We will take you live to William Dudleys remarks. First, julie hyman is with us. We are halfway into the monday trading day. Julie we have nearly a flat line. The nasdaq gaining a little more, but it has given up about half its games today. We had a record at the end of last week, so we are seeing that extended into todays session. Any higher close, no matter how small, will be a record for the averages. Gains are somewhat tepid. I want to check some of the under the radar movers. One is anthem. The company is getting a new chief. Josephl be succeeding later this month. She is one of the highest ranking women in the healthinsurance industry. She was formerly the ceo of united health. Of the insurance arm of united health. Comments in the u. K. There is a trade dispute with boeing. He says the final ruling may not match the preliminary ruling, which was more in bum party are bombardiers favor. And analyst says we are seeing a rebound to a sixweek high in natural gas. Bestt weather has let some lead some to bet on a no coat november has led some to bet on a member. I want on a no coat november. Down. Oup, apple, fox, all Kingdom Holding does not publicly disclose all of its holdings. We had to glean them from comments made and filings on very as companies. Especially at a company like citigroup, he is a large shareholder. It does not look like he is above the 5 share hold threshold at that company. Likerms of apple, it looks he holds about 5 of that firm. Finally, 21st century fox at the end of 2016, he held a nearly 5 stake in the company. Vonnie thank you for all of that. Shery President Trump now in asia, and a veiled warning against pyongyang. One, no dictator, no regime, should underestimate,. Ver, american resolve every once in a while in the past, they underestimated us. It was not pleasant for them, was it . Not pleasant. The latest on the president s trip, we are joined by Jennifer Epstein from washington. Annifer, i have been to couple of those american bases in japan and south korea. When President Trump was on the campaign trail, he talked about wanting his asian allies to shoulder more of the burden of having american troops there. How much of that was discussed during this trip, and how successful was he in portraying some support from the u. S. Toward his allies . This was a trip for the president to begin to show and kind of rally himself around this idea of demanding a better deal for americans, whether it has to do asiantary aid countries that have for a long time benefited from a u. S. Presence contributing more, or the trade deficit and trying to get the u. S. On to better footing. Or in korea, which is where he is headed in a few hours, or in china, in a few days. Did the president succeed in his mission in japan . Jennifer it doesnt sound like there were any clear takeaways on trade or on National Security thus far. What the president did with Prime Minister abe was more along the lines of relationship building, what they did when the Prime Minister was in the u. S. Off. Played nine holes of they fed fish. There were a lot of things that about showingore that the relationship was good on thesed to delivering president s promises for the u. S. Vonnie any indication of whether the president is more or less inclined to visit the dmz . Think that is ruled out. He is going to a military base to visit the troops. An Administration Official last kind of a cliche for leaders to go to the dmz at this point in time. Tryinghink this is about to avoid ratcheting up tensions anymore. A couple of cabinet secretaries have been to the dmz in the last few months. Go there andump to stare down north korea at this whencular moment in time he is threatening attacks all the time and sounding the alarm bell for potentially a Nuclear Attack of some kind, i think this administration or people who are not the president decided not to send him there. Shery we will have to leave it there. Thank you. Away ina world washington, republicans are in a sprint to rewrite the tax code. To our chief washington correspondent on capitol hill. Four frantic days. Can it be done, kevin . Kevin well, they just started. Behind me is the House Committee hearing room. Already, we are hearing from the financial lobbying industry about what they would like to see stay and what they would like to see go. Today therearlier is potentially going to be a iod onar holding per carried interest. Im told republicans are trying to move ahead as quickly as they can because they want to get this done by the end of the year. Tomorrow, ted and mike lee are , the taxrover norquist lobbying guy in d. C. We are waiting for wednesday to get what we could see from the Senate Version of the tax package. The difference between the package in the senate and the house will be interesting in terms of time table, whether that could potentially slow them down. Of the bign all divisions we still have ahead, where could we see those changes . I spoke to a source about that in particular. Really hit amp loophole hard. There is some talk about the mortgage deduction, moving that cap to 500,000. The Real Estate Industry not very happy they have been hit. Republicans