>> SHUTDOWN IS NOT GOOD.
BUT MY BIGGER COMPLAINT IS,
AMERICA, MAYBE BECAUSE OF,
PARTISAN POLITICS HAS BEEN
UNABLE TO DO A LOT OF THINGS
THAT NEED TO BE DONE.
YOU HAD SOME, SOME TAX REFORM.
SOME REGULATORY REFORM.
BUT INFRASTRUCTURE.
WE PUT A MAN ON THE MOON IN
EIGHT YEARS.
TAKES EIGHT YEARS TO GET A
PERSON TO BUILD A BRIDGE.
MELISSA: RIGHT.
JPMORGAN CHASE CEO JAMIE DIMON
REVEALING HIS CONCERNS TO OUR
OWN MARIA BARTIROMO.
IS HE RIGHT?
OF COURSE HE IS.
JAMES FREEMAN IS BACK WITH US,
ALONG WITH JOHN LONSKI, MOODY'S
ANALYTICS MANAGING DIRECTOR,
CHIEF ECONOMIST.
HE HIT THE NAIL ON THE HEAD
THERE, JOHN.
WHY THIS WHOLE THING IS SO
FRUSTRATING.
BECAUSE IT ILLUSTRATES WHAT HAS
BEEN SQUANDERED RECENTLY.
WE WERE ON OUR WAY, TAX REFORM,
REGULATORY REFORM.
WE NEED SOME INFRASTRUCTURE.
AND THEN BOOM, WE KIND OF CAN'T
GET TOGETHER TO DO THE REST.
WHAT ARE YOUR THOUGHTS?
>> YOU KNOW, WE HAVE RUN INTO
VERY SERIOUS BUDGETARY
CONSTRAINTS.
HE IS TALKING ABOUT PUTTING A
MAN ON THE MOON FROM THE 1960S.
BACK IN THE 1960S THE FEDERAL
BUDGET AS ROUGHLY IN BALANCE.
TODAY WE HAVE FEDERAL BUDGET
DEFICIT IN COUPLE YEARS SHOULD
APPROACH ONE TRILLION DOLLARS.
SO, YEAH INFRASTRUCTURE, IS A
GREAT IDEA BUT WHO WILL PAY FOR
IT?
ESPECIALLY IN A TIME WHERE
EVERYBODY WANTS SOMETHING FROM
THE GOVERNMENT WITHOUT PAYING
FOR IT, WITHOUT HAVING TO PAY
HIGHER TAXES.
MELISSA: BUT JAMES, WE WERE
MOVING CLOSER TO THINGS BEING
BETTER IN TERMS OF RIPPING DOWN
SOME OF THE REGULATION THAT IS
GUMMING UP THE WORKS.
FREEING UP PEOPLE AND
CORPORATIONS FROM THE BURDEN OF
TAXES.
THE GOVERNMENT GOT ALL GUMMED UP
IN ITS OWN PROBLEMS.
>> IT'S A PARTISAN ISSUE.
YOU BASICALLY HAVE VERY FEW
PRO-GROWTH DEMOCRATS LEFT.
WHY THE PRESIDENT HAD TO DO TAX
REFORM ON PARTISAN BASIS.
YOU COULD NOT FIND DEMOCRAT
VOTES FOR CUTTING TAXES.
THE DEREGULATORY EFFORT IS,
THERE ARE NOT A LOT OF DEMOCRATS
WILLING TO CUT GOVERNMENT RED
TAPE.
YOU HAVE THE SAME PROBLEM HERE.
YOU HAVE A FIGHT OVER MONEY.
WHITE HOUSE WANTS INFRASTRUCTURE
TO BE MOSTLY PRIVATE FUNDED BUT,
THE BIG DISPUTE IS GOING TO BE
ABOUT JUST WHAT JAMIE DIMON IS
TALKING ABOUT, AN UNWILLING
NECESSARY ON THE DEMOCRATIC SIDE
TO CLEAR AWAY YEARS OF FIGHTS
OVER ENVIRONMENTAL IMPACT
STATEMENTS AND ALL OF THE
REGULATIONS THAT PREVENT YOU
FROM BUILDING IN THE UNITED
STATES.
