environment will be a little more receptive over the next two years than it might be after that. [00:01:51] S1: So then how do you think this current political environment could change where global capital flows and how companies invest them? [00:01:57] S0: I think the. Global capital flows will continue to go to America. We have the single, we have the strongest capital markets, the most liquid capital markets. We have the greatest creative entrepreneurship in the world, by far. You know, I wouldn't trade America's hand with any country or continent.
00:01:57 · Ralph Schlosstein, Dani Burger
[00:01:57] S0: I think the. Global capital flows will continue to go to America. We have the single, we have the strongest capital markets, the most liquid capital markets. We have the greatest creative entrepreneurship in the world, by far. You know, I wouldn't trade America's hand with any country or continent. [00:02:28] S2: Today. and it's still a country with incredible growth, too. We see that in all the figures. This idea, Ralph, that this was a vote for moderation, for a more centric government, I just wonder how that also squares, though, with this big pull from the left, with very far left candidates upsetting in the primaries, winning their elections last night. Does that sort of change the dynamic, at least for those coming in, and just how center this current Democratic Party looks?
00:02:28 · Dani Burger, Ralph Schlosstein, Isabelle Lee
[00:02:28] S2: Today. and it's still a country with incredible growth, too. We see that in all the figures. This idea, Ralph, that this was a vote for moderation, for a more centric government, I just wonder how that also squares, though, with this big pull from the left, with very far left candidates upsetting in the primaries, winning their elections last night. Does that sort of change the dynamic, at least for those coming in, and just how center this current Democratic Party looks? [00:02:56] S0: Well, I would say that in reality, they get a lot of publicity, but they're a very small minority of the Democratic caucus in the House and in the Senate. We have exactly... one Democratic senator who ran with a somewhat more left than I would be comfortable with. And so that's out of 54 or 55 or 56. In the House, I think you have 12 or 15 senators It looks like there are going to be somewhere on the order of 250 Democratic House members. So you've got literally somewhere between five, six, seven percent of the caucus. And very importantly, Hakeem Jeffries, who will be the new speaker, can actually get the majority of his caucus to go for something without any of those members. So I think the size of the victory in the House gives Speaker Jeffries a lot of flexibility that he might not have otherwise hoped for, and certainly more than Speaker Johnson had in the previous Congress. [00:04:14] S1: Do you think the results we saw overnight is a preview of what 2028 could look like?
00:04:14 · Isabelle Lee, Ralph Schlosstein, Dani Burger
[00:04:14] S1: Do you think the results we saw overnight is a preview of what 2028 could look like? [00:04:19] S0: Well, I think the Democrats in the Congress have a really important decision to make. There are two temptations. The first, which I very strongly support, is put on your policy hats, pass legislation that's important and relevant to the things that the American people care about. Energy prices, food prices. housing availability, health care availability. And the president may compromise on some of those. He may veto some of those. But I am a democratically inclined business person. That's what I hope we do. There will be some who are tempted to have a little bit of a more investigative approach persecution-oriented, because obviously we've seen a period of time when the Justice Department has been weaponized a bit in the eyes of many. And there's a temptation to respond to that somewhat in like kind. I truly hope that the Democrats in Congress resist that and that they focus on doing the right things for the American people. [00:05:44] S2: When it comes to the fiscal trajectory of this United States, it's something you've long spoken out against and you're concerned there. That's one of the things that notably wasn't on the ballot, deficit spending. Maybe the bond market has fits and starts about what it cares. If it cares about that bond market notably rallying today. Is there anything that puts a brake on this Congress? Again, especially because that was not on the ballot. They came in with no one talking about deficit spending in the United States.
00:05:44 · Dani Burger, Ralph Schlosstein
[00:05:44] S2: When it comes to the fiscal trajectory of this United States, it's something you've long spoken out against and you're concerned there. That's one of the things that notably wasn't on the ballot, deficit spending. Maybe the bond market has fits and starts about what it cares. If it cares about that bond market notably rallying today. Is there anything that puts a brake on this Congress? Again, especially because that was not on the ballot. They came in with no one talking about deficit spending in the United States. [00:06:09] S0: Well, if I have a concern about the next couple of years, I think our fiscal trajectory is totally unsustainable. It will end. I've often said this. It will end. When it ends, it will end badly. I just don't know what will precipitate that and when it will happen. If you look back historically at periods of divided government, particularly centered around the fiscal policy and budgets, the method of compromise between the Democrats and the Republicans has very often been no new taxes for the Republicans and some more spending for the Democrats. That would obviously exacerbate the concern that I already have. I think it's a very low probability, but what would be a remarkable thing would be if we actually had something along the lines of, I don't think you could do a real Simpson-Bowles, but a mini Simpson-Bowles where there's an acknowledgement on both sides of the aisle that we have to start bending the curve on our fiscal trajectory.