Transcript: Nightly Business Report – December 5, 2018

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Bill Griffeth and Sue

welcome to this special edition of NIGHTLY BUSINESS REPORT.

market was closed today as well as the treasury market in remembrance of
our nation`s 41st president, George Herbert Walker Bush, who died November
30th at the age of 94.

HERERA: President Trump declared today a National Day of Mourning with an
executive order, closing the federal government.

GRIFFETH: In fact, the last time the market was closed to mark the death
of a president was back on January 2nd of 2007, in the wake of President
Gerald Ford`s passing.

HERERA: Indeed.

And the nation`s mood today was somber. The former president departed the
capitol building this morning where his body had been lying in state.
Family, friends and dignitaries gathered for a memorial service at the
national cathedral in Washington.

In the front row, Presidents Trump, Obama, Clinton and Carter and their
spouses. Eulogies were delivered by his son, former President George W.
Bush, by former Canadian Prime Minister Brian Mulroney, former Senator Alan
Simpson and Bush`s biographer Jon Meacham.

His body was then flown back to Texas where it will lie in repose until
tomorrow when a funeral service will be held in Houston.

GRIFFETH: During his presidency, the stock market gains were solid.
That`s the best we can use for that. The Dow rose 45 percent over the four
years. The S&P gained even more, 52 percent.

But the market gains were overshadowed by economic issues, issues that
continued to influence many of today`s discussions. Whether you are
talking taxes or banking or trade, President Bush`s economic imprint is
still felt.



GRIFFETH: In 1988, George H.W. Bush was elected president. Thanks in part
to the low inflation and solid growth the nation experienced during the
Reagan administration.

BUSH: I am absolutely convinced I will be your next president. Thank you.

GRIFFETH: But eight years earlier during a failed run for the Republican
nomination —

BUSH: A voodoo economic policy.

GRIFFETH: — Mr. Bush gave us the term voodoo economics, believing hat the
math behind Reagan`s proposed supply side tax cuts just didn`t add up.
Still, though, he served two terms at Reagan`s vice president. And while
change again in 1988 he defended the tax cuts with a promise.

BUSH: Read my lips: no new taxes.

GRIFFETH: The Reagan tax cuts did leave President Bush with growing budget
deficits. And so in 1990, he famously broke his promise, signing a tax
increase that some economists believe contributed to a recession. And even
though it ended in 1991, it still helped Bill Clinton win the 1992
presidential race, depriving Mr. Bush of a second term. Higher taxes and
that recession prompted conservatives to revolt and caused a lasting divide
that the GOP still copies with today.

Bush also faced a banking crisis. Bad real estate loans put savings and
loans out of business. And the Bush Treasury Department, which included a
younger Jerome Powell tightened regulations.

Those fixes and spending cuts aimed at reducing deficits, while they were
unpopular for many are credited with helping to set the stage for the tech
led boom of the `90s. In one of his highest profile domestic achievements,
in 1990, he signed the Americans with Disabilities Act into law, requiring
employers to provide reasonably accommodations to employees with
disabilities. It also imposed accessibility requirements on public

President Bush also engineered foreign policy wins. He oversaw a peaceful
ending to the Cold War in 1989 and 1990.

BUSH: America won the Cold War.

GRIFFETH: And he also put together an American-led 35-nation led coalition
that pushed invading Iraqi forces out of oil-rich Kuwait in the 1991,
sustaining the energy flow that powered the world`s economy for decades.
And there is still controversy about his decision to sign the first trade
deal between rich and poor countries, the North American Free Trade
Agreement or NAFTA. The trade deal was latter ratified by a Democratic
Congress under President Clinton and then criticized and eventually
reworked by President Trump, who blamed the old NAFTA for American job

But for George H.W. Bush, the decision to sign wasn`t about politics. As
he did so often during his career in public service, he simply thought it
was the right thing to do.


HERERA: Let`s talk more about President Bush`s economic legacy with John
Harwood. He is outside the National Cathedral in Washington, D.C.

Always good to see you, John.

Bill just kind of laid out the template of the Bush economic legacy. But
of those various things mentioned, what do you think he will be best
remembered for on the economic front?

front, I think it`s that budget deal. And you know, the last couple years
of his presidency psychologically were shaped by that recession. And that
recession by the way began in the middle of 1990, before the budget deal,
before the tax increase. And it actually ended a few months after the tax
increase was enacted.

