>>OH, MY GOSH.
>>THAT’S CATCHY. >>BEFORE THE BREAK WE TOLD YOU
ABOUT THE EFFORTS FROM THE STATE OF MARYLAND AND WASHINGTON,
D.C., TO SUE THE PRESIDENT, ACCUSING HIM OF PAYMENTS FROM
FOREIGN GOVERNMENTS. JOINING US NOW FROM CAPITOL
HILL, DEPUTY WASHINGTON BUREAU CHIEF FOR “TIME” MAGAZINE ALEX
ALTMAN. HIS NEW COVER STORY DETAILS HOW
PRESIDENT TRUMP’S WASHINGTON, D.C., HOTEL IS RAISING AN
INCREAING AMOUNT OF ETHICAL CONCERNS AND HE WRITES IN PART
THIS. THIS IS THE NEW TOWN SQUARE IN
DONALD TRUMP’S WASHINGTON. TOURISTS PERCH ON THE BLUE
VELVET SOFAS IN THE LOBBY, SNAPPING CELL PHONE PICTURES AS
POWER PLAYERS STREAM ACROSS THE DARK MARBLE FLOORS AND CREAM
CARPETS. IN THE PAST, PRESIDENTS HAVE
OFTEN GONE TO GREAT LENGTHS TO ASSURE THE PUBLIC THAT THEY
AREN’T MIXING THE NATION’S BUSINESS WITH THEIR OWN.
TRUMP HAS TAKEN A DIFFERENT APPROACH.
HE HAS STEPPED AWAY FROM THE OPERATIONS OF HIS BUSINESS, BUT
HE HAS NOT RELINQUISHED OWNERSHIP.
CRITICS SAY THE APPROACH FALLS FAR SHORT.
HE IS ONE GREAT BIG EXAMPLE OF EXPLOITING PUBLIC OFFICE FOR
PRIVATE GAIN, SAYS KATHLEEN CLARK, A LAW PROFESSOR AT
WASHINGTON UNIVERSITY IN ST. LOUIS, WHO TRAINS GOVERNMENTS
AROUND THE WORLD IN ETHICS AND ANTI-CORRUPTION PRACTICES.
OF COURSE IT’S A SCANDAL. >>SO, ALEX, IS THIS A GUY THAT
KNOWS HOW TO GO RIGHT UP TO THE LINE BUT NEVER CROSSES IT OR DO
YOU THINK IN YOUR INVESTIGATING THAT ACTUALLY THERE IS SOMETHING
THAT THESE STATES ATTORNEYS GENERALS MAY BE ABLE TO SINK
THEIR TEETH INTO? >>WELL, ONE QUESTION WITH THE
LAWSUITS IS GOING TO BE STANDING.
THE PRESIDENT HAS TRADITIONALLY HAD A GREAT DEAL OF LATITUDE
FROM THE CONGRESS AND FROM THE SUPREME COURT IN TERMS OF WHAT’S
I THINK THE PRESIDENT’S LAWYERS MAY BE ON SOLID GROUND IN SAYING
NOTHING THAT HE’S DONE HAS CROSSED THE LINE.
THERE’S NOT JUST THE QUESTION OF CONFLICTS OF INTEREST BUT THE
QUESTION OF THE APPEARANCE THEREOF.
WE’VE NEVER HAD A PRESIDENT TAKE OFFICE WITH A GLOBAL EMPIRE,
FOREIGN OUTPOSTS AND A TROPHY HOTEL ON PENNSYLVANIA AVENUE
RIGHT IN THE SHADOW OF THE WHITE HOUSE.
>>AND HE GOES TO ALL OF HIS FACILITIES JUST ABOUT EVERY
WEEKEND. THIS WEEKEND.
THERE HAVE BEEN PROMISES THAT HE MIGHT SHOW UP AT WEDDING
RECEPTIONS. THIS WEEKEND HE DID SHOW UP AT A
WEDDING RECEPTION AT ONE OF HIS HOTELS.
>>YEAH. THIS IS SOMETHING THAT HE HAS
DONE SINCE THE BEGINNING OF HIS CAMPAIGN.
