September 19, 2025 • 36 mins
On this week’s episode of Everybody’s Business we're joined by Rohit Chopra, former director of the now largely kneecapped Consumer Financial Protection Bureau. He argues that Trump’s efforts to apply political pressure to the Fed present an opportunity to scrutinize the central bank’s decision-making. Chopra points out that the Fed’s governors, who tend to either come from academia or Wall Street, originally came from a more eclectic array of backgrounds—with perhaps more sensitivity to the needs of small business owners and consumers.
“I really think a good central bank is really good for democracy,” Chopra says. “But I think it has to also change with the times so that it is responsive and that it is not seen as a group of priests and priestesses who make determinations about our lives without really understanding how the economy is working on the ground.”
Also this week, we bring in Bloomberg News reporter Randall Williams to unpack the story that is currently roiling the world of professional basketball: allegations that Los Angeles Clippers-owner Steve Ballmer improperly funneled payments to one of the team’s stars via a dubious (and now bankrupt) fintech company, Aspiration. Ballmer has denied the allegations, which first surfaced in an episode of the podcast Pablo Torre Finds Out. Aspiration’s co-founder has denied being party to any scheme to evade the salary cap.
Williams explains why the story has garnered so much interest among NBA owners and how it illustrates the importance of salary caps in order to maintain competitive balance.
Finally, we unpack a strange case of fake branding, involving the logo of Elon Musk’s aerospace company.
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:12):
This is Everybody's Business from Bloomberg BusinessWeek.
Speaker 3 (00:14):
I'm Max Schafkin and I'm Stacy Vanick Smith.
Speaker 4 (00:16):
And Stacy, we have a big conversation coming up about
your favorite topic, the Federal Reserve. Our guest is Rohit Chopra.
He was a big deal guy in the Biden administration
and he has provocative things to say about Jerome Powell.
Speaker 5 (00:29):
We're also talking about salary caps in professional sports leagues.
Teams and players have been finding some pretty interesting ways
around those limitations.
Speaker 4 (00:37):
And our underrated story, Stacy, I have a idea, a
brand idea for Elon Musk.
Speaker 2 (00:44):
Warning may not be leaked.
Speaker 3 (00:46):
I will keep that in mind.
Speaker 5 (00:50):
Okay, Obviously, the big economic news this week was the
Federal Reserve, but we also got some pretty big.
Speaker 3 (00:58):
Business news last night. We're recording Thursday morning.
Speaker 4 (01:01):
We should say, yeah, another late night host is down stage. Yes,
amid some political pressure from the Trump administration. Disney essentially
pulled Jimmy Kimmel, who is the ABC late night host,
a competitor to Stephen Colbert, off the air amid political
pressure from the Trump administration. For me, this story really
(01:21):
has echoes of the one that we talked about with
Felix Gillette a couple weeks ago with Stephen Colbert, where
you have a combination of factors. One is the threat
of regulation of not approving mergers, and the other is,
like this format, the late night format is basically failing,
and all of these late night shows are not doing well.
So Trump is giving these networks essentially an excuse to
(01:44):
kill a product.
Speaker 2 (01:45):
That is not working super well.
Speaker 5 (01:47):
I would argue the bigger story in a certain way,
could be a potential threat to free speech and news
organizations feeling like if one of their hosts or commentators
says something or does something that the administry disagrees with,
they might end up facing the very real wrath of
like governmental regulation.
Speaker 2 (02:05):
Yeah, one hundred percent.
Speaker 4 (02:07):
And we have another story related to political pressure that
just so happens to.
Speaker 2 (02:11):
Me going on right now.
Speaker 5 (02:12):
We have another story related to political pressure, which is
the Federal Reserve.
Speaker 3 (02:16):
For the first time this year, the Federal Reserve cut
interest rates, which we were all kind of expecting.
Speaker 2 (02:20):
But there was a cut it by three hundred percent,
right as Donald Trump want.
Speaker 5 (02:23):
Yeah, a quarter of a percenta which was like what
was expected but by economists. Yes, well there were there
was a lot of drama around this. We will get
into kind of what was going on behind the scenes
with Row hitch Chopra in just a minute. But the
Fetchair did say something that I thought was kind of
interesting for the rest of us, us in the economy,
(02:43):
which is he he started to talk about stagflation, how
prices are going up, how the economy is slowing down,
and this is a really dangerous combination. And so I
thought I would like ask people how they were feeling
about the economy right now. How do you feel about
the economy right now?
