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First Move with Julia Chatterley
U.S. Stimulus Talks Continue with Mixed Signals on All Sides; China Says a Surge in Domestic Tourism is a Sign that COVID is Contained; The U.S. Gulf Coast Bracing for yet Another Hurricane. Aired 9-10a ET
Aired October 09, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:21]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR: Live from New York. I'm Julia Chatterley, this is FIRST MOVE, and here is your need to know.
Funding flip flop. U.S. stimulus talks continue with mixed signals on all sides.
Gainful Golden. China says a surge in domestic tourism is a sign that COVID is contained.
And Delta's force. The U.S. Gulf Coast bracing for yet another hurricane.
Thank goodness, it's Friday. Let's make a move.
Welcome once again to FIRST MOVE and it's an on-off, off-on, I think kind of wild weather we're talking about: U.S. stimulus talks, presidential
debates, even this show on occasion; but the good news is, we are here for you today and we have plenty coming up.
As always, let's take a look at what's going on for the futures. We're looking to add to yesterday's gains. We actually closed at one month highs
here for the majors, but the stimulus deal drama remains a key short term driver either in the form of a pre-election agreement, as the President
indicated yesterday on FOX News, or perhaps if Joe Biden should win the election. Why?
Well, actually it's pretty simple. The expectation that the Democrats will spend more if they win and sharpish. Now, speaking of sharp, we saw a sharp
rise in Chinese stocks in the session overnight, too, following the Golden Week holiday. Shanghai Composite rising some 1.9 percent, taking that
market to a two-week high, too. We've got all the latest on the Golden Week holidays, as I mentioned as well.
What about across the Atlantic, though? I can tell you worrying signs in terms of the rising COVID cases and what that could do to the economic
growth prospects. The World Health Organization reporting a record daily, one-day rise in the past 24 hours driven by a surge in Europe. The
continent now reporting more cases than India, Brazil or the United States, and that's clearly having an economic impact, too.
U.K. GDP growth rising at just over two percent in August. That was a marked slowdown versus the numbers that we saw in July and dashes hopes of
a V-shaped recovery that despite government stimulus efforts are pushed to reopen and the Chancellor's eat-out scheme.
The message here, perhaps is that without more support, it actually could have been worse, something that lawmakers in the United States, I think
need to remember, too.
Let's bring in Christine Romans to join us now. Christine, I called it on- off, off, we think, on, we think. I mean, we're laughing but it's devastating, isn't it for the people involved? What are we looking at here,
if anything?
CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: You know what, I've been using whiplash or flip flop. I'm not quite sure what this is or even
how serious the presidential leadership is in this issue of stimulus. Is it back on with less than a month to go before the election? At least we know
after killing -- completely killing stimulus talks and telling his negotiators, no, we're going to focus only on Supreme Court nominee until
the election.
Now, the President has been dangling other options, saying he could look at one off deals or even like yesterday, he was saying maybe a comprehensive
plan all-together.
So you've got airlines wondering if there is money coming quickly, so they can rehire those 37,000 people that they just laid off in the past few
days. You've got families wondering if they're going to get a $1,200.00 check and when that can get in their bank accounts. You have jobless
workers, you know, 26 million people getting some sort of financial aid and jobless benefits, wondering if there is money coming down the pike.
And of course, states -- states that have seen their policing costs go up, have seen their teaching costs go up, who are going to be needing more
funds to plug the holes in their budgets because of COVID. A lot of people want to know when the money is coming, and it's still -- I mean, it's still
kind of a soup, don't you think, of conflicting information about whether there will be a stimulus deal soon?
CHATTERLEY: Yes, really thick soup, quite frankly. There's so many angles we could discuss here. Your point about the state and local government
spending. I mean, some of the debate behind the scenes seems to be look, that the Democrats and we've talked about this before, want to use it for
all sorts that the Republicans want it more narrow.
But you know, I saw one of the write ups on CNN Business this morning, and it struck me that the Democrats five months ago, signed a deal in the House
to come up with $3 trillion worth of stimulus.
I don't care how much they try to chuck into that. We've had five months to negotiate back from that point. The runway, to be fair to them was huge.
[09:05:04]
ROMANS: You know, and that was May 15, $3.5 trillion, the Heroes Act and obviously that's a negotiating point. That's a starting point for
negotiations.
For a while there, other Republicans said they wanted to wait and see how stimulus was working. There wasn't an urgency for a fifth round of
stimulus. Remember, the President stepped in and did some Executive Orders that had, you know, fair to say some impact for some extra jobless
benefits, but not in other areas where he wanted to get money directly to the American people.
But there's been plenty a time for politics to figure out how to get to yes here and what that number should look like.
