Live from Washington, D.C. this is Balance of Power with Joe,

Matthew, and Kailey Lines. Defense spending comes into focus as the

U.S. goes back to war with Iran.

Welcome to the Wednesday edition. As President Trump heads for

Pennsylvania today to take part in a defense industry conference just as the

Aspen Security Forum gets underway in Colorado.

I'm Joe Matthew alongside Kailey Lines here in Washington reminding us, Kailey,

it's not only about how we are using weapons in places like the Middle East

or Ukraine, but which weapons we're using.

Yeah. As the face of warfare changes and

increasingly the U.S. has to position itself for the threat of

drones, maybe trying to make some cheaper things to shoot down cheaper,

uh, threats that, of course, are being posed as we speak to U.S.

forces in the Middle East, as we are seeing once again, a volley of strikes

between the U.S. and Iran is now the fifth day that the

U.S. has been conducting these renewed

operations against Iran, and the president warned in an interview

yesterday that they will only get more intense and potentially targeted

civilian infrastructure like bridges and power plants next week if Iran doesn't

come back to the negotiating team. That's on the menu for next week,

according to the president. As far as today goes, we're watching a

very difficult debate over the NDAA, the annual defense authorization bill on

Capitol Hill. The president wants a trillion and a

half dollars for the Pentagon this year, and he's looking at a couple of

different vehicles to do that. But the shopping list is already being

drawn up. And over the course of this hour, we're

going to talk about that with our Tyler Kendall.

He's who is in position in Carlisle, Pennsylvania, where the president also

will be taking place in a roundtable talking about procurement reform and

exactly what we should be investing all this money in.

We also have to talk about how busy of a day it is on Capitol Hill, not just

because of the NDAA or the budget reconciliation package that Republicans

in the House are trying to get together, but also because we had a lot of

testimony in the Senate today, Kevin Warsh, day two before the Banking

Committee, but also the confirmation hearings for the president's nominee to

be Attorney general, Todd Blanche, and the next director of national

intelligence in Jay Clayton. Both of those were pretty tough

hearings, some tenuous questioning, for sure.

Some tenuous moments. Some drama came out of these with, uh,

obviously partisan interests. Uh, Kelly, most people seem to think

that they will both be confirmed when it comes to Todd.

Blanche might be a little bit closer than Republicans consider comfortable.

Yeah. So we'll get into that this hour.

But of course, we also have to check on the markets, as we always do at the very

beginning. And for that we turn to Charlie Pelley

up in New York. Charlie, I thank you very much.

Kelly and Joe indeed. A choppy session on Wall Street.

We are back in the green right now, barely on the S&P.

Let's get right to the numbers here. A lot of moving parts of this market S&P

500 index higher by one point right now. Little changed.

We are seeing a rout in chipmakers the SoCs the Philadelphia Stock Exchange

semiconductor index down 3.8% Nasdaq 100 down almost a 1% right now.

The Dow up one tenth of 1%. Nasdaq ha by one tenth of 1%.

And again the Nasdaq 100 index down by just about 1%.

We've got the ten year currently yielding 4.54%.

The two year 4.13% with Kevin Warsh on Capitol Hill.

Spot gold down $15. The ounce to 4037.

Drop there a 4/10 of 1%. West Texas Intermediate crude bouncing

around flat right now 7935 a barrel. Brent the global benchmark 8470.

It is down by just under one tenth of 1%.

Space shares currently trading at one 3453.

That means SpaceX is now below its IPO price of $135.

Sources tell Bloomberg the New York Yankees are in advanced talks to raise

nearly 3 billion of financing from Apollo Global Management, as more

institutional capital flows into pro sports.

Again, little change right now for West Texas Intermediate crude 7934 a barrel.

Taking a look at oil majors they are trading lower ExxonMobil right now down

1.4%. Chevron down 1.1%.

ConocoPhillips lower by 1.1% as well. Recapping S&P 500 index flat on the day

Joe Matthew and Kailey lines. That is a Bloomberg business flash.

All right Charlie Pellet thank you so much.

Live in New York today. And we're live here in Washington where

as we mentioned it's a busy day on Capitol Hill, not just because of

hearings, uh, confirmation and otherwise that are happening on Capitol Hill, but

also as Republicans are trying to rally around a budget blueprint that would

provide for a third reconciliation package that includes $73 billion to pay

for costs related to the Iran war. The vice president, JD Vance, is

actually going to head to the Hill himself today to make the case for this.

And of course, Joe, $73 billion really just a drop in the bucket when we

consider the asks, this administration is making up Congress when it comes to

defense related to spending. That's true that we should note this

price tag got bigger. It's at $95 billion.

Now for the full, uh, framework that was outlined with ever more for defense, 60

billion, 12 billion. 13 uh, that would be instructed by

committees, uh, to dole out as well. Farmers get a piece of this.

And as far as the Save America Act goes, it instructs House Republicans to enact

as much of it as possible. That's a little bit difficult to

quantify at this moment. Yeah.

Keeping in mind that there are restrictions in the Senate, the

parliamentarian has to rule that any measure within this is budgetary in

nature. Hence why this is going to maybe look

more like grants for states to implement things like voter ID and proof of

citizenship, rather than just the wide piece of legislation the president wants

to see get done the same amount that we've got.

We're also looking at the NDAA, uh, the annual Defense Authorization Act that

has ground to a halt here, with Democrats seeing this as a red or green

light for operations in Iran. It seems this is a must pass, as we

always hear each year, and something that will be following closely.

It also includes an element that would prevent defense contractors from buying

back their own stocks. But it brings us to this moment in time

with the Aspen Security Forum under way, where they're talking about strategy and

spending is a big part of the conversation.

