Bill on Secure Freedom Radio 01/19/22

Bill talks with Frank Gaffney about: China’s President Xi’s jawboning at Davos to keep interest rates low. President Biden picking climate radical Sarah Raskin for Fed Vice Chair. West Virginia’s State Treasurer firing BlackRock as a manager of its $8 billion fund. Transcript: Frank Gaffney (00:00): We're back. And I'm thrilled as always to be able to say we're back with Bill Walton, the star of The Bill Walton Television Podcast, a really terrific resource and a longtime maven of the financial sector as the CEO of Allied Capital Corporation. He has come over to the light side, shall we say, with his recent years of work now in the conservative movements, notably as the President of the Council for National Policy of which I'm very proud to be a member. Bill Walton, it's good to have you back, sir. As always, there's a lot to talk about. Welcome. Bill Walton (00:42): As always, much to talk about. Great talking with you, Frank. Frank Gaffney (00:45): Let me start by asking you for your impressions. We talked a little bit about this with Gordon Chang previously, but I wanted to get your read on Xi Jinping's appearance virtually at Davos, the World Economic Forum annual seance now conducted pretty much in absentia. But he nonetheless urged the world's central bankers not even to think about raising interest rates. What's up with that and is it likely to be [inaudible 00:01:21] Bill Walton (01:21): Well, the part of me that enjoys humor enjoys President Xi acting like one of the businessmen used to act when they were jawboning the central bank saying, "Don't raise rates, you'll kill our business." And he is now- Frank Gaffney (01:34): Just another capitalist. Bill Walton (01:35): Just another capitalist. He's now lecturing the assembled elites at Davos virtually about the risk if the central banks raise rates. Now, of course we're experiencing tremendous inflation in the United States and in the rest of the west and 7% last year, which was a record, I think since 1982. And Xi's playing from a very weak deck. The economic growth in China slowed to about 4% in the last quarter. It was overall about 8% for the year, but the trend is down. We've just seen demographic statistics come out on China. It's possible their population may be shrinking for the first time ever as their birth rates slow to even more dramatic levels. They've got to discuss- Frank Gaffney (02:27): We discussed that with Gordon [crosstalk 00:02:28]. Bill Walton (02:28): Property development. I'm sorry, go ahead. Frank Gaffney (02:29): We discussed that with Gordon as well and it's not just possible. I think it's certain population is going to shrink and there will be all kinds of domestic and possibly international repercussions from it, but go ahead. Bill Walton (02:41): Gordon covers this so closely. I'll go with his analysis, but it certainly looks dire for their population. And of course, population is one of the strong indicators that links to economic growth in countries with rapidly rising population tend to see a lot more growth. China's curves moving the other direction. We've talked earlier in the year last year about the property crisis in China, the real estate bubble. Residential real estate has popped with Evergrande in bankruptcy, the largest property developer. And so Xi is terrified that rising rates are going to further hit China's economy. And so we're witnessing the spectacle of him pleading as we point out an old-fashioned capitalist style against the central bankers raising rates to put a damper on inflation. Frank Gaffney (03:39): Yeah. Let me turn to a couple of central bankers in particular. We're watching Joe Biden begin the mating dance with the United States Senate on several nominations of people he'd like to have serving on the Federal Reserve Board, including one that's particularly problematic it seems, a woman by the name of Sarah Bloom Raskin. What do we know about her and her policy predilections and what that might mean for the Federal Reserve and its program? Bill Walton (04:16): Well, as we've learned looking at nominees and people in politics, you also have to understand what their background is and where they're "coming from." and Sarah Raskin's married to Jamie Raskin who's one of the leading liberal radicals in the House and Jamie's on the January 6 tribunal. And the other notable fact about Jamie is his father's considered the dean of the Progressive movement and was one of the earlier radicals along with Saul Alinsky in the '50s, '60s and '70s. Now, Sarah comes along. Sarah has previously been on the Fed. She was a governor from 2010 to 2014 and she is now being nominated by Biden for one of the most powerful positions apart from the chairman, which is to be the Fed Vice Chair for Supervision. And what that means is she's not just looking at money supply and credit statistics, or capital market statistics. She's actually