You know, most of the Wall Street analysts and the economists who I talk to, they had been factoring in $1.5 trillion or $2 trillion, at least in
their assumptions for growth in the recovery. If they don't get that soon, you'll see them starting to pull back their expectations for what the
recovery looks like or whether we can sustain this recovery and not have a double dip recession early next year.
CHATTERLEY: Yes, and this is the critical point, isn't it? We're already seeing slowing and the risk is that we start to, at the back end of this
year, see some kind of job losses.
Mark Zandi, Moody's Analytics is going to be on the show later on. He has got this rule of thumb, that 10,000 case rise in COVID cases equates to the
requirement for a further $100 billion in stimulus spending. He was already saying $1.5 billion. So given the rises that we've seen, even just in the
last few weeks, we're already looking at what? $1.6 billion. We're already at the base case for the Republicans and the cases are going in the wrong
direction.
ROMANS: And I think it's a really great reminder that you just can't say, just open the economy. We have to live with this virus. No, the virus, if
it's not under control, actually cost the economy more. It holds back your ability to recover. These two things work together. It's not a light
switch. That's one or the other, and I think that's what's so frustrating sometimes when you hear, you know, even from the beginning of the summer or
the spring when the President wanted to have you know, full churches in April. Now, he wants to have full rallies again.
No, when this virus keeps spreading, it costs money, and it costs the economy and economic growth and job creation. And that's very clear here
and grappling with that and getting some real leadership from, you know, from the Executive Branch is really, really necessary.
And we just -- we really haven't had it, and that's, I think, what's been so frustrating in all of these months.
CHATTERLEY: Yes, it's been necessary and desperate for eight months, quite frankly. Christine Romans, thank you so much for that.
ROMANS: Have a nice weekend. Julia.
CHATTERLEY: You, too.
ROMANS: All right. Let's move on. Virtual or reality? It's unclear if or how the next U.S. presidential debate will take place as Donald Trump
recovers from coronavirus. He says he won't take part in an online event and might even hold a rally though on Saturday.
But most concerning to me actually is the President's health. Just listen to this short clip from FOX News last night.
(BEGIN AUDIO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: I think the first debate, they -- excuse me, on the first debate, they isolated the mic.
(END VIDEO CLIP)
CHATTERLEY: John Harwood joins us now. John, I'll say it straight. You and I neither obviously, a medical experts. Our job is to tell the facts rather
than to speculate. But unfortunately, that's part of the problem here. We don't have the facts.
I just worry whether part of the reason of postponing this debate or not doing it virtually is because actually the President's not well enough to
do it. That was a really worrying interview.
JOHN HARWOOD, CNN WHITE HOUSE CORRESPONDENT: The problem, Julia is that we haven't gotten straight information from the White House about the
President's health from the beginning. The President's Dr. Sean Conley acknowledged that he misled reporters because he wanted to put a rosier
spin on the President's condition a few days ago.
Now, the White House still has not said when the President's last negative test was. That would tell us how far he is in the course of illness. The
further in he is, the closer he is to being out of the woods, but we don't know.
And you hear things like the cough in that telephone interview, and you wonder, does that mean he is sicker than we think? They have not made the
doctors available for questioning in the last several days. We've not seen the President live on camera since Monday and not speaking in quite some
time.
He has released some tape messages and he has been on Twitter rants that are pretty odd, claiming his own Cabinet is failing him, as well as
Democrats and the media lashing out saying that Barack Obama, Joe Biden and Hillary Clinton ought to be indicted for crimes against him.
We know that he has indicated that he is pretty much done with coronavirus medications except for the powerful steroid that he's been on and the
steroids can affect your mood and behavior. So the exact state of the President's health is unclear. He says he wants to have a rally on
Saturday. His staff has not indicated whether that's really going to materialize.
He is trying to use that as an argument to tell the Commission on Presidential Debates that they should have next week, an in-person debate
rather than a virtual one. But the Commission has acted in ways to design to protect people working on those debates, as well as Joe Biden and his
staff and the President's staff and the President clearly doesn't like it.
[09:10:27]
CHATTERLEY: Yes, and to point, if he is still taking steroids, you can't take steroids forever and there is a comedown involved when you're weaned
off them. John, we'll see if he does the rally tomorrow. Thank you so much for joining us and giving us an update on that.
All right, from tensions in D.C. to tourism in China where the Beijing authorities are saying that 640 million tourists made trips throughout
Golden Week. Celina Wang has all the details.
(BEGIN VIDEOTAPE)
SELINA WANG, CNN CORRESPONDENT (voice-over): China just went on a massive vacation, swarming tourist sites, crowding airports and train stations,
scenes that are impossible in most parts of the world right now. It almost looks like life before COVID-19 with huge crowds like this at the Forbidden
City, standing shoulder to shoulder most with masks on, but some without.