At the Pennsylvania Defense and Innovation Summit that's getting way

underway today as well, with the help of Senator David McCormick, who is running

this, bringing together, as he says, defense and tech leaders, including

senior military commanders, industry CEOs.

Also a president of the United States, Donald Trump, will be there a little bit

later on today to take part in a roundtable.

And Bloomberg's Washington correspondent, Tyler Kendall, has made

her way to Carlisle to be part of this conversation, traveling with the

president, and joins us right now with a special guest.

Tyler, take it away. Thanks so much, Joe.

As you mentioned, I am joined by a special guest, the chair and president

of the U.S. Export-Import Bank, John Yovanovitch.

John, it is so nice to see you again here at the summit, where we are talking

about bolstering the U.S. defense industrial base.

So let's just start broadly, how can export financing for commercial dual

use, domestic, uh, defense manufacturers help when it comes towards needing that

supply that our allies are looking at? And how are you thinking about

replenishing stockpiles, even if it's indirectly?

So one of the best things about revitalizing Ex-Im has been figuring out

ways where our financial tools can help bring about not just supply chain

security, energy security domestically for everyday Americans, but how we can

be great partners with our allies all around the world.

So really came down to it. As President Franklin Roosevelt started

Ex-Im in 1934, and the reasons he founded the bank then rhyme with all the

challenges that we're trying to meet today.

So, number one, how do we help American companies win all around the globe?

And I can tell you right now, we've never had more demand to partner with

U.S. technology to get U.S.

industry involved in every single bit of growth projects all around the planet.

Number two energy security. How can we help bring American energy

molecules and technologies to every corner of the globe?

Number three, supply chain security, things like project vault, supply chain

resiliency. Make more in America.

These are things become so foundational to economic and national security.

And last but not least, you may not think about a 92 year old sleepy

institution like Exxon as being focused on winning in the industries in the

future. But when it comes to global exports,

dual use technologies, which we're talking a lot about here today, advanced

mobility. These are areas where we're trying to

help ensure that we can not just innovate in America, but we can iterate

manufacturing deliver. Part of what's adding to the urgency is,

of course, the conflict in Iran. And yesterday we saw President Trump

move off of a threat for a 20% reimbursement fee and instead says that

regional allies are going to invest in the US when it comes to trade and

financing deals. I'm curious, can you give us any context

here? Are these new investments or building on

commitments that we've already gotten? Look, with the president's doing it,

Iran is long overdue. What I could tell you about Exxon's role

is that we're focused on delivering energy dominance, which involves not

just energy security all across America. Because I'll tell you what, if you were

a state in America, like Pennsylvania, like Texas, like Louisiana, that enjoys

a lot of energy exports, you also have low cost of electricity for all of your

residents. It's also about bringing about energy

technology that we have to every corner of the globe.

And so it's just it's more than energy security, though, when you think about

what it takes to respond to a global environment like the one we're in today,

it's also about fostering next generation innovation like we have here

today. It's about supply chain security,

because no matter what you're trying to build and deliver, having the

foundational building blocks in terms of critical raw materials, it's absolutely

essential. And that's why I, with Dave and Dina

McCormack have done here? Convene capital providers, innovators,

some of the largest companies, but also those who really are bringing and

infusing innovation into the equation. That's what's most important, and that's

where XM has found new life in our revitalization.

Well, how has the conflict in Iran perhaps mobilized capital to regional

partners who may be thinking a little bit differently now about a reliance on

the Strait of Hormuz or their own defense capabilities and calls within

them? It's funny.

What we've seen is a continuation of what we experienced even before the

conflict broke out, which was people coming to us at Exxon and saying, we

want to partner with American Energy and technology.

We want to procure American energy molecules, understanding that that's the

best way to build a long term strategic relationship.

We want nuclear technology to be front and center.

We want to partner with American SMEs or American large scale reactors.

And what it comes down to is that buying American is a good bet for building your

future. And so what we want to do is allow

everyday working class Americans to have more well-paying jobs, to have the

opportunity continue to flourish. All the while, we deliver American

goods, services and technologies to every corner of the globe.

And part of this is the evolving nature of technology.

And I it's my understanding that you just launched an initiative that would

essentially help to fast track these tech exports.

Can you talk to me about what the demand has been like?

Absolutely. So, you know, thanks to the president's

leadership, he issued a global export plan, which he Export-Import Bank, we're

very proud to be a part of now. I will say that we were the first

federal agency named in the executive order that's delivered, right.

So we've revamped an entirely new export program specifically tailored to the AI

tech stack. And we've learned our lesson from 5G

from the telecom space only a few years ago to understand that we needed to

pivot and innovate right before we had this onslaught of demand.

Because what I can tell you is every country that comes in meet with us,

every company from around the world. One of the first things they ask is, how

can we partner with American Airlines, right?

They're not just asking the president. They're asking us to.

And so we want to be a front line economic tool that allows the American

technology stack to win and to be brought to every corner of the globe,

because it's not just I, I want to be a foundational part of every single

industry, and we want to make sure American companies wait.

I understand the demand, but we're also seeing, in some ways, growing concern

from European allies about being too reliant on US tech, perhaps highlighted

by the fact that the U.S. Commerce Department imposed and then

lifted those export controls related to anthropic most advanced technology.

I was just speaking with the CTO about how the French government moved to cut

ties with that company in a bid to bolster their own technology.

I'm wondering how you're thinking about financing technology that could be

restricted overnight. Well, what I can tell you is that we are

inundated with demand for American technology partnerships.

But also, if you think about what it takes to deliver on the promise of AI,

it's a brick and mortar process, right?