Speaker 6 (03:01):
I'm not good. All the prices are going up and up,
especially food shopping. Before you could just put everything in
your cart, and now you have to start cutting back
on things.
Speaker 2 (03:11):
What's your real have and have not economy?
Speaker 5 (03:13):
And you know, you look around, people are making a
lot of money, and some professions and the champagne's flowing
and in others, you know, things are definitely a lot tighter.
Speaker 1 (03:23):
I kim here because this is the only not going
to fall right now.
Speaker 3 (03:26):
The pizza the dolephi to be slice.
Speaker 7 (03:28):
Yeah. Yeah, when I get the job, I think I'm
going to go back to like chicken and eggs.
Speaker 3 (03:33):
Eggs are like a luxury a little bit.
Speaker 7 (03:35):
Exactly.
Speaker 5 (03:36):
Is there something that, like, if you had more money
or felt better about the economy, something.
Speaker 3 (03:40):
That you would buy.
Speaker 2 (03:41):
It's a new car.
Speaker 3 (03:43):
What's your car like now?
Speaker 6 (03:44):
It's a terrible Nissan that keeps having one hundred problems
because it's almost at ninety thousand miles.
Speaker 4 (03:50):
Prices going up, economic opportunities stagnating. There's a word for
that stacy that is that's Stagflation's stagulasi.
Speaker 5 (03:59):
It's the worst all the inflations, I think. And it's
like kind of a trap for the Federal Reserve because
if they cut interest rates, it does help grow the economy,
but it can also make inflation worse, so it puts
everybody in tough position.
Speaker 4 (04:14):
Yeah, and it's not clear to me what the what
the fix is at this point. I mean, we are
we've got economic challenges that I don't know, you know,
whatever you feel about Jerome Powell or whoever's running the Fed, Like,
I don't know how fixable it is at this point.
Speaker 5 (04:27):
Well, I agree, and like prices are going up and
with tariffs are going to go up more at least
a little bit more. It could be a one time thing,
but it is a really tough position, Like it's not
obvious what they should do. But the Federal Reserve yesterday
said jobs right now are the most important, and I
think most of us would probably agree, although if inflation
gets out of control, it can be really bad. So Max,
(04:56):
we talked earlier in the show about the big economic
news of the week, which is the Federal Reserve and
interest rate cuts, and somehow everyone in the country like
knows about the Federal Reserve and interest rates.
Speaker 3 (05:07):
Now it has become huge news.
Speaker 4 (05:09):
Yeah, And we've also been talking about this question of
like FED independence and the sense that Trump and members
of his administration are doing things to kind of attack
the FED or to push them in various directions. And
I was excited about the conversation we're gonna have because
we've been sort of talking about the FED. And I
know this is kind of partly how you feel, but
(05:31):
some of it has to do with conventional was whatever,
like that there is this beautiful jewel of public policy
that is the US Federal Reserve.
Speaker 5 (05:39):
I am a huge fan of the Central Bank and
like the structure of it and the system.
Speaker 4 (05:43):
And I appreciate that, but I also thought it'd be
fun to have a guest who would kind of challenge
that a little bit fair enough.
Speaker 5 (05:51):
Yes, I mean, I think it's it's good to challenge
these things. That's what they're there for, all right.
Speaker 4 (05:55):
So we have Rohit Chopra, who was the director of
the Consumer Financial Production Bureau under Joe Biden. He served
on the FTC under Trump. He helped actually set up
the CFPB as its assistant director. Basically, he is a
heavyweight on the kind of like progressive left, and he
has kind of an interesting perspective on these issues, and
(06:17):
I thought it'd be fun to kind of hash it
out here.
Speaker 2 (06:19):
Rohit, thanks for being here.
Speaker 1 (06:21):
Thanks so much for having me.
Speaker 5 (06:22):
So we got the rate cut, that was the big
headline quarter of a percentage point rate cut, but there
was a lot of stuff going on behind the scenes
that was also making news. Do you might just kind
of laying out some of the things happening in the
FED right now, which has always loomed very large in
my world, but is somehow also looming large in the
regular world now.
Speaker 3 (06:43):
Very strange.