i speak with, senior aides and members on the committee tell me this is it. This is their opportunity and someone is going to have to pay for some portion of the tax package. They know that Economic Growth as a result of the tax package will ultimately be what drives the most significant driver and pays for this plan. About individual mandates . There are rumors that could orvide another 400 billion so dollars. Would that gain any traction . Kevin thats a great question and one that will be closely monitored inside the markup. Marco rubio, republican from florida, wrote an oped in the new york times, trying to frame this as something needed for the middle class. That is in stark contrast to what we heard from former treasury secretary Larry Summers on bloomberg earlier today, a democrat, in which he argued that this is the type of tax package that bolsters income inequality. Clearly, the ideological lines are drawn. Pressure coming from republicans inside the white house and halls of congress, peopley pushing back, like realtors, and yes, even private equity. Shery thank you. To first wordgo news with mark crumpton. Mark there is a report that establishes a connection between the suspect in the Texas Church Shooting and the church. A local sheriff tells cnn the mans former inlaws attended the church from time to time, but werent there yesterday. Theeople were killed in shooting, 20 others wounded. The suspect was found dead in his vehicle. In washington, a federal judge says she is inclined to remove two former Trump Campaign officials from house arrest. Paul manafort and rid gates rick gates appeared in court today. The judge says she wants more information about their financing before making a final decision. Theresa may is calling for a new culture of respect in public life following what she called troubling allegations of Sexual Harassment and abuse in british politics. Her remarks came during a speech today at the federation of british industry. The scandal has already triggered the resignation of the secretary, annse investigation of mays deputy, and the suspension of several lawmakers. Banks haveabia, started freezing the accounts of high profile suspects in the corruption case. Was onenaire investor of those taken into custody, along with government ministers and top officials. As a power are seen play by Saudi Crown Prince mohammad bin salman. Global news 24 hours a day by 2700 journalists and analysts in over 120 countries. This is bloomberg. Up, we will bring you these comments live. This is bloomberg. President york fed William Dudley is giving a speech at the Economic Club of london. Lets take a listen. We started the search process at the new york fed. To do a search, you have to be public, so it is public now today. As we mark thedo 10th anniversary of the onset of the financial crisis, i want to draw some lessons from that harrowing experience and consider what the implications are for regulatory policy going forward. As always, what i have to say reflects my own views and not necessarily those of the Federal Reserve system. A financial crisis can have great consequences that can linger for many years. The toll from the financial crisis was severe. 9 million jobs lost. 8 million housing foreclosures. The deepest economic downturn since the great depression. Moreover, the road back has been long and slow, despite economic policies oriented toward recovery. It has taken eight years to push the Unemployment Rate down to a level consistent with the Federal Reserves employment objective. Shery that was William Dudley with his life comments at the Economic Council of new york luncheon. Lets bring in michael mckee, Bloomberg International economic and policy correspondent. Tell us the key points he is supposed to address today. Going to talk not about the economy or regulatory policy. He is rising to the defense, today, of Financial Regulation in general and the feds regulation in particular. He says precrisis, Financial Regulation was woefully inadequate and therefore, we need to make some changes. We need to make sure we have a resilient Financial System and we need to make sure the safe yards we put in place in response safeguards we put in place in response to the crisis are fully implemented and respected. He has a series of recommendations. One is that you preserve higher capital and liquidity requirements, dont cut back on those. Greater oversight of Central Trading houses. He says that is one area that has not been regulated enough. He wants regulatory relief for smaller banks. He says the volcker rule should be less burdensome. Foreed a viable resolution closing down firms like Lehman Brothers without a financial meltdown. And an Oversight Committee should retain their ability to designate companies as significant Financial Institutions with higher capital requirements. He points to ge and aig, which have recently been undesignated because they were designated, didnt want to be, and changed their financial models. He says that needs to be able to happen. Shery he Just Announced his retirement in the middle of next year. We have some vacancies when it comes to fed and governor