derivative invader >> shorten the industrial, etm >> tara novajoe? >> we began talking about taking amazon, now i'm in microsoft >> dr. quick, you got a name >> lamar i bought it during the show, scott. >> thank you kelly picks it up. thank you, skolcott hi, everybody, here's what's happening. the fed's latest next move the fed is less than an hour away now what can we expect in the jobs report and with markets acting a little frothy? >> and larry kudlow joins us starbuck's sells off today as it announces a dramatic shift to its business model and tesla is up to $1,000 a share. an $86 billion market, dom

that's what we're talking about with tesla crazy. >> it's amazing when it compares to other traditional automakers out there, kell. certainly a name that's catching a lot of attention you can see here mixed market but green. half a percent upside for the nasdaq composite above that 10,000 mark, a new record level s&p level, dow industrials about half a percent as well let's take a look in context what's been the leadership in the markets. the nasdaq has been and remains the big leadership remember, we talked about a v-shape recovery it's not totally symmetrical, but that's still a big v remember, the nasdaq composite lost a big percent of its value and gained about 50% sor, so wee going to watch that. the folks at ycharts looked at

nasdaq 5000 and nasdaq 10000 nasdaq has put up about 71 points of the nasdaq gain. amazon, 49 points on its own facebook, you can see 47 points on its own, 43 for alphabet, and then around 41 for microsoft you total all of those up, it's roughly about 250 points i think it's 251 so 25% of a thousand-point gain in the nasdaq between 9 and 10,000, kelly, just those five stocks alone >> dom, thanks so much, and we'll see you a little bit later. the fed's take on interest rates is due in the next hour. it will be interesting to see how much the fed is willing to put up and for how long. hi, steve. >> it does put a risk to the market because there's really no consensus on what the fed might do i have some economists saying the fed will do this, another

guy is saying they'll never do that, so we go in with a little bit of uncertainty on what the fed will do and what the market expects the fedto do here's some areas i'll be looking closely at obviously guidance on rates. there's talk about stronger forward guidance for how long rates will be low. how does chairman powell react to the better jobs report on friday does it cause him to ease back on plans for further relief on how much it will do beyond what's already been promised, and that is considerable finally a return of the dots, the forecast from the federal reserve that took a break in the middle of the crisis in march. let's take these one by one. what more will the fed do? our cnn fed survey showed support for three principal areas. databased forward guidance pick a stat like unemployment. the fed really hasn't done a qe program, not a classic one, at

this point it's done more for market functioning purchases that it's done and bonds yield caps setting a rate for the treasury market and buying and selling bonds to hit that rate. okay, so the outlook comes back. take a look at the yellow bars in this next chart that's the last time we heard from the fed back in december. they were looking for 2% growth this year, 3.5% unemployment and a 1.6% fund fed rate something has decidedly changed them that's the fed survey, a 5% gdp decline, a 1.5% unemployment rate for the end of the year we'll see how close it goes. but kelly, i question as to whether or not the fed surprises on the upside by announcing some new forward guidance or keeps the status quo, saying, look, we've done a lot and there's lot more to do, and it looks like the economy is improving >> steve, what's going on in the stock market, i wonder if that will be the talk of the fed meeting. yesterday when we talked about

them capping bond yields or doing yield control, the feds said the reason is because they don't want to have to send stock prices flying as they continue to strengthen the economy. this would be a different kind of measure i guess my question is how much do you think they're watching some of the retail behavior in the stock market and thinking to themselves, we don't want to repeat the dot-com bubble all over again >> i think they're watching it i think there's concern. i think there's always concern about that i don't know, kelly, they have the luxury of addressing that issue right now. i think that chairman powell has said straight forth getting the economy back to its maximum potential, employment is the number one goal of the federal reserve, and there's going to be some fallout from that, and that could be a bubble in stocks. and there have been some issues and equities that we've looked