looking at the activities of the banks that the Fed's regulate. The Fed basically has two broad powers. One is to maintain our stable money and the other one is to supervise the banking system along with the controller of the currency. And it's that role that she would be a tremendous problem for us. I mean, she is a climate radical and she wrote a piece in The New York Times in May of 2020. Remember, this is just two months after or three months after the pandemic lockdowns started and saying it. The title was Why is the Fed Spending So Much Money in a Dying Industry? In which she called out the Federal Reserve from providing emergency loans to fossil fuel companies. And she saw the crisis as an opportunity to kill fossil fuels and said that, "the pending climate crisis was a much bigger risk than the pandemic." Frank Gaffney (06:20): It's the ESG, the Environmental, Social, and Governance agenda it seems. Again, being reinforced now on the Federal Reserve. And what are the implications of that as you see it, Bill? Will the Fed be able to punish fossil fuel companies at a moment when the demand for oil is actually increasing inexorably and likely to continue to do so, I would guess for the foreseeable? Bill Walton (06:50): The aspect of the Fed's regulatory power is we know we think of the Fed as managing money, but they also are managing our money supply, et cetera, but they also have a very powerful role in overseeing what the banks do. And they have stress tests that they apply to the big banks and medium-sized banks in the country. And they ask banks to address something like systematic risks. Now, back in the old days, that would be things like asset bubbles, real estate bubbles, exposure to risky countries abroad in their lending portfolio. Now, she is arguing that banks ought to be reporting on climate as a systemic risk and that she writes something, "We must rebuild economy where the values of sustainability are explicitly embedded in market valuation." Now, I'm not exactly certain what that means and I don't think she knows what it means, but she does mean to steer banks towards lending policies, which stress anti-carbon policies and promote things like electric car mandates and carbon taxes. And if they deem fossil fuels risky assets, that'll have a cataclysmic effect on the capital provided to the fossil fuel industry, which of course would result in a power crisis of unprecedented ... What happened in Texas a couple years ago, would happen throughout the country if she has her way. Now, here's another pernicious thing they're doing, Frank, is that they know that killing fossil fuels that have a catastrophic effect on the economy and would really hurt low-income people the most. And so what they're doing is what the left always does is she's also calling for the Community Reinvestment Act, which she helps oversee to fill in the blanks and have the banks much more aggressively lend through the Community Reinvestment Act to shore up low-income people. So, in fact, she also wants to create in addition to killing the fossil fuel industry, she wants to create another entitlement program, another redistribution of wealth initiatives through the Federal Reserve. Frank Gaffney (09:04): This is insidious to say the least. Bill, you mentioned the controller of the currency, the woman who was initially nominated for that role [crosstalk 00:09:14]. Yeah and it sounds as though we've got kind of a mini me now in Sarah Bloom Raskin. Bill Walton (09:24): The big risk we have here is I know Sarah and she's incredibly charming. She doesn't look ... The woman nominated to head the control of the currency was sort of a villain at a central casting when you looked at her and heard the way she talked. Frank Gaffney (09:39): Bond villain she was called. Yeah. Bill Walton (09:41): Yeah, Sarah's a charmer. She's very, very charismatic. And she did a pretty good job as Deputy Secretary of the Treasury. And so she comes with allies. Frank Gaffney (09:52): Well, that brings me to our final topic for today, Bill Walton. The state treasurer of one of those states, West Virginia a fellow by the name of Riley Moore has just recently taken a very important step. And it was for two reasons explicitly. One was countering this sort of ESG agenda. The other, trying to preclude West Virginia's pension funds from being used to strengthen the Chinese Communist Party and the threat that it represents to all of us. This is specifically in the context of a decision by Mr. Moore to remove from the management of a man who is all about both of those agendas. We've talked about him with you frequently, Bill. Larry Fink the CEO of BlackRock. Tell us a bit about what the West Virginia State Treasurer has done and why, and whether this might prove to be a model for other states to do the same. Bill Walton (11:08): Well, I think he's been paying attention a lot to what we've been saying about