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00:00From the world of politics to the world of business, this is balance of power with David Westin. From Bloomberg World Headquarters in New York to our television and radio audiences worldwide welcomed the balance of power. We start today at the White House. We're waiting for President Biden, who is scheduled to give some remarks about those M1 Abrams tanks that will be heading over to Ukraine. We will bring those remarks to you live when they happen. But that's not the only thing I'm in the White House right now. There are reports maybe about a change in the director of the National Economic Council. And for that, we turn our Washington correspondent, Jeanne Hardin, who is at the White House, will tell us about Lael Brainard. Yeah. So, David, the number two at the Fed might end up becoming the number one voice in the West Wing when it comes to economic issues. Lael Brainard, her name is really at the top of the short list. So who is going to replace Brian D? Interviews are still ongoing. They have not made a decision yet. We should also note, obviously, there's other shakeups. We do have the chief of staff as well looking to exit. We know that Mr. Zients will be taking over from Mr. Clean. No one is leaving before February 7, but Lael Brainard is at the top of this list. Shery Ahn contender, Emory. The only reason I'm here is for the president and states. He's now in the White House. He's about to speak. Yesterday, Mark Little since Bush approved full scale invasion of Ukraine. Covid, who was Ukrainian people who shoot Putin and the world full force to their courage in the dominant determination to live free. Through every single step of this horrific war, the American people have been strong and unwavering support. Democrats and Republicans in Congress have stood together. The United States has worked in lockstep with our allies and partners around the world to make sure Ukrainian people are in the strongest possible position to defend their nation, their families, and against the brutal, the truly brutal aggression of Russia. Haven't seen the likes of this in a long time. The United States and Europe are fully united. This morning I had a long conversation with our NATO allies. German Chancellor Schulz, French President Macron, prime minister. So look. And the Italian prime minister. Maloney to continue our close coordination and our full support of Ukraine, because you all know, I've been saying this for a long time. The expectation on the part of Russia is we're going to break up. We're not going to stay united, but we are fully, thoroughly, totally united. With spring approaching, Ukrainian forces are working to defend the territory they hold and preparing for additional counter offensives to liberate their land. They need to be able to counter Russia's evolving tactics and strategy on the battlefield in the very near term. They need to improve their ability to maneuver on open terrain, and they need an enduring capability to deter and defend against Russian aggression over the long term. The secretary of state, the secretary of the military behind me, are they? They've been deeply, deeply involved in this this whole effort, armored capability, as General Austin will tell you, speak of it has been has been critical. And that's why the United States has committed hundreds of armored fighting vehicles to date, including more than 500 as part of the assistance package we announced last Friday. And today, today, I'm announcing that the United States will be sending 31 Abrams tanks to Ukraine, the equivalent of one Ukrainian battalion sexually. Austin has recommended this step because I will enhance the Ukraine's capacity to defend this territory and achieve its strategic objectives. Abrams tanks are the most capable tanks in the world. They're also extremely complex to operate and maintain. So we're also giving Ukraine the parts and equipment necessary to effectively sustain these tanks on the battlefield. When we begin, we'll begin to train the Ukrainian troops on these issues of sustainment, logistics and maintenance soon as possible. Delivering these tanks to the field is going to take time, time that we'll see and we'll use to make sure the Ukrainians are fully prepared, integrate the Abrams tanks into their defenses. We're also closely coordinated this announcement with our allies. The American contribution will be joined by an additional announcement, including that will be will be readily available and more easily integrated for use in the battlefield in the coming weeks and months from other countries. I'm grateful that Chancellor Schultz for providing German Leopard 2 tanks and will lead an effort to organize a European contribution of two tank battalions for Ukraine. I want to thank the Chancellor for his leadership and steadfast commitment to our collective efforts to support Ukraine. Germany has really stepped up. The Chancellor has been a strong, strong voice for unity. A close friend and for the level of effort we're going to continue. Supporting Ukraine's ability to fight off Russian aggression, to defend its sovereignty and territorial integrity is a worldwide commitment. I just look to a worldwide commitment. Last week, Germany in Germany, Secretary Austin conveying Ukraine Defence Contact Group for the eighth time, this group is made up of some 50 nations, 50 nations each making significant contributions of their own to Ukraine's integrity, each fully committed to making Ukraine remain strong and independent and able to defend itself against Russian threats and violence. I want to thank every member of that coalition for continuing to step up. The UK, the United Kingdom recently announced that is donating Challenger 2 tanks to Ukraine. France is contributing HMX tens armored fighting vehicles in addition to the leopard tanks. The Germany, like the United States, is also Germany is