at that are just head scratching in terms of what's happened to them but if the fed were to draw that liquidity from the market because of that reason, it could risk a longer downturn, and it will be meeting, as you know, for the first time since the economy was declared to be in recession. >> right, exactly. it's tricky, that's for sure >> very difficult tradeoffs. >> steve, thanks very much we'll see you again. steve liesman with a preview there. with more on the feds' move, i'm joined by julie and subatr subatra rajappa. they could set a target for when they raise rates i'm curious what you think that target could be, they could cap bond yields. which of those do you think is the most attractive option >> i think none of the above i don't think the fed is ready to formalize their monetary

policy they have been pretty clear they're waiting for more clarity on the outlook before making those sorts of decisions, so i think they'll be talking about them but i think the message we're going to get today is very much the message we've gotten in the last couple of months, which is by any means necessary the fed is, i don't think, taking much comfort from -- as much comfort from the leveling out in data as the markets have. i think they're still very concerned about a second wave, which is already beginning in states that have started to open up so i don't think the fed thinks we're out of the woods yet i think what we're going to get from the fed in terms of forward guidance is through their summary of economic projections. i think what it's going to show is a substantial decline in gdp for 2020 and a double-digit employment rate at the end of the year still, despite the friday report, and also despite above trend growth in the next two years, i think we're still going to have an unemployment rate at the end of 2022 that is well

above the natural rate, and therefore we're going to get a median dot and that's the down payment on forward guidance that they'll give us today. >> exactly so, steve, bringing you into this, none of this is predicated on, hey, the jobs report surprised the upside, the market is basically at all-time highs and the fed is going to step back it's more about how do they support this economy through the period julia described without creating the wrong kind of dislocatio dislocations >> it's pretty clear that investor needs, investor desires, especially those that wanted to pick up distressed assets, that wanted the federal reserve to stand aside and allow things to crash, that those are far behind what the fed's ultimate goals are here, and that is restoring the economy to full potential like you just heard. it's going to be difficult because the federal reserve can't operate very easily in the

particular corners of the economy that are impacted by covid. again, i think we'll see a very strong snapback in the economy it's already happened. we didn't lose 20 million jobs in the month of april because of the virus, we lost them because of the shutdown. we can get a lot back from that. but chairman powell has to be very clear here that whatever the consequences in financial markets and the risks investors may want to take, their job here is to support restoring the economy to full potential, getting the unemployment rate down over the next few years so probably forward guidance, some element of that whether that's through dots or communication, again, is what would be more likely to happen >> subatra, it would make sense to me that they wouldn't raise rates, for instance, and that could have implications for qe, especially for other markets

sabatra, what do you think their announcements are for 2 p.m. >> i think i'm in agreement with julia. i think it's a little too early for forward guidance and it's definitely too premature for forward control. i would be surprised if the fed gi gives specifics on all of these topics or sets the road for forward guidance or gives us a little more clarity on what they'rethinking on monetary policy going forward i think for the most part, this is going to be a status quo meeting, because from my perspective, i think the fed is very focused on the fed facilities this week they introduced the main street lending program, allowing more small and medium-sized businesses to participate. they are also focused on the

liquidity facility, so that's really what their focus is on right now. i think it's too early to make drastic changes in monetary policy >> yeah. steve, same thing to you what are some of the code points that would upset the markets here >> well, i think clearly expressing any sort of overconfidence, you want the federal reserve chairman ultimately in the press conference to be the most worried person in the world, yet again acknowledge that a good deal of what has happened here can be reversed, but that the federal reserve is there to ensure that we will have financial support, right, that the financial system, that financial conditions will not be standing in the way of recovery. i just say on yield control, if you want to ensure we ever low treasury yields, the federal reserve if it fails, again, will receive low treasury yields, and this is probably the very sort of policy that what you just heard, again, about specifically

