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>> Attorney General Pam Bondi is leaving

her post uh at the head of the US

Justice Department, ending a tumultuous

tenure as the nation's top law

enforcement official after some

high-profile stumbling blocks in her

efforts to carry out President Donald

Trump's agenda. Now, in a social media

post uh today, earlier today, President

Trump writing, "Pam Bondi is a great

American patriot and a loyal friend who

faithfully served as my attorney general

over the past year. We love Pam and she

will be transitioning to a muchneeded

and important new job in the private

sector to be announced at a date in the

near future." And our deputy attorney

general and a very talented and

respected legal mind, Todd Blanch, will

step in to serve as acting attorney

general. So again, President Trump

putting this out a little bit earlier.

She was viewed as one of Trump's most

loyal allies. She oversaw the

unprecedented transformation of the

Justice Department. Joining us now with

what we need to know, Bloomberg News

Washington and White House correspondent

Jeff Mason in the Bloomberg News

Washington DC bureau. A a quickly

developing story. Somebody who seemed

very loyal to the president. Jeff, um we

cannot forget uh what she did in front

of Congress just a few weeks ago. What

was it that really caused the president

to fire her?

That's a spot-on question and I'm the

wrong guy to answer it. We're going to

have to ask him that and he didn't make

that clear in his social media post. I

do think it's fair to use the word

fired, however. That's not the word he's

using. Uh but it's what it was. The the

president the attorney general doesn't

just leave that job without the

president saying you're leaving that

job. And so there clearly was some

increased frustration on his part that

he she wasn't able to deliver on u the

things that she that he was asking her

to do. I also think it's important to

sort of put a framework around what the

president sees as the the justice

department and the attorney general and

what their role is. Most presidents view

it as an independent agency. President

Trump did not. He viewed it essentially

as his at his uh personal lawyer. And

right now he's looks like he wants a new

one.

>> You know, Jeff, I think so much about

this president who understands like him

or not, everyone says he understands

media and presentation and so on and so

forth. And I do think about um how so

much of the administration seems camera

ready. And so I do wonder how much of

this is, you know, actually her her

ability or what she did on the job or is

it how she presented whether it's before

committees up on Capitol Hill. I I just

think about that and contrast it with

what we've seen perhaps of Pete Hegath

and some of those updates on the war.

>> Yeah, I think you're right, Carol, that

he cares a lot about presentation. This

is a former reality television host who

has brought a lot of those same demands,

skills, and sort of mind frameworks to

the presidency. So, yeah, he likes that

in a cabinet official as well. That

said, if you look at how Attorney

General Bondi performed in Congress and

the way that she bantered, uh, if banter

is even the right word, with members of

Congress, it was very combative and it

was often done for the audience of one

in the White House. So, I'm not sure

what he would criticize specifically

about uh the way she came across because

it was seemingly the way that he

expected her to come across. Maybe that

shifted, you know, that's certainly a

possibility, but it the evidence doesn't

show that he's looking for someone who

is less combative or someone who is uh

less willing to do his his bidding or or

what he asks of the Justice Department.

And and that's those are things that she

did, but she didn't she wasn't able to

produce everything that he wanted. And

you even saw at one point during the

over the last year a uh sort of a direct

message to her over social media when

she wasn't and that was that was really

unusual. So we we know that there was

some frustration there.

>> Um okay. So what does um we talked about

uh Todd Blanch taking over. Um

>> what about Lee Zeldon? That's a name

that's in bandit about,

>> right? So who do we think is going to

lead it next? Well, that's the question.

Um, and both of those are possibilities.

The president certainly has a comfort

level with them. Um, clearly with Todd

Blanch, who is his former one of his

former personal attorneys. Um, and

that's that's going to be something that

we'll be continuing to report on in the

in the coming days. It depends, of

course, on how long the president uses

or takes to to make that decision. But

again, I wouldn't expect a major shift

uh at the Justice Department. there will

be a new head of the of the DOJ. But in

the same way that at DHS after Secretary

Gnome's departure, the policies aren't

changing. President Trump himself is not

changing. What he wants out of his two

of those two cabinet agencies isn't

changing. What he is getting is a new

face.

>> How easy is it going to be for that new

face to get approved?

>> Good question. The president still has a

majority of course in the Senate. That's

where cabinet members get confirmed. Um,

you know, I I suspect that he will he

will probably do just fine with this. If

he was looking for a new head of of ICE,

uh, that might be trickier, but um, I

don't know. I I would be speculating,

but but uh, you know, as long as he

continues to have Republican majorities

in the Senate, which of course he will

have at least through the end of this

year, uh, that's not too big of a

problem.

>> Yeah. And I guess it was typ so easy for

Mark Wayne Mullen, relatively speaking

to to get through uh that.

>> Well, and he's one of them, you know,

and that's usually it's usually easier

to get confirmed if you are coming from

Congress and that that worked in his

favor.

>> Hey Jeff, you going to be able to uh

turn the ringer off and have a quiet

weekend? [laughter]

>> Nope.

>> Well said. Well said. All right, Jeff

Mason, thank you. Bloomberg News

Washington and White House correspondent

joining us from our DC bureau. We're

going to stay on this. Uh with us is

Matthew Seligman, Greyhawk Law founder

joining us from Big Su. He has taught at

Harvard Law School uh academic

appointments at Stamford and Cardoo uh

practices constitutional and appellet

litigation, filed Supreme Court amicus

briefs, and written extensively on

structural questions of law and

government authority. So we thought

perfect guest with all that's going on

right now.