However, it was a difficult step. It divided his party. He took the rate
up from 28 percent where Ronald Reagan left it to 31 percent, in return for
spending cuts.

And that budget deal, although he did not get much credit for it at the
time and it was controversial contributed to his defeat in his 1992 re-
election attempt, set the stage for the surplus that is occurred later in
the 1990s. It was followed by another budget deal that Bill Clinton
enacted that also raised taxes. And by the end of the 1990s, we had a
booming economy and a budget and surplus.

GRIFFETH: And what`s interesting, yes, is he the last president — I was
hearing that — where we had consecutive quarters of 4 percent growth or
more, right?

HARWOOD: Four, this is the irony. Bill Clinton`s campaign was “it`s the
economy, stupid.” The notion was that Bush had been inattentive to the
economy. But in reality when you look at statistics, we were well out of
the recession by 1992. He is the last president to preside over four
consecutive quarters of 4 percent plus growth. That`s remarkable when you
think right now, people are yearning to get back to 3 percent growth.

GRIFFETH: Right. It wasn`t enough at that time. John, stay there.

Let`s bring in our next guest here, Barbara Franklin, she became the
highest ranking woman in the Bush administration when appointed at
secretary of commerce.

Madam Secretary, it`s good to see you again. Thank you for joining us this


GRIFFETH: And as fate would have it, you — maybe one of your greatest
achievements as commerce secretary, you led a presidential mission to China
to open up that market to American exports, something that we`re dealing
very much with today.

FRANKLIN: That`s right. And President Bush was the one who had the idea
of sending me to China.

And to put it in context, if you remember the crisis at the Tiananmen
Square in 1989 in June, and we put placed eight sanctions on China. And I
think President Bush very deftly managed the sanction regime so that we
showed displeasure with what China had done but we weren`t going to mess up
the relationship completely. However anything economic really stopped
after Tiananmen. And there was a ban on high level government to
government contact.

And it was after the election, after we had loss that tough election in
`92, he called me the week after election and said I want you to go to
Beijing. And I want to you meet with your counterpart to reconvene the
U.S. China Joint Commission on Commerce and Trade, JCCT, still meets. I
want you to do that. And that will in effect restart the economic
relationship between two countries that we really need to have this

And he also wanted to smooth the relationship a bit, which was — had been
at a really quite a low point.

And then the other thing was this would take away the span on high level
government to government contact. He thought the Clinton administration
then would have a smoother way to engage with China and to keep this
commercial relationship going if that sanction were removed.


FRANKLIN: And I`m happy to tell you we didn`t know how we would be
received. We threw a mission together very, very quickly because we were
going to go out of office.

HERERA: Right.

FRANKLIN: The Chinese side delivered and we brought back a billion dollars
worth of signed contracts between U.S. and Chinese companies.

HERERA: It seems to me that the president doesn`t get quite enough credit
for really bringing in the concept of globalization, because not only was
your mission successful but also the fall of the Berlin wall, the beginning
of a healthier economy in the now reunited Germany. There were a lot of
economic things that were happening around the world that happened on his
watch, and some of which of course like China he started.

FRANKLIN: Well, he absolutely did. And I think on the China piece, people
don`t really understand what he did. And he paved the way then — my
mission was just a piece of that process — paved the way for the great
growth of the economic relationship between the U.S. and China, which is-
has been the very bedrock of the foundation of that relationship today.

Now, we`re in a little bit of a rocky patch. But I have confidence that
we`re going to get somehow through that. But I don`t think the president –
– of course, he never took credit for anything —

GRIFFETH: Right, right.

FRANKLIN: — as you said. I don`t think he gets credit for what he did
with respect to that relationship, U.S. and China, which is a very
important relationship globally, economically today.

GRIFFETH: John, we heard repeatedly during the memorial service at the
National Cathedral, he was a gentle man. And he cared deeply about public
service to the United States, didn`t he?

HARWOOD: Well, he also, Bill, was somebody who believed in the
institutions of American government. And that`s what I think is so telling
about Secretary Franklin`s anecdote about being sent to China after his
election defeat. That was a very difficult campaign.


HARWOOD: I was covering his White House then. He took — that was a very
difficult defeat for him to stomach. But he ran through the tape. He was
concerned about continuity after he left so that President Clinton would
continue the dialogue with China.

In fact, President Clinton did that. And China was admitted to the World
Trade Organization by the end of this term. And that sort of encapsulated
in the famous note he left on the desk of Bill Clinton that Bill Clinton
found on his first day in office, where he said, Bill, you are the
president now. I`m rooting for you. Your success is America`s success.