policy effectiveness for small businesses, why we have seen so few companies register and make it clear that they want the federal reserve to be a buyer, these sorts of stigma issues, they could perhaps work a little bit on this. chairman powell, in these times we have a history of him setting markets in his press conference. the message here again should be things can go well, but we're going to make sure that they go well >> a threat, almost. julia, i'll end with you, and this concept which steve pointed out the other day that the typical expectation for the fed's balance sheet which is already at $7 trillion, i believe, is that it goes to 10 trillion we've never -- this makes '08-'09 look like peanuts. >> yes, it does. so does the labor market, for that matter. the shock is big, it's global, and it's not going to be easily resolved yeah, shutdowns help, but we

still have this virus hanging over our economy and changing the structure of what we do and how we do it this is not child's play and the fed is not going to mess around. i agree with steve that the message is still going to be we'll do whatever it takes, and that includes lots of balance sheet expansion through both qe and these credit programs that sabadra mentioned. they're very focused on that margin of policy which is quite powerful i think that's what we're seeing in the markets the fed has successfully disconnected the shock from transmitting through the markets into a financial crisis. that's good news i don't think the fed is going to worry about that at all in fact, i think they see that as success >> for sure. thank you all today. we appreciate the guidance before we get to the top of the hour we'll take a quick break here the odds for mislstimulus is ve

very high. what does it look like we'll talk to larry kudlow on a cnbc interview, next also starbuck's is announcing big strategic shifts, down 5% this afternoon we'll have full details ahead on "the exchange. as business moves forward, we're all changing the way things get done. like how we redefine collaboration... how we come up with new ways to serve our customers... and deliver our products. but no matter how things change, one thing never will - you can rely on the people and the network of at&t... to help keep your business connected. find a stock basedtech. on your interests

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welcome back the talk of more stimulus coming from washington keeps getting louder in fact the words used yesterday by economic adviser kevin hassett is the odds for a deal are, quote, very, very high and it could happen very soon. what would the deal include and does it have bipartisan support? joining me now is larry kudlow, executive of the monetary council. good morning, larry. >> nice to see you >> one of the things people realize is the ppp program has really helped this economy recover, but the businesses are saying we're worried about the other side of this would you consider letting small businesses go back to ppp if they need more funds >> i'm not ruling anything out i'm not going to negotiate here. the ppp -- the loan demand seems to have peaked at about $500 billion, and i think that was an enormous help, as you suggested. i mean, really, the ppp, i

think, led directly to the surprising wonderful jobs number we had last friday, where more or less 3 million people who were temporarily laid off or furloughed went back into work in the labor force and went down to 15 million, and that was the whole story, and that's a ppp story. i just want to say, i want to brag on some of my friends, the congressional budget office, nonpartisan congressional budget office, their director, mr. swagel, he said the trump team should get a lot of credit for the fast delivery of the coronavirus stimulus he particularly singled out the treasury department's delivery of the ppp and the sba's delivery of the ppp. in a short period of time, we got out in round numbers about 175 million checks the assistance number is probably approaching $2 trillion this is the liquidity cushion

that we hoped would work we got it done i don't know that we're going to repeat it, but i'm just saying it worked, and now with the reopenings, kelly, i'm getting a little more optimistic we've seen a lot of glimmers of growth in many different places, maybe we'll talk about that, but i think we reopen in may and june i think the next employment figures are going to be very, very good as the businesses reopen and rehire and people have cash. so let's hope that this thing bottomed away in april and we're headed towards a terrific recovery in the second half of the year >> you know, it's interesting that the market seems to be ignoring the prospect of any more shutdowns related to coronavirus. we know in places like texas and arizona, the count is up we talked to the head of a texas hospital system yesterday, and frankly he couldn't even give us a clear answer as to why it was up icu bed usage and all those