It's a similar picture at the Great Wall, crammed along the winding wall, squeezing past each other in narrow quarters.
China just celebrated its Golden Week Holiday, one of the country's busiest travel periods. Normally, it's when millions of Chinese go abroad. But as
the rest of the world battles COVID-19, they are staying closer to home, boarding cruise ships, relaxing on beaches, hiking mountains and even
getting married.
During the eight-day holiday, 637 million people took trips within the country spending more than $68 billion. If we compare the first seven days
this year with the shorter holiday last year, that's a more than 20 percent drop in travel and spending. But it's still a much needed boost to the
economy which has been gradually bouncing back.
Local governments are even competing to attract tourists issuing travel vouchers and discounted tickets. But in cities like Beijing and Shanghai,
schools have asked students not to leave for the holiday, leading to busy parks in Shanghai like this one, with kids and parents mostly without
masks.
Hundreds of millions of people going on vacation at the same time is a major test for China's COVID-19 strategy. The country hasn't reported any
locally transmitted cases since mid-August. Even Wuhan, the original epicenter of the outbreak has become a traveler hotspot.
Online agency Ctrip listed this Wuhan landmark, the Yellow Crane tower as the most sought after Golden Week attraction, enticing them with this light
show. But some travelers like Chen, a 29-year-old who works in Beijing are still worried.
(BEGIN VIDEO CLIP)
CHEN, TRAVELER (through translator): Even though the epidemic situation has improved, I'm still very worried. Every day is different and the situation
may change. So, we should still wear masks and take good protective measures when we're on the train.
(END VIDEO CLIP)
WANG (voice-over): China has had a few flare ups in recent months but they were followed by lockdowns and mass testing measures. Now, the rest of the
world is watching to see if China can keep up its track record of no infections after the mass travel holiday, and if China will live up to the
government's message that the country has defeated the virus.
Selina Wang, CNN, Hong Kong.
(END VIDEOTAPE)
CHATTERLEY: All right, let me bring you up to speed now with some of the other stories that we are following around the world.
And the Nobel Peace Prize. The U.N.'s World Food Programme is being honored with this year's Peace Prize in Oslo. The Nobel Committee praised the group
which works to save lives and end starvation in more than 80 different countries and they said the program's mission is even more crucial this
year because of the pandemic.
(BEGIN VIDEO CLIP)
BERIT REISS-ANDERSEN, CHAIRMAN OF THE NORWEGIAN NOBEL COMMITTEE: In the face of the pandemic, the World Food Programme has demonstrated an
impressive ability to intensify its efforts as the organization itself has stated until the day we have a vaccine, food is the best vaccine against
chaos.
(END VIDEO CLIP)
CHATTERLEY: Wise words there. Phil Black joins us now. Phil, it may have been a surprise, but you cannot deny this as a worthy cause.
PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT: Indeed, that's right, Julia. This wasn't a name that was buzzing about ahead of the announcement as a
likely winner. But the organization, its work is undeniably worthy, especially this year.
To give it some context, last year, they said they helped nearly a hundred million hungry and starving people. This year, it is around 135 million and
the organization warns that number could increase further and of course, this spike in demand for its help is all because or largely because of the
pandemic. Its Executive Director has warned of a potential wave of famine around the world.
The organization specializes in fighting hunger, of course, and the Nobel Committee justified in why it deserves a peace prize by talking about what
it was saying was an undeniable link between hunger and war. They are often locked in a vicious cycle, you'll never solve one without the other.
[09:15:23]
BLACK: And the committee said it wants the world to think about the millions of starving people right now. So the World Food Programme is being
honored for its work but also for its example. The Committee made it pretty clear, it is sending a message about the importance of countries working
together to solve the really big problems, in its opening comments making this announcement today, it said that the need for international solidarity
and multilateral cooperation is as great as it's ever been -- Julia.
CHATTERLEY: Yes, work and the message. Phil black. Thank you so much for that.
All right, we're going to take a break here on FIRST MOVE, but coming up after this, stories of recovery and transformation, both big and small.
IBM's Executive Chairman, Ginni Rometty, up next. An old company facing new opportunities and challenges in the Cloud.
And a little later, small firms cutting loose in loans. The CEO of online lending marketplace, Lendio gives his take. Stay with us. That's next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. IBM is splitting itself into two companies. The 109-year-old firm will list its IT Services Unit as a
separate entity to focus in on high margin Cloud computing. IBM expects the cost of the breakup to come to nearly $5 billion.
Ginni Rometty, Executive Chairman of IBM joining us now to discuss this. Ginni, always fantastic to have you on the show. Thank you for joining us.