YOU KNOW, REPORTERS AND HIS PRESS CORPS CAN RECALL BEING
DRAGGED ALONG TO TRUMP PROPERTY AFTER TRUMP PROPERTY.
I MEAN I CAN RECALL VISITING ONE OF HIS GOLF COURSES IN SCOTLAND
RIGHT BEFORE THE REPUBLICAN CONVENTION, WHICH STRUCK A LOT
OF PEOPLE AS ODD. AS YOU NOTE, IT IS SOMETHING HE
HAS CONTINUED DURING THE PRESIDENCY.
HE DECAMPS FOR HIS GOLF COURSE IN VIRGINIA AND NEW JERSEY ALL
THE TIME. HE’S BROUGHT FOREIGN LEADERS TO
MAR-A-LAGO, HIS FLORIDA ESTATE, AND IT’S SOMETHING THAT HE’S
>>AND THE DUES ARE UP AT MAR-A-LAGO.
THEY RAISED THE PRICE. >>THAT’S CORRECT.
I BELIEVE THEY RAISED THE INITIATION FEE FOR NEW MEMBERS
FROM $100,000 TO $200,000. >>OKAY.
HOW’S THAT NOT BENEFITING? PRESIDENT TRUMP’S WASHINGTON,
D.C. HOTEL ISSUE COULD BE PART OF A LARGER ETHICS ISSUE.
LET’S BRING IN ANDREW RICE. HIS NEW PIECE ASKS THE QUESTIONS
IS TRUMP INC. HIS GREATEST VUBLNER ABILITY.
EVEN AS REPUBLICANS LIKE LINDSEY GRAHAM STARTED TO TALK ABOUT
INVESTIGATING TRUMP’S FINANCES, IT BEGAN TO OCCUR TO MANY PEOPLE
THAT THE PRESIDENT’S DEFIANT REFUSAL TO SEPARATE HIMSELF FROM
HIS TANGLE OF INTERNATIONAL BUSINESS INTERESTS MIGHT
REPRESENT SOMETHING MORE OMINOUS THAN MERE STUBBORNNESS, THAT HIS
INVETERATE HUCKSTERISM MIGHT NOT BE A SIMPLE PERSONALITY QUIRK OR
AN IMPLAUSIBLE SELLING POINT OF HIS SUCCESSFUL CAMPAIGN, BUT THE
FATAL WEAKNESS OF HIS PRESIDENCY.
>>AND THE BELIEF OF A LOT OF PEOPLE THAT HE’S IN IT FOR THE
MONEY. HE’S GOING TO MAKE AS MUCH MONEY
AS HE CAN IN OFFICE AND OUT OF OFFICE.
>>THIS GOES TO THE CENTER OF THIS UNPRECEDENTED SITUATION
THAT WE FIND OURSELVES IN AS A COUNTRY, IN THAT, YOU KNOW,
TRUMP HAS NOT DIVESTED HIS BUSINESS INTERESTS.
YOU KNOW, THE CONFLICTS ARE REAL.
I MEAN THERE’S A RECENT REPORT IN “THE WALL STREET JOURNAL” OR
IN “THE DAILY CALLER” SAUDI ARABIA SPENT $270,000 DURING THE
TRANSITION AT THIS WASHINGTON HOTEL.
SO THAT’S AN EXAMPLE OF LIKE A FOREIGN GOVERNMENT PUTTING A
QUARTER OF A MILLION DOLLARS INTO THE TRUMP ORGANIZATION’S
POCKETS. >>THAT’S ACTUALLY WHAT I WAS
GOING TO ASK YOU AND ALSO TO ALEX AS WELL, THIS $270,000 TAB
COINCIDING WITH A SAUDI LOBBYING PUSH AGAINST LEGISLATION TO
ALLOW VICTIMS OF TERRORIST ATTACKS TO SUE FOREIGN
GOVERNMENTS THAT CAME OUT OF 9/11, DIPLOMATS FROM BAHRAIN, WE
WERE TALKING ABOUT EARLIER, THE WAY THE PRESIDENT TALKS TO THOSE
NATIONS AS COMPARED TO OUR ALLIES.