also sending a pet a Patriot missile battery. The Netherlands has donated Patriot missile and launchers. France, Canada, the UK, Slovakia, Norway and others have all donated critical air defense systems to help secure Ukrainian skies and save the lives of innocent civilians who are literally the target, a target of Russia's aggression. Paul Allen is sending armored vehicles. Sweden is donating infantry fighting vehicles. Italy is giving artillery. Denmark and Estonia are sending howitzers. Latvia is providing more Stinger missiles. Lithuania is providing the anti aircraft guns. And Finland recently announced its largest package, a security system today. You may remember why I was asked a while ago what I think was going to happen, and I said no. He thought that was going to end up with the finalization of Europe. He's got the NATO ization of Finland. We can do something he never intended. Together with our allies and partners, we've sent more than 3000 armoured vehicles where the 8000 artillery systems, more than 2 million rounds of artillery ammunition and more than 50 advanced multi launch rocket systems and ISE ship and air defense systems, all to help counter Ukraine's brutal aggression. That's happening because of Russia. And today's announcement builds on the hard work and commitment from countries around the world led by the United States of America to help Ukraine defend its sovereignty, territorial integrity. That's what this is about helping Ukraine defend and protect Ukrainian land. It is not an offensive threat to Russia. There is no offensive threat to Russia. If Russia troops return to Russia, they'll be there. That's where they belong. This war would be over today. That's what we all want, an end to this war in just and lasting terms. You know, our teams do not permit one nation. We're not going to allow one nation to steal neighbors territory by force. Our terms preserve Russia's sovereign Ukraine's sovereignty and territorial integrity and honor the U.N. charter that start by the terms we're working on. And you know, these are these are the terms we all signed up for. One hundred and forty three nations voted for the United Nations General Assembly last October. So the United States standing shoulder to shoulder with allies and partners is going to continue to do all we can to support Ukraine. Putin expected Europe and the United States to weaken our resolve. He expected our support for Ukraine to crumble with time. He was wrong. He was wrong. He was wrong from the beginning. And he continues to be wrong. We are united. America is united. And so is the world. We approach the one year mark, as we do on the Russia full scale invasion in Ukraine. We remain united and determined as ever and our conviction and our cause. These tanks are further evidence of our enduring, unflagging commitment to Ukraine and our confidence in the skill of the Ukrainian forces. As I told President Zelinsky when he was here in today's his birthday, by the way. In December, we're with you for as long as it takes to press. Ukrainians are fighting an age old battle against aggression and domination. It's a battle Americans have fought proudly time and again. It's a battle we're going to make sure the Ukrainians are well equipped to fight as well. This is about freedom. Freedom for Ukraine, freedom everywhere. Spot the kind of world we want to live in, the world we want to leave to our children. So may God protect the brave Ukrainian defenders of their country. Keep the flame of liberty burning brightly as we can. Thank you for taking this decision now. We force you to change your mind on something. To reinforce you, change your mind, you want to make sure we're all together. That's for you to do. That's freedom. Thank you, President. Any response to the Pence disclosures of classified documents? We have been listening live to President Biden's giving remarks at the White House and he ended the way began with the unity of the allies in supporting Ukraine in resisting the Russian invasion. He announced, as anticipated, the 31 M1 Abrams tanks finished its would be on wending its way, although he said it would take time to Ukraine along with the supporting hardware user that was equivalent of a one battalion. He also specifically thanked Chancellor Schultz of Germany for leading the effort to have at least two tank battalions of those leopard to two tanks. And then he went on a litany of how much support there has been. And again, he ended up with how much unity there is among the allies in supporting Ukraine. We're reminded as we listen the president not just what the military aspects of this, but also the economic ones, because it is really thrown something, a wrench into the global economy and to take us through exactly what's happen to the economy because of that, as well as whether we recovered. We welcome now Laura Tyson. She's professor at the UC Berkeley, has School of Business and Public Policy. Dr. Tyson served as the chair of President Clinton's council and advisors. And then as his director of the National Economic Council. So Dr. Scott Tyson, personal, thank you for waiting with us, listening to President Biden. But as I say, give us your snapshot of what effect on the economy domestically, United States, but globally this war in Ukraine has had. Well, I actually think the main channel through which the war in Ukraine has affected the global economy is probably the adding to inflationary pressures and supply chain disruptions that supply chain disruption. And in agriculture, which led to inflationary pressure and food supply chain disruption, reconfiguration in energy and the higher energy prices. So I think the way this has really shown up in the global economy is the inflation and therefore the efforts by the central banks to actually engineer a soft landing out of an inflationary environment. So let's talk about that soft landing quite apart from the war in