>> Hey Matthew, good to have you with us.

Uh, as Carol mentioned earlier, the

president did say that uh, Pam Bondi

will transition to a muchneeded and

important new job in the private sector.

Will she be able to do that easily going

into private practice if she chooses to

stay in law?

>> Yes, I don't think there's any question

that she'll be able to find private

employment. The question is what? uh

something that we've seen as members of

the administration and other allies of

President Trump, especially lawyers, as

they leave their work uh for President

Trump, whether that's voluntarily or

not, their options are more limited than

those coming out of prior

administrations. Uh an attorney general

leaving uh any other administration,

Republican or Democrat, would have their

choice of any job. But I think it's fair

to say that uh attorney general and now

former attorney general Bondi will face

substantially more limited options

because the administration's lawyers are

toxic to a wide range of law firms and

private sector companies.

>> Hey Matthew, I'm thinking too uh big

time about who is the next US attorney

general and what might be top of mind.

Um how might you be looking at that?

>> Well, I think it's telling that Lee

Zeldon's name is being floated right now

when Todd Blanch is the acting attorney

general. He's been in the Department of

Justice since the beginning of this

second term. He's served President Trump

in a private capacity during uh the

criminal prosecutions of President

Trump. And yet, the obvious choice

perhaps is not being floated as the next

choice. The reason why I think that's

telling is because Todd Blanch, who is a

very good lawyer, is also not a TV

personality. And something that we've

seen across uh President Trump's first

and second term is that what he wants

out of his cabinet officials is not only

the execution of his policies and his

priorities, but also a certain type of

ability to present on TV and before

Congress. And so he's looking for

someone who will defend him on TV in a

way that not everyone who's a good

lawyer will. But as our Jeff Bondi her

Jeff Bondi or Jeff Mason said about Pam

Bondi um we all remember her you know

going through her books and combative uh

before committee members up on Capitol

Hill. But having said that that would

have probably been what many would have

said or what Jeff was kind of saying

that a performance that President Trump

would have agreed upon or would have

maybe admired uh that comp combative

kind of back and forth. Um do you think

that's what the president's going to

continue to look for? someone who's

going to fight back.

>> I think that's there's no question of

that. I think he he views himself as a

fighter and he wants fighters on his

behalf. I think the reasons why he

became frustrated with uh former

Attorney General Bondi don't have to do

with that uh that performance in

Congress. I think they go back earlier.

uh you mentioned before the uh the

unintentional social media private

message that became public and uh former

attorney general Bondi's uh various

public missteps primarily with respect

uh to the Epstein files. And so I think

those missteps are probably more what

the president uh the source of the

president's frustration. He wanted an

attorney general to make that problem go

away and she didn't.

>> So what do you think this

>> but can anyone do that?

>> What

>> can anyone make that problem go? And and

that that's not and and the reason I ask

is because Trump views the attorney

general as a different job than other

presidents have viewed. But nobody

nobody's going to make that go away.

Matthew,

>> that's exactly right. I think he was

asking the impossible, especially once

Congress passed a law mandating the

release of those files and that was a

bipartisan law.

>> Right.

>> So I think he was asking the impossible

of an attorney general who wasn't able

to deliver. And so one question we'll

have to look at is as things go forward.

when he asked the impossible of his next

attorney general whether he will fire

the next attorney general as well.

>> So you don't think that all of a sudden

we're going to see the Epstein files

more of them released?

>> Probably not. I think the reason why

they haven't been released so far has to

do with the administration's interests

as you said. You know, I think it's

impossible to make that political

problem go away, especially when it's

dividing his own base.

>> One thing uh curious about too is, you

know, so we've got this news on Pam

Bondi out as attorney general, US

attorney general. We had President Trump

uh attending the discussion over the

birthright citizenship issue before

Supreme Court justices yesterday. Not

the first time we've seen a president

kind of watching what the Supreme Court

does, but first time that we've seen it

in the modern era. Um how are you

looking at all of that? You are someone

who studies, thinks about constitutional

law in a big way.

Well, [snorts] I think what we're seeing

here is the natural timeline of the

legal system responding to the Trump

administration's aggressive actions. Um,

whether you like him or dislike him,

there's no question that he's exerted

more executive authority than any prior

administration.

>> But President Trump being there, how do

you see that before Supreme Court

justices listening?

>> Well, as you also mentioned, he's a

reality TV host, and that is a moment

made for television. You know, it's

possible that he thought he might be

able to intimidate the justices, but I

can tell you that would never work and

it might even backfire. And so, I think

the fact that he decided to go was a

political statement about his investment

in the issue. Um, and it's theatrical in

a way that I think appeals to the

president.

>> How do you view the Supreme Court, just

based on what we heard yesterday, how do

you view the Supreme Court ruling on

that?

Well, I think it's it's quite likely

that the Supreme Court is going to hold

the against the administration and that

the executive order that purported to

say that uh that the children born in

the United States to undocumented

immigrant parents are not citizens.

That's what the administration said. And

uh there's been precedent on the books

since uh since the 19th century that

says that that's not what the 14th

amendment means. um that everyone born

uh in the United States with the

exception of very small categories like

the children of ambassadors. Aside from

that, you're an American citizen and the

president can't undo that by executive

authority. I expect the Supreme Court

will say exactly that.

>> Hey Matthew, before we let you go,

you're joining us from beautiful big

sir, California on the central coast

right now. Have you seen the $10 gas?