things are headed in the wrong direction. this time around no one seems concerned we're going to do another shutdown they probably figured out there's more tactical ways to respond to this. but i guess my question, larry, is -- again, i'm putting my shoes in a small business. even someone like frotita is saying his business is down. people are wary of going to crowded places tillman even said if there was money left over, he'd want to tap it, but small businesses are saying they're fine right now but they're worried about this cliff that could be coming from ppp, because it's rebounding but it's definitely not on the way back >> don't forget, the legislation president trump signed last friday extends the ppp program, i believe out to 24 weeks from eight or nine weeks. and it also provides more flexibility in terms of spending

the loan money you can now spend 60% on payroll and 40% on expenses, so the payroll numbers come down. that will help look, i want to go back to the numbers point. i think what you'll see is in the aggregate nationwide, new cases have pretty much flattened out, many parts of the country coming down. i mean, the growth rates over one day and seven-day are about zero, and the same is true for the mortality. fatality rates are down close to zero, between zero and 1%. now, certain areas, perhaps. i grant you it's a good point. on the other hand, our health experts have said to me repeatedly we have much more experience in dealing with hot spots, we have much better equipment, ppe, testing and so forth, ventilators, and we will be able to fight some fires

without closing down the economy. the president said himself, we're not going to close down the economy again. so, you know, you can look at the glass half full or half empty. right now i think it's more than half full, and i think, you know, you mentioned the stock market you and i have talked about the stock market we said it might be a buying opportunity for long-run investors, kelly, not a bad call, and frankly, i think the market is seeing the same numbers -- the market knows all -- the same numbers. and so far so good look, i'm hoping, i'm praying. we still have a lot of hardship and we have a lot of heartbreak in many areas. the numbers are still, you know, way too high on the unemployment and so forth but it looks like we've hit a turning point. >> one more on that, larry it is interesting now to see all of these new retail traders, the robin hood traders, they're sometimes called there is a lot of the interest in some wacky parts of the market, and you have people who

have been trading for a couple months saying, warren buffett is an idiot and making money is a piece of cake. do you see any signs of froth out there? are you worried about that >> i'm sorry, warren buffett is an idiot i don't believe that >> i don't think many do my point is do you think there's any signs of froth in the market >> you know, short-term i don't know you're much closer to it than i am i just want to make the point that this pandemic contraction, which did in the early stages do great damage to the stock market, but this is different than historical cycles i mean, this is more in the nature of a hurricane or a bad snowstorm. now, i don't want to compare viruses to snowstorms, but the point is this. it was a natural disaster. and that natural disaster stopped, in this case, for three months it stopped the economy dead in its tracks, and of course it stopped the stock market, and of

course it stopped falling employment we had a terrific economy last winter, as recently as january and february, 3.1%, according to the atlanta fed. froth, i have no idea. overbought, oversold, i have no idea but what i think is happening is the stock market is prestaging an upturn in the economy and that we have turned this corner. you got green shoots, kelly, right? >> more than >> new business applications, business opening, tremendous housing demand, apple mobility index showing people are traveling again. automobiles are absolutely going to explode if we keep some restrictions on liability insurance. you're going to get restaurants opening everywhere folks are going to return to work i think they're all anxious to do so. i still reference the congressional budget office,

roughly 20%-plus in the third quarter. i think you'll get another 20% in the fourth quarter and the cdc has the big '21 at 20% having rebuilt this economy once, i believe, under the president's leadership, we can rebuild it a second time the hurricane and snowstorm and hopefully, prayerfully, the virus is passing, and we get back to the incentives that gave us such a terrific economy >> larry, one of the clearly worst parts of what's happened over the last couple months has taken a much worse toll on the african-american economy the unemployment rate fell in the last few months, the black unemployment rate about 17% right now. the median weekly earnings in april fell this has been a tremendous hit do you just say, look, the

message is the economy is recovering, it will take care of itself, or does more need to be done is there any discussion for more targeted help for this community? >> look, let me just say the african-american unemployment rate in may was up .10 of 1% now, it so happens that employment went up, if i'm not mistaken, about 300,000. so it was a good month and furthermore, for that demographic, for that cohort, the employment's population ratio went up over one percentage point so i think african-americans are coming back into the labor force and looking for work because they're more confident, all right? i don't want to belittle it's a bad unemployment rate, i get that but i think the employment turnaround bodes well. take a look at the "wall street journal" story today