Ukraine. As far as I can tell, there are conflicting signals that we're getting right now. The employment situation seems very strong, although I think temporary work is is winding its way down. At same time, retail sales are down. So I'm getting conflicting signals. What do you make of all those signals and what is the likelihood at this point of a soft landing? So I think interestingly at once and listening to the macro economist there, there's a higher probability of a soft landing than usual, soft landings are very rare. And I think we should recognize that it's not a high probability. But still, there's a kind of sense that conditions may be pretty good for a soft landing. Now, why why is that? Well, the inflation rate is coming down and it's it is coming down in. In the United States, we have core goods, deflation. We have finally a slowing of shelter inflation. We don't have much in the way of services, ex housing. But still, if you put the hole in the seat, put all the indices together, I think we can say real action to bring the inflation rate down, real success. I look at wages. I look at wages. If you look at nominal wage growth, the last reports in December report, it came in at four point six percent on an annual basis. That was below what the market anticipated. Look, the Fed can't bring the inflation rate down with nominal wage growth of in the neighborhood of 5 percent. It's coming down. That number is very good and that creates room. You see, the ideal soft landing is wage growth could be used to slow and people and to get that slowdown. We don't need a significant increase in the unemployment rate. If employers and this what it looks like it's happening, they're holding onto their workers because it was so hard to get them holding onto their workers. They're slowing down new hires. But actually, if that can be combined with a slowdown in the growth of wage earners, boy, that's conditions for a soft landing. So Dutch has one last one here. Does China help or hurt in that soft landing if it comes back? What does that do to, for example, commodities prices? Very, very interesting question. And there is a real plus to China coming back, because China is a growth engine of the world economy. And it also can help pull a lot of the emerging markets around the world that have been that have slowed significantly because of China's slowdown. So that's all very positive news. On the other hand, China is a major commander of commodities and particular and oil. And so there is an anticipation that you have higher pressure on those kinds of prices from the Chinese recovery, China recovery. But you also have a plus side. So it's a mixed. It's a mixed situation. On balance, I think people believe that it's a plus for the world economy, for China's recovery. OK. Laura, thank you so much. Once again, thank you for your patience in waiting with us with her for President Biden. That's Laura Tyson. She's professor at the UC Berkeley Haas School of Business and Public Policy. And now for reaction from Capitol Hill, we turn Democratic Representative Brendan Boyle of Pennsylvania. He's a member of the Appropriations Committee. So, Congressman, first of all, before talking with the debt ceiling, give us your immediate reaction to this decision by the president says to send M1 Abrams tanks to Ukraine. Well, great to be back with you, David. I'm very supportive of it. I was part of a congressional delegation that met with Chancellor Shultz last week. I have been a strong advocate for the U.S. doing absolutely everything we can to support the Ukraine and fight for freedom. I believe it's our fight for freedom as well. So I think that this is very good news and frankly, a very bad day for Vladimir Putin. And so I don't want to be flip about this any way. But to put it bluntly, can we afford them given what's going to the debt ceiling? I mean, we're running up all these bills, but there's some question where they're going to pay the bills. So I can always tell when there's a Democrat in the White House, because that's what my Republican colleagues immediately discover, the deficit and the debt as an issue. Didn't really hear much about it in the four years Donald Trump was president. But now suddenly it's back on the agenda. Let's look at the facts. The deficit has come down the last two years by one point seven trillion dollars. That is the fastest and greatest deficit reduction in any two year period in American history. I think that really the main focus right now should be making sure we get, as Professor Tyson was talking about, that soft landing that we don't jeopardize our record job creation with a 50 year unemployment, our 50 year low in the unemployment rate, but that we don't, in attempting to bring down inflation, run into a situation of which we didn't vertically cause unemployment to spike. So as I understand this from a distance here where we are right now, as the Democrats are saying, the Republicans are. What is your plan for the debt ceiling? We're not know if they're going to come up with a plan or not, but if they do, it'll include, no doubt, some spend. But if they do do that, are you going to respond? Because we've heard you're not going to negotiate. On the other hand, you've asked for a plan. Yeah, well, let's be clear and don't take my word for it. Here's what House Speaker Kevin McCarthy has said. And the number two Republican leader in the Senate, John Thune, has said they have outright said they plan to use raising the debt ceiling as leverage, essentially take that hostage in order to get in return. Cuts to Social Security and Medicare. We Democrats are not going to go along with that period. Now, if we want to have a conversation about what future spending looks like, keeping in mind, as you know, the debt ceiling is about past spending. By the way, past spending that many of the Republican colleagues of mine voted for. That's one conversation