HAVE YOU EVER SEEN THERE ARE ALLIES USING THE HOTEL AND HOW
THE PRESIDENT TALKS ABOUT THESE COUNTRIES AND HIS OWN BUSINESS
INTERESTS? >>I THINK CLEARLY, YOU KNOW,
THERE’S A LOT OF EVIDENCE, JUST SMALL THINGS ON SOCIAL MEDIA,
LIKE THE AMBASSADOR OF GEORGIA TWEETING OUT A PICTURE OF THE
TRUMP HOTEL AND SAYING BEST DINING EXPERIENCE I’VE EVER HAD,
ET CETERA. YOU KNOW, THESE SEEM LIKE SMALL
THINGS. BUT WE KNOW THAT TRUMP IS, AS
NORM EISEN, THE HEAD OF CREW, WHO IS BRINGING THESE — THIS
EMOLUMENTS LAWSUIT, HE’S INFLUENCED BY THESE MINOR FORMS
OF TRIBUTE SEEMINGLY FROM THE PUBLIC RECORD.
IF YOU’RE A DIPLOMAT AND YOU HAVE A CHOICE BETWEEN THE FOUR
SEASONS AND THE TRUMP HOTEL, WHY NOT STAY AT THE TRUMP HOTEL.
>>ALEX, THE UNITED STATES’ FOREIGN POLICY, THE PRESIDENT
HAS TREATED OUR ALLIES IN EUROPE BADLY AND EMBRACED TYRANTS IN
TURKEY AND IN THE PHILIPPINES, WHERE TWO HUGE TRUMP PROPERTIES
EXIST. >>THAT’S RIGHT.
NOT ONLY DOES IT RAISE QUESTIONS ABOUT WHY THE PRESIDENT IS
SAYING AND DOING THE THINGS THAT HE’S DOING WITH RESPECT TO
GEOPOLITICAL HOT SPOTS, BUT JUST ANSWER THE PREVIOUS QUESTION.
WE’VE ALSO SEEN POWERFUL DOMESTIC INTERESTS TAKE AN
INTEREST IN PATRONIZING THE PRESIDENT’S PROPERTY.
DURING THE PRESIDENTIAL TRANSITION, THE HERITAGE
FOUNDATION, WHICH IS IS A POWERFUL CONSERVATIVE THINKTANK
HERE IN D.C., PERHAPS ONE THAT’S DONE MORE THAN ANY OTHER TO FORM
THE TRUMP POLICIES, THANKED DONORS WITH A GALA AT THE TRUMP.
WE’VE SEEN A BANQUET, PUT UP POWERFUL INTERNATIONAL CLERICS
AT THE TRUMP HOTEL. THESE ARE ALL CAUSE FOR CONCERN.
>>IT’S UNSEEMLY, IT HAS THE APPEARANCE OF CONFLICT OF
INTEREST. MY HUNCH IS YOU’RE NEVER GOING
TO BE ABLE TO SHOW QUID PRO QUOS SO I DON’T THINK ULTIMATELY THIS
DOG WILL HUNT BUT IT CREATES THE PERCEPTION OF AN ADMINISTRATION
THAT ISN’T DEALING WITH THE WHITE HOUSE, THIS SOUNDS CORNY,
AS CHERISHED AS IT IS. IT’S AN UNBELIEVABLE
RESPONSIBILITY AND OBLIGATION AND HONOR TO BE THERE, AND ONE
JUST JUST SENSES THERE’S BEHAVIOR
THAT’S INCONSISTENT. >>STEVE, WHAT’S SO REMARKABLE
ABOUT THIS, HERE WE ARE AGAIN, SIX MONTHS AFTER A CAMPAIGN,
NINE MONTHS AFTER A CAMPAIGN. FOCUSED ON A POLITICAL CANDIDATE
WHO USED HER POSITION IN GOVERNMENT TO SOME PEOPLE
ACCUSED HER OF GETTING MONEY INTO THEIR FOUNDATION, WOULD
CHANGE POLICIES, HER HUSBAND WOULD GO GIVE SPEECHES, AND
INSTEAD OF GETTING HIS 250,000, AND ONCE SHE BECAME SECRETARY OF
STATE, GET THE 500,000. I’LL BE DAMMED IF WE’RE NOT IN A
POSITION NOW WHERE IT’S THE SAME THING.