This is sort of like a big story na

nationally that premium gas there

[laughter] at that one gas station has

hit $10.

Uh it's uh it's remarkable and I think

that's um another dimension that we're

going to see increasingly. I mentioned

that the sort of the legal bills are

coming due where the administration took

executive action, very aggressive

executive action last year and now the

legal system is slowly starting to

respond. Um and and I think that's

happening economically as well. you

know, the president's tariff powers, for

example, you know, he asserted these

unlawful tariffs and over time there's

an economic toll that that builds up and

we're seeing that as well with his

actions uh in the Middle East that this

war isn't going away as quickly as he

thought it would as he's promised it

would and we're starting to see the

economic consequences of that and after

that we'll see the political

consequences.

>> Yeah, we had planned to really talk to

you about uh one-year anniversary of

Liberation Day and more on terrorists.

Maybe we'll have you come back at a

moment because we do see of course uh

the continuation of the White House to

to think about that certainly as as a

tool. Um Matthew, thank you so much.

Matthew Seligman, Greyhawk Law founder.

Stay with us. More from Bloomberg

Business Week Daily coming up after

this.

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>> We [music] are thinking a lot about the

cost of war, the cost of tariffs, the

impact of all of this on the US and

really the global economy. This is Iran

uh warned the presidents against a

ground offensive and as the Islamic

Republic will set a toll for ships

passing through the straight of Hormuz.

Uh we got this from the Iran uh deputy

foreign minister uh in a quick interview

with Sputnik. President Trump though,

remember last night, right Tim? um

pledging to continue the US war in Iran.

>> Yeah. Even as he looked ahead to when

the war is over, here's just a little

bit of President Trump last night from

the White House regarding his outlook

for the conflict.

>> When this conflict is over, the strait

will open up naturally. It'll just open

up naturally. They're going to want to

be able to sell oil because that's all

they have to try and rebuild. It will

resume the flowing and the gas prices

will rapidly come back down.

That was President Trump last night from

the White House. Meanwhile, the war

continues now more than one month old.

We've got a great group joining us for

all things on the macro and interest

rates.

>> Let's get to it with Ira Jersey

Bloomberg Intelligence, chief US

interest rate strategist alongside

Robert Tip Pum, fixed income managing

director, chief investment strategist,

and head of global bonds. Both in

studio. We're just going to lock the

doors, keep you here for 60 minutes.

[laughter] There's so much to talk

about. Um, where do we begin? Uh, I

think it's safe to say that I think

investors in markets thought that we

were going to get something different

from from President Trump. Um, Ira, let

me start with you. What are we seeing in

terms of the rates markets? What are we

seeing in terms of financial markets

from investors about where we're maybe

going from here? The reality of it.

>> Yeah. So, so I think we should talk a

little bit about today because I think

today is very interesting with the West

Texas Intermediate crude up and everyone

saying, "Oh, look, the bond market's

hardly moved." But then I dig into the

details of this and I say, "Okay, the

2-year Treasury yield on the the

everyday 2-year bond is only down one

basis point." But then you look at the

TIPS market and look what's going on in

like 5year tips and two-year tips. Those

yields are down dramatically. And

typically those yields go down primarily

when you worry about either growth or

inflation being high. And guess what? We

have both of those things today. So,

when you look at inflation expectation

and what the market's pricing for

inflation expectation, that's up 10

basis points today, right? So, you look

at two-year inflation swaps, like

they're they're higher by, as I checked

my Bloomberg terminal now, by about five

basis points today, but that's well off

yesterday's low.

>> So, Ira, is that not being reflected in

the Treasury market? Is it only being

reflected in in in tips? What's going

on?

>> Yeah. So, well, that's my point, right?

You have this you have this disconnect.

So, so well I think in in large part

because the the the way the market is

pricing this is they're pricing it

through tips and inflation expectations

as opposed to the Federal Reserve hiking

interest rates, right? Because if the

market was pricing for the Fed to be

really hiking, going to hike interest

rates anytime soon like the ECB we think

is likely to do this coming month um

would be to uh would be to have higher

yields and that's not what's happening.

Robert, come on in on this because I

think the thing we're thinking about is,

you know, with treasuries, I mean, the

concern that at some point energy

prices, higher energy prices, if they

stick around longer, um, that that

ultimately can impact growth and I'm

just curious where you are because what

I'm hearing from Ira is the potential

for are we dare, you know, talking about

stackflation again,

>> right? We're definitely talking about

it. Uh, but the fact of the matter is,

you know, I think we've learned a lot

since co we had a huge increase in

interest rates. Economy was pretty

resilient. In Silicon Valley Bank, the

economy was pretty resilient. Fast

forward last year, you have this massive

increase in tariffs, tremendous

uncertainty. The economy is pretty

resilient. So now we're looking at high

energy crisis, right? And there are up

the curve is is still in backwardation.

So people are optimistic it's going to

come down, right?

>> But the fact of the matter is the

economy has shown a lot of resilience.

So, uh, I think the the market is is

looking at the Fed and saying, you know,

they may not be able to cut rates.

They're going to have to drag their feet

on this, but it's not like other

countries where, you know, hikes are

priced in. So, that has a dual mandate.

Uh, they're going to be very well

considered in this, but I think the

market is sensitive to that. If we get

minus 100,000 payrolls tomorrow, then

it'll be different. The market will be

looking at recession possibility.

>> Um,

>> is that likely? I don't think so. Okay.