It requires molecules, it requires processing, it requires infrastructure.

And so all of those things are traditionally things that Exim has

focused on. And so from our perspective, we want

American companies to win. We want us to be able to deliver

promise, because delivering an AI future is one that you and I want to be

comfortable with, is going to ensure that these industries thrive for many

more years to come. In the final few minutes, I have you,

uh, just quickly first on Project Volt, which you did mention at the top.

Can you give us an update on, uh, how that is going when it comes to building

up that critical minerals stockpile, any sort of update that that the market

could be looking for? Yeah, it's great to.

So Project Volt for your viewers at home was actually an initiative that

President Trump announced in early February where, uh, the Export-Import

Bank partnered with the private sector to be able to bring about a strategic

reserve for critical raw materials. And so we're very pleased to say that

it's being operationalized. Uh, Project Volt has executive

leadership in place. Uh, Brett Lambert, someone who's a

career veteran, dedicated his entire career to supply chain security and

resiliency. And so, uh, we're making great strides

there. Um, and then final, final question.

Can you just talk to me about how you're thinking about institutional

independence? Because, uh, there have been some

questions raised, including by Senator Elizabeth Warren, about one financing

deal that has alleged ties to the Trump family.

How do you maintain institutional independence?

Process is key at accepting every single applicant that comes through the door

has the exact same process. And what we can tell you is that we're

wide open for business. But the bottom line is that the

foundational elements of every deal have to pass muster.

And, uh, we're very, very comfortable with what we do all day, every day.

All right. The president and chairman of the U.S.

Export-Import Bank. John Yovanovitch, thank you so much for

joining us here live on Bloomberg Television and Radio.

Joe and Kailey, this has been a conversation on the sidelines of the

Pennsylvania Defense Summit, and I'll send it back to you.

All right. Great work.

Bloomberg's Tyler Kendall, thank you so much.

And we'll be checking it back in with Tyler throughout the day here on

Bloomberg TV and radio. She brings us great interviews from the

summit. And interesting for Tyler to end their

on the idea of institutional independence.

It's something we've been hearing a lot about on Capitol Hill over the last few

days, including from the fed chair, Kevin Warsh, who had to repeatedly, uh,

tell members of both the House and Senate that he will maintain

independence from the president and not answer to him directly when it comes to

rates. But the nominees who had to testify

today as well, face similar questions. The acting attorney general who wants to

become the attorney general, Todd Blanche, had to talk about, uh, not

being the president's friend or his lawyer any longer.

And, of course, the man who was tapped to lead the nation's intelligence

services, Jay Clayton, was asked repeatedly about whether he's going to

be willing Joe to face, uh, the president and give him tough information

and potentially go against him in the Oval Office, which is why so many

Democrats in particular, were pressing him on the question of whether or not

Trump won or lost the 2020 election, with the idea being that the

intelligence is going to inform many of the president's decisions, including, of

course, what is ongoing in the Middle East as we speak.

Well, that's true. And this is also why, you know, a lot of

Democrats are willing to potentially put up with a Jay Clayton because it means

someone other than Bill Pulte, uh, who has had the keys to the intelligence

apparatus for several weeks now. But you're right.

The intelligence that's surrounding the war in Iran is something that the

president was presented with in the Situation Room once again yesterday.

It was a room full as he considers options for what might come next with

full on war, uh, being one of them. And as the president made clear in an

interview on Fox News, Kailey, uh, civilian targets, infrastructure, power

plants, etc. are still on the table and could be

attacked as soon as next week. Listen, I'll save the energy targets for

last, but ultimately we'll hit energy targets.

Yeah. But we're going to hit them very hard

tonight. We're going to hit them very hard

tomorrow night. We're going to hit him very hard the

night after. And then next week it gets really bad

for them because next week comes the, uh, power plants.

Next week comes the bridges. So let's get more into this now as to

whether or not this threat is real or just, uh, an attempt by the president to

get Iran back to the table in a more meaningful way as we turn to Chris

Kennedy of Bloomberg Economics, who's here with us in our Washington, D.C.

studio. So, Chris, when we consider this threat

once again to go after infrastructure, which we had heard from the president

before, only for him to back off, is it more real this time, now that he's

proved willing to resume strikes against Iran in the absence of real dealmaking?

Well, we never know with the president, but clearly he's following through on

the threats to continue strikes on Iran. We're seeing those strikes continue

through today. We're seeing retaliatory strikes from

Iran. And I think the broader point is that

we're at a very precarious moment in this conflict.

There's a real risk of further escalation that could cause lasting

damage to, uh, Gulf energy infrastructure, for instance.

Or, you know, this threatens threats to open the conflict on other fronts,

including in the Red sea, which would cause further disruption.

So what would that mean for Iran's neighbors, if you will?

Uh, if President Trump followed through with civilian targeting, obviously Iran

would have some sort of, uh, response, whether that was, uh, asymmetric, what

would it mean for Kuwait? For Jordan, we saw targeted or even

Israel. Yeah.

So, so far over the past few days, Iran has primarily been limiting its

targeting to either vessels or to US military installations in some of these

countries. I think you would imagine that if the

U.S. does actively target civilian

infrastructure in Iran, you would see a similar response from Iran on some of

its regional neighbors. Now, whether all of them or certain

elements, I think it's to be seen. But clearly the risk of escalation is

there. Water desalination plants are

particularly sensitive, uh, type of infrastructure in the region.

Uh, but, you know, energy export facilities, if they're targeted, it

could take quite some time to, you know, bring those supplies back on line,

especially some of these LNG facilities like we saw targeted in the early stages

of the war. Well, and if we were, uh, to see that or

even with just what we are already seeing, would you assume, Chris, that

the trajectory of oil prices is going to be one that continues higher for the

time being? I think for the time being, I mean, the

market is digesting what's happening right now.