HOW DO YOU PROVE SECRETARY CLINTON CHANGED U.S. POLICY, BUT
IT DID JUST SO HAPPEN TO BILL CLINTON GET HALF A MILLION
DOLLARS FOR A 30 MINUTE SPEECH. AND, AGAIN, HOW DO WE PREVIEW
ANYONE IS GOING IN THERE. IT’S SLEAZY ON BOTH SIDES.
>>THE STUFF DONALD TRUMP WAS GOING AFTER HILLARY CLINTON FOR
A LOT OF REPUBLICANS WERE GOING FOR HILLARY CLINTON.
A LOT ARE SILENT NOW WITH STUFF MUCH MORE GLARING.
IT COMES BACK TO THE ELECTION WITH HIM.
HE GOT THROUGH THE CAMPAIGN. NOT PUTTING OUT HIS TAX RETURN.
THUMBING HIS NOSE AT THE CROWD ON THE TAX ISSUE.
HE FEELS HE GOT ELECTED AND IT’S VINDICATION AND SO THIS SAME
ETHICS CROWD COMES OUT OF HIM. DIVESTING, BLIND TRUSTING.
I THINK HE SAYS I GOT AWAY WITH THE CAMPAIGN ON TAXES, I’LL GET
AWAY. >>JOE BRINGS UP A GREAT POINT
ABOUT THE CLINTON PRACTICES WHICH I WILL SAY I WAS KIND OF
ALONE. I BROUGHT IT UP IN REALTIME.
I’VE GOT THOUGHT IT WAS SLEAZY TOO.
THE CLINTON PRACTICES AS IT PERTAINS TO SPEECHES SET THE
PRECEDENT FOR DONALD TRUMP NOW. REALLY HARD TO NAIL DONALD TRUMP
ON THIS. DIALING IT RIGHT BACK TO HOW THE
CLINTONS PRACTICED THEIR FINANCIAL GAINS AND KIND OF PUT
THAT I RECALL GRIPS ON A LARGE SECTOR OF SOCIETY THROUGH THEIR
FOUNDATION. BY USING THE SAME.
>>AS GEORGE STEPHEN WOULD SAY. YOU GIVE THEM MONEY BECAUSE YOU
WANT TO BUY ACCESS. IF HE WAS SAYING THAT, YOU KNOW
FOREIGN LEADERS WERE SAYING THAT.
BY THE WAY, HOW IS THE CLINTON FOUNDATION DOING NOW THAT
THEY’RE OUT OF OFFICE. >>I WOULD SAY THE ONE THING,
THERE’S A SUBTLE DIFFERENCE HERE FROM NORMAL CORRUPTION CASES.
WE’RE TALKING ABOUT THE CAUSE OF THE CONSTITUTION.
ABSOLUTE PROHIBITION ON TAKING BENEFITS FROM FOREIGN
GOVERNMENTS. DON’T HAVE TO PROVE HE DID
ANYTHING IN RETURN FOR THIS MONEY, ALL YOU HAVE TO PROVE SU
THAT HE HAS BEEN ACCEPTING. >>WOULDN’T A JUDGE HAVE TO LOOK
AT IT AND SEE HE’S GETTING MORE THAN FAIR MARKET VALUE.
IF THEY BUILD A HOTEL AND PEOPLE GO VISIT HIS HOTEL, YOU CAN’T
GET HIM FOR THAT, BUT IF THERE SEEMS TO BE A PATTERN OR E-MAILS
OR HERE WE ARE LOOKING FOR E-MAILS AGAIN OR EVIDENCE THAT
THERE’S A QUID PROQUO THAT’S FINE.
IF THEY’RE GETTING FAIR MARKET VALUE FOR A HOTEL IN WASHINGTON,
D.C., IT BECOMES DIFFICULT. THE WORDING IS PRETTY CLEAR.
YOU CAN’T TAKE A PROFIT WHATSOEVER.
YOU’RE NOT SUPPOSED TO TAKE PAYMENTS.
>>HE WAS TAKEN. IF HE BASICALLY IS ONE STEP
REMOVED AS OTHER PEOPLE ARE RUNNING THE BUSINESS, DOESN’T
THAT GIVE HIM A CHINESE WALL THAT PROTECTS HIM FROM THIS
ARGUMENT. >>HE SET UP SOMETHING A DONALD
J TRUMP TRUST.