positions. Michael he is going to be leaving mid2018. He would have to leave in january of 2019 because his term is up. He is leaving about six months early because he wants his successor to be in place and time. Thats the public reason. Of theuld leave one biggest public banks, the most important bank, with out experienced leadership and institutional memory, which could be a problem because the new york fed president is the vice chair of the open market committee. You would have to people the chair is the chair of the Federal Reserve. You would have to could people two people running it who are new. Vonnie you can watch this speech on the bloomberg at live go. Vonnie this is bloomberg markets, im vonnie quinn. Shery and im shery ahn. The u. S. Could be entering the next phase of the m a cycle. A report, u. S. Executives are expecting the deals market to return to normalized levels after a flurry of to mistake m a activity over the past couple of years. Jason kelly joins us with more. Jason thank you so much. , viceere with bill casey chair of transaction advisory. Ervice the report you just put out is talking about where the m a market is. A lot of the talk this week is about qualcomm. What are we to make of that from a sector respective or an enthusiasm for deals perspective . Coming off last weeks largest tech deal ever, our barometers showed that 73 of executives believe this is a healthy and stable market. In fact, as we saw last week, companies that are over 5 billion in revenue, 74 are expected to do deals. Combine that with coming off two quarters of 3 gdp growth. Overall, the Global Economy is doing really, really well. 63 of respondents feel the corporate earnings are improving, combined with all the other great fundamentals we have seen in the market. We are expecting an uptick in the deal market. Revving up, and when we look toward washington, there is a lot of talk about opening it up for more deals. How does tax reform play into that . , people and foremost are doing deals for strategic reasons. However, clearly, if there is some relief in the new tax bill, that will further rampup the activity in the m a market, no question. Jason do people get on with business two people wait to see what that looks like or get on with business while washington gets on with business . We are coming off historic rates and terms of values and values within the market. However, companies are focused in terms of making sure they are capturing values in the deals. They are focused on their core assets. Whereies are looking at are we going to land with respect to tax reform . But first and foremost, once what the understand tax bill is, you will see it pick up the pace. Taxes where does private equity fit in the current landscape . There are a couple of provisions in the tax code right equity, affect private carried interest as well as the deductibility of interest expense. One thing we have seen over the years is that new deal structures will emerge. I am sure the private and green is going to be very innovative with respect to deal structures. I think that is one of the seen in certain sectors. Jason the president right now is overseas. We are hearing a lot about dealmaking on a different level over there. What do you expect to see out of china and other parts of asia . China if you look at their ecommerce market, it is larger than the u. S. , u. K. , german ecommerce markets combined with only 50 of people having access to the internet. Thats why the u. S. Is so interested in china. Jason do you expect that there are other geopolitical concerns out there . There are going to continue to be geopolitical shocks, but push for growth continues. Jason bill casey, thank you so much for joining us. Rate to be with you. This is bloomberg. Great to be with you. This is bloomberg. Vonnie live from bloomberg World Headquarters in new york city, i am vonnie quinn. Shery i am shery ahn. This is bloomberg markets. Stocks fluctuating between gains and losses. We have two conflicting stories out there. Energy stocks leading the gains. Oil higher due to the corruption crackdown in saudi arabia. Still, telecom declining right now. A collapse of merger talks between sprint and tmobile. We are seeing the s p 500 marginally higher after eight weeks of gains. Any positivity at the close today could be another record. The nasdaq up when 2 . Up. 2 . President trump talking trade in asia. Vonnie lets get to first word news with mark crumpton. Markel and Prime Minister shinzo abe mark in japan, President Trump and Prime Minister shinzo abe are talking about nuclear weapons. President trump warns that the era of strategic patience with north korea is over. Jim mattis is facing a growing chorus of questions from nato allies and partners about what the next steps will be to fight Islamic State in syria. Mattis is in finland for a week of meetings about how to ensure peace. A Court Hearing is tied to the theonnaires outbreak during flint water crisis. Sendcutors are trying to officials to jail. 2017 is on track to be one of the three hottest years on record. The United Nations world meet are Logical Organization says the year is on pace