tremendous article on just how good it was for african-americans, for asian americans, for hispanic americans, for that matter, for women, for people without college degrees. we had an employment boom. we had a blue collar boom. we had a minority boom in job creation the february jobs report before the pandemic came crashing down, african-american unemployment was 5.8. that is nearly the record low, which is 5.4, and that was set in august '29. go down the list hispanics, 4.4, asians 2.5, women 3.1. all of those were near or at record lows. that's how phenomenal. the tax cuts and deregulation program, frankly, benefited the middle and lower income wage earners. that's why i called it the blue

collar boom. so the deal is, okay, we have set up about a thousand opportunity zones to take advantage of investment tax breaks and renovate where there were disadvantaged areas and depressed areas. those zones, by the way, included education reform and health care reform we have donated enormous amounts of money to the historic black colleges and universities. we have had trcriminal justice reform which was long overdue, and i think the president is working now on various reforms, on police reforms, to deal with the latest issues. of course, we must have the law and order. it's the only way it grows, with law and order. i saw that in new york city under rudy giuliani many years ago. my point is, kelly, the african-american community can rebound. they had historically low unemployment they were on a boom. that's what that "wall street journal" story said today. let's keep some faith on this.

the same policies to open up opportunities, prosperity, opportunities, that will bring everybody back to the work force. >> and that may be the case, but it's going to take years even in this case, it took a long time to get down to those levels as you know, the saddest part about this is once you hit an unemployment rate this high, it doesn't come down as nearly as fast as it rose. it could be 2021, '22, '23, i don't know there happens to be a reelection campaign in a couple months that i don't know if voters will give credit to what the situation was. >> not everybody buys those '20s, kelly, i'll just put that in there i know the forecasts are widely disbursed. i know the president of the st. louis fed, jim bullier, believes unemployment will be down in single digits. i happen to think that is possible

i think you're going to see, just in the next few months, all right, employment, both household employment and payroll employment, which in the aggregate rose 3 million or more i think those employment numbers, as the country reopens, as businesses reopen in june and july july, these are transition months, you're going to see big gains in jobs. the next report and the one after that and by the way, the trend -- i don't want to talk politics, i'm just saying the economic trend is going to matter a lot people understand that we had this pandemic, they understand it's like a passing hurricane and things will get better or go back to normal at some point i'm not smart enough to know precisely when but if you're moving in the right direction, there is no reason america can't have it come back here

>> we were seeing whether or not more ppp was under discussion. what would that bill look like what is the priority for you >> it's not for me, it's for the president. there are a number of things he's talked about time and time again. first of all, to create return-to-work incentives. he's in favor of the payroll tax holiday for the work force this time we're also looking at amending the unemployment story, the $ 0 $600-plus. i believe we will have a credit for a return-to-work scenario. he's talked about infrastructure he's talked about rebuilding the restaurants and small businesses with tax deductions. he's talked about helping tourism with tax deductions. he's looked at the capital gains tax. he's looked at, by the way, onshoring where he wants to provide some tax incentives and some other assistance so firms

can come back to america you know, the fashionable idea of long and complicated supply chains i think has really changed during this pandemic because of china's unreliability. we're going to see quite a lot of that. so there are a number of issues that he has talked about i think the negotiations will probably formalize in ernest after the 4th of july holiday. >> all right larry, thanks so much. lots of information in there we appreciate it, as always. >> thank you, kelly. >> larry kudlow is the chair of the national economic council. coming up, tesla is taking over the stock is soaring over $1,000 a share today, nearly 8% plus amazon wants to be your everything to everyone, and now that includes to being your lender we'll have full details ea ayitusahd.