We just had some new releases from U.S., uh, you know, information on on oil

supplies. I think markets responded positively in

the sense that oil prices tamped down a little bit based on that.

But yes, I think if if things stay where they are, even if they don't escalate,

we're going to be entering another uncertain time.

We've seen, you know, emergency releases are continuing for now, but those will

only last for so long, probably by mid-October.

We'll start to see those taper off. And then China is a it's a big wild

card. They've really cut down their imports

over the past couple of months. How long will that last.

Interesting. Goldman Sachs that a warning of a rise

back above $100 a barrel after Iran targeted a couple of UAE tankers?

Uh, Chris Kennedy, we'd love to pull you into the conversation around defense

spending today because we've got a couple of events we're looking at.

We just heard from Tyler at this Pennsylvania event that Senator

McCormick is running. The Aspen Security Forum is happening

simultaneously, and the president is asking Congress for a trillion and a

half dollars. You specialize in economic statecraft,

and we can bend that in a couple of different ways.

But when you consider the big stick here, the president's mantra has been,

this is how you avoid forever wars is by having an even bigger military.

Will he get that money and what will it mean in terms of psychological impact

globally? That's a great question.

I think faces an uphill battle on the Hill right now.

The president you know, he's he's facing a lot of challenges, I think from both

his party and of course, Democrats on the Hill.

There are a lot of questions over this war.

I think Congress wants to have more of a say in some of these, uh, interventions

that we've seen the president undertake over the past several months, but also

before. So I think it's going to be difficult.

But of course, the thesis, yes, of course, the U.S.

is still the most powerful military in the world.

Uh, but we're seeing the limits right now.

And I think the entire world is seeing the limits.

I also want to ask you, as we consider whether or not he's going to get what he

wants in terms of, uh, defense spending from Congress, whether or not sanctions,

tighter sanctions related to Russia will be getting through Congress is there's

now a renewed push for this in the Senate in the aftermath of the death of

Senator Lindsey Graham, who, of course, was spearheading this effort.

This package, as we understand it, would mandate the president to do anything,

but it would give him optionality, uh, in terms of people who consume Russian

energy products, being able to impose a 100% tariff, that that right there is,

uh, very real economic statecraft. Is that something that could be

effective and potentially turned the tide of Russia's war with Ukraine?

Uh, that's a great question. So, I mean, the bill is interesting

because, of course, the president, before his tariffs were thrown out by

the Supreme Court in February, was imposing these secondary tariffs,

tariffs on countries doing business with, you know, Venezuela or.

Yeah, in any case he's done this. Now he doesn't have that tool because of

the Supreme Court. This bill would for the first time

delegate this secondary tariff authority to the president.

Uh, I would find it hard to believe the president would want to accept the bill

as it's written, because it does sort of lock him in.

Um. But I could imagine now you know that he

doesn't have this either tool that he would like some sort of congressional

legislation that would allow him to, again, use his favorite tool, which is

tariffs in more creative ways. You know, he said yesterday, Kelly, and

you probably heard this when he was in the Oval.

He would like to add Iran and Hezbollah to that legislation.

Is that realistic or does Chris, does that slow it down?

I mean, it'll we imagine there would be some additional markup on this bill.

I'm sure the president would like to have as much flexibility as he could

possibly get out of this legislation. Whether or not it's realistic, I think

there are many on the Hill that are skeptical of the way in which President

Trump has deployed tariffs, and whether they want to give him this tool.

At this point, we'll have to see he's on one of the best teams we have at

Bloomberg Economics. Chris Kennedy leads our coverage of

economic statecraft. It is great to have you with us as

always, Chris. As part of our conversation, we're going

to play a lot of these themes to our panel.

Coming up next, Bloomberg Politics contributors Rick Davis and Jean Zeno

are with us. But first, we stop down on the markets

as we do every day at this time with Charlie Pellet, who's at world

headquarters in New York. Charlie has Wall Street, but right now

we are higher. It's been a choppy day, Joe.

Matthew, lots going on. Let's get right to the numbers because

we have got the S&P 500 index back in the green, barely up under one tenth of

1% right now higher by five and a PPI Wednesday.

We've got the S&P at 7548. Dow industrials flat on the day right

now. Little change their Nasdaq up 57 up 2/10

of 1%. However the Nasdaq 100 index full of

those big tech names it is down 7/10 of 1%.

Very interesting divergence with the Bloomberg Max seven index or pushing

higher by 1.8% and semis selling off again.

We've got the Sox, the Philadelphia Stock Exchange semiconductor index down

now by 3%, ten year, 4.54% with Kevin Warsh on Capitol Hill spot gold down

4/10 of 1%. 4037 the ounce West Texas Intermediate

crude lower. little change down under one tenth of 1%

right now. WTI 7928 a barrel.

Briefly anthropic is planning IPO investor meetings as its mega listing

nears. SpaceX falling below its IPO price for

the first time as the hype fades. SpaceX now at one 3473.

You recall it went out at 135. And the Yankees are said to be in talks

for 3 billion in Apollo financing. Apple has received Chinese government

approval to roll out Apple intelligence in China.

Apple now up by 3.6%, and from Apple to the Big Apple.

New York City's air quality index has now deteriorated, to quote, unhealthy

for everyone. This is wildfire smoke from Canada hits

the northeast. That's according to the EPA's air.

now.gov tracker. It's recommended that people reduce

strenuous outdoor activity and take extra breaks when indoors.