REVOCABLE. HIS KIDS RUN IT.
IT’S NOT PARTICULARLY ARM’S LENGTH.
I THINK THAT’S SOMETHING THAT ULTIMATELY LITIGATION WILL
DETERMINE. THIS IS LIKE WHY CREW AND OTHER
ORGANIZATIONS ARE BRINGING SUITS.
ARE ENTHUSIASTIC ABOUT THEM. IT WILL ALSO GIVE AN OPPORTUNITY
FOR TRUMP’S OPPONENTS OR ETHICAL ADVOCATES TO GET INTO HIS TAX
RETURNS TO GET INTO THE DETAILS OF HIS FINANCES.
>>IT’S GOING TO BE REALLY TOUGH TO PROVE THIS.
JUST AS TOUGH TOLL PROVER QUID PRO QUO.
>>YOU CAN READ THE HIS PIECE IN THE NEW ISSUE OF “NEW YORK
TIMES.” >>>DEMOCRATS STRUGGLE TOLL GET
ON THE SAME PAGE. STEVE KORNACKI, DEEPENING
DIVIDE. >>>ALSO AHEAD, POLITICAL BATTLE
LINES ARE BEING REDRAWN ACROSS EUROPE.
EMMANUEL MACRON PARTY IS POISED FOR AN UNBELIEVABLE WIN IN
FRANCE. WHILE PRIME MINSTER THERESA
MAY’S FUTURE IS UNCERTAIN IN THE UK.
AND AS PRESIDENT TRUMP’S COMMENTS ABOUT LONDON’S MAYOR
DRAWS BACKLASH S THE WHITE HOUSE CONSIDERING POSTPONING OR
CANCELLING AN UPCOMING TRIP TO ENGLAND.
LIVE REPORT FROM
(pleasant mallet percussion music) – [Narrator] Take a look at this chart. It tracks how much banks and
others pay for overnight loans using something called
repurchase agreements. This is also known as the repo rate. These bumps right here on
September 16th and 17th have caused a really big
stir in the financial world. That’s because the repo
market is a critical part of the financial system. It provides a lot of the grease that keeps the wheels spinning, meaning it provides the cash
that financial firms need to run their daily operations. When the repo market chokes
and cash stops flowing, trouble can reverberate
through the economy. That’s what happened in September, and in response, the Federal
Reserve had to step in to help, providing tens of billions
of dollars to borrowers to keep the system cranking. In the weeks since this happened, experts have called the incident
a technical malfunction, and banks, for their part, have said it could have been prevented. They’re blaming the rules
that were put in place after the financial crisis, rules intended to keep the banking system from falling apart. (dramatic mallet percussion music) (pleasant mallet percussion music) Imagine two people, Karen and Mark. Karen has $1000 and she’d like to earn some fast interest on her money. Mark has a stack of
treasury notes but no cash, so he strikes a deal with Karen. One note for $100, but there’s a catch. Mark has to agree to buy that
note back tomorrow for $101. The difference between
the price of the note on day one and day two,
that’s the repo rate. If everything works properly, Mark gets the cash he needs
right when he needs it and Karen makes some fast money. The repo market functions in the same way. You just have to replace the
Karens with money market funds and other asset managers who are looking to make a little money
without a lot of risk and replace the Marks with hedge funds, Wall Street traders, and
banks who have a lot of assets but need cash on hand to fund
their day-to-day trading. In the repo market, Karens and Marks all over the financial
system lend back and forth for short periods, often overnight, and they do this at an enormous scale. Usually, more than $1 trillion
runs through it every day. On September 16th and
17th when the rate spiked, the Karens were not willing
to trade cash for securities at the usual rate, so
the Marks who needed cash kept offering more and more and more until the Fed arrived with help. (pleasant mallet percussion music) When the Fed announced its
surprise repo operations, people wanted to know, why did the Karens suddenly stop lending? Experts point to two financial deadlines that sapped cash out of the
system on the same night, causing a crunch.
(gears snapping) September 16th was the cut-off for banks to submit their quarterly tax payments, so a lot of money that
they might usually lend in the repo market was being
sucked out of their accounts and deposited into the Treasury. September 16th was also the day that $78 billion of Treasury
debt was scheduled to settle, which just means that
another chunk of cash was being turned into
securities on that day, too. Now, some banks said the
crunch was compounded by another factor, a rule put in place after the financial crisis
to keep banks solvent. The rule, which is called
Liquidity Coverage Ratio, or LCR, requires banks to keep a
certain amount of reserves or cash on hold at the Fed at
all times, among other things. The idea was to improve the
banking sector’s ability to absorb shocks arising from
financial and economic stress. You can see it on this chart. Since the crisis, banks have stockpiled cash
in their reserve accounts. There argument is that
keeping these funds on hold makes it harder for them
to lend out cash on a dime when money gets tight. Now, for the Fed’s part,
Chairman Jerome Powell dismissed the possibility
of revisiting those rules. – If we concluded that we
needed to raise the level of required reserves for
banks to meet the LCR, we’d probably raise the level of reserves rather than lower the LCR. – [Narrator] What he’s
saying is that the Fed would rather provide
the extra funds itself than lower those liquidity
requirements for banks, and since that press conference, the Fed’s done just that. In October, it announced
it would start buying short-term treasury debt
at $60 billion a month and continue through
at least June of 2020, which means there’s
gonna be money to borrow even if the Karens stop lending again. Its aim is to boost reserves, allowing banks to stay liquid
without violating the rule, and in doing so, to keep the wheels of the financial system spinning.
(gentle music) – [Narrator] This chart shows the yield on the German government’s 30-year bonds over the past few months. You’ll notice something unusual
happened in early August. The yield dropped below zero. A yield is the return
investors receive on a bond. A negative yield is the
opposite, meaning investors are receiving less money
than they originally paid. Negative yields are a
relatively new feature in the world’s bond markets,
but they’re appearing with increasing frequency. Globally, around $16
trillion worth of bonds currently carry a negative yield. Bonds are one of the safest
investments on the market. They’re staples of many
investment portfolios, from pension funds to retirement accounts. Investors like them because
of their reliable returns. So how did some bond yields go negative? And why would investors
keep putting their money in assets with negative returns? To understand negative yields, you need to understand how bonds work. Bonds are a form of debt that governments and companies issue for
various lengths of time. A bond’s lifespan can
range from a few weeks to a few decades. Bond issuers make
regular interest payments to bond holders over the asset’s lifespan. This is known as the coupon rate. But bonds are often bought and
sold on the secondary market. Their prices fluctuate, which affects what an investor can expect to earn. The yield is a calculation
of how much an investor can expect to make from
holding onto a bond bought at a particular price for a
particular length of time. The yield of a bond is
inversely related to its price. High demand in the bond
market drives up prices and drives down yields. This is largely why yields are negative. Right now, the bond market is experiencing unusually high demand. There are a few reasons for this. The first is that investors have grown increasingly concerned
about the lack of growth in the global economy. Amid low inflation, political uncertainty, and trade disputes, investors
are putting more money into safer assets, like bonds. The second is that several
central banks around the world have set their interest rates below zero. Central banks are banks
for commercial banks. So when they set negative
interest rates, commercial banks must pay them for the privilege
of holding their money. This incentivizes commercial banks to lower the interest
rates they charge to. So far, commercial banks
have been reluctant to pass that negative
rate to average consumers, but some have passed on
the cost to companies and large institutional investors. Negative rates give investors
an incentive to buy bonds rather than park their money at a bank. This drives up demand. These factors have
pushed bond prices higher and driven down yields, so
much so that they are now in negative territory and,
in some cases, even below the negative rates set by central banks. So why would investors
continue to buy bonds with negative yields? Well, if demand continues
to rise, buying now means potentially selling bonds
later at a higher price. This can help offset
losses in the short term, but the long-term implications
of negative yields could mean lower returns on pensions
and retirement accounts, meaning workers might have
to save more and work longer. Negative bond yields, and
negative interest rates in general, are viewed
as a short-term remedy to get economies moving. But with the footprint of
negative rates getting deeper and wider, investors worry
that they may be less of a temporary fix, and
more of a permanent fixture in the market. (gentle music)