I think that reflects the ethos of George H.W. Bush.

HERERA: Madam Secretary, do you want to weigh in on that? I heard you a
little bit in there? But he really has a remarkable legacy, does he not?

FRANKLIN: He really does. And some of this shows his quality and strength
of character. He could be a tough minded and decisive when necessary, but
he was always gracious and kind at the same time. And this is leadership
to me.

And what he did with respect to getting the China U.S. relationship back on
an even keel was leadership. And that is what presidents do. And he did
it without seeming to be doing anything sometimes.


FRANKLIN: Made it look effortlessly. But he did.


FRANKLIN: The great quality of this man I`m honored to have served and
known him and Barbara Bush for 40 years.

GRIFFETH: And we are pleased you are with us as well. Barbara Franklin,
the former commerce secretary and our own John Harwood, joining us as well.
Thank you both, folks.

FRANKLIN: Yes, thank you.

HERERA: Still ahead, the day in business news and the surprise hidden in
the latest report from the Federal Reserve.


GRIFFETH: A massive pharmaceutical acquisition was approved as well.
Takeda shareholders okayed the $59 billion-dollar takeover of Shire
(NASDAQ:SHPGY). The deal creates a global drug powerhouse and pushes it
further into the rare diseases industry. It`s the biggest overseas
acquisition by a Japanese company but it also adds to the pharmaceutical
company`s debt load as well.

HERERA: To the economy and the housing market, which saw mortgage
applications rise 2 percent last week. According to the Mortgage Bankers
Association, volume was nearly 20 percent lower than the same week a year
ago. Experts say the 3-week decline in mortgage rates is not enough to get
buyers back into the market in a notable way.

And one reason is that prices remain high. And affordability is at its
lowest level in a decade.

GRIFFETH: Meanwhile, the Federal Reserve`s latest survey on the economy
was released this afternoon. And it pointed to modest to moderate growth
through late November. But there was also a surprise.

Steve Liesman joins us now. What was the surprise?

started mod toast moderate growth, the way it has. I don`t know how long
going back but then quickly transitions into this discussion of slower
growth. And we really haven`t seen much of it. In fact four districts
report either slight or slower growth compared to the prior Beige Book
which is the collection of economic anecdotes from the 12 Federal Reserve
districts that comes out every six weeks or so.

And it said that while firms remain positive, the quote was in there,
optimism has waned. And that was a kind of dour note in the book that`s
generally been upbeat and (INAUDIBLE). And they noted tariff uncertainty.

GRIFFETH: Exactly.

LIESMAN: Rising constraints and labor market constraints.

GRIFFETH: In fact, tariffs were mentioned 39 times.

LIESMAN: Thirty-nine times. We`ve been tracking this number. It was zero
in January. And it ramped up to 51 in the prior report. And now, it`s
still a very elevated 39 this time. The word slow, 43 times.

HERERA: Does that change anything in terms of what the fed does on rates,
the language has change, with we`re seeing tariffs more frequently.

LIESMAN: I think that`s a direct question I want to back up a little bit
before I answer. And I think the first thing is there is some evidence
here for those in the market who are betting on — or now believe that U.S.
growth is slowing down. I don`t believe the report at this point is as
dour as down beat as some of those have said. I do think if the evidence
of slowing continues, for example in the Friday jobs report, we get the ADP
number tomorrow that gives us a heads up on what might be on the jobs

If that happens, if we tend to get a generally downbeat out look from the
economic data, certainly 2019 is in question. But we might be on the cusp.


LIESMAN: A few more 800-point down days in the Dow, which I`m not hoping
for, but that could change the outlook even for December.

GRIFFETH: All right. Well, we`ll see how the market responds to this
Beige Book report when we open it tomorrow. Thanks, Steve.

Steve Liesman joining us.

HERERA: Indeed we will, because as Steve just mentioned, the financial
markets are closed today and getting a bit of a breather after that almost
800-point plunge.

So what`s next for stocks?

We`re joined right now by Brian Jacobsen, investment strategist at Wells
Fargo (NYSE:WFC) Asset Management.

Brian, thanks for joining us. Nice to have you here.

Thanks for having me.

HERERA: All right. So, we don`t have trading today. We had an almost
800-point plunge yesterday. And now we have the Beige Book. What`s your
best guess of how the rest of this week is going to play out?