Investors certainly love the sound of this yesterday, a significant shift in the business model, but it does to me feel like a natural progression in
light of that transformative Red Hat deal. Talk us through the thinking now.
[09:20:03]
GINNI ROMETTY, EXECUTIVE CHAIRMAN, IBM: Yes, well, you've -- first off, good to see you, and you've interpreted all right. This is really the next
step for us.
It's been a multiyear journey -- multiyear journey, as you know, and this step could not have happened had we not done all the work ahead of time,
which is, you know, we've divested many businesses, then we built up foundation of the Cloud, both private and public.
And then two years ago, it was really a seminal moment when we acquired Red Hat, and that really positioned us which we are today, the leading hybrid
cloud platform out there. Now, over the last two years, Julia, we saw great results, and it has accelerated. So we really do have what I believe is now
the enduring technology platform that IBM needs for its future.
So this is a natural next step, and it's also really now what has happened on how clients are buying, they look at their managed infrastructure
services. One set of decision makers do that, and then the digital transformation is really driven by another. So the company is really along
those two lines.
CHATTERLEY: Yes, and we've seen nothing but digital transformation, the shift to that, particularly in the last seven months. So the timing, I
think care as well is pretty critical. You would always emphasize to us in terms of the infrastructure business, that it was a critical part of the
relationships and the services that you provided to clients.
So I understand the split, but how do you make that separation as painless as possible in terms of those relationships?
ROMETTY: Yes, well, and I've also had the chance, obviously, now a day later to talk to many clients. Given that they're both market leading, and
the clients depend so much on IBM for the hybrid Cloud and digital transformation; and the new company, which will be for their modernization
of their infrastructure, they want them both to be best in class.
Now, the new company is at $19 billion, it is best in class by a factor of two and that is a scale game. And then IBM has an innovation side now with
the hybrid Cloud. And clients understand those are two different capital allocation models, and they are very comfortable because they see the same
people that will be in the new company. They know that it will have its investment priorities. It'll be number one for its own investment
priorities, which are different than the investment priorities for the hybrid Cloud and they know there's a strong partnership between the two.
And so those elements of the same people, the right capital allocation strategy, and a strong partnership is going to allow this to work, and so
every client I've talked to sees strong logic and is actually looking forward to even acceleration from both companies.
CHATTERLEY: Yes, honing a focus here on the two separate things.
Ginni, well known short seller, Jim Chanos weighed in yesterday and he accused the company of financial engineering. I'm just pulling out some of
the things from his blog. He said, the upcoming $2.3 billion charge for, quote, "structural action" is -- and that being invested is and I'm quoting
again, "financial gibberish." He said, "The earnings per share for the company this year is more like $6.00 rather than $11.00 and expectations
need to be reset."
Ginni, you've led this company and led this company for a long time. What's your response to those accusations?
ROMETTY: Yes. Look, I am very proud -- we have led this company at 109 years to both reinvent and rediscover itself and every move was made in
that spirit. And in fact, right now, if you just think back to what the logic is in the marketplace, you used the word focus, which is what this is
about: maniacal focus on hybrid Cloud, maniacal focus on managed services.
And then what we did was line up every action behind it to make both of them successful. So let's talk a minute about on one part is a
restructuring charge. But that is around things like stranded costs, and what you have to do to create these two different things.
And when you think about that, it also says, by the way, as we make ourselves more streamlined as we will, we're going to take that money and
reinvest it. People don't do those things, if they were doing something else.
This is about being able to take IBM, the hybrid Cloud company and invest more, and in fact, the company committed to as you saw, mid-single digit
growth in the medium term. And so this is all about lining up every vector you line up so that you can have a growth company with IBM, and then with a
new company, scale delivery excellence, I should say, by the way, it's going to be given a very healthy balance sheet; again, something that would
dispel any of that kind of discussion, a healthy balance sheet, good cash investment grade.
And so you've got clients with two market leading companies with the fuel that they each need to succeed.
CHATTERLEY: He was saying financial engineering will prove you wrong. That seems to be the message.
ROMETTY: Sorry, Julia.
CHATTERLEY: I was just saying, you're saying financial engineering will prove you wrong.
ROMETTY: Oh, this is absolutely a strategic move, and it is the next move and what you know has been a journey that we couldn't have taken this move
today until we did all the work to prepare and have a strong foundation, a technology foundation that IBM will now grow on and again, I have to say
market leading, and it's the success from Red Hat.
[09:25:10]
ROMETTY: In the last two years, we have gone from 800 customers to 2,400. The number of large strategic engagements up 200 percent, so this gave us a
lot of conviction that now is the moment to do this, and then with the acceleration of digital transformation that you guys talk about every
single day on the show, that actually has created that difference in how clients buy.