meteoroLogical Organization says the year is on pace to follow 2015 and 2016 which were both affected by el nino. News 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. Im mark crumpton. This is bloomberg. Vonnie thank you. Over the weekend, saudi arabias king put in motion a crackdown of what he called an anticorruption drive. To an arrest of the nations most wellknown investor. So far not been brought or made public as far as we know. Many believe the king is clearing the way for his son to ascend to the throne. A dramatic 24 hours for saudi arabia as the fallout continues after a series of arrests of former and current officials on charges of corruption. The most notable is a saudi billionaire. The government has been tightlipped about who has been charged with what exactly. It all so remains to be seen also remains to be seen to what extent this is a power grab as opposed to a commitment to cleaning up the house. The crown prince took over his new role in the summer. Foreignpolicy front, tensions continue with yemen. For aarabia blamed iran Ballistic Missile that came through the skies over the weekend. There is a conflict with a lebanon. In terms of the market, investors are undecided about whether this is net positive or net negative. Bloomberg news, riyadh. Vonnie the attorney general says the arrests are just phase one of an antigraft push. And the suspects will have open trials with access to legal resources. Turning to domestic issues in the u. S. , will cutting Corporate Tax rates promote growth . Larry summers weyden. Weighed in. Mr. Summers not very much, for two reasons. We already have record low taxes on capital. Attractives have investments, they can make them at low costs right now. Thats the first problem. Doesecond is, the build include an element that i think is constructive, expensing of investment for equipment. If i make an investment in equipment, i can write it off in the first year. If you make a one dollar investment, you get a deduction equal to the Corporate Tax rate. Then you share all of the profits. You share a fraction equal to the Corporate Tax rate with respect to the government. The government is paying for the same fraction of investment in is claiming later and benefits. As long as that is true, the Corporate Tax rate shouldnt have any affect on the incentive to make the investment. What the Corporate Tax rate does , tax tax monopoly profits rents that are somehow derived competitivee of advantage, tax the profits earned on capital already in place. In the presence of expensing, it is an elementary economic principle that the Corporate Tax levelhould not affect the of investment, and indeed, because of the interested deductibility, it may even mean that a higher Corporate Tax rate would operate to encourage investment. There are some more complicated aspects involving the choice of a Global Location for investment, but here, if you just take the simplest view of , the principal the administration is pushing, the socalled territorial taxation, what that means is that in stead of taxing the Global Income of u. S. Companies, they are going to try to tax only the u. S. Income of u. S. Companies. What could be a more straightforward incentive to invest abroad than that . It is more, located because they have a global minimum tax and a variety of complexities, it because theyicated have a global minimum tax and a variety of complexities, but taxes are being cut on old capital and income earned abroad. I would have thought the right focus for tax reform would be cutting the tax on new investments made to employ new workers in the United States . Me thewhere it seems to tax bill is more responsive to than twonterests economic interests of american families. Then it is to economic interests of american families. Up, we will bring you a conversation with John Chambers. His next chapter as he prepares to step down as chairman of cisco. This is bloomberg. Shery a new chapter on the horizon for cisco. , after 24 years, former ceo John Chambers will officially next month, after 24 years, former ceo John Chambers will officially step down from the board. We are going to send this to cory johnson, who is standing by with more. Y John Chambers joins me now. John, i think one of the things that you did for cisco for so many years was really find market transitions and find what was going on in the future of business, and be there in the the Wayne Gretzky line, be where the puck is going to be. What are you learning as you work with startups now in this new stage of your life . It well, and its a pleasure to be back with you. I have a lot of weaknesses, but getting market transitions right is usually my strength. Ry i am sorry. We have some breaking news. We will be back shortly. York, William Dudley having a q a. Lets listen in. William cowan what i learned last week in an amazing news flow is so many william what i learned last week in an amazing news flow see the dow dropped 15 , 21 , we have a chairman oninee who has to fall back phds from berkeley. How will these institutions work under crisis, given this new structure for the fed . How will you work with the phds . Will do i