Again recapping equities higher. Little change.

The key takeaway at this hour with the S&P up six points now are by one tenth

of 1% Joe Matthew and Kayla Lines. That is a Bloomberg business flash.

All right Charlie thank you so much. And he'll be back in just about 20

minutes time with more on the markets as we connect the dots between policy and

Wall Street trading every day here on balance of power.

Thanks for being with us on the Wednesday edition.

We've got our eyes, of course, on Pennsylvania, where President Trump is

going to be traveling today. He's taking part in a roundtable

discussion at the Carlisle, Pennsylvania Defense summit where we heard earlier

this hour from Bloomberg's Tyler Kendall, presidents there, along with a

number of luminaries from industry, Jamie Diamond is there.

And it's a big conversation about not only how much we're spending, Kailey,

but what we're spending it on. Drone companies, for instance, are

expected to be a big player in this conversation today, with some deals

expected to be announced when the president talks later.

Yeah. And of course, drones, uh, top of mind

for many in the community, uh, defense community right now.

And for this president, given what has been happening in the Middle East over

the last several months in the aftermath of Operation Epic Fury, which I don't

know if we're saying Operation Epic Fury is back on or this is just a restart.

I think that's right. Some operations.

And of course, the president earlier this week notified Congress that the war

with Iran had, uh, resumed trying to restart that 60 day clock for war

powers, as we're seeing today, a fifth day of strikes, daylight strikes, in

fact, announced by Central Command, which we haven't seen in some time.

These usually happen over the evening. And, of course, President Trump, in an

interview on Fox News yesterday, suggested that the strikes could

escalate next week if Iran doesn't come back to the negotiating table once

again, renewing his threats against energy infrastructure and civilian

infrastructure like bridges and power plants.

So we want to get into this now with our political panelists, Bloomberg Politics

contributors Rick Davis and Jeannie Shan Zeno join us.

Rick, of course, is a stone cold capital partner and Republican strategist,

Genie, or Democratic analyst and democracy visiting fellow at Harvard

Kennedy School's Ash Center. Rick, just to begin with you.

This is not a unique or novel threat made by President Trump.

He has threatened this infrastructure repeatedly in the past only to back

down. Do you have the sense that this time

would be different? Uh, hard to tell.

Uh, I think the level of frustration is higher than it's been in the past.

I think, uh, President Trump thought that he could call the Iranians into,

uh, not only, uh, completing the negotiations that had already started,

uh, but coming out with a deal and the fact that the Iranians have slipped out

of that noose and now continue to harass, uh, U.S.

assets and maritime assets in the Gulf. I can't imagine how much more frustrated

he must be. So, uh, we know this is a president

that, uh, tends to govern through emotion.

Uh, and, uh, you know, I'd love to have been a fly on the wall in the, uh, in

the meeting that he had on Tuesday at the white House to talk about options.

Uh, because I'm sure he was pushing our national security team to be ever more

aggressive. So, yes, I think there could be some

especially symbolic hits against, uh, civilian targets that maybe dual use

bridges, things like that, uh, that, uh, that the president will instruct in

order to make a point. The question is, does any of this really

have an effect on Iran? And we have not seen anything to date

that the president's done that has that has cowed that leadership.

You know, in that same Fox interview, Jeannie, where the president talked

about power plants and bridges next week, he was asked about, uh, Pick Axe

Mountain, which is something that he discussed on the Hugh Hewitt program a

day earlier. He said U.S.

bunker busters can go deep, but claimed nobody knows if they can reach Pick Axe

Mountain, where the U.S. is monitoring suspicious Iranian

activity. They think that's where they want to

shelter the nuclear program from airstrikes.

That's the kind of conversation that should be had publicly like this in the

media. No it's not.

But of course, that's in keeping with the way President Trump governs.

He says everything presumably publicly. And I think where we are today is we

just have to look back at the June 17th MOU.

We signed that MOU because Iran backed us into a corner, and we signed it

because we had no military strategy to defeat Iran.

And then once it was signed, we tried to open this separate Omani channel in the

Persian Gulf. Iran was having none of it, saw it as a

violation of the MOU, which it was. And we are back now to this tit for tat

and these constant going back and forth trading strikes.

But the problem for the president and by extension, the United States is that

nothing about this has changed and the president does not have a clear winning

strategy here. He's got a lot of, you know, bombastic,

threatening comments to make online and publicly.

But beyond that, what is the strategy to defeat Iran?

There is no military strategy. And you can't bomb somebody back to the

negotiating table. And that's the dilemma we've been in.

And that's the dilemma we continue to be in.

I do think there are great people in the State Department with good ideas about

how to move forward. But Donald Trump doesn't seem to be

listening to them. He's listening to people like Steve

Whitcomb and Jared Kushner for all of the things that they have to offer.

Foreign policy negotiations are not amongst them.

And so that's where we sit today. Well, you have to wonder to what extent

the president will listen to financial markets as well.

As he previously said, he went for the memorandum of understanding whether an

all out resumption of the war against Iran because it risked economic

Catastrophe. If the Strait of Hormuz remains closed,

closed and energy prices remained at the levels where they were.

Of course, there's a lot of consternation around energy prices, and

it isn't just affected by policy in the Middle East.

It's also affected by policy here at home.

And it's at the very heart of the debate around data centres in particular.

We, of course, saw action in New York yesterday as the governor, Kathy Hochul,

announced a one year moratorium on data center construction in that state.

And she talked about it on Bloomberg's Odd last, Odd Lots podcast with Joe

Weisenthal and Tracy Alloway. Listen, I wanted to make sure that we

take the time to have a community investment framework to give to

localities, but also you have to be able to power yourselves.