Uh, you know, I don't think so because

that that's my point is the economy's

been pretty resilient and I think

frankly we've seen a lot of stability in

long-term interest rates once they got

to this 4 and a quarter level late 2022

they've been rangebound along around

that level. So shortterm there's

tremendous amount of uncertainty. Longer

term the inflation expectations things

seem to be pretty stable. Ira do

consumers have that that cash to to um

protect themselves from these higher

energy prices? I spoke to Chime's CEO

earlier today on on Bloomberg TV and and

Chime is a is a company the average, you

know, the typical person they they deal

with has a um income of around $75,000.

Uh so it's it's a certainly a part of

the economy that is more affected by

higher fuel prices. And he said fuel

spending has risen 25% amid this war

with Iran. Yeah. And certainly, you

know, energy prices have and obviously

that's a pretty large part of the

consumption basket. The way that I think

about these higher uh gasoline prices,

it's really a tax on the consumer. So if

it acts like a tax on the consumer, then

it will slow the economy. Now, you know,

we talk about stagflation. We have to be

a little bit careful on how we define

that, right? Because you could have a

slower economy and not a recession,

right? And and that's and we've had a

pretty robust economy, and I agree with

Robert that, you know, the economy has

been somewhat robust, but a lot of that

robustness has come from two things. One

is investment spending things like AI

and the like and then the other is you

know when you look at all of the jobs

that have been created and actually two

times the number of jobs have been that

have been created in aggregate have come

from one sector and that's the

healthcare uh sector right with a lot of

people in home home healthcare and and

the like. So so the fact is is that when

you have a one sector economy I think it

is at risk. I'm a little bit more

pessimistic maybe than Robert is on on

the US economy, but we don't have to

have a recession. And uh but you could

have a significant enough slowdown that

it certainly feels like that. Like think

about 2015 when you had the exit of the

the energy uh investment boom. Or think

about 1994. I always bring up that one

because that's when I got out of grad

school and I had a problem finding a

job. But luckily my wife found a job and

we were all good.

>> [laughter]

>> Um but but but nonetheless the the you

know if if you do have a significant

slowdown it can feel similar to a

recession even if it like never shows up

in the actual numbers.

>> You know Robert what what about though

you look at you know obviously the

global bond market but I do think about

disconnects between what some other

central banks might be doing because

this war certainly impacting Europe Asia

differently than it is the United

States. We've talked about that a lot.

So if we have disconnects in global

central bank policies which does happen

um you know it is still we're all kind

of connected. So I'm just curious of do

we see parts of the world go into

recession or significant slowdowns? Does

it ultimately feed back to the United

States in some way? People buy stuff

from the US. They do business with the

US. So I'm just

>> Right. Right. Well I think you know the

United States ultimately is more of the

world's customer. uh and so I think that

you know the slowdown here will have

more impact on other economies than

their slowdown

>> which we saw with the GFC.

>> Yeah. Now uh in terms of Europe they are

looking at possibly some rate hikes

there.

>> Yeah.

>> Uh and uh they may have a big a bigger

bite from the energy side or not. So far

their gas prices are up but it's been

measured. Uh we're going to have to see

what comes from the government on these

things. You know there's very little

appetite out there for recessions. uh is

there going to be a subsidization

uh coming from the government in order

to offset some of the costs there? But I

think that you know the US is uh

[snorts] for better or worse in some

respects more secure in terms of

resources in terms of geography. Uh we

will have more defense spending. Who

knows maybe we'll have some fiscal

stimulus you know before we get to the

uh the elections and um so I think we're

seeing some firmness in the dollar. Uh

but definitely sound much more

optimistic like I'm curious because you

are a little bit more pessimistic. Do

you have a question for Robert like as

you listen?

>> Well, not really. I mean the one

question I would say is how do you

invest some of this in the global fixed

income market? Right? Because because

like Carol said, you know, it's possible

that the ECB is going to be increasing

interest rates whereas the Fed's

probably on hold. Is there a curve trade

or something to do between the US and

and Europe? Say

>> right. Uh well I think that you know

when I look at the markets more broadly

you know look at cash look at equities

look at bonds and what investors have

been doing investors without changing

their asset allocations have ended up

with a tremendous amount of equities.

>> So they have a lot of exposure to

downside risk in the economy. Equity

valuations are fairly full

and I think that's a tougher call. Do

you stay with that an above average

allocation to equities? When you look at

cash, what we've seen is money fund

balances in the United States have

continued to go up. Cash balances for

investors, for returnseeking

institutions and individuals appear to

be kind of high. Bond allocations are

low.

>> So, I think people are underallocated to

fixed income. And I think that's why

we're seeing resilience in terms of

long-term yields.

>> Why do you think we see all that cash on

the sidelines? because cash has been a

great performer. But so if you think

about it, since late 2022, the tenure

gets to 4 and a quarter. We're still at

4 and a quarter. You've been all over

the map in the price of a 10-year. You

could have ridden cash all the way up to

530 down through 430. Now you're at 360.

So you're thinking about should you go

out on the curb and so on. But the risk

adjust returns of cash have been

phenomenal.

>> I was sorry. I was under the impression

that cash is trash. All right.