CHATTERLEY: Good to know, Ginni, I want to move on and get your sense of what we're seeing in terms of economic recovery, and what more support is
required. I know you're part of the Business Roundtable, the biggest executives and leaders in the country in the business sector that talk
about policy and strategy. What do they think is required at this moment? And how worried are they?
ROMETTY: It will look, I think, you know, one of the elements that I've been very involved with in the Business Roundtable, as you know, Julia has
been what I think is now going to be a crisis around jobs and skills.
This was brewing before with the digital transformation era, where everyone's job was going to be changing in some kind of way, and now, with
the confluence of both an economic situation, COVID, as well as the racial injustices around the world, all of those coming together, it really
crescendos and I do think it's a jobs crisis, but it is driven by skills.
And so one of our biggest efforts is all of us together. And you know, we've worked on this for really my entire tenure, about how to bring so
many underserved populations into the technology world and they don't necessarily have to have a four year degree.
I think we started a movement around skills first, meaning hire someone if they can get the skill, no matter how they get it, versus just because of
their degree. And so many of us are working together on what I consider things that only private and public sector could do together.
In fact, I think you'll see like you have seen with the approach to COVID, some of the largest mobilizations of the corporate world to make some of
the largest contributions now.
CHATTERLEY: Yes, and that relaxing of college degree requirements is so critical, and you and I have discussed in the past, and we'd love to do it
again, Ginni, come back anytime, please and talk to us about this purely because we're both very passionate about the subject.
Ginni Rometty, Executive Chairman of IBM. Great to chat with you, Ginni, as always.
ROMETTY: Thank you.
CHATTERLEY: All right, the market opens next. Stay with us.
(COMMERCIAL BREAK)
[09:30:41]
CHATTERLEY: Welcome back to FIRST MOVE. That was the opening bell for the final time this week. Stocks opening higher this morning following gains
yesterday. Just to give you a sense of where we are so far in October, we're up around two percent for the majors after a week where hopes for
more financial aid for the U.S. economy have been revived, dashed and revived once more and probably not getting enough of the twitches and turns
in there, but we'll go with that.
Start of talks have also sent stocks in California based chipmaker, Xilinx surging; their rival Advanced Micro Devices or AMD is reportedly in
discussions to buy it in a deal with over $30 billion. That could come as early as next week, so watch this space on that.
All right, now to an update on the global COVID cases. Countries around the world are seeing new spikes in coronavirus infections. This chart shows the
trend lines for new cases per day. Europe is yellow, and showing a sharp rise in recent weeks. As we mentioned earlier on the show, Asia, meanwhile,
in blue, is beginning to see a slight drop there and others are relatively flat.
The United States has seen a jump in more than 56,000 new cases, the highest daily total in nearly eight weeks, in fact. And the chief economist
of Moody's Analytics says that could have a staggering economic impact.
Mark Zandi says for every 10,000 new infections, around $100 billion of additional Federal government support is potentially required. And Mark
Zandi joins us now.
Mark, great to have you with us, and I love your rule of thumb because it gives us a sense of where we should be headed in these negotiations. You've
long said $1.5 trillion stimulus is what you think is required. Are you more or less optimistic pre-election that we get something in light of the
chaos? Can we call it that -- of the negotiations over the last week or so?
MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYSTICS: Well, Julia, I'm perplexed by what's going on? It's just whiplash. You know, it depends on the, you
know, the minute hour of the day.
You know, at the end of the day, it makes economic sense to come forward with a sizable fiscal rescue package, $1.5 trillion, I think would be
appropriate at this point, and it makes political sense. I mean, I just don't get it.
So I'm still holding out hope. I think this is going to get done. But you know, right at the very last minute. So hopefully, these guys can get it
together, because it is what the economy needs for sure.
CHATTERLEY: I mean, you were saying $1.5 trillion, when the cases were around 40 to 45. We are already talking about 56,000 cases a day, just
using your rule of thumb, we're already talking sort of $1.6 trillion to $1.7 trillion. When I look at the gap between the two sides here, and I
know it's more complicated than that, but $2.2 trillion dollars, the Democrats $1.6 trillion. So the Republicans were sort of getting to the
meat in the middle point.
ZANDI: Yes, you would think. I agree with you, I mean, $1.5 trillion, I thought that that's a doable amount, so that's what I've been assuming.
But, you know, you would figure that if the Trump administration is at $1.6 trillion, and the House Democrats are in $2.2 trillion. You know, logic
would dictate you know, you could get to the middle, $1.85 trillion.