You're to bring your own power source, or you have to pay a premium to use our

grid. And those are the basic foundations of

what we're doing with this moratorium. And this moratorium is, uh, not sitting

well with President Trump, who took to social today to criticize Hochul and the

state of New York, saying in part, New York State has made a terrible decision.

Going on to say it should change its policy immediately.

Quote, the radical left Democrats. Democrats, he says, must not be allowed

to cause us to lose data centers, AI and all of this incredible new technology to

China and other countries. Rick, I would love your thoughts on

this. First, this notion of a data set, a

moratorium in the first place, and whether or not it could be spreading

throughout the country, uh, to other states, not just, uh, New York.

And if that might ultimately include red states, not just blue states that are

easy for the president to attack over. Yeah, I think that there are two

separate issues here. One is, uh, states are starting to set

standards by which they will allow, uh, data centers to come into their state.

And Kathy Hochul, a governor of New York, just said, uh, here are my

standards and included. You got to bring your own power.

Uh, but then to apply a moratorium on top of that doesn't really make much

sense. Here's what you got to do to be able to

come into my state. But I'm not going to allow you to do

that for a while until we really study this thoroughly.

There is a race to deploy capital that is a race to build infrastructure and

capacity. And I think the kind of approach that

Kathy Hochul has taken and some other governors around the country are

basically keeping their states from, uh, benefiting from this, uh, immense amount

of infrastructure development that's going on in the country right now.

So, yes, I think that there are going to be states, uh, because, uh, to have

moratoriums, because they will follow the political crowd.

Right? They'll read the polls, say people, even

though it doesn't affect them directly right now.

Boy, they're afraid of it because of what they read.

Uh, but I think leadership is what makes a difference there.

And giving standards to companies to do business in their state is perfectly

acceptable. Why have a moratorium?

So where are we going here, Jeannie? The analysis at Bloomberg Intelligence,

uh, says it all. New York's statewide data center ban is

first likely, not last, As we write, hyperscalers like alphabet, Amazon and

Microsoft, as well as developers like Equinix and Digital Realty Trust all, of

course, deeply invested in this infrastructure faced increased policy

risk by is putting an 80% likelihood of comparable data center rules elsewhere.

Is this just the beginning? I think it is just the beginning.

I have to tell you both, I have been stunned by the number of young people

who, without me even raising this issue at universities and colleges, have

expressed that their families are concerned about these data centers

cropping up, and not just in New York, but around the country, because it's not

something I think many of us thought about, you know, a year or two ago,

three years ago. But boy, is it a big issue.

We saw it in Virginia with energy prices, new Jersey in recent elections.

Now here in New York, I think it spreads around.

Polls on this are very difficult to sort of tease out, but Americans are

concerned about the impact on their cost for them, for their electricity.

They believe that they're already paying a good amount.

Now they're going to pay more. They're concerned about the impact on

water usage. It's they don't want them in their

neighborhood. We may want to use these online.

Um, these this as we go online, but we don't want them in our neighborhood.

So I think this is going to be a growing issue.

I think a lot of education has to be, um, has to be done here to help people

understand the impact. And also, Joe and Kelly, I think we're

going to see a lot more movement of attempts to put data centers in space,

and that has an impact as well. They go into space or under the ocean.

They still have to figure that out. Elon Musk says they're going to space

deep into space. Yeah, just drop the IPO price.

Yeah, maybe a lot. Not a lot of people buying that theory

right now. $133 I think last time I looked Rick

Davis, Jeannie Shan Zeno Thank you. Our great panel.

Bloomberg Politics contributors Charlie Pallett will check markets in space.

Coming up right here on zoom.

It's 140 on Wall Street. We do check markets all day long here at

Bloomberg. Most stocks pushing higher semiconductor

names lower. However Mag seven stocks are higher as a

group. But the Nasdaq 100 index down right now

by 5/10 of 1%. This amid a rout in chip stocks.

We're looking at the SoCs the Philadelphia Stock Exchange

semiconductor index down now by 2.9%. The Dow and the S&P they're both higher

by 2/10 of 1%. Nasdaq doing a little bit better up 4/10

of 1%. But again the Nasdaq 100 index down 5/10

of 1%. The ten year yield 4.54%, with a two

year currently yielding 4.13% gold, up $4 the ounce.

A little change there of one tenth of 1% 4057 ounce West Texas Intermediate

crude, now lower by 4/10 of 1%. WTI 79 04A barrel.

Brent. 8445 barrel of Brent, down by 3/10 of

1%. Earnings news Johnson and Johnson among

the names reporting this morning JNJ down now by 2%.

SpaceX has fallen below its IPO price for the first time as the hype fades

space. Now at one 3483.

SpaceX went out at $135. Anthropic plans IPO investor meetings as

its mega listing nears, and the Yankees are said to be in talks for 3 billion in

Apollo financing, and New York City's air quality index has now deteriorated.

To quote, unhealthy for everyone. This is wildfire smoke from Canada hits

the northeast again. That's according to the EPA's Air

now.gov tracker recapping S&P up 15 up 2/10 of 1% John Kelly.

That is a Bloomberg business flash. Can't even see across town.

Yeah. Doesn't look too pleasant up there.

You stay safe, Charlie. I think we have a little easier down

here in D.C., even if we're suffering from yet another heat wave.

Something to behold. The president, of course, right now is

about to escape. Uh, D.C.

go just a little bit further north as he heads to Carlisle, Pennsylvania, where

he'll be speaking today at the Pennsylvania Defense and Innovation

Summit, talking presumably about the need for more spending in defense in the

United States and investments in the defense industrial base, in particular,

into new technologies equipped to fight the wars of the present and future, of

course, all shaped by the conflict ongoing with Iran, because, yes, we are

calling it an ongoing conflict. Now, the president has notified Congress

of as much. We're now five days into renewed strikes

against Iranian targets. And the president, as we told you, told

Fox News last night that those strikes could very well escalate next week.