think the fed just fine because the Financial System is much stronger today. I think the Financial System can handle much more stress today 2007 and 2008. The second thing is i think the much more even keel. I dont see the kind of boom in muchss that put so pressure on the system. There is a lot of change at the fed. Is,i think what people miss first of all, the people who have been named are really high quality people. I am a big fan of the new people at the Federal Reserve. The second thing is, its not just about the people at top. Film tooember the big to fail, there were just principles around the table. Thats not really how it works. The principles are not making this all up on their own. A good staff is still going to be there. The third thing i would say is that the mission of the fed doesnt change. The objectives dont change. People are still going to follow the same set of objectives. The last thing is, the current of theee is very much same mind. There is not a lot of discord going into this transition. I think it is going to be a smooth transition. Andink governor powell chair yellen are very wellliked. Athink its going to be smooth transition. Does that answer your question . Tom close. [laughter] the importanceed in your speech of macro credential tools. Probably the most important is. He stress test that banks take if you look at the market, it is quite exuberant, but the message from the banks [inaudible] [no audio] encouragingwas very. Jpmorgans guidance was its capital ratio could will fall. My question is, how would you respond to the idea that there is less capital in the system going forward, particularly at a moment when Financial Markets are exuberant and you might expect things to be tightened . I agree that we should be stress test. I dont think we should not be relaxing the stress tests. I dont think we are going to be relaxing the stress tests. I think the stress tests are going to be very stressful. [laughter] are an the stress tests important innovation because its not about how much capital you have today, but how much you would have after a stressful p eriod. I think there is a strong testssus that stress are a good idea. We did the first stress tests in the spring of 2009, and it was credible. Test thathat we did a was credible we were coming into the office the next day and i had a piece published by a , and thege fund headline of the piece was, we agree. I knew that was hugely important. If people thought the stress credible, we were over a hurdle in the Financial System. I dont think anybody thinks the tests should be rolled back in terms of rigor. I think you could ask yourself, are the could the stress a moree done in efficient way . But i dont think there is any sentiment to roll back the stress test. You get right to it in paragraph two. You talk about residual impacts, significantly higher public debt , substantial damage to the public trust. I think about the work linking fiscal policy to foreign policy. Lets look at deregulation. You wrote in a book a few years ago, theres not a moment to lose on fiscal policy. With a trillion dollars of national debt. Now its in the vicinity of 20 trillion. Will the new team at the fed, led by chairman powell, will they be fiscal policeman as well . , its up tol congress and the administration to decide the path of fed fiscal policy. That said path of fiscal policy. That said, we need to think about the debt over the medium to long run. Its interesting to me that this last year, the deficit was 3. 5 of gdp. That compares to 1. 1 of gdp back in 2007. We are at pretty close to full employment and we have a deficit that is quite a bit larger than it was prior to the last economic downturn. I think that suggests we dont have a huge amount of fiscal capacity we should use at this time. But that is a decision for congress and the administration to address and i am sure they will debate a quite intensely in the coming weeks and months. You describe the role of otc derivatives. We basically have a situation where most of the derivatives in the western world pass through a. Iny number of utilities those utilities have very little in termsnd liquidity of the standards of banks. A newohen said they were systemic problem. One of the supervisors also talked about an armageddon scenario. I wonder if you could talk about the risks in these utilities and how they might be mitigated. Actiam the dodd frank gives the Federal Reserve some authority in terms of supervising and overseeing these infrastructures that are systemically important in the United States. I think thats an important power to have. I agree with the tenor of your question. These utilities are systemically important and we need to watch that basket closely. One thing i was involved with early in my career at the new york fed was i chaired to the committee for payment settlement systems. Bulls fortty Financial Market infrastructures, which was a fore host principles Financial Market infrastructures, which was a whole host of standards markets should be held to around the should infrastructures be held to around the world. We watched those be accepted on a global basis. I think there