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welcome back to "the exchange." what a day for tesla, the stock reaching the $1,000 mark for the first time it's now 80% up. it's nearly quintupled tesla, which delivered just over 367,000 cars last year has a market cap of $187 billion general motors, which sold more than 2.8 million cars last year, has a market cap of just $41 billion, the stock selling off today. and ford selling 2.4 million cars last year has the market cap of just $27 billion. it's also lower today. to add insult to injury for these automakers, nikola, which has yet to deliver a single car, has a market cap of $24 billion. now to sue herera for an update. hi, sue. >> hello, everyone here's what's happening at this hour texas reporting a third straight

day of record coronavirus hospitalizations it was just first states to relax restrictions for more on the resurgence, you can go to cnbc.com president trump will address policing reforms while visiting dallas tomorrow. nbc news reports the president will likely announce new measures that can be implemented by executive order with a broader legislative proposal coming in the next few days. and the justice department's move to dismiss charges against michael flynn should be denied in part because it is a, quote, gross abuse of prosecutorial power and highly irregular conduct to benefit a political ally of the president, end quote. that is the recommendation of a retired judge brought in by the trial judge to help him decide whether to accept the government's motion despite the former national security adviser's earlier admissions that he lied to the fbi. you are up to date that's the news update this hour kelly, i'll see you in an hour >> sue herera, thanks so much.

amazon wants to be your lender, but it will cost you a pretty penny we have details on amazon's new partnership with a wall street bank too limited. is there more they could be doing? a fed official says, yes, a lot more he'll join us. stay right here. this is decision tech. find a stock based on your interests or what's trending. get real-time insights in your customized view of the market. it's smarter trading technology for smarter trading decisions. fidelity.

welcome back to "the exchange." it's the latest tie-up between big tech and wall street cnbc has learned exclusively that amazon is partnering with goldman sachs for its new line of credit. hugh sun is the banking

reporter hugh, good to see you, and who wins most from this? >> it is a bit of a coup from goldman sachs. they stated that they wanted to build out their partner, ecosystem. you heard of the software service. they coined a phrase calling it banking as a service they want to be behind the pipes of a lot of big, popular brands. obviously there is some compelling marketing economics behind that and why you would want to do that. obviously they launched that last year. that was a huge success. earlier this year we reported that jetblue and marcus, their goldman brand, was going to make installment loans. yes, obviously goldman is a winner, and two, for sellers on amazon who has cash crunches during times they have to buy a lot of inventory and there is a lag between the time they have to pay for stuff and the time they get paid from amazon, this

should be a win. >> i'm looking at the terms of the these are revolving credit lines -- and this is also with the marcus brand, as you said -- fix fixed interest rate of about 21% like a credit card what's interesting about this, hugh, we do now, but five or ten years ago, you wouldn't have thought amazon's apple sellers are going to be goldman's, but it's the transition goldman wants, isn't it? >> it's not easy to break into the world of consumer finance. this is something completely mature in this country, so you only have opportunities when there are seismic changes. the rise of fintec is going to be good for them as people rise to more digital existence. it's certainly something super surprising it's something that didn't have to happen. amazon had this small business lending program since 2011 they use it to fuel their solid

growth and they use it themselves for the entirety of this business. now for the first time, they're allowing an outsider to come in and with permission get access to some of their seller data so that goldman sachs can decide whether or not to lend to these people >> why do you think they went with goldman exclusively instead of one of the possible outcomes which was to make it a marketplace where there could be a bunch of different lenders for marketplace sellers to pick from >> they were considering an online marketplace model where goldman sachs would be one of several competing to offer small businesses money that obviously didn't happen this is better for goldman sachs. i think it shows that they basically -- they have a relationship, so goldman banker took them -- advised them on the takeover in 2017 that was a huge transformational deal, so they actually have a

longer relationship. sometime in 2018, a goldman banker launched this idea of why don't we sell on amazon? >> here they are, consummating that deal. hugh, thanks very much great scoop and thanks for joining me today >> thanks, kelly >> hugh son with goldman starbuck's takes a $3.2 billion revenue hit from the pandemic they're also revealing another strategy we bring kate in for more on that kate >> with that projected loss of $3.2 billion revenue in eq, they expect to get it back. 91% of u.s. stores opened at the end of may, same store sales were down 43% in may, up from