>> Well, the sharp ratio of cash has been

quite good, right? I think that's that's

Robert's point. And the other thing that

I would note with with all of the cash,

you know, I talked to some some of my

colleagues in equities and they say,

"Oh, look, there's all this cash on the

sideline that needs to be deployed." In

this case, I I do agree with Robert that

the people are underinvested to fixed

income, right, to to buy bonds in

general. Um, and but it's cash on the

sidelines that's in all these money

funds and the like, they're not going

into equities, right? This is instead of

holding bank uh deposits that yield

zero.

>> That's so interesting because I would I

would imagine that some of it is is

people who are saying well to your point

that equities seem fully valued. So

we'll have money in a money market fund

or in in some sort of bond fund and then

when we see an opportunity in equities

we'll go there. But that's not the

pattern.

>> What we're seeing is money is going into

bond funds. A lot of money is going into

bond funds. Money is going into stock

funds. But the amount of money going

into money markets is almost equal to

the sum total of those two. So

apparently there's a lot of investable

assets. It's piling up in those forms.

>> It continues to pile up. I feel like the

last couple years we keep saying when is

this going to come in? But it just

continues to grow.

>> Yeah. So for the most riskaverse

investors, the cash has been very

competitive with Treasury returns.

>> But for more adventurous investors in

fixed income, your high yield, your

emerging market hard currency debt, and

even your your corporate bonds over the

last few years have done very well. So,

[snorts] I think that's why, you know,

there is overall support for the market

despite the tremendous short-term

uncertainty.

>> Robert, when it comes to global bonds

though, where is the money going? And

I'm curious, it's been interesting when

you watch the dollar, which we saw it

under pressure, then we saw it move up

certainly, you know, as of late. Um, I

think about the impact on the emerging

market world. So, where have you guys

been specifically in global bond funds,

seen money going in or out? In terms of

the flows, it looks to me like there's

two offsetting kinds of flows that we

have seen since the election in

November. There's a big drop in the

dollar,

but the money is coming here. So, what's

going on? We're seeing foreigners buy US

debt securities, buy US securities, but

the amount of money that's coming in is

small relative to the total stock of US

dollar assets held. So apparently people

have been hedging the currency exposure

of their US investments but net where

are they putting their money it's still

coming here

>> and I think here's a reason for that

right when you look at where the flows

are coming from from foreigners into the

US in terms of treasury bonds corporates

equities and the like um it's foreign

institutions have been selling treasury

securities or at least running off their

portfolios but private institutions

continue to pile in right and those are

the economic sensitive investors and the

price sensitive investors So those are

those are the ones who are more likely

to hedge their currency exposure.

Central banks don't because that's not

really their mandate. And also private

investors, they buy 10-year treasuries,

30-year treasuries. Central banks don't

do that. Central banks buy T bills 2

years, three years. They don't buy the

long end. So So they don't own a lot of

market risk.

>> All right. So let's push this forward a

few months and and talk a little bit

about Kevin Worsh and the economy that

that he inherits if he becomes Fed

chair. When? I don't know. Is it is it a

when or is it an if, Robert?

Uh I think it's it's a when

>> when is it?

>> Okay.

>> Uh and

I don't I don't have a great call on

that, you know. Let's say this year, you

know, but I think I think the the more

interesting part

>> will be what does he do? But I think

what I'm supposed to say, what I'm

supposed to think is he's going to come

in, he's going to get the Vulcan

mindmeld on the committee [laughter] and

they're going to cut rates regardless of

what's going on.

>> But you know, we've seen this in the

past and we've read of in the history is

ticking higher

>> that central bankers come in and they do

the right thing when you're in the seat

>> and honestly if the dollar is going up

and that's getting inflation down

>> and long rates kind of stay where they

are because the inflation outlook is

solid maybe that's an acceptable

opportunity for everybody especially if

you're putting your signature on the

dollar bill.

>> What if it's after midterms and they go

to the Democrats? Would it still does

that change? It just got about like 15

seconds. You know, I'm optimistic on the

markets long term, but in terms of the

the picture for human beings and

politics, it could just be increasingly

chaotic.

>> All right. I told you and prosper.

[laughter]

>> Lock the doors. They're not going. I

Jersey Bloomer Intelligence, chief US

interest rate strategist. Robert Tip,

thank you. Pumm fixed income managing

director, chief investment strategist,

head of global bonds.

>> This is the Bloomberg [music]

Business Week daily podcast. Listen live

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on Apple CarPlay and Android Auto with

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>> Shares of top asset managers sliding

today. This after Blue Owl Capital said

it will limit redemptions from two of

its private credit funds after facing a

surge in withdrawal requests. Just ahead

of that blue owl news though, Apollo

Global Management President Jim Zelter

launched a fullthroated defense of

private credit, downplaying investor

concerns and describing recent

developments in the asset class as quote

mere growing pains. He was on Bloomberg

surveillance. We've really lost the plot

on credit. Um we're talking the

headlines and the conversations are

about this little narrow of area of

direct lending 200 billion of the

non-traded BDC's. And why are we here in

the first place? The reality is the last

15 years credit has compounded great

returns for investors around the globe

and they've done it in a manner which

outbeats their beats the high yield and

loan indexes dramatically. And so we're

talking about a little bit of skirmish

on the sidelines here. That was Apollo

Global Management President Jim Zelter

earlier on Bloomberg. Blue Al shares by

the way fell at one point today to their

lows going back to 2022. They're now

down around 66% from highs last January.

