Presidential plans and a downhill Dow
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TEXT OF INTERVIEW
Scott Jagow: It’s been quite a week for the history books, that’s for sure. The country voted in its first African-American president and by most accounts, he’s inheriting the worst economy since the Great Depression.
Jagow: Let’s dive in and take a look at the week in politics and the economy. I’m joined by Johs Worsoe. He’s the head of global markets trading at Union Bank. Welcome to the program.
Worsoe: Thanks for having me, Scott.
Jagow: And Jerry Seib. He covers the political scene for the Wall Street Journal. Thanks for being here, Jerry.
Seib: Happy to be here.
Scott Jagow: Johs, last week people were feeling pretty good as the market was starting to climb back up. But what happened this week? We had a pretty bad couple of days.
Johs Worsoe: We did. The beginning of the week was positive; we saw the market move up, anticipating getting rid of the uncertainty in the political scene. We got the election over, and since then we have out 7 to 8 percent in the equity, and we still have fundamental issues we’re working through here. So the run-up we’ve seen in the prior week and a half, I think, was a little ahead of itself; we set ourselves back a little bit. We ended the week at a healthier level.
Jagow: And, of course, the election being the big story this week. Jerry, you were just at the President-elect’s press conference — his first news conference today — he didn’t give a lot of details, but he did talk about the need for a stimulus package. And, so far, that’s been focused on the idea of big public works projects to create jobs. How affective do you think that could be?
Jerry Seib: I think it’s a subject of a lot of debate. Some people think big public works projects really don’t have that much immediate simulative effect because, obviously, a construction project take a while to work its way through the system. That plays out over time — not over days and weeks, but months and years. The reverse argument is that if that money is in the pipeline, if states see that money coming for infrastructure projects, they let contractors know work is coming, heavy equipment makers know there are contracts and purchases to be made, people keep their jobs even though the projects themselves take a while to play out. It’s a priority for Democrats; they like this. Republicans like the idea a lot less, and that’s in part because nobody is quite sure what the actual immediate stimulus effect of those kinds of projects actually is.
Jagow: All right, well, let’s talk a little bit about some other possibilities here. Johs, you represent bankers and traders, I guess in this scenario. How do you feel about some of the policies you’ve been hearing from the Obama campaign?
Worsoe: I think, obviously, there’s a monetary issue and there’s a fiscal issue, and they represent the fiscal issue. The reality is the markets are much more focused on getting the markets through clear again, start working again. In other words, the monetary side of the house. So, the markets are factoring in at this point — I think some kind of a stimulus plan, maybe $100 million coming in in the next six months or so. But the markets are much more interested in who’s going to kind of continue to fight the wars that are being found out there, and I think we were a little disappointed that we didn’t get some kind of hint today, or even an announcement, of who’s going to pick up for Hank Paulson. I think there’s obviously lots of speculation on who’s going to pick it up. Are we going to continue the current path that we’re on, which I think we will. We need to understand who’s going to be in that battlefield appointment and we need to understand that pretty quickly.
Jagow: Well, Jerry, who’s on your short list for Treasury Secretary?
Seib: Well, I think the names most prominently mentioned are Larry Summers and Tim Geithner, the president of the New York Fed. I think the argument for Summers is in part that he’s an experienced guy, he’s done the job before. It gives you the added bonus, if you’re Barack Obama, of allowing Tim Geithner to stay in the job he’s got, which is pretty central. He’s been the link between the markets and the Paulson Treasury department. He could continue to play that role and give you some continuity. So I think that the pairing makes a lot of sense. I don’t know that that’s what’s going to happen, but I get the sense that there’s a lot of serious thinking in that direction.
Jagow: Johs, who do you like?
Worsoe: I like Paul Volcker; Tim Geithner as the assistant secretary to the Treasury. I’m not sure he would take the job, but that combination, I think, is the dream team; the experience and at the same time the young guy with the continuity to what has happened in the last couple of months — I like that team.
Jagow: Johs Worsoe, he’s the head of global markets trading at Union Bank. Thanks for joining us.
Worsoe: Thank you for having us.
Jagow: And Jerry Seib. He covers the political scene for The Wall Street Journal. Thanks Jerry.
Seib: Happy to be here.
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