MELISSA: MEANTIME, JAMIE DIMON
ALSO OFFERING INSIGHT ON THE
FEDERAL RESERVE.
TAKE A LISTEN.
>> REGULATORY POLICY AND
MONETARY POLICY INTERLINKED IN
COMPLETELY DIFFERENT WAY THAN
BEFORE.
I DON'T UNDERSTAND FULLY EFFECT
OF THAT.
I DO THINK REVERSING QE IN
DIFFERENT REGULATORY ENVIRONMENT
MAY HAVE A DIFFERENT EFFECT THAN
WE THINK BUT ON THE OTHER HAND
THE FED WILL NOT SIT THERE
ANDING NORTH IT.
MELISSA: JAMES, THAT IS THE
UNKNOWN.
AS YOU UNRAVEL, WE HAVE NO IDEA
WHAT THAT WILL MEAN IN THIS
REGULATORY ENVIRONMENT.
HE WENT ON TO SAY, THAT HE FEELS
LIKE, HE IS A GUY WHO SELLS
MONEY, HE FEELS LIKE 10-YEAR
SHOULD BE 4%, BUT I DON'T KNOW
BECAUSE ALL THE RULES HAVE
CHANGED.
WHAT IS YOUR TAKE ON THAT?
>> I WOULD SAY SO FAR, SO GOOD
IN TERMS OF TRANSITIONING BACK
TO A REAL ECONOMY FROM THE
PREVIOUS ERA, WHERE IT WAS KIND
OF THE FEDERAL RESERVE TRYING TO
CONJURE PROSPERITY BY PRINTING
LOTS OF MONEY.
THE FEDERAL RESERVE HAS NEVER
CREATED SO MUCH MONEY.
AND SO, IT IS UNCHARTED
TERRITORY AS WE TRY TO GO BACK
TO NORMAL.
THE FED'S BALANCE SHEET SHRINKS.
INTEREST RATES HAVE TO RISE.
HE IS THINKING ABOUT WHAT IS
NORMAL GOING TO BE NOW.
BUT I THINK SO FAR YOU HAVE TO
BE ENCOURAGED ABOUT HOW WE'VE
GOTTEN GOOD GROWTH AND JOB
CREATION AND NOT INFLATION.
MELISSA: JOHN?
>> WELL, JAMIE DIMON, LIKE A LOT
OF ECONOMISTS IS SCRATCHING HIS
HEAD WONDERING WHY BOND YIELDS
AREN'T HIGHER.
MELISSA: YEAH.
>> YOU KNOW, RECENTLY WE DID
HAVE THE 10-YEAR TREASURY YIELD
MOVE ABOVE 3%.
BUT IN RESPONSE WE HAD A
REDUCTION AND UNIT SALES OF
HOUSING, MORTGAGE CREDIT, BEGAN
TO SLOW DOWN, BEGAN TO COLLAPSE.
WHAT WE'RE FINDING OUT TODAY'S
WORLD IS DIFFERENT.
IN VERY FUNDAMENTAL SENSE.
BECAUSE WE'RE SO MUCH MORE
HIGHLY LEVERAGED.
BECAUSE WE HAVE OLDER ECONOMY,
THE U.S. ECONOMY SENSITIVITY TO
HIGHER INTEREST RATES, IS
GREATER THAN IT WAS IN THE PAST.
AND THUS, WHAT WE'RE FINDING
OUT, IS THAT THE UPSIDE FOR BOND
YIELDS, FOR FEDERAL, THE FEDERAL
FUNDS RATE IS LIMITED.
OF COURSE MAKING MATTERS WORSE,
RIGHT NOW, NOT ONLY IS THE
FEDERAL DEFICIT WIDENING AND
THAT IS PUTTING UPWARD PRESSURE
ON TREASURY BOND YIELDS BUT AT
THE SAME TIME, THE TREASURY, THE
FEDERAL RESERVE IS SHRINKING ITS
BALANCE SHEET.
THAT IS, IT IS INCREASING SUPPLY
OF TRADEABLE TREASURY BONDS.
THAT ALSO HAS THE EFFECT OF
PUTTING UPWARD PRESSURE ON
INTEREST RATES.