on the debt ceiling. A separate conversation is what future spending looks like. We're going to have to have that by September 30th anyway, because that's when the government runs out of money. So we're obviously going to have a conversation about future spending one way or the other. We don't have to jeopardize the full faith and credit of the United States in order to have it. So. So I wonder and this is both a political question in terms of what your constituents think, but also a policy question. Should we be concerned with the deficit? As I calculated, something like a trillion dollars was added to the deficit under President Trump. That's over four years. And we've got another four trillion dollars on two years under President Biden. That sounds like a lot of money to me. Yeah, well, I would remind you what a former a recent Republican vice president once said, Dick Cheney. He famously said on Meet the Press 20 years ago, deficits don't matter. Now, I don't necessarily subscribe to that view. But what I would point out is, look, just a few years ago, we had a complete shutdown of the worldwide economy. We had trillions of dollars in emergency spending, both under a Republican president and a Democratic president. The overwhelming majority of us in Congress voted for that. And guess what? We've come out of Covid now, the fastest growing economy on earth. That's something we should be proud of. So let's focus on the here and now to make sure that we keep this economic recovery growing, that we do tackle the inflation issue. Yes, there is a conversation in the long term to be had about debt, but let's not forget why we had that sudden run up in deficit in the first place over the last several years. It was through an absolutely abnormal historic situation in world history. We've heard from Senator Mitch McConnell, minority leader, over in the Senate, that basically this is between President Biden and the speaker of the House, Kevin McCarthy. Is that where it sits right now? And is there a possibility, do you think, of the deal because everybody seems to agree defaulting is it really is not an option, is it? Yeah. Well, first, I was struck that Mitch McConnell gave the Heisman to Speaker McCarthy when it comes to this issue. And to be fair, Mitch McConnell has outright said that we will raise the debt ceiling, that we will not jeopardize the full faith and credit of the United States. That's the responsible position. Speaker McCarthy keeps talking about what exactly they they want to get out of this. I've still yet to see any specifics on their side. It's almost as if they want to take the hostage first and then figure out why they're doing it later. I think a lot of Americans sit back and say, how can it be that we're really talking about defaulting on the debt? I'm not sure there's any country in the world that does this. Do you see? Not necessarily right now, but in the longer term, some longer term solutions. So we don't have this recurring all the time. Yeah. I'm so glad you asked about this. We are really the only country in the world that has this broken sort of debt ceiling process. Indeed, the only country on earth that even has a debt ceiling in addition to us is Denmark. But they don't go through this annual or regular process of jeopardizing the full faith and credit of their country. I'm the author of a bill called the Debt Ceiling Reform Act. Also have a lead co-sponsor and Senator Durbin in the Senate. What? Our bill simply would do is end once and for all. This dysfunction around raising the debt ceiling allow the executive branch to initiate an increase in future debt ceiling raises. Congress would still have a voice. It could vote to disapprove if it wanted. But what it would avoid is the situation that I most fear, and that is that we we fail to raise the debt ceiling by accident. There is a real danger of that happening in August 2011 as our politics have become more extreme and more dysfunctional. I want to make sure we permanently defuse this ticking time bomb. Sounds like it makes sense to me, but you know far better than I. Thank you so much. Always great to have you with us. That's Democratic representative from Pennsylvania. He's Brendan Boyle. Still to come, we're going to talk with former deputy secretary general of NATO, Rose Gottemoeller, about what Leopard and Abrams tanks will mean for the war in Ukraine. This is balance of power on Bloomberg television and on radio. This is BOVESPA Bloomberg Television Radio. I'm David Westin with the bad news is the equity markets are down the indices and the good news is they're not DAX much. They were a short while ago to take us through. We welcome now critic Gupta so pretty where we are still a little bit rough seas when it comes to equity market. We're looking at S & P 500 us down about nine tenths of one percent. The real pain is in the tech space, though, down about one point three percent on the Nasdaq. Now, a lot of this is coming from Microsoft earnings after the bell yesterday, essentially saying that their big money maker product where a lot of their growth is coming from, their azure cloud computing business. At the end of the day, it did great in the fourth quarter, but it might not do so well in the year. Had a lot of that coming on, those recessionary fears, the macroeconomic fears. And it's a sentiment, by the way, that has start to ripple across the techs fear pretty broadly. They're looking at Amazon Alphabet. A lot of the folks that are also looking to grow in the cloud computing business, well, maybe we're not going to get that momentum. We were really expecting at least that seems to be the sentiment in the markets. But David, it's not just the tech story we have to keep an eye on. It's also the geopolitics here, because on the on or on the surface, it does look like most of tech is driving the action. But look, it is a broad based sell off, which tells you risk