JACOBSEN: Well, it`s probably going to be a pretty bumpy week. The Beige
Book was a lot more negative than what I was expecting it would be. Now,
kind of in a weird way, investors might like that because it suggests that
the Federal Reserve can be patient with hiking rates. Maybe they can hike
in December and then take a pause.

But the fact is that economic growth has been slowing. And that is I think
a major change from where we were even a year ago when everybody was
talking about synchronized global growth and now it`s more about
synchronized slowing and how much slowing will we get? It seems like we
are having issues with optimism of business executives related to tariffs.
And that`s one of the reasons why this whole tariff situation between the
U.S. and China is so important.

GRIFFETH: Two other events we have later this week that will have market
impacts, the OPEC meeting and then the jobs report Steve was talking about.
So, that could add to the bumpiness. What are your expectations there, by
the way?

JACOBSEN: Well, the OPEC meeting — they had a preliminary meeting today.
It seems Russia will go along with some production cuts. And so, the
meeting tomorrow might finalize that as far as the details around it. So,
we could see oil prices rise in the wake of this OPEC meeting.

And then with the jobs report, it seems like the consensus is around about
190,000 jobs, wage growth of around 3.2 percent year on year, those are
good solid numbers, probably above trend numbers. Now, I think the danger
is with the Beige Book, the indicators there that maybe it`s a bit weaker.
So, we could be in store for more volatility as we enter into and get
further through the holiday shopping season.

HERERA: We also saw in the Beige Book wage pressure continuing, and the
labor market extremely tight. Might we see that reflected in the Friday
report as well?

JACOBSEN: We could see wages rise. I think the expectation is around a
3.2 percent increase year on year, which is a slight pick up from the 3.1
percent that we had for October. Now, from a historical perspective,
that`s really not bad as far as increase in pressure. If we have about 2
percent inflation, that`s about 1.2 percent real wage growth.

And honestly, we could do a lot stronger than that before I think that it
would become a problem. But, you know, traders are always looking at what
does it tell us about next year, not just last month? So, it could be
pointing to a build up of pressure. But my expectation is that it`s going
to be pretty steady as she goes here.

HERERA: All right. On that note, Brian, thank you so much.

JACOBSEN: Thank you.

HERERA: Brian Jacobsen with Wells Fargo (NYSE:WFC) Asset Management.

GRIFFETH: And as we mention, OPEC is meeting in Vienna tomorrow. And the
stakes have never been higher for that oil producing cartel.

Brian Sullivan has a preview of what will be an important and possibly
contentious meeting.


few months make. OPEC not only facing falling oil prices but perhaps the
beginning of the end of its cartel.

In June, OPEC agreed to raise production. It was a move to counter rising
prices and the threat of lower supply from on coming Iran sanctions but it
miscalculated and was caught in the crosshairs of two trends. Iran has
been able to sell oil around the world and the United States and Russia
continue to boost their production.

UNIDENTIFIED FEMALE: I can`t stress the importance of what`s happening in
oil right now — a one-year low.

SULLIVAN: Prices crashed in November, posting the worst month in more than
a decade. President Trump loves it, tweeting recently that lower gas
prices are a big tax cut. But our tax cut is a profit tax on OPEC.

And it not only has to figure out how to deal with Trump and the United
States but also a break in its own ranks. This week the country of Qatar
shocking everyone, saying it is quitting the cartel because it wants to
focus on natural gas instead of oil.

UNIDENTIFIED MALE: Our intention to develop a new gas project for export.

SULLIVAN: At Thursday`s meeting, OPEC expected to cut production likely by
about 1.3 million barrels of oil per day. But the markets will be paying
attention to what happens on Friday as well, because that`s when the Saudis
meet with non-OPEC member Russia, what some cynics call the real OPEC
meeting. So between expected cuts, Qatar cutting and running and the
continued rise of the American oil juggernaut, it could be a contentious
couple of days in Vienna.



HERERA: General Motors (NYSE:GM) CEO was on Capitol Hill today for two
days of meetings. Mary Barra met with the two senators from Ohio and
tomorrow she is scheduled to meet with Michigan lawmakers. The meetings
revolve around the automaker`s decision announced last week to close four
U.S. plants and lay off thousands of workers.

Phil LeBeau joins with us more on that story and others.

Good to see you, Phil.

So, what is she telling these officials? And might these meetings change
her plans to close some of those plants?

to change General Motor`s plans. I think General Motors (NYSE:GM) looks at
these plans and they say, look, these are wildly underused plants in terms
of how much unused capacity is there. And we need to make this decision
for the good of General Motors (NYSE:GM).