And you're right, I mean, the price tag is rising because the infections, as you point out, are rising as well. The other thing I'd say is, it's
better to err on the side of too big than too small for a couple of reasons. One is, you know, it's a long time between now and the other side
of the election and the inauguration and getting legislation through is -- particularly in a time of a pandemic.
And the other thing I point out is the uncertainty here. There are so many things we don't really know how they're going to play out -- the pandemic,
the election, and lots of other things -- and in a period of high uncertainty, you know, Policymaking 101 says, you know, go big, because you
want to make sure that you don't fall short, particularly in a crisis like the one we're in.
So, you know, everything argues for a big package here.
The final thing I'll say, though, Julia, is if we don't get a package now, I'm very confident when the next President -- soon after the next President
is inaugurated, we're going to get a package, and it is going to be -- the more than economy struggles, the bigger that package will be.
[09:35:04]
CHATTERLEY: Yes, but I think your point here in the short term at least, and it's not even the short term, it's more medium term now, because it's
been a few months since the bump up in unemployment benefits ended. So we're already well into this stage, the risks are asymmetric. The downside
risks here are far greater than providing too much money in than it being too much.
You've also been looking at -- and this plays to the point you just made about the economic impact of an ongoing Trump presidency, a split Congress,
House is run by the Democrats; Senate is maintained by the Republicans, but also a clean sweep for the Democrats. Just give us a sense of what the
economic outcomes based on, at times, meager policy announcements for both sides is giving you.
ZANDI: Yes, sure. So we did run different scenarios on the election outcome and determined what the policies would be under those scenarios and what
that meant for the macro economy, for the economy's performance going forward, and my sense is that under a Democratic sweep, we'd end up with a
stronger economy, more jobs, lower unemployment, more GDP by the end of the President's term than if we ended up with a split government or with the
Republicans.
I mean, it boils down to three things. First, is around fiscal policy. A Biden sweep would result in a big fiscal rescue package: infrastructure,
healthcare, education, and housing. And that's exactly what the economy needs right now since unemployment is so high, inflation is so low, and
interest rates are pegged to zero, and the Federal Reserve is saying, you know, we're going to keep interest rates at zero.
Second is trade. I think Biden would continue to be aggressive in trying to get China to play by the rules, but they wouldn't use a tariff war to do
it, and the tariff war that the Trump administration has been pursuing has been very counterproductive. It's like a tax increase on American business
and consumers.
And finally, immigration policy. These guys are night and day on immigration. President Trump would double down on his restrictive
immigration policy, which is not good for the economy, particularly longer run, and Biden would normalize policy, bring it back to where it was pre-
Trump, and that would be positive for the job market and productivity growth in the future.
So I can go on. But those are the key things that would result in these different outcomes. And, you know, if you're interested, just Google Zandi
Macroeconomic Consequences of Trump v. Biden, and you can see all the gory details it's laid out for everyone to see.
CHATTERLEY: Nice pitch there, and I'll tweet it out as well just to help along here. Just to be clear, you say seven million more jobs created under
a Biden presidency compared to a scenario where Trump is re-elected, and the Republicans hold the Senate.
The counter to this and admittedly I studied Economics a while ago, isn't extra spending, a drag on growth, Mark, and the suggestion is taxes would
rise under a Democratic leadership here. Also, the risk of greater regulation coming back and some of that good, perhaps, if we are talking
about the environment, but not all of it, and it could be a case of being seeing businesses mummified, quite frankly, and red tape would also be a
drag on growth. What's the counter to that?
ZANDI: Yes, in my view, regulatory policy is, you know, really much -- really on the margin for the broader economy. You know, it matters for
industries. You know, it's going to matter for the fossil fuel industry if Biden wins. He is going to take a different -- a very different approach on
regulation of fossil fuels than the Trump administration.
It matters maybe perhaps, with the financial system and banking industry, and perhaps for some companies, but from a broad macroeconomic censors,
it's very difficult, and I haven't seen anyone do it and I've tried to connect the dots between regulatory policy and economic growth. It's just
very, very difficult to do. It's really on the margin.
And you're right, Biden is going to raise taxes on corporations and on high income, wealthier households, reverse much of what President Trump did in
his first term. Take that money and then also borrow some additional money to fund his infrastructure plan and all the other spending and investments
that he is going to do, and the net of all that is a big boost to economic growth.
And Julia in many periods, I probably wouldn't feel as upbeat about this kind of a policy, except in this period, because we have a 7.9 percent
unemployment rate. We have a lot of people who are underemployed, people have had pay cuts. Inflation is very low and interest rates are at zero and
the Federal Reserve is saying to policymakers and lawmakers, you know, step on the accelerator here, and that's exactly what the Biden plan is doing.
So in other times, I wouldn't be as enthusiastic. But in this time, I think it is the exact right policy to pursue.