Yeah. He says, will be hitting power plants

and taking down bridges. If in fact this continues into next

week, which remains a question. The president was in the Situation Room

with his top military advisers. Uh, just yesterday, JD Vance, who's on

Capitol Hill today, Secretary of State Marco Rubio.

Pete, the defense secretary, along with the chair of the Joint Chiefs of Staff,

CIA director, white House envoy Steve Whitcomb, and other senior officials.

It was a room for Kaylee as he's trying to manage this situation.

And maybe he'll shed some light on this when he speaks later on in Pennsylvania.

It's a big topic of conversation on the other side of the country as well.

In Colorado, where the Aspen Security Forum is underway.

Uh, Bloomberg's David Gura is there, as a matter of fact.

And he spent some time with one of the forces behind Aspen.

And that would be Nicholas Burns, the former U.S.

ambassador to China, who is in fact vice chair of the Aspen Strategy Group.

And the Security Forum, weighed in on what's happening in Iran.

Let's listen. I think it's crystal clear right now

that this cease fire agreement has fallen apart, that it's not being

honored by the government of Iran that there's substantial differences between

the United States and Iran on what that ceasefire agreement said.

The Iranians believe, I think, erroneously, that they get to run the

Gulf, the Strait of Hormuz. They get to be the toll keeper.

Exact fees establish a fee structure. There's not a government in the world

that agrees with that. And I don't see any way that President

Trump can ever agree to that. That would mean Iran emerges from this

long war of four and a half months stronger in that respect than when the

war began. It would be injurious to the global

economy, to insurance companies, to shippers, to people who to the companies

that depend on the free flow of commercial traffic.

So I think that the president cannot, and I believe, will not give in our

president on that issue. I don't think the Iranians are going to

give in. So where does that leave us?

I think a cat and mouse, probably next couple of weeks or months leading into

the autumn, where there's a back and forth, they agree to a cease fire.

The cease fire is honored than not honored.

They go back to exchange of fire. And I think that's where we are, because

these are hard bitten, highly ideological leaders in Iran.

They think they can play us for time. And so they're testing us.

It's very important that President Trump stands up to them in that respect and

not give in on issues like Iranians becoming the Tony Soprano of the state

of Hormuz, you know, exacting tribute, uh, from other countries.

If Steve would call for to give you a call or Jared Kushner, what counsel

would you give them, uh, about how to move forward here?

It sounds like what you're prescribing, we're anticipating is a long period

where things are effectively stuck. Well, certainly, I wish President Trump

and his team well, and we want them to succeed on behalf of the United States.

I do think the agreement, the original agreement was not well done.

A lot of loopholes. The Iranians are trying to race through

the loopholes. So in the one hand, you may need to go

back and renegotiate this, and that could take a substantial amount of time.

I don't think it's reasonable to expect that there's going to be a perfect deal,

perfectly arrived at, and may end and implemented any time soon.

I think we're going to be in a period of instability in terms of shipping through

the Strait, a low intensity conflict between the United States and Iran.

Major disagreement on the future of the Strait.

I see this going into the autumn. And if there's a surprise to you, based

on how it's all unfolded, it's not. I must say, I was the first Iran nuclear

negotiator for President George W Bush, Condi Rice, 20 years ago.

Long time ago. But you took the measure of them then.

They haven't changed. Former U.S.

ambassador to China and, of course, longtime State Department dignitary

across multiple administrations. Nicholas Burns, now the co-chair of the

Aspen Security Forum, in conversation with our colleague David Gura yesterday,

weighing in on what he sees as something that could take a while here, this

conflict between the U.S. and Iran, which in his mind at least,

could take a great deal longer to come to a firm resolution.

And the question, of course, is how much money

it may need to spend. The U.S.

may need to spend in this interim period as we see renewed strikes against Iran.

Of course, we are looking at a request, uh, to Congress for supplemental funding

for the war in Iran. And it looks like that is going to be at

least attempted to be rolled into a third reconciliation package.

The package is $95 billion in total. More than 70 billion of that would be

for the Defense Department. The question, of course, is whether or

not it has a chance of getting through both chambers, as there don't appear to

be offsets embedded in this package in particular.

And it's on that note that we start with Bloomberg Politics contributor and

former chair of the House Financial Services Committee, also former Speaker

Pro Tem Patrick McHenry, who is back with us on Bloomberg TV and radio.

Mr. chairman, good to have you as always.

Your former colleague Warren Davidson is pointing to the lack of offsets, in

particular in saying, therefore, that this is going to be a no go.

Does this $95 billion package have a chance at getting through?

It has a chance, but this is really a test of political wills.

Um, on Capitol Hill, you have fractious majorities in the House and the Senate

that are really tight for Republicans there.

Uh, the the House is particularly challenged in passing legislation over

the last months have been locked down over debate on immigration.

It appears that House Republicans have a plan forward for reconciliation, a

partisan, uh, package that will not need, uh, Democratic votes in U.S.

Senate to get enacted. Uh, it totals a nearly $100 billion.

Some of this deals with, uh, election security, uh, voter ID, and immigration

issues domestically that can help sweeten the pot as well as these

important defense priorities. What this means is House Republicans are

trying to go around Democratic opposition to this president and this

president's intervention in Iran, uh, and ensure that Democrats won't have a

point of leverage to bring in their spending policies and priorities and,

uh, other domestic priorities into the debate.