For more, we're joined by Olivia Fishlo,

Bloomberg News leverage finance

reporter, and James Crombie, Bloomberg

News senior editor for credit. They both

join us here in the Bloomberg

Interactive Brokers Studio. Olivia,

we're going to get to the Blue Owl story

in a second. You've been so great in

your reporting around that company. Um,

but I want to start big picture, James,

and just get your comments on what we

heard from Jim Zelter. He said, "We're

talking about a little bit of a ski of a

skirmish on the sidelines here." Is that

uh correct in your view? Is that

accurate? I mean, if you're one of the

biggest participants in the market,

that's what you have to say as Apollo.

Um, obviously he's going to support it.

Um, but I think it's more than just a

skirmish. We've seen big outflows,

redemptions from a lot of BDC's. Uh,

we're now seeing outflows from funds

that look at high yield bonds and uh,

high grade bonds as well. So, you know,

follow the money. Money is flowing out

of credit. Liquidity is coming out.

There's also a ton of supply that's

going in. So, I think this is more than

just a skirmish on the sidelines. I

think it's a big repricing going on.

Wait, so Jim Selter attributing the

reason private credit is in the

headlines due to the hefty returns the

asset class has generated for

institutional investors. Um is he right?

Is he potentially from his perspective?

Um James, right? maybe their book is

good and he's talking their book or is

he because I think about the

responsibility to investors in terms of

what he says at some point if he's not

being totally transparent that's a

problem down the road

>> he was talking historical so returns

were good in in historical terms I don't

think they're going to be good um there

are going to be more defaults more

losses more markdowns there's going to

be you know severe u impairment in some

of those portfolios so the returns just

aren't going to be there.

>> All right, so Olivia, come on in on Blue

Owl and the latest on that because what

investors were clamoring it for, that

was a lot.

>> Definitely. And I think to the point of

returns, that's sort of what started the

fears around BDC's was we started to see

returns come down as as rates came down

and Blue was sort of at the forefront of

that in part because they've tapped the

retail market so heavily and in part

because they were one of the last firms

to to close their tender offer window.

So the market was sort of waiting to see

what would happen around this really BDC

focused firm and as you saw the the

results were pretty staggering.

>> Yeah. So take us to today the imposing

the caps after facing 41% and 22%

request to exit. Bring us up to speed on

today's news.

>> Definitely. So what blue decided to do

was impose a 5% cap on the funds on both

funds which one had around 40% of

investors tried to get out and I would

say at this point

>> so almost half the fund were like I'm

out. I want to be out,

>> right? And so now what happens is every

quarter they have the option to decide

to try to get their shares out again. So

they have to resubmit. And so I think we

expect to see kind of a continued period

of we don't really know how long where

investors are trying to get out.

>> This is where James comes in and says

this is all in the prospectus on the

first page, right?

>> And Jim did mention that page one. Yeah.

>> So

>> 5% cap.

>> People shouldn't be surprised here. What

>> they weren't paying attention. They

weren't reading the small print. nor was

nor were a lot of investors during the

good times of credit when they were just

buying whatever and now that's

backfiring on them.

>> But James, is there a secret sauce to

Blue Owl in that as you said um opening

it up pretty aggressively to retail

investors? So a different investment

pool that maybe doesn't always read the

you know I'm not taking their side. I'm

just saying but that also in terms of

closing their fund kind of at the tail

end of making the investments. So maybe

the investments weren't the best in

terms of choices. Are they kind of

should they be put in a separate class

because of their where they are in this?

I

>> mean, I think Olivia has written a lot

about their tech focus, which is

problematic, but I think all of the

other BDC's are suffering. Um, and we

saw one downgraded to junk last week.

So, you know, that that wasn't a good

sign either.

>> So, what what changed for Blue Owl,

Olivia? is this was a a company that was

so loved not only by markets but also by

investors who wanted to invest in in

credit through Blue Owl. What was the

what was the tipping point here that

that really made it um get to the

headlines in a way that it wouldn't want

to be?

>> It's a good question. I think there were

a few things that sort of happened at

the same time which were really tough

for the manager. The first being

lowering returns in private credit,

sorted a conversation around retail

accessing the asset class, but then of

course AI I think was like a huge

turning point because Blue sort of made

software their thing and you know they

were said they were really great at it

and really focused on it and then no one

really expected the impact or perceived

impact of AI and then finally when they

first tried to to merge one of their

funds and and give some liquidity I

think they obviously had to pull that

merger had a lot of issues there. So it

was like they couldn't really stay out

of the news it felt like.

>> So you know doesn't this go back to

riskreward like [sighs]

that's investing and some things are

more of a sure thing and some of them

aren't. So again I go back to what you

said James of like you have to read the

prospect pro prospectus I can never say

that word but I mean understand what

you're investing in and understanding

how liquid or not liquid it is. And so

I'm just wondering like how are we

thinking about because it feels like

every day there's a a drop of stories.

So how are we starting to think about

private credit? Is it just a case folks

understand your rewards can be grand but

so can your risks especially when it's

focused on something like one particular

sector whether it's software or

something else.

>> And to be fair I think there is

something to be said about this

particular structure the semi-liquid

fund. It's sort of a test of that moment

and I think we're still waiting to see

of like private credit at large but I

still think it's an important area to

focus on

>> because you talk to private credit folks

and I think about all the times we've

been at Milkin it's like listen we're

lending to a part of the market that

can't access funds. So James like is it

good? Is it bad? Is it just I don't

know.

>> Well it's pretty boring actually. I mean

in terms of [laughter] middle middle

market middle market lending.