Speaker 1 (06:44):
Yes, Stacy, there had these sets of meetings to determine
what to do with those interest rates.
Speaker 7 (06:49):
And it had to have been a really.
Speaker 1 (06:51):
Awkward meeting because one of the governors who was going
to vote there, sitting deliberating and voting, was actually the
target of an attempted firing by President Trump. That's Lisa Cook,
who is battling in court. She has won many rounds
of that courtroom battle and cast a vote. Another person
(07:12):
sitting in that room is newly confirmed Governor Stephen Myron,
who is currently the chair of the Council of Economic
Advisors and is in some ways dual hatting taking both jobs,
which is unusual.
Speaker 2 (07:30):
Now anyway, just in general in the work for economy.
Speaker 3 (07:33):
It's for everybody now.
Speaker 1 (07:35):
Yeah, And this comes after, of course, months and months
of the President targeting j. Powell, essentially trolling him online
and infamously showing up in hard hats to do a
site inspection of a construction project. So right now there
is a lot of debate about what's the right role
for the President and Congress in the Federal Reserve, and
(07:59):
a lot of people are fiercely defending the status quo.
But I think the story is sometimes triggier than that.
Speaker 5 (08:07):
Well, also, we should say that Stephen Myron who was
in his new role this is his first time voting
on interest rates, was the loan dissenter and very much
in line with what the President has said he wanted.
Myron said he wanted like.
Speaker 2 (08:21):
A bigger cut.
Speaker 3 (08:23):
Bigger cut, Yes, bigger cut.
Speaker 4 (08:25):
So Rohit, you have thoughts about the FED, and and
we've talked, you know, off off this podcast about this
a little bit. But I'd love for you to just
explain when you say like they're sort of assuming everything's
great or whatever, like what you mean or like at
a high level, like what is wrong with the FED today?
Speaker 2 (08:44):
Yeah, Well, I would put it this way.
Speaker 1 (08:46):
There's lots of reasons why in a democratic society we
create some anti democratic features in certain parts of our government.
For example, we make sure the judges are confirmed for
the idea being this should stand for election all the time,
be subjected to the political process.
Speaker 4 (09:06):
And we also coordon off some of.
Speaker 1 (09:10):
Our regulators to make sure that they're not put in
the middle of a total political slugfest. That's some of
the agencies I've served at, the CFPB, the FTC, others.
And then you really have the Federal Reserve system, which
has in many ways an enormous amount of power. We
(09:31):
talk about it as a central bank, but another way
to put it, it's a price control agency. It sets
the price and supply of money that has so much
effect throughout the entire economy. And one of the things
that is important to me is that even if an
agency is independent, it can't be unaccountable. And I think
(09:55):
there is questions about whether the FED has always been
bable to the public or if it's often serving the
interests of a narrow set of financial stakeholders and really
prime Among those examples is the Fed's lack of preparation
(10:15):
when it came to an epidemic of subprime mortgage lending,
for which the Federal Reserve had an enormous amount of
authority to crack down on, chose not to, and the
results were really catastrophic.
Speaker 5 (10:30):
So what would your vision be for a FED going forward?
If it's not a politicized FED, but it's not the
FED it is? Now, Like what if you were designing
it and.
Speaker 7 (10:41):
The CFPB is part of the fund?
Speaker 3 (10:44):
Is it technically part of the FED?
Speaker 5 (10:45):
Or Okay, yeah, so you've been in the I don't
want to say the belly of the beast, but I'll just.
Speaker 3 (10:50):
Say it, belly of the beast.
Speaker 7 (10:51):
How would I want it?
Speaker 1 (10:53):
I actually do think it's really important for us to
think what is the role of these federal reserve banks.
Remember it's not just a Federal Reserve Board appointed by
the President. There are also federal reserve banks.
Speaker 2 (11:08):
We're sitting to some of them all over the that's straight.
Speaker 1 (11:10):
We're sitting uptown from an extremely powerful one at the
Federal Reserve Board of New York. I think we also
have to make sure that do we have the right
structure in terms of allocating what powers the FED should
use as to what powers should be located elsewhere. I
think there are some legitimate criticisms about the fed's expansive
(11:35):
view of its interpretation of law, including its interventions in
money markets and other actions that have moved the flow
of credit away from local banks toward the global money markets.
That has a real impact.
Speaker 7 (11:53):
On our economy.