63% in april in the last week, 90% of sales from starbuck's were mobile or online in the u.s. they had a constant decline of 30 to 40%. in china 99% of stores were open and komcomps fell 44% in q3, kelly, comps are expected to be down 20 to 25% they're also expecting some store changes. they'll open 300 new stores in financial year 2020, down from projection of 600. it will close 400 existing stores in the next 18 months that will be in conjunction with the opening of new stores. the reopening for large cities have a mix of traditional caves and these walk-up and pick up at

store for mamats there's one right by the new york stock exchange. this was supposed to happen over the next three to six years. they're condensing it now to just 18 months because of covid-19 that accelerated some of the changes they had already planned, because kelly, customer preference is shifting now as we continue to see. back over to you >> does this mean they are going to deemphasize starbuck's as -- what do they call it -- >> the third place >> the third place, right. >> no, i don't think so. i think this is changing to consumer preferences i think it's still part of the starbuck's brand and is really important. i think they've seen the shift in how customers want to interact with the brand now. a lot more emphasis on to go before covid, 80% of their business in the u.s. was to go you can imagine that's only going to pick up moving ahead into the future, so i think that speaks to those preferences, but again, the third place certainly

here to stay and a core part of the brand. >> kate, thanks so much, we appreciate it. kate rogers with the run-through there. starbuck's shares lower after all that news. we're going to get the fed rate decision in 15 minutes. with all the fed is doing to prop up the economy, how many moves does it have left? we'll discuss that next. miles to the job site. the campsite. and anything else we set our sights on. miles that take us back to the places we want to go. and to the people who count on us. so, let's roll up our sleeves. because we've got miles to make up. find a stock basedtech. on your interests or what's trending. get real-time insights in your customized view of the market. it's smarter trading technology for smarter trading decisions. fidelity.

welcome back to "the exchange." since march the feds have released a historic number in the economy due to the coronavirus. as more reopens, what more should and can the fed do to reopen recovery? apparently they have some moves

left great to see you both. david, i'll start with you, because there are a couple of interesting things in here, including capping bond yields, which i prefer the term yield curve control, but i know maybe they're not one and the same in any case, the second part here is more money from the cares act to make even riskier loans, including to nonprofits >> so as you point out, the fed could cap long-term rates, yield curve control. that's something that isn't an issue now but could pick up steam. the fed could make its loan programs more generous it said the other day, as it widened the eligibility for the main street lending facility that it's working on a program to lend money to nonprofits as well, so one thing the fed could do is basically lend more money on more generous terms to more

people, if the treasury is willing to stand behind it >> absolutely. bill, how does that sit with you? >> i think that sounds great the key thing about this cycle is it's liquidity assurance and market funding assurance it's not so much the rates the rate capping and negative rate is in some sense a misnomer we have to assure that businesses survive the lending so far biases the capital structure and incentivizes the managers to do the same old things. what we are missing is the innovative changes, which we a need now bill, you're concern here is the fed will undermine activity in the long run, what do you mean by that? >> one of the incentives, the last thing the lender wants to do is we want to try something new. they want their money back

whereas an equity investor, all he wants to do is make a lot of money, so he's going to say train better people, get whatever innovations you need in place, and let ace make money and come back strong that's the incentives we need. the economy itself has been to be restructured with the efficiencies that the old technologies are giving us but we need new technologies that's what you get with equity investment >> what would that look like, bill, coming from the fed? >> the fed has focused on credit markets. we talked about buying loans and giving more easy loans what the fed should start to do is buy equities the way the hong conmonetary authority did during the crisis, buy a big etf and support the equity market, and in the microlokcro loan sphere,y packaging to ensure new