>> Sorry I forgot about that choice. And um

you know it's it's in the spotlight now

but but the impact I think the BDC blow

up is having and and Jim Delta described

it as a sort of sideeshow is 200

billion. It's relatively small but I

think it's creating caution across the

board amongst direct lenders who you

know a much bigger part of private

credit. They are going to be tightening

up. They are going to be asking for

different pricing, different structure.

>> Are you doing like big banks and things

or what? talking about, yeah, the big

shops that have, you know, hundreds of

billions of dollars uh of exposure to

direct loans to middle market companies.

And, you know, by the way, there are

200,000 middle market companies that

employ 50 million Americans and they

produce more than 10 trillion of GDP.

So, you know, it's quite a big impact on

the actual economy when we're when we're

talking about suddenly liquidity

draining from that system.

>> All right. Every time we talk about

private credit, I want that quote. I

want that quote.

>> Okay.

>> Um,

>> well, you'll have to come back.

>> Yeah. Both of you. You guys like every

time your stories the the whole sector

we're just kind of blown away.

>> Olivia Fish Low, Bloomberg News leverage

finance reporter James Crumby. Bloomberg

News senior editor credit. This is

Bloomberg Business Week Daily.

>> Stay with us. More from Bloomberg

Business Week Daily coming up after

this.

You're listening to [music] the

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Catch us live weekday afternoons from 2

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>> We often talk about the intersection of

the business world, market world, money,

uh, with so many different sectors of

our world. And we often, you know, talk

about how increasingly it has to do with

health in particular. And I was just

thinking about earlier, we're talking

about equities and what has been kind of

um, where you see job growth. You often

see equity outperformance. A lot of it

has to do with health.

>> With us, Jessica Rosen Warsel, executive

director of the MIT Media Lab, also

former chair of the FCC, the Federal

Communications Commission, the first

woman to lead the FCC as permanent chair

by President Biden. Previously, she

served as commissioner. That was back in

2012 after being nominated to two

separate terms by President Obama and

President Trump. She joins us from

Boston. We're going to talk about health

and we're we're going to talk about

everything you've been working on

recently. But I'm I'm really curious and

we're both really curious about the

shift of going from the FCC to the media

lab and the new perspectives that you've

gained by being there given the

experience that you had working in the

government.

>> Well, thank you for having me. Uh I like

the intersection of technology and

policy and it was a treat when I was in

Washington to try to come up with new

ways to use technology to close the

digital divide. And now it's been really

um just awesome being here at the MIT

Media Lab, which is a place that's been

around for more than four decades and is

really committed to thinking about what

our digital future looks like and how to

make sure that there's a role for

humanity when we develop it.

>> So, so let's talk about this in the

context of of healthcare because when

you were at the FCC, you were known for

um working to preserve net neutrality.

You were very interested, if I recall,

in in making sure that everybody had

access to to broadband throughout the

country. this idea of the homework gap

as well. Do you see the techn the

technological gap that and the

challenges that many Americans face? Do

you see that similar when it comes to to

healthcare or is it even more stark when

it comes to access to healthare?

>> Well, I think there's a lot about

technology now that leaves people wary.

They can feel like they lose their

agency and that big systems are making

decisions and they don't have a voice.

But at the same time, I look at a lot of

those new technologies that are being

developed like wireless sensors and AI

diagnostics and I see lots of

opportunity for us to improve healthcare

and there's a lot of work we can do to

improve healthcare. So, I think we've

got to seize it.

>> Jessica, let's go deeper into

specifically for women. Um this is what

we call our um business week women's

health segment and we talk about often

the gaps when it comes to men versus

women in either diagnosis and treatment

and R&D dollars. It's slowly getting

better but there are still gaps. So I'm

just curious this intersection of

technology how that might help reduce

that gap and really expand access to

care for women specifically and women's

issues. Yeah, you're so right. I mean,

there's longstanding gaps when it comes

to women's healthcare. For so many

years, they weren't included in critical

studies. And then we've had just a

fraction of the research dollars go

towards women's health care issues

compared to men's healthcare issues in

this country. And it's made a real

difference. We are not diagnosing

women's health care problems the same

way that we are for men. And if we close

that gap, we're going to do some good

work, not just for women's healthcare,

but for our global economy. In fact,

there are studies that show that as much

as $1 trillion could be seen in economic

growth globally by 2040 if we close the

kinds of gaps you are talking about. And

there are so many ways that we are

starting to see possibility and they all

involve technology. I think in

particular we're going to see so much

more use of wireless sensors because

when we use wireless sensors with

healthcare we get so much more

information good quality data continuous

data continuous monitoring that can be

used to improve diagnosis and healthcare

and that is one of those areas that I

think is just poised to grow

tremendously in the future. I'm I'm glad

you brought that up because I think a

lot of people who work in that space who

who are trying to create uh these

devices and and work in in medical

devices, they they have thoughts about

the regulatory process that it takes too

long to get FDA clearance or or FDA

approval, what whatever they're going

for. You operate in this unique position

because you were one of those folks who

was considered uh you know a regulator

at one point in your career. Is there

room to in the regulatory process there

to to make this easier so more people do

ultimately get access to this

technology?

>> Yeah, you know, I mean, I had a

different kind of regulatory role and

that I oversaw communications networks,

but I used to say that it was a

three-legged stool. We had to make sure

that we got the regulations right to get

wireless airwaves available to those who

could use them for these kind of

technologies and broadband again for

these kind of technologies. We also had

to make sure that practitioners knew how

to use them. And then the third leg

would be making sure that insurance was

set to reimburse these kind of

technologies because that's what also

makes it really practical. So we've got

to have all three things. Regulation,

familiarity among our practitioners and

insurance reimbursement working

together. And if we do that, I think we

can solve some of the healthc care gaps

we know that we have today. And I, you

know, I think these things are possible.

