Live on Bloomberg TV

00:00-- STANFORD. YOU SAID YOU WOULD RATHER LISTEN TO THE CEO AND NOT THE FED GOVERNOR. >> IT APPLIES HERE. GIVE JAMIE DIMON CREDIT FOR SPEAKING OUT. HE PROBABLY HAS 250 REGULATORS SHOWING UP AT HIS HEADQUARTERS EVERY DAY SO IT'S IMPRESSIVE. THE GOOD NEWS IS, I'M HERE OF THE FIRST DAY OF THE FED BLOCK OUT. WE DON'T HAVE TO HEAR THE MUSINGS OF 19 PEOPLE AROUND THE TABLE. IF I HAD MY WAY, THE BLACKOUT WOULD LAST THE SIXTH EXPECT MEETINGS SO THEY CAN FOCUS ON WHAT'S HAPPENING IN THE REAL ECONOMY. JONATHAN: HOW'D MUCH OF THIS HAS EVOLVED FROM THE FED? >> THE GENERAL PREOCCUPATION OF MOST CENTRAL BANKERS IS THAT THE MORE THEY TALK, THE MORE TRANSPARENT THEY ARE AND THE MORE AND LIGHT FINANCIAL MARKETS WOULD BE. THAT IS NOT MY VIEW. MY VIEW IS IT'S IMPORTANT TO GET POLICY RIGHT AND 19 PEOPLE SCREAMING OVER SEPTEMBER IS A GREAT WAY TO MAKE IT POLICY ERROR. IT WOULD BE FAR BETTER IF THEY SPENT SIX WEEKS FOCUSING ON HARD UNDERLYING QUESTIONS ON THE ECONOMY LIKE PRODUCTIVITY, LABOR FORCE PARTICIPATION AND I THINK IT WOULD BE BETTER FOR YOUR VIEWERS IF THEY USE THE NEXT WEEK WHEN THE FED IS NOT SPEAKING TO ASK THEMSELVES ABOUT THIRD-QUARTER EARNINGS AND WHY THEY ARE MEDIOCRE AGAIN. THEY NEED TO ASK ABOUT THE STRENGTH OF THE ECONOMY AND WHY GLOBAL TRADERS DOWN. THIS FED SPEAK IS GREAT DANGEROUS AND NOT HELPFUL. DAVID: APART FROM THAT, HOW MUCH DOES IT MATTER? HOW IMPORTANT IS JANET YELLEN POSITIVE VOTE? >> YOU ARE ASKING ME TO PULL BACK THE CURTAIN. MY EXPERIENCE UNDER CHAIRMAN BERNANKE HE AND I DON'T THINK IT WAS TREMENDOUSLY DIFFERENT EITHER UNDER GREENSPAN OR JANET YELLEN, THE CHAIRMAN HAS A LOT OF VOTES IN THEIR POCKET. THERE HAS NOT BEEN A DISSENT BY A SITTING GOVERNOR FOR 15 YEARS. IF CHAIR YELLEN ONES TO GET SOMETHING DONE, MY EXPERIENCES SHE CAN GET IT DONE. THAT MEANS SHE HAS TO DECIDE WHAT SHE WANTS TO DO. THAT MIGHT BE THE BIGGER QUESTION. YOU HAVE 18 OTHER PEOPLE POSITIONING TO GET HER TO COME THEIR WAY. WE HAVE SEEN A LOT OF THAT OVER THIS PAST WEEK. ALIX: I HAVE A CHART THAT RAISES ANOTHER QUESTION AND THAT'S THE ACTUAL NEUTRAL RATE. THE RED LINE IS THE NEW RATE AS THE FED SEES IT AT 3%. THE PURPLE LINE IS HOW WILLIAMS SEES IT AND THE BLUE LINE IS THE EFFECT OF FUNDS RATE. EVEN IF THE FED HIKES 25 BASIS POINTS, THEY DON'T HAVE THAT MUCH MORE ROOM TO HIKE AS WE GET BACK TO NEUTRAL. WHAT >> DOES THIS CHART LOOK LIKE NEXT THURSDAY? >>I THINK THE FED FUNDS LINE IS IMPORTANT AND