sentiment really plays a story or plays a role in this trading day. And a lot of it is coming from Ukraine. The idea that the Biden adminstration is now agreed to send tanks to Ukraine, that increased presence, that increased involvement, that is seen as an increase in geopolitical risk. Now we've come to the right place to tell a geopolitics here in balance of power. Thanks so much. But the basic thought is it may increase geopolitical risk and might increase geopolitical risk. And look, you're seeing that with the wonkiness of the dollar right now because yields were lower, the dollar not falling yields, which tells you a little bit of a bid there. Little safety. OK. Thank you so much. Gupta. You can watch her anchoring at 1:00 p.m. Eastern on Bloomberg Markets. Coming up, Rose Gottemoeller of Stanford University takes us through Ukrainian preparations for a new Russian offensive in the spring and what these tanks might mean to that. This is balance of power. And we are Bloomberg Television and on radio. This is balance of power on Bloomberg Television Radio. I'm David Westin to keep you up to date with news from all around the world. We turn now to Mark Crumpton here with the first word. David, thank you. The United States will send Ukraine thirty one of its M1 Abrams battle tanks, adding to a German commitment to supply some of its top line tanks. Speaking from the White House earlier this hour, President Biden said the tanks will help Ukraine achieve its changing strategic objectives. The decision by the U.S. and Germany follows a broader trend of allied nations giving Ukraine increasingly powerful weapons to counter Russia, although food prices have declined over the past nine months. The world is still gripped by an historic food crisis. The war in Ukraine is hurting the flow of goods, including scenes with much of Africa on the brink of famine. U.S. ambassador to the UN's Food and Agriculture Agriculture Agency's Cindy McCain said it's going to be a, quote, tight year for funding food security agencies and projects. Canada's finance minister is facing significant pressure to spend more on clean energy subsidies and health care even as a possible recession looms. Chrystia Freeland says she'll continue to take a, quote, fiscally prudent approach as the government prepares its budget for the fiscal year that begins April 1st. She's vowing not to stoke inflation that could force the Bank of Canada to raise interest rates even higher. Pope Francis is calling for a change in the Catholic Church's approach to homosexuality. The pope told the Associated Press that bishops in particular must be welcoming and show respect. He said homosexuality is not a crime and that the church and worked to end laws in place. Some countries that criminalize homosexuality and discriminate against the community globally is 24 hours a day on air and on Bloomberg Quicktake, powered by more than twenty seven hundred journalists and analysts in over 120 countries. I Mark Crumpton. This is Bloomberg Daybreak. Thank you so much, Mark. Well, we started the broadcast with President Biden announcing the 31 M1 Abrams tanks we sent over to Ukraine. As Mark just described, and that came after the German chancellor, old Schultz had earlier said what they're going to do from Germany. That's here. Our goal is to quickly provide two tank battalions together with our allies. There are many countries that would like to supply and we will coordinate that and involve them to make that happen step by step. Seen them, it should do it. So we know the tanks are on their way. The question is what difference will they make? For an answer that, we turn to Rose Gottemoeller of Stanford University, Moscow promoter, served as deputy secretary general of NATO and before that as undersecretary of state for arms control. So thank you so much for being back with us. It sounds like a lot of tanks. At the same time, I've read that there are hundreds of Ukrainian tanks and I don't know how many Russians. Why will this make a difference on the battlefield? I think it'll make a difference because these are the most capable battle tanks in the world today. The leopards are well-known for being reliable, for being capable. And I think the fact that they are deployed across the European NATO allies and also NATO partners such as Finland who have offered up tanks, I think that this will give the Ukrainians a really strong offensive capability, which will be important in terms of pushing back. I should say counter offensive, because we're all expecting the Russians to launch an offensive in the spring. And the Ukrainians really need the ability to fight back against that, to push back with armored vehicles, not only tanks, but personnel carriers, other ways of moving troops rapidly on the battlefield. So to make a long story short, I think this is a great first step getting from an initial company of 14 tanks, which is what the Germans are talking about, two to three to four companies, two battalions, that's between 80 and 100 tanks in approximation. That's going to take a lot of work and it's going to take a lot of NATO allies and partners to make that happen. Well, actually, President Biden used the same word you did. Counter offensive is what they're really talking about for the Ukrainians. Do you have a sense of how long it will take to get the Leopard 2 tanks in place? I assume that's going to be possible. Do that faster than the M1 Abrams. Yes, I believe so, I've understood from from what I've been reading that the Poles are already training Ukrainians in Poland on their leopards, waiting for permission from the Germans to send up. This is a requirement of German sale of these tanks that anybody who's going to pass them along to third parties get permission. It's an important export control rule. But it stood in the way of getting these tanks moving quickly to the Ukrainians. But polls have already been training the