is some risk, but we are cognizant of that risk. Happen if there actually was a failure of one or two of the largest counterparties . This is essential infrastructure. If some of these infrastructures go away, you dont have a functioning Financial Market. Its not about resolution, its about recovery. I agree they are critical to the system and thats why we have title viii, the dodd frank act, and thats why we need to keep that. I want to thank you for footnoting mark twain, american economist, in your speech this morning. In the broader scheme of lessons from the financial crisis, we hear from many guests, particularly the right, that a new world of regulation is dampening investment. Thedo you respond to lessons we have all learned about the application of these next 510s in the years, how do you bring that to what it will do to our gross the mastic product and investments Gross Domestic Product and investments that will create jobs . William its hard to say if i just turn the style on regulation, what will happen to gdp . Uncertains really what would happen to growth if dial backly were to on regulation. Behink all regulation should subject to analysis. I think all regulation should be thinking about how can we accomplish the same end in a more efficient way. It shouldnt be about no regulation or more regulation. It should be about what regulatory changes can we make to make the president york fed William Dudley answering questions at the Economic Club of new york luncheon. Lets turn to michael mckee. Great to have you back. His speech,ssing which was heavily focused on regulation. Right now, he is answering some of those questions, saying Bank Stress Tests are going to remain very stressful. Any other points that caught your eye . Michael we talked earlier about that they should not attack doddfrank with a meat cleaver. They should use a paring knife. He does say the volcker rule could the pared back and made more simple. Tests need to be strong because they are the foundation of the markets believe that we can get through any financial crisis. He also wants additional regulation of clearinghouses. He was asked about jay powell coming in as fed chair. He said he will do just fine. The fed is a Strong Institution going forward. His brief comment roughly referencing the u. S. Economy is that we seem to be in good shape and there dont seem to be clouds on the horizon. He was asked about tax cuts and whether we need them. He said there is not a lot of fiscal capacity in the system right now. It is up to congress to decide what they are going to do and the fed will have to see how the economy responds. Vonnie being very diplomatic in the sense that federal banks are not supposed to talk about fiscal policy. , hear standard deviations seems very calm about the prospects for the treasury market. Michael at this point, he says we have regulation in place that has made the system stronger. We still need tweaks and fixes, but you dont have the underlying as he put it woeful regulation that we saw before the financial crisis. There is a lot more trust in the system. The lack of trust is what really caused the financial collapse. ,s he pointed out in his speech people have more belief they will get paid back, and that makes the system stable or. More stable. Shery does he sound more confident this time around about the state of the u. S. Economy . Michael he has recently suggested he is confident about the state of the economy. Its not going to be roaring. You cant take into account any kind of fiscal plans because we dont know what they are going to be, but we have a 2 economy. Inflation is going to gradually move to 2 as unemployment continues to fall. So its status quo. A joke aboutde retiring early because who retires in january to play golf, but why . Why six months . Michael the official statement is to give his successor time to get into the job, but there is obviously some personal reason he wants to leave earlier. It could be a little more than six months if they can find a successor in the search process and get them in place in the spring. He said he could leave then. Bloomberganks to andrnational a economics policy correspondent, michael key. Shery coming up, michael kane. Michael mckee. Coming up, the sprint to rewrite the tax code. Vonnie and later, a conversation with John Chambers. His next chapter as he prepares to step down from cisco. This is bloomberg. Drum bloomberg World Headquarters in new york, im david europe. Welcome to bloomberg markets, balance of power. David here are the top stories. President donald trump is in asia kicking off his trip with a message to the japanese Prime Minister that his nations economy could be number two in a comes to strength but the president said theres a trade deficit between the two countries and he says its not fair. A corruption crackdown in saudi arabia. There was a rest of billionaire officials. Prosperityor president joins us to tell is why his special Interest Group says there is still worked a do in the gop tax overhaul proposal. President trump is in japan on the first leg of his 11 day asian tour. Hes talking about trade deficits and giving veiled