00:00We saw something very unusual last week.
00:02Fed Chair Jerome Powell, he's remained, as you know, very quiet as the president has questioned interest rates.
00:09But then he came out with this video right after those subpoenas.
00:12What do you make of that?
00:14Well, he was reacting to the criminal, potential criminal grand jury element of this.
00:20Without going through the blow by blow, I think my own view is three weeks from now,
00:27we're not going to be talking about that Sunday night anymore.
00:30I think more likely the lasting imprint of what happened will be to raise the bar for whoever's going to be the Fed Chair
00:40to demonstrate that he or she is politically independent and is not going to be pressured.
00:47I mean, do you think it's even possible after everything you've seen for the next Fed Chair to be independent?
00:53Yes, I do.
00:54I think, listen, the culture inside the Fed is people have different views.
00:58They have different political backgrounds.
01:00But when they get in the room, they argue based on what they truly believe and they debate it out.
01:06I'm hopeful that culture will stay alive.
01:09I think the new Fed Chair, though, is likely to want the Fed to anticipate inflation improvement,
01:18where this Fed feels like it wants to further lower rates from here based on a demonstrated improvement.
01:27So there'll be that tension.
01:29But is it possible?
01:29Yes, it's possible.
01:30But it will put the onus on the next Fed Chair to demonstrate it.
01:35We've heard the names Kevin Hassett, Kevin Warsh.
01:37Now, Rick Reeder's star seems to be on the rise.
01:41Who do you think would be the next Fed Chair and would be the best one?
01:45Well, obviously, I don't know who it's going to be.
01:48And I think any of the names mentioned could do it.
01:51Each of them come from a different place.
01:55If they're from outside the Fed, they'll have to learn about the Fed and understand the Fed.
02:00And that will affect their views.
02:02If they've got a history of the Fed, that's another background.
02:05If they come from directly from the administration, any of them could do it.
02:09But I will tell you where they all need to get to is without political pressure or political influence or intimidation.
02:17Do they congeal the group around a consensus without regard to those outside factors?
02:24That's the challenge.
02:27And now all of this happens right before next week's meeting.
02:30I mean, what do you think comes of that?
02:31Well, so for the meeting, the Fed cut three-quarters of a percent in the fall.
02:39It did that because it was worried about weakness in the labor market.
02:43Rightly or wrongly, there had been a shutdown.
02:45There was weakness in labor.
02:46They bought three-quarters of a point of insurance.
02:49And the reason that was very tense was they did it, even though inflation is still two and three-quarters percent, i.e. above target.
02:59But they're now, in my view, at about neutral.
03:02Okay, what's neutral?
03:03Three-quarters to one percent real.
03:05Add the inflation rate.
03:07The neutral nominal rate is about three and a half, three and three-quarters.
03:10And from here, again, they need to see evidence of improvement.
03:14And so I thought it was very unlikely they were going to move in January.
03:17It's still unlikely they're going to move in January.
03:19Events of the last two weeks are not going to have any effect on that.
03:22A lot of uncertainty surrounding tariffs.
03:25I feel like every time we have this conversation, we return to uncertainty surrounding tariffs.
03:30How do you feel that's affecting the economy right now?
03:34It has created some uncertainty.
03:37It's particularly affected small business, in my opinion, who don't have the levers to manage it.
03:43You add that little bit of a headwind with lack of labor force growth because of immigration policies.
03:51And that's why last year the economy was maybe more sluggish than people might have thought.
03:56Having said that, as we head into 26, we've got three powerful tailwinds.
04:00Tax incentives, tax on tips, tax on overtime, accelerated depreciation.
04:05We think it's going to add at least three-quarters of a percent to GDP growth in 26.
04:10Regulatory reform is going to manifest itself more in 26, in our opinion.
04:16For example, the banking sector is going to have more capital, ultimately, and they'll
04:20put it in the economy.
04:22And then the AI data center power infrastructure boom is alive and well.
04:26It's going to be $500 billion of investment.
04:30And that's before you get to the productivity benefits downstream from all this AI adoption.
04:36So we think GDP growth next year is going to be very solid.
04:40It means that, to me, the job market may have mismatches, but I doubt it's going to cyclically
04:46weaken.
04:47And I think that's why, by the way, the Fed can wait to see whether there's going to be
04:52inflation improvement.
04:53I think we're heading into a strong economy with a lot of noise, you might say, and tail
04:59risk, which we can talk about.
05:01You know, in Goldman Sachs, where we sit, we can actually watch the progress each day
05:06of your new building here.
05:08Update us on the progress with that.
05:11We're right on schedule.
05:12We're excited.
05:14Over the next two years, we're going to move into a new building.
05:17We're approaching, we'll have as many as 6,000 people here in Dallas.
05:21We serve the United States and our global clients from Dallas.
05:28We're a global hub here in Dallas.
05:32We have a global hub in New York, now Dallas, other offices, London, Hong Kong, et cetera.
05:38So we play a very prominent role, and we are continuing to recruit people here, and we're
05:44continuing to build our efforts across the firm in Dallas.
05:48When you talk about the Texas economy, do you still feel, you've always said you feel
05:53really good about it.
05:54Do you still feel the same way?
05:56I do.
05:57So listen, there are three ways you grow GDP.
06:00Grow the workforce, improve productivity, and there's a third way you leverage up.
06:04And we've done that a lot at the federal level.
06:07Texas has got something many states don't.
06:10We've got workforce growth.
06:12We are a magnet for talent.
06:14People and firms are moving here.
06:16Population of Texas 12, 13 years ago was about 22 million.
06:20We're now at 30 million on our way north.
06:23And so that's a tailwind that few states have.
06:28And it's also a pro-business environment, central location, low taxes.
06:32We've got a lot going for us, and that's why there's not a week that goes by where I don't
06:36talk to a CEO somewhere who isn't thinking about looking at coming to Texas or acquiring
06:40something in Texas.
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