BlackRock and BlackRock's ESG agenda and BlackRock's complicity with promoting the Chinese Communist Party through continuing to invest and help them with their capital markets. And he manages about eight billion through the board of treasury investments for West Virginia. And they've had BlackRock as one of their money managers and he just announced they're no longer going to use a BlackRock's investment fund as part of its banking transactions. It's not just a big picture decision. He goes right at the heart of the issue. He says that, "BlackRock has urged companies to embrace net zero investment strategies." And of course, that would dramatically harm the coal, gas and natural gas industries. BlackRock's policies, investment policies are a dag aimed at the heart of the West Virginia economy. And so he's protecting his state by taking his action. Furthermore, he's dug into the fact that BlackRock has also got they not only want to not invest in fossil fuels, but they want to invest in China. And Riley points out that there's significant financial risk as we've talked about associating with investing heavily in Chinese countries. They don't have free market protect intellectual property rights, and they engage in outright government interference and markets, as we've seen with what they did to DiDi and the private tutoring companies. So he's been paying attention. And I think this is a very smart move. Frank Gaffney (12:46): Bill, I'd like to take credit for it. I think there are a number of efforts that have been sort of vectored in this same direction. And I want to do a shout out for the folks at Consumers' Research. Consumers' Research has been around for a long time, but they've come up on the net very forcefully about the problems with BlackRock issuing both a public warning about having it invest your money. And specifically writing to 10 governors whose states have been doing as West Virginia's has a lot of business with BlackRock with their pension funds essentially saying, You've got to get out of BlackRock for these very reasons, specifically China." Bill Walton (13:31): Well, he even references George Soros, which means he really has been paying attention. When George Soros who regardless of how destructive his political policies and who he supports have been, he pays a lot of attention to taking care of his capital and managing capital. And he's warned investors out of China early last year. And so I love his sentence, "Any company like BlackRock that thinks communist China is a better investment than West Virginia where American capitalism clearly has a bad strategy." And CNBC got Larry Fink who runs BlackRock on the show the very next day. And it was interesting to see how defensive Larry Fink was and how he really didn't have a strong intellectual argument against what West Virginia has done. And he recently wrote, I think he published it this week like a 3,200-word investor letter, which is 10 times longer than it used to be. What he's done with this one, though, he seems to managed to infuriate both sides. The climate change people don't think he's going far enough. And people like me and conservatives think that he's completely wrongheaded. You dig into Larry's background, Larry started as a bond trader and did a great job packaging mortgage-backed securities, and was quite good at it. And he's obviously a genius with money. He's not a genius at climate change and he's not a genius at public policy. And I think he's wandered to- Frank Gaffney (15:06): Let alone a national security expert, which he's to doing a lot of damage to. Bill Walton (15:11): He's clearly not that. It's unclear he even thinks national security is relevant for masters of the universe. He's wandering into an area now where people are on both sides are taking shot at shots at him. And as a bond trader, he has to know that ultimately the way he's out talking about allocating capital, woke capital will end up damaging their returns. And he's so very proud that BlackRock just passed the 10 trillion level in assets under management and of course that's about 10% of the world GDP. He now is beginning, I think to wonder, "Well, everybody's eyes are looking upon me and I've got to be careful what I say and do." Let's hope this is a course correction for him. Frank Gaffney (16:02): Bill, we have to leave it at that though. Good to talk with you, my friend as always. Congratulations as you continue to do great work at the Bill Walton Show. Bill Walton (16:12): billwaltonshow.com. Frank Gaffney (16:13): There you go. Bill Walton (16:14): You can find us right there. Frank Gaffney (16:14): Check it out. Check it out. Bill. We'll talk with you again next week. Thank you for your time today. God bless you. Next up, we'll talk with Yoram Ettinger, former ambassador of Israel in the United States about how Israel sees what we're doing in Iran and vis-a-vis Israel as well right after this.