EVERYTHING ELSE IS CENTRAL BANKERS BE NONSENSE. ALIX: ARE YOU ALLOWED TO SAY THAT? >> WITH ALL DUE RESPECT MY FED FANS, THEY SAY THEY HAVE A NEW NEUTRAL RATE. THAT IS FANCY TALK FOR PRODUCTIVITY IS LOW IN THE ECONOMY. AT THIS RATE, IF THEY WERE TO RAISE RATES TO GET TO THEIR NEW LOWER LEVEL OF THE FED FUNDS RATE AND LET'S ASSUME THEY GO IN DECEMBER, THEY WILL GET TO THAT TARGET IN 2027. THE PACE TO GET THEIR STRIKES ME AS SOMEWHAT PUZZLING EVEN IF YOU BELIEVE THIS. WHAT THIS IS IS A FUNCTION OF THEM SCARED TO MOVE RATES TO WHAT JAMIE DIMON DESCRIBES AS NORMAL. THEY ARE SETTING THEMSELVES A LOWER BAR BUT IT'S NOT OBVIOUS WIN. DAVID: HOW DOES KEVIN WARSH NOW VOTE GIVEN ALL THE FACTORS? >> I AM A HAS BEEN BUT I WOULD TELL YOU ABOUT 2.5 YEARS AGO, I WOULD HAVE SHRUNK THE FED BALANCE SHEET. THERE IS AN INCREASING GLOBAL CONSENSUS THAT SHANNON -- THE JANET YELLEN SPOKE TO A FIERCELY IN JACKSON HOLE AND SAID WE NEED TO KEEP BIG BALANCE SHEET. THAT WAY WE WILL HAVE MORE TO LOSE TO HELP THE ECONOMY. THESE BALANCE SHEETS SHOULD HAVE BEEN STRONGER A LOT -- SHOULD HAVE BEEN SHRUNK A LONG TIME AGO. I WOULD HAVE BEGUN THE SALE OF TREASURIES AND MORTGAGE BACKED SECURITIES AND SLOWLY MOVE UP AND INTEREST RATES SO THAT IN THE UNLIKELY EVENT THAT THE LATEST FORECAST IS WRONG, THE FED WOULD HAVE SOME OPTIONS. JONATHAN: YOU WOULD ACTIVELY SELL DOWN THE FED >> WORD, YES. I WOULD HAVE BEGUN IT YEARS AGO. THE WORLD IS DYING FOR U.S. TREASURIES AND MORTGAGE BACKED SECURITIES. THIS DOES NOT MEAN A FIRE SALE BUT OVER THE COURSE OF THE NEXT SIX-OF MONTHS, THE FED COULD ANNOUNCE WE HAVE THESE ASSETS AND YOU MIGHT WANT THEM AND HERE IS THE AUCTION SCHEDULE. IT WILL SHOW THE FED IS PROCEEDING BACK TO NORMALCY. IT WOULD SHOW THE FED IS NOT TRYING TO BE FISCAL POLICY MEMBERS. WE ARE RETURNING TO THE POWERFUL BUT NARROW ROLE BUT IT'S IMPORTANT WHAT YOU HEARD FROM JANET YELLEN IN JACKSON HOLE. THEY DON'T WANT PROCEEDS FROM ROLLOUTS LESLIE SAID SLOWLY, THEY WILL REPLACE THEM. I HEARD A PERMANENTLY LARGE BALANCE SHEET AT THE FEDERAL

No schedule data available.

Former Fed Governor Warsh Decries Fed Communication

Kevin Warsh, distinguished visiting fellow at Hoover Institution and former Federal Reserve Board Governor, discusses Federal Reserve communication and what he would do if he was still a member of the Fed. He speaks on "Bloomberg ‹GO›." (Source: Bloomberg)

More From Bloomberg Daybreak: Americas
All episodes and clips

PxPixel