So therefore, the package is smaller. Uh, they're saying, uh, to fellow

Republicans, uh, this package is smaller than the deal they would have to do with

Democrats necessary to get their support and their votes.

So in that way, uh, Congressman Davidson is exactly right.

This is an expensive package. But the alternative here is a more

expensive package done with the support of Democratic lawmakers.

That's really the narrow, uh, scope of the narrow range of scope and debate

they're having on Capitol Hill in order to get this package done.

And over the next couple of days, tomorrow will be a crucial day for House

Republicans and getting that bill through the Budget Committee.

Yeah. All right.

So let's say Speaker Johnson, Mr. Chairman, pulls a rabbit out of a hat

and he's done it before. This thing actually comes out of

committee and it passes the House. What happens next door in the Senate?

Well, the Senate look, uh, we have, uh, the untimely passing of, uh, Senator

Lindsey Graham and, uh, his sister's quick appointment to that seat.

We have, uh, Mitch McConnell, who is ailing.

Uh, and so you have an attendance problem, the US Senate, and you have a

disagreement on the approach as well, on immigration.

Uh, and these domestic, uh, priorities on voter ID.

Uh, so this is going to be a second, very, very, uh, uh, narrow path to

through the US Senate. But as you said, Speaker Johnson has

pulled a rabbit out of the hat before with the help of President Trump.

And I think likewise, leaders soon will be able to get this package through if

it's able to get out of the US house, which then unlocks a second.

A second process. Once you have a budget resolution, that

is just the opening act for them to actually write this policy and to pull

that rabbit out of that hat is a second, uh, sort of tricky, uh, tricky set of

things that need to happen. This is, uh, it's a lot to do.

And in July of a midterm election year, uh, but, uh, necessary priority for the

president to see this through the Congress.

Um, I'd like to ask you about something else that the president has called a

priority. In fact, he mentioned that this should

be passed in honor of the legacy of Senator Lindsey Graham after his

passing, which you mentioned, which is the Clarity Act, which it's not clear

that, uh, Senator Graham was particularly passionate about crypto

market structure in particular, but there are many that are in Politico is

reporting that tomorrow at the white House, a group of senators will be

meeting with the president about the path forward for this Legislation.

Mr. chairman, are they going to have to tell

the president if he wants to see this done, he's going to have to agree to

restrictions on the actions of him and his family in the crypto space.

Well, that's certainly what the Democratic senators are saying is the

their objection to passing clarity. Look, this this path to getting clear

law on crypto is really, uh, the ethics issue, uh, for elected officials and for

the private sector. Frankly, we need to define what is a

digital asset and its means of exchange. We currently don't have any federal law

dictating those two things on a very important, very large market, uh, that

now traditional finance is getting heavily engaged in, um, so, uh, frankly,

the pitch here is that, uh, ethics, uh, is downstream of us actually having

sound law and a clear set of rules and regulations at the federal level.

That's what clarity will bring. The opposition by Democratic lawmakers

here, I think, is is really trying to bring this into the political debate

about the president. Uh, the president's, uh, uh, you know,

financial disclosure statement and his engagement, uh, across, uh, financial

markets and investment activities, business activities for he and his

family. That is a separate issue.

Uh, that having sound law on on crypto, which is what the the Clarity Act would,

would bring about. It's really an open question whether or

not the Democrats in the Senate will stand firm in opposition unless we have

some additional ethics, uh, language here for government officials, most

specifically the president, vice president.

Uh, a lot is going to be, uh, riding on this test vote.

The Senate will have on clarity. Uh, hopefully next week or the following

week. 30,000 foot view.

Uh, Mr. Chairman, there are real concerns about

whether anything is going to get out of this Congress between now and the lame

duck. Sarah Chamberlin from the Republican

Main Street Partnership, uh, said in our studio yesterday.

Uh, that the store is basically closed. We'd be lucky to get a car right now.

And she expects the government likely will shut down for some period of time,

uh, and could, in fact, be a lengthy one, uh, following the end of September.

How about you? Well, uh, I think a government shutdown

is more likely than not September 30th. Uh, and that's because we saw the

Democratic Party, uh, pay no price for the longest government shutdown in

American history, led by Democratic Senate opposition.

Uh, and so, because they didn't pay a political price, then they believe

they're unlikely to pay a political price, uh, this fall.

I think that is, uh, a really tricky thing, uh, for the Congress to

negotiate. That is also why they're pushing this

reconciliation 3.0 so intently. Defense supplemental have always been

bipartisan over the last, uh, decades. Uh, and now you see Republicans facing

unified Democratic opposition, uh, to replenishing our stocks and supplies,

um, of of weaponry. Uh, that's why they're going this this

partisan path that doesn't make a government shutdown more likely.

It probably, uh, sorry, it doesn't make a government shutdown less likely.

It probably makes it more likely in the fall.

Uh, but time will tell. And, uh, politics, especially these

days, is quite difficult. Day to day and week to week.

Well, and at the truth, we're always lucky to have you walk us through it.

Patrick McHenry, Bloomberg Politics contributor.

Former congressman, of course, Republican, former speaker pro tem.

He actually held the gavel for some time.

And I feel like he's still really glad that he's not doing that anymore.

Yeah. Although I wonder if you missed chairing

the Financial Services Committee, which had the chance to question the new chair

of the Federal Reserve, Kevin Warsh, this week.

Fair enough. French Hill, but pretty efficient

process today, I will say. Uh, we're going to head up to the

Senate. I'll meet you up there for the Late

Edition at 5 p.m. eastern.

Dramatic day on Capitol Hill. This is Bloomberg.