Speaker 4 (11:54):
I mean, one thing that I find really interesting is
on some level, Stephen Meran, the new governor, is like
a total He's like a trunk guy, right, He's a
White House economic advisor. He seems like a loyalist. On
the other hand, he in addition to being those things.
He has advocated for some of the very things that
(12:14):
you're talking about right now, and like reading there was
an Elizabeth Warren op ed that you pointed me to
back in August essentially bring up some of these issues
that you're talking about right now. And there was an
op ed by Scott Besson in the Journal just a
couple of weeks later that has kind of a very similar,
very different words like Besen is using kind of conservative buzzwords.
Speaker 2 (12:36):
He accuses the FED of like.
Speaker 4 (12:38):
Gain of function, monetary policy, little little COVID hat tip there,
but kind of ultimately pointing in the same direction.
Speaker 2 (12:46):
Right, Yeah, I.
Speaker 1 (12:48):
Think what you're seeing is not a political debate about it,
but what's the right place for this institution. When the
financial crisis occurred, there was a lot of discussion about
whether core consumer regulation should ever be at the FED.
Every FED governor I have spoken to you likes to
(13:11):
say I'm glad the Fed's powers were stripped and a
CFPB was created because that was last on our list
of attention.
Speaker 5 (13:21):
Well, yeah, you've got inflation, you've got unemployment numbers like
those are two big I mean, the.
Speaker 2 (13:26):
Dual manda totally.
Speaker 1 (13:27):
It's a big deal, and I think that there's there
we got to ask ourselves what do we want them doing.
I think what we want them doing is stewarding the
money supply in ways that creates stability that still create
the conditions for growth. And I would also argue trying
to ensure that the United States has a currency that
(13:51):
a payment system that is working. But there's a lot
of things that they do, including on the regulatory front,
where there's long been concerned that they are captured by
big Wall Street interests rather than representing the borrowers and
the business owners that are really affected by their decisions.
Speaker 4 (14:12):
It feels like what you're saying partly is like, hey,
there's there's a lot at play right now. It's kind
of an opportunity to think about where where should the
FED go? Like what what what what should the.
Speaker 2 (14:22):
FED look like?
Speaker 4 (14:23):
And part of me wonders if like we're just sort
of playing fantasy politics here, because like the CFPB is
gone basically, I mean CFPP is still technically.
Speaker 2 (14:31):
Exists there, but it's not doing anything.
Speaker 4 (14:33):
And and Trump, you know, maybe like there are there
are a bunch of these like populist ideas that are
are floating around the Trump administration, but he's actually doing
is like goosing the stock market. And it's like this
conversation we're having feels very far away from what's actually happening.
And I was wondering, like, do you see opportunities for
change that that could actually happen in this direction during
(14:54):
you know, the next whatever three years.
Speaker 2 (14:56):
So Max I would I would push.
Speaker 1 (14:59):
Back a little on that, which is that, of course
it's idiotic to defund and defang the CFPB. That's just stupid,
and I agree with that. But the truth is is
that the FED has changed dramatically over the years without
any legal change. It happens because of those governors and
(15:21):
chairs who sit in those seats. The concept of federal
reserve independence actually is relatively new. It's from the last
generation where there was acceptance around the world that some
insulation from politics was beneficial to achieving stable prices. But
you'll start seeing with people who are now sitting in
(15:44):
those seats, many of them who want to salute the
president rather than really focus on their mandate. That's going
to change this FED. There are going to also be
people who really are thinking differently about what those tools are.
And I think we have to pay attention to that.
(16:04):
There's already rumblings what's going to be the Fed's role
in stable coin and crypto? Would the FED potentially not
just target one interest rate but intervene in the market
with their balance sheet in other ways. I don't think
you need a law change on some of that's fort
to witness that change occurring. And frankly, a great example
(16:28):
is that Donald Trump has not changed a lot of
laws in this country, but he has changed a lot
of agencies pretty dramatically, and we need to really think
and debate what is it that we want our FED
to be doing, Because again, I just don't think independence
should ever mean unaccountable.
Speaker 3 (16:49):
I mean, obviously things are changing a lot right now.
Speaker 5 (16:52):
If you kind of project forward, looking at some of
the changes that are possibly going to happen, and some
of the changes that I've already happened, like what does
the Federal Reserve look like in five years?
Speaker 1 (17:05):
I think there should be quite less power when it
comes to bailouts and backdoor bailouts. Especially Congress did was
very angry about the FEDS backdoor bailouts and frankly, front
door bailouts during the financial crisis, curtailed that. I do
think it is important to really limit the power to
(17:29):
backstop and pick and choose winners and losers in the
financial sector. I think we have to do things that
give them less ability to subsidize certain types of activities
borrowing by hedge funds, borrowing by some other financial institutions,
and get them focused on their core mandate, especially when
(17:52):
it comes to making sure that they are a lender
of last resort for local banks, running a stable monetary policy,
and not being seen by presidents as a cure all
to enact their agendas with no consent from the governed.
Speaker 2 (18:10):
Have you converted?
Speaker 5 (18:11):
I mean, I still am I this is quite a look.
Speaker 2 (18:15):
I'm I'm sorry.
Speaker 3 (18:17):
I mean, I don't. I'm not sure, I like totally,
I'm not sure.
Speaker 1 (18:21):
I really think a good central bank is like really
good for democracy and really good for people. But I
think it has to also change with the time so
that it is responsive and that it is not seen
as a group of priests and priestesses who make determinations
about our lives without really understanding how the economy is
(18:43):
working on the ground.
Speaker 5 (18:44):
There is something of an ecclesiastical vibe around the FED
that is true.
Speaker 7 (18:49):
Yeah, I worry about this.
Speaker 1 (18:51):
Actually, I worry about that many of them spend their
time traveling around the world to economics conferences. In reality, Stacey,
back in the day, there was actually a Fed governor
who was a hog farmer. They really represented a broader
swath of America, and I don't think that's a bad thing.
Speaker 4 (19:09):
See, I think if they're going to be so above
the fray, they should wear cool outfits like the Catholic Church.
They should have robes and ceremonies and just either really
lean into it or bring.
Speaker 2 (19:20):
Back the hog.
Speaker 5 (19:21):
It would make the press conferences a lot more exciting
to kind.
Speaker 4 (19:25):
Of like a purple gown that he had to wear
like whenever.
Speaker 3 (19:28):
He said it, just the tie he went full down.
Speaker 1 (19:31):
And by the way, you know, I'm not sure that
we should be happy that usually they take unanimous votes
and usually that everything is scripted. We should probably want
a degree of debate when it comes to issues that
are so important to our economy.
Speaker 7 (19:49):
Yeah, that's true.
Speaker 3 (19:50):
There should be descent, especially to a moment like now,
when the.
Speaker 5 (19:53):
Path forward is really is unclear and it seems like
there are valid reasons to go in a bunch of directions.
Speaker 2 (19:59):
Ro hitch Ora, thank you for being here. Thanks again, Stacey.
Speaker 4 (20:08):
I don't know if you've been following this, but there
is a huge story in the world of sports happening
right now, sports business in particular, involving one of the
biggest stars in basketball, Kawhi Leonard, one of the richest
people in the world, Steve Baumer, the longtime executive Microsoft
I think he's the seventh richest person in the world,
and a massive tech company that the Justice Department described
(20:33):
as a quote two hundred and forty eight million dollar
scheme to defraud investors and lenders. In brief, the NBA
is investigating whether Bomber, the owner of the La Clippers,
funnel payments through this weird tech company, which is called Aspiration,
to Kawhi Leonard, and in so doing circumvented the salary cap.
I know it sounds like really complicated, but like I'm
(20:53):
telling you, this is everyone is talking about this, and
so I thought we would have.
Speaker 3 (20:56):
To talk about it, okay, okay, And.
Speaker 4 (20:58):
To do that we have Rundall Williams here, Bloomberg BusinessWeek
sports columnist, Everybody's business regular.
Speaker 2 (21:04):
Randall, how are you?
Speaker 7 (21:05):
I'm doing all right, doing all right, thank you for having.
Speaker 4 (21:07):
Me so, Randal, what can you just give us the
kind of like quick the one oh one on what
this controversy is about?
Speaker 2 (21:15):
What is accusation here?
Speaker 7 (21:16):
Sure?
Speaker 4 (21:16):
And like why why is it like causing people to
sort of lose their minds.