We've just got to work at them.

>> Yeah. Yeah, we also have to have money

like flowing into it, right? Investors,

like I hate to be so like basic, but

>> that old thing, Carol, you know, here at

Bloomberg, we kid, we laugh, but

there's, you know, follow the money with

anything, right? That just tells the

story. So, what kind of money and

interest do you see among investors? You

guys are in this great place, you know,

where there's that this great

intersection of of all of it.

>> No, you're absolutely right. That's part

of the equation. You know, we were doing

some work at the media lab. We have all

of these different efforts underway.

We've got folks working on ultrasound

technology that would go in a bra to uh

make it possible for early cancer

warning without having to go to the

doctor's office and get a mimography.

That could be tremendous at scale. We've

got work going on with affected

computing and physiological signals.

Then trying to understand how that

enforces our healthcare and things like

sleep. We've also got work going on with

bionic prosthetics that connect to our

nervous systems. Now the neat thing

about the media lab is we are

pre-commercial. So we're not yet

thinking about how you monetize all

these things. What happens is the work

we develop gets taken up by healthcare

practitioners and research doctors who

then put them into clinical trials. So

we're the early stage for ideas here.

But I think that's what makes me so

optimistic and excited about what I get

to see here every day. We just actually

did I was just looking up was it Bloomer

technology? Was it Bloomer Tech that we

had? Bloomer.

>> Yeah. Isha Chong Rodriguez, the founder

and CEO of Bloomer Tech.

>> Yeah, it was a smart bra basically for

for heart health and for for women and

it was really kind of fascinating. They

were in the testing phase. Yeah, there's

so much that is going on right now with

technology and healthcare. I just think

there's so many more opportunities for

customization when you think about the

data that we get from wireless

technologies. There's also opportunities

for customization that come from AI

based diagnostics. And down the road, I

think we're going to be doing more work

with digital twins where we might

develop models of unique organs and test

them before we have real world

intervention. Uh all of these things are

becoming possible. We're going to have

to work to get them out into the real

world with more clinical trials. And

like you say, it will also take some

money and funding. So I I just want to

ask about the the timeline for this

stuff because when we talk about this

this stuff I think a lot of people think

it's pie in the sky ideas but I mean do

you think we'll see this stuff in the

next 5 years?

>> Absolutely. You know, it was all like 10

years ago. I was visiting villages in

rural Alaska and they were demonstrating

to me how they were using these

refurbished echo cardiogram machines to

try to send images of heart disease off

to doctors in specialty hospitals in

Anchorage and Seattle because they

didn't have those kind of practitioners

in their backyard in a small village

near the Arctic Circle. And what I was

seeing in a rural location was something

that has now moved into mainstream

medicine, which is this idea that we can

connect and get expertise no matter

where we are and take measurement of

where we are with our health in places

that we've never been able to do that

before. So I think we are moving from

having technology be at the margins to

being part of mainstream medicine. And I

think what I saw years ago in that

little village in Alaska sort of set off

a light bulb for me which said that we

can do this here. We can do this

everywhere.

>> Listen, Jessica, you know, I'm listening

to you. I think both Tim and I are. And

we think about, you know, we live in

with a company where we can go go

everywhere uh and talk to all different

kinds of voices and and really respect

the importance of content and media uh

as a medium. And I am just curious

whether it's dealing with healthc care

issues and understanding what you're

talking about. It's so important that

correct content gets out there, but that

there's freedom in content, right? Um,

and I just wonder your view as former

chair of the FCC. I've got to ask you,

I'd be an idiot not to. Um,

>> no, I think I saw this coming.

[laughter]

>> Your your view on the use of the

agencies, the current agency's powers to

influence the content, whether it's late

night TV or news coverage in general.

It's for me who's been doing this for 30

years, it's it makes me a little

uncomfortable. A lot uncomfortable to be

fair.

>> Yeah, that's fair. It makes me

uncomfortable, too. During my last few

weeks as chair of the Federal

Communications Commission, you know, I

took a look at what was on deck and I

found some petitions that involved

content and coverage and behavior at

ABC, NBC, CBS, and Fox. And what I

noticed is they came from the left, they

came from the right, but every one of

them wanted the government to step in

and use its power to prevent free

speech. And so on one of my last actions

before I left the agency was I dismissed

them all. And I did that because I don't

think that the FCC should be the

president's speech police and I don't

think that the FCC should be journalism

sensor chief.

What do you think about

Brendan Carr, your former colleague,

just very briefly about his approval of

the Next Star Tuma merger without a full

commission vote?

>> Well, I think there are some challenges

associated with that and the underlying

law which limits the number of

television households any one company

can reach in this country to 39%.

And I know that there are ongoing court

cases involving that decision. Uh, so I

think we'll all have to stay tuned.

>> Um, and we're going to stay tuned to the

work you're doing. Um, please please

come back. We would love to continue

this conversation. Um, we've talked with

a lot of folks over there and it's just

great to hear what you guys are doing.

Um, Jessica, thank you so much. Jessica

Rosenorcil, she is executive director of

the MIT Media Lab, former chair of the

FCC, as we stated. Um, if you missed any

of that conversation, be sure to check

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