CHATTERLEY: Yes, cost of borrowing minimal, if not negative, and a promise to keep those interest rates down as well. Now is the time.
Mark Zandi, thank you so much for that.
All right. Coming up after the break, more help for those who have borrowed money for small business loans in the United States, too. The CEO of
lending platform, Lendio says more must be done, and he is next. Stay with us.
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[09:43:15]
CHATTERLEY: Welcome back to FIRST MOVE.
Small businesses that borrowed money under the U.S. government's payment protection or paycheck protection scheme, the PPP will find it easier to
have those loans forgiven. The Treasury and the Small Business Administration is simplifying the process for loans of less than
$50,000.00.
Lendio, meanwhile, is a marketplace for small business lending. During the pandemic. It says around 100,000 borrowers used its platform for the PPP
loans from its partners. It estimates over one million jobs have been preserved to the $8 billion worth of loans that were transacted during a
two-month period.
Brock Blake is CEO and founder of Lendio, and he wants the PPP scheme to be extended. Brock, fantastic to have you on the show, as always.
BROCK BLAKE, CEO AND FOUNDER, LENDIO: Great to be with you.
CHATTERLEY: So let's talk about trying to make getting forgiveness for these loans easier. You know, I've had to look at the details on this. You
still have to provide payroll forms, benefit forms, tax documentation. I'm not sure it's that much easier. What are your thoughts?
BLAKE: Well, I'm happy that SBA and Treasury have taken a step forward to try and simplify it as much as possible. But as you said, there's still
quite a bit of work to do, and it's probably as much as the SBA and Treasury can do on their own and the power they have. I think they need to
wait until Congress passes an additional bill that truly simplifies that for those smallest of small businesses.
But as you said, it's a step in the right direction, but there's still plenty of work to do for those smaller businesses.
CHATTERLEY: Are you in agreement that we should see some forgiveness? Just sign a document to say, look, I took this money in good faith. There are
those that are pushing for loans below $150,000.00 to simply be forgiven like that. Are you in favor of that? Or perhaps a smaller amount?
[09:45:08]
BLAKE: Yes, I believe there's a balance between accountability for those business owners to produce -- you know, they stated they would take the
loan for certain expenses, including payroll, and utilities and rent, and I think there's a certain amount of accountability that they need to be able
to show.
But that being said, for the smallest of small businesses, probably less than 50,000, maybe less than 25,000, and definitely, the sole proprietors,
self-employed, those should automatically be forgiven. We need to make it easier for them to be able to get that loan off their books and help them
through this difficult time.
So I think 150,000 is too large, but for the smallest businesses, definitely auto approved the forgiveness.
CHATTERLEY: You said accountability. And I do think this is important, because there will be people going, hang on a second, there was a lot of
fraud. You transacted four times the amount of loans is in matching in that period, of that two-month period as you done in what -- the eight or nine
years since you've founded the company, $2 billion, and then $8 billion.
These are astonishing sums of money and trying to get money to desperate people, quite frankly, to keep their businesses alive. Are you worried
about fraud? And are you worried about fraud at banks versus fraud from online lenders? Because there are people asking questions about the
comparison between those two things?
BLAKE: There's no question that fraud is a concern for the entire industry, from the SBA, from the Fintech lenders to the bank, and I don't think it
leaves anyone out. I think, across the board, there are concerns, and I also think that that was -- you know, when you roll out a program of that
magnitude in such a short amount of time, there will likely be some fraud.
The concern is, what is the level? And I don't think we have true visibility into how much fraud actually existed, and we're still trying to
gather numbers around that. But it is definitely a concern, which is part of the reason for my stance on forgiveness. I think forgiveness allows the
lending institutions and the SBA to have a second look at how that business owner used that that money. These are taxpayer dollars.
Did they go out and spend the money on a Lamborghini? Then that should not be automatically be forgiven. They should document that they used it for
those items, payroll and utility and other rent expenses. Otherwise, I think they have a responsibility to pay that money back.
CHATTERLEY: Yes, I'm with you, I think, on that Brock, despite the sort of logistical challenges of trying to pull all this information together and
keeping your business going.
That's my next question, Brock, what are you hearing from small businesses because the pandemic isn't over. The challenge exists, and for many of
them, the money has run out.
BLAKE: Very, very frustrating right now that we're watching what's happening in Washington with politics. It appears that on every side of the
aisle, everyone wants to help small business owners with a second round of PPP, and small business owners desperately need it. I have seen stats where
over 200,000 businesses are closed, 60 percent of them are closed permanently, about 70 percent of businesses have had a decrease of 25
percent in their revenues this year compared to last year.