innovative investment. >> i understand the point, but david, it's interesting. right now we have markets basically back to all-time highs. by the way, it's amazing what the retail investors, investors at large have done in order to get us here without the fed doing that kind of approach. what do you think about the possibility of them getting more involved in equity markets in the future >> it is true that other central banks around the world, japanese, french, do buy equities the fed's position has always been we don't have the legal authority to do that as jay powell has said over and over again, we lend, we don't spend. i think there is a risk that we are putting too much burt on the fed. i don't think the federal reserve is very well equipped to be a venture capitalist. there's a question about whether a government can be a good venture capitalist in any guise, but i think that's one of the problems we are facing the congress is hoping the fed can get them out of this thing and

they won't have to appropriate most money, and most of the economists i respect say that's not going to work, so it's bandy on jay powell, and to forcefully argue congress and the president that we need to put more fiscal support into this economic if people will have a decent recovery >> last question, bill why couldn't the whole fed main stride program simply been a congressional program? again, the money comes from both sides, but why aren't we thinking of it as more of a congressional activity >> in fact, it is. the key to monetary policies, we need to redirect the flow of money to equity financing. i'm not saying -- in fact i wanted to redirect the money flows away from debt, which we already have way too much of toward equity financing. it's the -- and the legal changes that are needed to enable the fed to do that are what are necessary policy

agenda. >> you can take the point there might be no appear ties by the broader public for that. >> there is. we see -- money is waiting by the sides looking for opportunities, dead opportunities are way overloaded what we are missing are the new venture capital kind of opportunities which the fed could feed and broaden into a different set of instruments and different sets of possibilities. >> fascinating you always get my thinking in many directions i was not prior to the discussion. thank you so much for joining us in the lead-up to this decision. bi david wessel and bill lee, thank you. the news conference haenpps around 2:30, all on "power lunch", right after this versati, whether on the track, or the everyday drive. today, that philosophy extends to how we connect with you. we call it, audi at your door.

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all right. welcome back, everybody. this is "power lunch." welcome. we are just a few minutes away from the decision from the federal reserve after what has been months, months of unprecedented intervention let's look at the markets as we welcome you in just for the marker, dow and s&p are both in the red. the nasdaq motoring back up a half person, another record high we welcome in our fed panel, as we always do, well cup bag -- and john bellows portfolio manager at western asset lady and gentlemen, welcome. what should i by looking for and listening for over the nest

hour >> mostly tone i think a tone of empathy, it's going to supply what the economy i think some of the short-term indicators are looking berm. but the main message is the fed will keep money very easy, very available, for as long as this pandemic is haunting the economy. >> i guess, mona, a lot of people will be looking to see what the fed economic predictions are, because those were omitted at the last. >> absolutely. coming from the fed, you know, we'll get consensus estimates for this year, gdp down

negative, but a plus 4% rebound in 2021, stabilizing in 2022 it will be interesting to see if the fed is anyone lieu with these estimate to david ace point, the fed's dual mandate, neither of which are being met. its 13.3, 16.4, depending on the metric you use, but still well above the natural rate you know, core cpi only at 1.2%, so it would be interesting to see how they manage that as well >> john, we may interrupt you as the decision comes down. 30 seconds on the possibility -- or is it off the table of negative interest rates? >> i don't think we're goinging to any any of interest rates, but i think the fed will stay on the front foot, as mona said, they're very far from meeting

either of their mandates it's straightforward they need to stay on the front foot, and we're looking for that more on bond purchases at the moment rather than negative rates >> i think we can certainly expect those kind of musings >> guys, let me just jump in here let's go to steve liesman for the fed decision steve? >> the federal reserve leading interest rates unchanged it says it will maintain the target range until it's confidence of a recovery, until the economy has weather ed weat oop events projecting near 0% interest rate through