Ukrainians. Now the Germans will start training the Ukrainians on German soil. So I think that we should be able to see some some of these tanks in place within a couple of months. Now, the Abrams tank, which is the U.S. tank on offer, again, it looks like from what I hear, 31 tanks. That's that's two companies approximately. So this will take longer because not only is the training going to be very intense, but they also have a logistics trail. And this has been part of the problem as far as the administration is concerned in Washington. Can they really make sure that they, the Ukrainians, have the maintenance trail in place, the jet fuel? Everybody's been talking about the jet fuel that these engines take. So that will take some work and some time as well. But I'm sure that the Pentagon's work through all these details and they've got in mind how to get them the fuel and the maintenance and the training that they need. Mark Gurman. What about the other side of the equation? By that, I mean Russia. Do we have any sense what's going on in and around Vladimir Putin? And specifically, I've read now that the Wagner Group may be on the decline, that in fact, they're not in his favor at the moment. No, I wouldn't count on that. The bargainer group has been the fist, really for the Russians at the moment. The Ukrainians I've read this morning have moved out a solid hour. Now, the small salt mining town in eastern Ukraine, the Russians are still fighting hard with the Ukrainians around back mode. So and this is all volunteer group action. So the successes, quote unquote, that the Russians have had very small ones have been on the back of the Bonner Group and a lot of apparently deaths of bargainer conscript soldiers, not conscripts, but rather soldiers on contract and also prisoners that they've gotten out of Russian jails and prison camps. And so they've been really, I would say, the point of the spear at this time for Putin's invasion of Ukraine. And so I wouldn't count on them being out of favor, at least for long. But it is true that they have taken very heavy losses. The question I've had in my mind is if what we're looking at next is concerned about a Russian armored advance and offensive in the spring, are those kinds of troops trained for that? Are they trained for combined arms warfare? I really have my doubts on the Ukrainian side. There are reports now that several senior officials, including a deputy defense minister, had been sacked, reportedly because of some irregularities in their defense spending. Do we know much about that? I think, frankly, Zelinsky is trying to get ahead of any concerns about corruption in Ukraine. He's been very clear that this will not be allowed with any of the assistance coming from the NATO allies and partners. He wants to really make sure that that the message gets across, that he's going to be very tough on corruption and crack down. And he has said he wants to come out of this war with Ukraine in a different place, ready for EU membership, ready for NATO membership. That means they have to cut back on their corruption and really they really have to crush it. So I think that's part of the message here. I think also part of the message is apparently, as we like to say, the dogs are fighting under the rug. And apparently there are some in the Zalewski administration who are wanting to be on top and trying to push others down. So there could be some aspect of that going on as well. I at least have not heard recently of Vladimir Putin, the president of Russia, talking about nuclear arms. What do you make of that? I'm mindful if you were undersecretary of state before being in NATO for arms control, do you think that that threat of some nuclear device being used has gone down or are we just not paying attention to it and put out, by the way, as we add these tanks, does it increase that threat? It's very interesting looking at what Dmitry Peskov had to say this morning that the Kremlin spokesman, he basically has said, oh, it's not going to make any difference to the fight there. They'll burn just like the other ones. These are too high tech for the Ukrainians to operate. So the tanks are going to fail. They won't make any difference. So they're trying to dismiss this as an additional threat or an additional problem for them in this fight. And I find that very, very interesting. But there have been some spokes people, officials like Medvedev, Dmitri Medvedev, who is on the defense council and in Moscow and and very high in the leadership. And he has continued to voice these nuclear threats. So I would say, yes, in some ways it's not Putin who's who's brandishing the nuclear saber anymore. But there are Russian officials who are doing so. Okay. Rose, it's always such a pleasure and really beneficial to have you with us at Stanford University lecturer Rose Gottemoeller. Coming up, a Texas goes after financial firms taking environmental, social and governance into account in making their investment decisions. We'll talk about how and why when Bloomberg is Danielle. All right. This is balance of power on Bloomberg television and on radio. This is about the power of Bloomberg television or radio. I'm David Westin it was a time not too long ago when ESG environmental, social and governance investing was all the rage, but now it's become something of a political hot potato. Quite a number of states here in the United States of America. One of those is Texas. And we now have a profile on the Bloomberg of the man in Texas responsible for administering this question about whether state funds can be invested in financial firms taking ESG into account. Jenny Moran wrote that profile and she joins us now. So thanks so much for the profile. Thanks for being with us. So tell us about Glenn Hagar. So, Glenn, here is the Texas Comptroller of Public Accounts. So basically what that means is that he's the state's CFO. His normal day to day job is