Having said that, Mary Barra has been called to Capitol Hill in the past.
And sometimes she has done well, sometimes she has not done well. She
realizes and General Motors (NYSE:GM) realizes it needs to listen to the
lawmakers where the plants are closing or will be idled. At a minimum, at
a minimum, they have to say, we understand the concerns. What can we do in
the future to make investments there?

But I wouldn`t expect a commitment out of these meetings.

GRIFFETH: All right. While we have you here, let`s talk about driverless
cars for a moment. Google`s company Waymo is launching an autonomous ride
share service.

So, how soon do you think before we see driverless cars giving rides around
the country?

LEBEAU: Oh, it`s a long ways off, Bill. I think what you`re going to see
is a gradual expansion of the Waymo One autonomous ride share service.
Gradual starting in Phoenix, maybe eventually they move up to the Silicon
Valley and then overtime you will start to see them slowly showing up in
other cities around the country.

But I have to be honest with you, I would not expect in to be replacing
Uber any time soon. We`re many, many years down the road before you and I
here in Chicago or New York are calling up Waymo saying, hey, I need the
car to come pick me up.

HERERA: Before we let you go, the airlines, Hawaiians airlines cut its
revenue outlook. Is it specific to them or are the airlines overall
slowing down?

LEBEAU: No, it`s more specific to Hawaiian (NASDAQ:HA) airlines and some
of their issues. I wouldn`t call them issues. But specific to their
service within the islands in Hawaii and the routes that they`re flying
there. The industry, overall, Sue, a lot of the analysts looking at
numbers say we have to raise the revenue projections for the airlines
overall because they are doing better with things like bag fees,
reservation change fees. The revenues are improving.

HERERA: Right.

LEBEAU: So, this is more specific to Hawaii than the industry overall.

HERERA: Phil LeBeau in Chicago — thanks, Phil.

LEBEAU: You bet.

GRIFFETH: Elsewhere, Glassdoor is out with the list of the best places to
work. The survey is based on the input of employees who voluntarily
provide anonymous feedback about their job.

These are top three companies right now. Management consulting firm Bain &
Company tops the list, followed by Zoom Video Communications, a video
conferencing company, and favorite of ours, In-N-Out Burger rounds out the
top three.

Coming up, President Bush and his love of fun, colorful socks.


GRIFFETH: Earlier this year, we aired a story about a young man named John
Cronin who along with his dad started a company that makes socks.

Now, John has Down syndrome and to him, the socks represent more than just
things to wear on your feet. The bright patterns allowed him to spread
happiness, awareness and fun. And it was through a mutual love of colorful
socks that John Cronin`s friendship with Bush 41 began.

NBC`s Harry Smith looks at the lighter side of President Bush`s legacy as
an unlikely fashion trendsetter and friend.


HARRY SMITH, NBC NEWS CORRESPONDENT: For a man averse to admiration and
attention, George Bush sure did want you to see what was on his feet.

BUSH: I like a colorful sock. I`m sock man.

SMITH: The more colorful the better. The preference leaned to red white
and blue.

Entrepreneur John Cronin of John`s Crazy Socks took notice and sent the
president a box of some of his favorites. Soon, on World Down`s Syndrome
Day, the president wore these socks that John designed.

John`s George Bush socks are sold out today. That he was often in a
wheelchair the last several years, all the better to show off socks. If a
fellow former president was stopping by for a visiting, Clinton socks.
When sully the service dog came onboard, he often co-starred on Instagram
with the socks, and was with president when he went to vote a few weeks

And there was Sully, dutifully at the president`s side even after he
passed. The president will be buried in these socks in homage to service
in World War II — jets in formation and the naval aviator`s wings.

Safe flight, Mr. President.

Harry Smith, NBC News.


HERERA: And thank you for watching in special edition of NIGHTLY BUSINESS
REPORT. I`m Sue Herera.

GRIFFETH: I`m Bill Griffeth. Have a wonderful evening. We`ll see you


Nightly Business Report transcripts and video are available on-line post
broadcast at The program is transcribed by ASC Services II
Media, LLC. Updates may be posted at a later date. The views of our guests
and commentators are their own and do not necessarily represent the views
of Nightly Business Report, or CNBC, Inc. Information presented on Nightly
Business Report is not and should not be considered as investment advice.
(c) 2018 CNBC, Inc.


This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply