♪ i'm caroline hyde. two big events out of the seat affected investors. we have the testimony of gary gensler, fcc chairman lawmakers questioning him on crypto, and stuff we love to debate. how transparent is he on the future of regulation? while we get the latest in terms of the data really from the u.s.

inflation picture, consumer prices have cooled a little bit setting off big gains in cpi but it is still posting the smallest in seven months. how inflation is still affecting the consumer but here is our guest reaction on bloomberg. >> the narrative is very much that inflation is going to be transitory. >> this is a mueller report for the second month and a road that gives a lot of credence to the transitory debate. >> i don't think this changes. >> temporary is the word of the day. >> inflation will stay high. >> we see pressure coming through the pipeline. >> supply chains were made to slotted. -- remain disrupted. >> look at what is happening with supply chains, labor, and wages. >> the reports give them a little bit of breathing room so they can stay on board. they're sitting in a good position regardless of which way they want to go. in reality, whether they taper

september, november, december, i do not think it makes a big change in the outlook. romaine: a few voices on the cpi report. 0.3% month over month. volatile food and energy going off 0.1%. used cars and auto insurance and airfare declining. all those are surprising and causes us to pull our hair. we are still at 5.3% on a year-over-year basis so there is a transitory argument being made but there is also an argument to be made that this has been going on now for more than a year so at what point does it sopping transitory? let's bring in our export joe weisenthal, a big friend of the show. this report has something in there for everybody. you can look at that report and make the argument it is transitory and compare it to the other reports insight -- and sate -- joe: some of the categories not kicking in yet. right going higher probably.

-- rent going higher probably. lodging and airfare might normalize. some comfort to transitory but not an end zone. romaine: you're going to be sticking with us for the next interview we have coming up. we want to bring you into the conversation. at the national economic council director at the white house is joining us now. to talk about taxes and a slew of topics. i do want to start up here with the cpi report today. general idea, at least on the ground with regards to medical -- middle americans, real people who say they look at their grocery bill in their gas bill and they say this is inflation and it has been here a long time. what do you say to those folks when you have to explain to them whether those types of price increases are going to stick around? brian: if you look at today's report, it is welcome news to

see moderation in price increases but at the same time, we have seen price increases in areas that hit people's public -- pocketbooks. what we say is that we are taking action in the places that matter most to american families . it food, last week, a set of actions to go at a highly consolidated industry. most of the food increases are isolated to beef, pork, and chicken. meatpackers are taking a lot of ransom here that we are going after that. the supply chain bottlenecks are coming up the works. we're trying to work on courts, trucking. the longer-term price pressures family around health care, housing, and these are things that in our plan, our bill back better plan, we would make the investments that would actually increase supply on the housing side and lower prices on prescription drugs. when prices increase, it hits

american families but we have a plan to address those issues in a way that would grow our economies productive complexity rather than constrain it. romaine: on the possibility of negotiating prices downward, it could have an immediate effect on measured inflation leaving the money in people's pocketbooks except for the fact that per the way of the law, it would not phase-in until 2025. not going to do much for inflation in the next few years. should the white house support this long window before the ability to negotiate kicks in? brian: those are the design details we are working on actively with the committees in congress and that will get hammered out across time but i would say on this particular issue, the fact that medicare has lacked the ability to negotiate for better prices on prescription drugs has been a long-standing problem and if we can change it, it will send a strong market signal that will affect market prices in medicare programs directly but also in the private market because

medicare is such a significant buyer. this is one of these rare win-win's where we can reduce the cost to the federal government of providing the services through medicare and reduce prices for all americans for prescription drugs. caroline: on the inflation side, it is going to be whether receipt wage inflation to a large degree. where do you stand on labor at the moment in terms of economic growth and jobs growth? we have worried about delta in the impact there. do you feel -- how much of a concern is that? brian: if you step back and look at over the last several months, what we have seen in the labor market is a historic jobs recovery both in terms of overall jobs, 750,000 jobs on average over the last three months per month, but also the wage dynamic. we are seeing plentiful jobs and employers competing for workers rather than the other way around. we are seeing wage gains good a disproportionately at the bottom

end of the income spectrum. with that is the kind of labor market we have been focused on. the president has been talking about for some time. we want a healthy labor market where jobs are plentiful and where employers are having to compete constructively for workers. we think there is a lot of positive signs in the labor market obviously in the short term. we're looking at impacts from delta. what is remarkable in some sense is we have enough durability in the recovery in the labor market that even as delta impacts, we still accrue jobs in august. we are on the right path in the labor market we think but certainly keeping a close eye on delta and focusing on getting these next set of investors think will sustain these benefits over the long-term. joe: i have been reading headlines that give me flashbacks to literally 10 years ago regarding the debt ceiling and the headlines like, is mcconnell going to blank about supplying votes to raise the debt ceiling?

literally the 2011 all over again. i guess this time, because the democrats control both houses -- the democrats can do it unilaterally. if it comes to that, do you support the democrats hiking the debt ceiling unilaterally or would it be better to do some other technical trick like the trillion dollar coin or something like that to avoid having to take a hard road? -- vote? brian: there is a more immediate historical analogy, september 20 17, 4 years ago are you had a republican president and republicans controlling both houses of congress and in the face of needing to do government funding, a crisis -- a hurricane that required disaster funding here at republicans and democrats came together, found a way to resolve these issues and increased -- suspended the debt limit and a bipartisan way and that happened three times over the course of the trump them that's presidency. both sides coming together.

even as democrats were in better policy fights with republicans about the republican policy priority at the time, the trump tax cuts. i think we have seen the right historical president -- even as we have policy debates on major economic policy issues, we should put politics aside when it comes to the debt limit and do what is right, which is to allow for us to be able to fulfill our commitments to commitments that have already been enacted and that is the key with the debt limit. it has nothing to do with forward spending. it is about bills the congress is already racking up. romaine: republicans are going to hold bite into the fire on the spending plan and how he plans to pay it. we have seen a little bit of pushback by the democrats in the house of representatives into the certain extent in the senate with regards to the tech proposals. it has started to sail back -- scale back the top rates the biden administration in your faults had proposed. i'm wondering how much further

down the ladder is bright and willing to go to accept a deal. brian: i would offer a difference perfect -- perspective with the ways and means committee which is you see the chairman, representative of a cross-section of the democratic caucus, putting together a passage -- package that is not everything the president calls fork but it goes at the core issues we face in our tax code versus bringing fairness, having an international tax reform to bring more coherence and can -- competitiveness to the tech system and cutting taxes for 50 million americans and 4 million small businesses so we are seeing real progress. you know how the legislative process works. some say we should add more tax increases. that is a process that will be ongoing that we are seeing major progress over the last couple of days i think in bringing forward the tax reform agenda the president outlined earlier this year. caroline: the fashion statement made by aoc last night in terms

of tax the rich and what about torque -- corporate tax rates? how comfortable with biting be --would biden be if they made corporate tax 26.5%? does that strike you as fair? brian: the president has been focused on two things. reversing the trump tax cuts and the most negative impacts of those but also really doing the firm of art international tax system -- reform of our international tax system, negotiating a global agreement on a minimum tax regime that would finally and the race to the bottom. we need to then implement reforms domestically to make sure we are being consistent with that and putting our firms on a level playing field but that could be a game changer here. as you know and -- we have been seeing a steady drift of ip and production racing to the lowest tax jurisdictions over the world. there is nothing economically

efficient about that. the core values president has put forward is reverse the most negative impacts of the trump tax cuts and get the torque -- corporate tax reform right so we are encouraging more incentives to investors domestically and we will keep working the process but certainly the package the ways and means committee has put forward is an important step. caroline: great to have time with you. we thank you for joining us. joe weisenthal, always great to have time with you. thank you for joining us. meanwhile, we are going to go outside the world of inflation and talk about other key items going on in d.c., not just taxes but the sec chair testifying in from the senate banking committee to rein in everything from crypto to spacs. >> the special purpose acquisition company, the blank check companies, the risk are to investors and the disclosure to the investors. i have asked staff to serve up recommendations we can consider the we are looking at greater disclosures and also looking at

inherent conflicts along the way. and then try to put this out and -- to rulemaking and some of these tokens have been deemed commodities. many are securities. they are not meg -- i'm not negative or a minimalist about crypto but it is best inside the regime that congress laid out and i think the inherent conflicts of flow and rebates on the stock exchanges, both may make markets less efficient. this is important for capital formation and the retail investors. caroline: a whole wide range. very important to investors. he covered the hearing from crypto to spacs. we love to talk about these areas of frothiness in the market but what is the key takeaway? how did you come across gary gensler? a man who is focused on regulation who is making it transparent? guest: you heard two sides of

how people are seeing what he has done so far. in the first few months he has been in office, he laid out very ambitious agenda talking about everything from clamping down on the crypto industry to spac to the innerworkings of the stock market. today on capitol hill and before the senate for the first time was democrats who love what they are hearing, progressives seem happy with the pledges to look at things like tsg disclosures and taking a look at diversity in corporations and of republicans saying, all of these things the sec chair is talking about, a lot of them are not about the core mission of what they say the agency should be focused on, securities roles. you kind of saw here, i think, what is likely to be a policy debate that will shape up as chair gansler moves ahead with his agenda which includes at least four dozen regulations

that he is having -- plans to have the agency take a look at over the next year or so. caroline: in your list, you forgot one of our favorites. bond pricing as well which the sec chairman said once to bring greater efficiency and transparency to a market that relative to the equity market still can be pretty opaque. how are bond investors responding? what are you hearing and the transparency ideals that might be on their way? ben: we heard this starting yesterday. it is really interesting because over the past several months, we have heard a lot about on the stock side, certainly we have the meme stock craziness that started the year and so much attention played to what our regulators, particularly sec, going to do to bring transparency and take a look at what is going on behind the curtain if you will in some areas of the stock market. we started to hear from chair gansler yesterday and certainly

today as he was asked about it. it is not just the equity markets he is concerned about. he is pointing specifically to the areas in corporate bonds where there is transparency. the defense we have so far is what might be coming. i do not think there is big changes necessarily coming around the corner but it is unique and notable that an sec chairman is focused on bond transparency because when you think about the sec, we are talking about the stock market. taylor: thank you to our reporter. i appreciate your time and a good set up for what comes next because we will dive deeper into all of these issues and what is ahead for the sec's agenda. cato institute director and financial regulation studies and our director joining us next for finra. this is bloomberg. ♪

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romaine: just discussing the big hearing and washington with the sec chair, gary gensler. you're all over what was going on with bonds, taylor, but the things most people care about is the oil spills. taylor: [laughter] that was small. you thought you couldn't get any more fancy than bonds and then you bring up payment for order flows. let's bring up a cool chart we found on bloomberg intelligence. romaine and caroline, take a look. this is the timeline from the first quarter of 2020 into the second quarter 2021. i am focused on yellow and blue at the bottom of the screen which is options and equities, payment for order flow, and there was some concern in the second quarter because it had been a drop from the first quarter, as you can see in 2021, where some of the revenue had been falling just a little bit but it is still a big part of

their revenue and so a lot of concerns about the future of payment for order flow, certainly impacting the robinhood investors and it is top of mind. let's go to jennifer schulp, the cato institute director. financial regulation studies. she was previously a director in the department of enforcement at finra. a wide range of topics. let's hone in on what romaine said correctly is catnip to investors when they think about payment for order flow and the ripple effect for some of the companies we were just referring to. what do you see as a realistic, all-out ban or perhaps taming of the payment for order flow? jennifer: the chairman has said in all-out ban is on the table but he has not said that is the direction he wants to head. it is entirely possible the sec heads that way but we are more likely to see improvements in disclosure surrounding payment

for order flow and perhaps broader market tax reforms that look at making sure the best execution is easier to come by for retail investors. the flows have stood the test of time and i don't see going away. romaine: there would be pushback if he tried to propose that. i'm curious as to how you create a structure. if you do not ban payment for order flow. how do you create a structure where that sec can monitor in short order to make sure investors are being protected or at least are being given a much more transparent idea of what is happening? jennifer: the first focus is on better disclosure. a lot of the disclosure that happens to investors now is bulk or late and not accessible to retail investors who we have the most concerned about. i think there will be a focus on

better disclosure and pass that, i think there will be a focus on enforcing best execution and if that does away with payment for order flow by fiat, because you cannot overcome a conflict and get best execution, that would be the way payment forward focuses on that. caroline: it's interesting you are mentioning the enforcement and it is happening in the eu, regarding regulation by enforcement. i will turn our attention to crypto market because that chart is how much it depends on crypto trading which is a payment for order flow. interestingly, is this about retail protection? what did you make of whether or not we learned that much more from gary gensler? how he thinks about the clarity of whether or not certain crypto assets are indeed securities and how regulation performs that? jennifer: i think we learned a

little from gary gensler today. he has been pretty clear over the past several weeks that he thinks that most, if not all, crypto is a security and it falls under the jurisdiction of the sec. what we did learn today with more detail about where he thinks congress has a role to play in clarifying digital assets based and we learned that role is minimal. he thinks congress can really step into help with coordination between the financial regulatory agencies and then handling more technical details like gaps in custody laws and other things. he really views the sec as a primary regulator in this space and thinks he has the authority to regulate already. caroline: on that note, what is the fine line? how do you see the sec regulating, protecting consumers, working on transparency, maybe walking a fine line? jennifer: i think it is a very difficult line for him to walk

and i think the way the sec has been going about it thus far is on a collision course for stifling innovation. the type of regulation by enforcement senator toomey was talking about i think is inherent when we are looking at the ripple case, when we are looking at the recent move for coinbase and the wealth notice on their landing program. the sec has been moving in the enforcement space rather than in the guidance space and when after they are afraid to act because the full weight of the sec is coming behind them, there is no question but that will stifle innovation. romaine: how much of that, with regards to the sec -- and i understand we have at changing administration and policy -- how much of this is also the shortcomings of the industry policing itself? with regards -- whether you are talking about finra or the other oversight bodies for the industry, have they not done

enough for addressing the issues? jennifer: i think in the crypto space, we have difficult questions. crypto despite chairman gensler's statements that it is clear that crypto -- most crypto are securities, the debate on capitol hill today really highlighted that that clarity is not there. the industry is going to have a hard time policing itself, period, if it does not know the rules to operate under and there is a need for clarity here in order to make progress in that space. caroline: really great to have time with you, jennifer schulp. cato institute director of -- alternative director of financial regulation studies. she is doing great work. the gamestop hearing is when she caught everybody's attention with the depth of knowledge she had about transparency in the markets. romaine: i think she made a good point about the its idea that it

moves to enforcement type of mechanism with the sec rather than just guidelines and guidance. taylor: and the impact of what that means for people trying to innovate. they know the full weight of the sec is coming. certainly a good conversation. bloomberg technology with caroline is next. romaine: this is bloomberg.