the check writer, the revenue estimate, where he collects the taxes that Texas brings in. But during the last legislative session, he was given a new duty, and that was to create this kind of naughty list of financial firms that Texas deems to boycott the oil and gas industry. And so he spent months, along with his staff, going through, poring through documents, looking at firms policies, and ended up coming up with a list that had 10 companies on it and more than 300 individual funds that are now subject to divestment from Texas entities. So the legislator told him to do this. So it's not just him doing in his own ledger. You go do this. Yeah. But did they give him criteria or ways of determining which ones would go on, as you say, naughty list or not. It was fairly open ended. He was given this directive from the legislature after they passed a law called Senate Bill 13. And it had to come up with a list, come up with criteria, try and figure out what was the best way to approach this. And given his personality, he has a reputation in Texas of being pretty low key, pretty methodical adult hand in a lot of the politics there. So it seemed like a good fit for his office. As I understand, this is environmental, not not all of ESG. It's particular the E part of environmental. Is it just a coincidence that Texas is such a big fossil fuel state? I mean, that's a huge part of it. Fossil fuels is a big part of the Texas economy, although it is more diversified than it once was. But this is an oil and gas list. And Hager will tell you that he said that this is a environmental policy. Although Texas legislation has come out against other types of ESG criteria, they have a similar law that prohibits gov government contracts with companies that are what they call discriminate against the firearms industry. So it's just this ripple effect that it's been having. So he has the list, as I understand it. He wrote a letter. Have they started disinvesting in any financial firms? Felt the thrust of this so far. So the entities that have been impacted, which are pension funds and other state level investments, have divested from companies stock of the listed firms. And then if they held any of the funds, but that list is flexible, it will be updated as often or it's required to be updated annually and can be often updated as often as quarterly. Final question for me, and that is how much of this is tied to the investment performance of these firms and taking into account environment concerns and how much of it is just we don't like politically the values of the history. I mean, it definitely goes back and forth. A lot of the core crux of this debate is if you limit investment in oil and gas, does that hurt consumers as energy prices could increase? And so there is could be an economic impact to that. And another part of it is, is it's a very hot button political issue right now and probably will continue to be one as we go through the legislative session. OK. Thank you so much. Danielle, terrific piece by Daniel Moran on the Bloomberg about this program in Texas. Coming up, we're going to talk with the man who's put together and is administering that ESG plan. He's Glenn Hager. He is comptroller of the state of Texas. That's coming up next. On balance of power on Bloomberg television and on radio. This is balance of power on Bloomberg Television Radio. I'm David Westin and we just heard about the Texas program initiative of the legislation now being administrated. The executive branch that deals with financial firms who take into account environmental issues as they make their investments and specifically which funds in the state of Texas get to work with those firms going forward. We now turn to the man who's responsible for administering this is Glenn Hager. He is comptroller of the state of Texas. So, Jihye Lee, thank you so much for joining us. Really appreciate it. First of all, just give us a sense from your point of view. How do you decide who is put on this list and who is not? Because I've heard talk about boycotting oil and gas, but there's a lot of firms like BlackRock, for example, who certainly don't boycott on gas. Yeah. Now, that's a great question. And one of the things that we've tried to do very hard is nobody's ever done anything like this. So we were given a task by the state legislature, pretty broad realm of how we come up with this list. We've done a significant amount of research before we ever started the process. First, we have to identify those financial institutions that are publicly traded. So we utilize Bloomberg services to help us identify those over 700 financial institutions. Then secondly, start the process of identifying who is in the top tier half of ESG related. And most people think this is an ESG list, but it's a sub part of environmental, as you said, boycotting oil and gas. It's not s an orgy of ESG. So we identified that. And as we go through, then we look at companies and say, OK. These might be companies that would be on the list. Now, when I say on the list, boycotting can be not necessarily the Webster definition, it is the statutory definition the legislature passed. And what that essentially means is you could be engaged currently in the oil and gas industry, however engaging in activity that is not in your ordinary business functions, one that is limited teen current and future engagement in the oil and gas industry. Any type of efforts to harm that industry. So that's where some people look at this and say, well, wait, this institution actually is engaged in the oil and gas. Yes, but activities from here going forward or limiting those activities. And that's how some got on the list. Well, this is one of my questions. And I think a lot of bloom ISE would wonder about this. How do you know why they're limiting it? Suppose they are living. It is possible that an investor would say, look, I would invest it now because I have