Speaker 7 (21:21):
It's a big deal because sports leagues like the NFL
and the NBA have something called the salary cap. A
salary cap is set up so that players are paid
a specific amount and teams can only play players a
specific amount. And so what Bamber is accused of doing
is going outside of that through this company called Aspiration
and then paying Kawhi Leonard even more than what he's
(21:43):
already paid. And I'm sure if we looked up Kawhi
leonard earnings, he's probably made close to half a billion
dollars and he's making even more because of these accusations.
Speaker 4 (21:51):
And this we should say this was originally reported on
a podcast Pablo Torre Finds.
Speaker 7 (21:55):
Out Right, the Great Pablotori.
Speaker 4 (21:57):
Yeah, but the basic allegation is that Balmer, a rich
guy who like he has more money than he knows
what he could do with, is like using his personal
wealth to funnel money and essentially cheat all right, right,
like this is this is this would be like a
cheating thing in some ways.
Speaker 7 (22:15):
Yes, I mean that salary cap issue is very fundamental
to all the leagues because if you are able to
pay someone outside of the salary cap, then then what
could happen is that an owner could persuade a player, hey,
don't go play here, because on top of the money
that I'm already going to be paying you through the
salary cap system, I'll get you a deal on the side.
And so why this is against the rules is that
(22:38):
what happens is a sponsor can go to an owner
and say, hey, I want to do a deal with
let's just say Smow Joe from California, and the owner
is then supposed to be like, okay, that's fine, I'll
connect you to and the owner's supposed to move out
of the way. In this case, that's not what's happening.
There's three parties involved. Allegedly it's Balmber, it's asked for,
(23:00):
and Kawhi Leonard all working together to make sure that
Kawhi Leonard gets paid. And that's against the world. If
Baumber had said, hey, here is aspiration, you two make
a deal. I think this will be perfectly fine, but
that's not what's being alleged.
Speaker 5 (23:11):
So essentially this player was hired by this company Aspiration,
like what what is this company supposed to do?
Speaker 2 (23:18):
Saying like what was he paid twenty eight million dollars to?
Speaker 7 (23:20):
Yeah?
Speaker 2 (23:21):
Yeah, what exactly was he? What does the company do?
Speaker 3 (23:23):
And what's he supposed to be endorsing?
Speaker 7 (23:24):
So I'll read straight from ESPN because I think they
summarize it the best. Okay, this is think of Aspiration
as a digital bank, but environmentally conscious. The company's product
includes savings accounts and debit cards with cash back from
a select number of businesses who were quote doing the
right thing, plus an option to plant a tree with
every purchase. Roundup. The company also offered access to investment
(23:48):
funds that are one hundred percent fossil fuel free.
Speaker 4 (23:51):
So they were essentially as iron or stand it, getting
paid to plant trees for businesses that wanted to.
Speaker 3 (23:57):
Like click an online bank, do good.
Speaker 7 (24:00):
Or something sounds good?
Speaker 2 (24:01):
Right?
Speaker 4 (24:02):
Oh yeah, And this is where I should say Balmer
has denied wrongdoing. Of course, Kawhi has said nothing, but
I don't think anyone that's kind of his thing, right
saying nothing, But I don't even know if anyone's accused
him of wrongdoing in this case because he just signed
a sweetheart deal. Also, Andre Cherney, who is the other
co founder of Aspiration, has essentially disputed the story as well,
(24:26):
saying this contract, which has been characterized as a no
show job, was not in fact a no show job.
Speaker 2 (24:31):
Just getting all that stuff out of the way, go ahead, Stacy.
Speaker 1 (24:34):
So, I guess my.
Speaker 3 (24:35):
Question is why is this such a big deal. First
of all, why are their salary caps in place?
Speaker 5 (24:41):
And why is it a like, why is it a
big deal that they're going over the salary Sure.
Speaker 7 (24:46):
Salary caps are fairness. I mean, if you look at
baseball in particular, there are baseball teams that just can
afford to Baseball does not have a salary cap to
MLB does not, and so moneyball right, Yes, I mean
that's a good example. But if you look at the Yankees,
if you look at the Dodgers, there are two of
the highest spending teams in the MLB. Now do they
always win, No, but they win a lot and it
(25:09):
is in some ways some people say it is an
advantage in the NFL and the NBA not so much.