And the last round of PPP happened in April. They provided two and a half months of capital to help these business owners get through. But the
pandemic is not over. Businesses are still shut down, restaurants are still impacted with the number of customers they can have. Retail shops have been
decimated.
And meanwhile in Washington, they are playing politics, and we cannot continue to go day after day after day waiting for these negotiations to
happen on this stimulus bill. So we are urging Congress and Secretary Mnuchin and Speaker Pelosi to figure out a way to be able to get a deal
done, come to a compromise and help America's Main Street small businesses.
CHATTERLEY: Yes, and the heartbreaking thing is, and you've pointed to it, there does seem to be agreement on both sides. It's just politics getting
in the way of just releasing that money.
Brock, I do want to ask about some more structural changes in the industry as well. We saw a big deal between Amex and Kabbage, a lender that's been
on this show, for example. We've seen other deals that look a little bit more distressed. What does the future look like for some of these Fintech
players? Do we see more consolidation in the sector?
BLAKE: I believe that there will be more consolidation, and when you look at the scenarios that are out there, Amex and Kabbage that's a great win
for both sides, and even the other scenario where you have Enova acquiring OnDeck Capital in what has been called a distressed deal. I actually am
very excited to see what happens with that.
[09:50:09]
BLAKE: Enova has prowess of execution with OnDeck's brand and the way they've helped small business owners. I actually have higher hopes for that
transaction than maybe most in the industry and look forward to seeing what happens over the next couple of years.
But certainly, a lot of players have been negatively affected by the pandemic lenders, and they're not going to make it through and that will
either result in them closing their doors or more consolidation, and really the challenge with that is, I think, the small business owner is the one
that gets affected.
The more lenders there are, the more competitive it is and the better rates, the better options that a small business owner has and so it's going
to be interesting to watch. But I do expect additional consolidation in the lending industry.
CHATTERLEY: Yes, but you raise a great point. The less competition, the higher rates go and the higher the lending rates, and it's a tough time to
make money. Brock, great to have you with us.
Brock Blake there, the CEO and founder of Lendio, and great job during those two months by the way.
BLAKE: Thanks, Julia.
CHATTERLEY: Great job.
BLAKE: Thank you.
CHATTERLEY: Thank you.
All right, coming up, after the break, severe weather warnings are in effect for Texas and Louisiana as Hurricane Delta churns in the Gulf of
Mexico. It could be the second such storm to hit the Lake Charles, Louisiana area.
All the details, next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Hurricane Delta has regained strength making it once again a Category Three storm. As it moves North
across the Gulf of Mexico, preparations in Louisiana are underway.
Delta is expected to hit later Friday near the same spot Hurricane Laura devastated just six weeks ago. Laura causing extensive damage to homes and
businesses.
Meteorologist Derek van Dam joins us now from the Louisiana Coast where more than three meters of storm surge is predicted. Derek, talk us through
it. That sounds pretty devastating.
DEREK VAN DAM, CNN METEOROLOGIST: Yes, not great for an area that's already been ravaged by so many storms. In fact, we've had four named tropical
cyclones strike the Louisiana Coast this year. This is going to be the 10th named tropical cyclone to make landfall in the U.S., setting a new record.
I mean, an unprecedented season that we are currently underway. We're using the Greek Alphabet for goodness sake. This has the potential, Julia, to add
another billion dollar disaster to the United States' list of billion dollar disasters that have occurred already this year. There's more than 10
that have already happened.
Now, you can think about the multitude of storms that continue to batter the coastline of Louisiana and what this is doing to the industries here.
Let's talk about that because I'm in Delcambre, Louisiana. This is in the Vermilion Parish and what you are looking at is very representative of this
particular area. Lots of fishing. This is a huge industry, shrimp, crab, those types of things.
And with Hurricane Laura, as you mentioned in your tease to me, just a moment ago, so fresh on people's mind. Just six weeks ago, we had over
30,000 homes that were destroyed; 35,000 homes that were damaged, they still have blue tarps on top of them.
There's still lots of debris that's still on the roadways that could potentially be projectiles as the winds pick up this afternoon and evening.
But the flooding from storm surge, Julia, here it is. Hurricane Laura, this is the high watermark that occurred.
With Hurricane Delta, the potential to repeat this once again, that will be devastating for the local businesses, and not to mention the residents here
in Delcambre. Louisiana -- Julia.
[09:55:48]
CHATTERLEY: Wow. That water line, Derek. Thank you so much for bringing us that update. Derek Van Dam there. Derek, stay safe and our hearts with
everybody there. Thank you for that.
All right, that's it for the show. You've been watching FIRST MOVE. I'm Julia Chatterley. Stay safe this weekend and we'll see you same time, same
place on Monday.
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[10:00:00]
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