anything. It's oil and gas, but because I think there are risks associated with that business in terms of its future growth because of regulatory anticipations, what's going with climate. And so I think it's not as attractive an investment as ISE be. That might be in the ordinary course of business as opposed to I just have a position on climate. Yes. I for example, 19 of the companies that we send information to and ask them to help us identify and we want to hear from these companies. We wanted to have their information, answer our questions because we think it's imperative to have that dialogue and make sure that we had the best, most accurate information as we were coming up with this list. And as we will going forward, whether it's in a year that we have to update it or every quarter when we deem that we need to update it. But that dialogue is important. And my point in coming to say, for example, one of the companies wrote back and said, yep, this is this is our business model. This is what we're doing. We boycott the industry. And we're very proud of that. And so that healthy dialogue is important, which I respect it. That's their business model. But one of the major issues here is that in my concern personally, I think the state of Texas and the legislature is there's not really a good, intellectually honest conversation about this topic. And also, I understand we're going to have electric vehicles. We're going to have moving in that direction Texas as a diversity in our energy portfolio. We have a very diverse energy portfolio. We are one of the states that has a higher concentration in use of wind power in the state of Texas, higher in solar power instead of Texas. So we're not just an oil and gas state. We believe in having all the eggs in the basket for that energy diversity. But with that being said, there are so many things that we utilize every single day in our lives that are petroleum based. If you drive an electric vehicle, whether it's the tires that make it go round the seat that you sit in, the wires that coat the components, the batteries sit in a tub of plastic. So therefore that petroleum industry is going to continue to be important into the future. And I think that's really the concern here in part is that intellectually honest conversation and being able to understand the connectivity of why that industry is still important today will still be important in the future. And if we stifle that industry and we do not allow investments in that industry, then we're going to have significant issues that unfortunately in an earlier segment, we're talking about the Russian invasion of Ukraine. And so therefore, as the disruptions in the market, now we see higher natural gas prices than we've had in quite some time. In part, why? Because of the disruption that has occurred worldwide with that invasion and the disruption in the market. So part of this point, we need to have that intellectual conversation. We need to make sure that we understand why we're doing this in the environment is important, but we need to have a balance in the portfolio. Yeah, I'm I say as. Talk to people from the oil and gas industry, but also for people on the from the from the climate, the environmental side, typically both of them agree there has to be some transition. Both sides say that the question is sort of how fast a transition is, how we get there. But you also have a fiduciary duty, I assume, to all the pension plan holders, for example. Do we have to pay pension plans before or how did those fit together with some of the more policy oriented situations you have? Suppose you had a company that you knew is going to make money for your more money for your pension plan. But they did really cut back on oil and gas. How do you decide that question? So that's why in the state legislation, the legislature enabled that each entity that this applies to, whether it's our employee retirement system or teacher retirement system or municipal retirement systems or permanent school fund. All of those entities have the ability to look at their fiduciary responsibility to those that they are entrusted to invest their money. And so therefore, that is a counterbalance, an ability to make sure that if there is a right reason for investing with these companies or having doing business with them, then they have that capability, because that comes first and foremost is your fiduciary responsibility. Now, some that I've interviewed would said, oh, well, then that makes the legislation hollow. No, it doesn't, because first and foremost, in my opinion, us having this discussion. Me being on with you today, David having this conversation raises the discussion to what I deem is a much more intellectually honest conversation that we need to make sure we have a balance and use of energy, that we also are taking care of the environment and we're not being overactive and let's not invest in oil because it sounds bad today when indeed it's not making a better return on it. Well, it certainly is reported to have that conversation. No question about. Thank you so much for being here to help us with that. Conversation is gone, Hagar. He's the comptroller of the state of Texas. Check out the Balance of Power newsletter on the terminal and online. Coming up, Balance of Power continues on Bloomberg Radio. Our second hour talk to the man who was in the room the last time we averted a debt ceiling crisis. This is Bloomberg.

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Balance of Power Full Show (01/25/2023)

Bloomberg: Balance of Power" focuses on the intersection of politics and global business. On today's show: Laura Tyson, former National Economic Council director. Rep. Brendan Boyle, (D - PA.) Stanford University Lecturer and Former Deputy Secretary General of NATO, Rose Gottemoeller. Glenn Hegar, Texas Comptroller. (Source: Bloomberg)

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