There is a salary cap, so everybody has the exact
same money to spend. Now you'll have owners who some
fans would argue are not in the business of winning
because the leagues are naturally profitable. But at the same time,
as it pertains to the salary cap, yes, the players
(25:29):
are being paid a lot more. But for the owners
who really want to win, who this is their pride
and joy. If you find out that someone is manipulating
the system and you were in the running to sign
Kawhi Leonard, and Kawhi Leonard went to the Clippers because
of the fact that he was offered an extra twenty
eight million dollars to not show up. That's a problem
and a job exactly. And another thing about this is
(25:51):
it is a no show job I have never seen.
And as Pabulatory reported, there are no tweets about from
Kawhi Leonard about aspiration, there was.
Speaker 5 (25:59):
Any jobs supposed to be he was in this company right,
it was an endorsement.
Speaker 4 (26:03):
Basically, there are all these things that Kawhi could or
could not do, depending on how he felt about it.
Speaker 2 (26:09):
So it's like some autographs he could tweet.
Speaker 4 (26:13):
But there are no there were no mechanisms in the
contract essentially forcing him to do it, whereas in I
think in most endorsement contracts.
Speaker 7 (26:20):
You're required, you've got to do something. So an example
of this, like a big endorsement deal, would be Nike
with Lebron James. He's everywhere that they ask him to be.
A smaller one is like nil deals in college name
image and likeness deals in college often are just like
post on Instagram a couple of times and then we'll
pay you out and that's that. But Kawhi is not
on social media. I mean even in his new Balanced advertisements,
(26:41):
he's he doesn't say a lot, and even in press
conference like no one has heard from him because outside
of his media obligations, he does not speak. To be clear,
athletes are allowed to do endorsement deals. It's just that
your owner cannot be paying them outright.
Speaker 2 (26:56):
To you without counting it against the right.
Speaker 7 (26:58):
Without counting it against against the cap. And there are
there have been plenty of deals with teams, players and
owners where again an owner will introduce someone to a
sponsor and they go and do a deal, and then
there's a billboard outside of a stadium with said sponsor
and an athlete. There's no NBA rules to prohibit that.
It's just in what pablatory reports is like Balmber has
(27:19):
invested in this company, some of his co owners have
also invested in this company, and so the NBA has
to do some due diligence and they're taking us very seriously.
Speaker 5 (27:27):
I mean, do are CAP's a good idea or is
it a better idea to just not have them, to
not try to end up with like a baseball model.
Speaker 7 (27:34):
I think cap systems are great because they stabilize things,
like everyone can a team can spend a certain amount
of money, and that's what it should be in my opinion.
I think that when you have different markets like New York,
like Los Angeles, like let's say Houston, some of the
bigger markets who have big billionaires who are ready to
spend on this because this is their business, then that
(27:56):
can create some sort of inequality. Now, at the same time,
the players still have to get out on the field
and perform all the same, but I think that it
creates more more stability when you have a cap system
where this player is making this and this player is
making that.
Speaker 2 (28:12):
It's funny Stacy's reaction to this.
Speaker 4 (28:14):
I think we were talking earlier is like, these are
such big numbers, you know, and like wow, like seven
million dollars for a no show job or an alleged
no so job, Like that seems crazy.
Speaker 2 (28:24):
The whole thing seems crazy.
Speaker 4 (28:25):
My reaction was actually like it, like I guess Kawhi
Leonard is underpaid, and like and and like didn't this
to me feels like a evidence that the players negotiated
a bad deal with the owners, Like that the salary
cap should be a lot higher if there's just like
twenty eight million dollars slashing around and you're probably lots
(28:46):
more like like the players should just get just get
paid more money, because clearly they're worth more money.
Speaker 7 (28:52):
I hear you. But I think in what various outlets
ESPN the Athletic have reported over the years is that
Kawhi Leonard was sarch for money outside of the cap system.
Even before this, when his free agency happened after he
won the title in Toronto, there was there was reports
that he was asking for private jet, a private jet access,
and he was asking for deals outside of the salary.
Speaker 2 (29:14):
Can say he's worth it, I don't know.
Speaker 7 (29:16):
I would argue that he isn't because of the fact
that he's been injured a lot, he doesn't play a lot.
He's not therest brand ambassador. And when you have someone
that you're spending I mean, look, that's putting a lot
and being kind here, I'm being kind. But when you
have someone that you're paying let's say, three hundred million
dollars to, you do want them on the billboards. You
do want them to have some sort of a personality
(29:38):
that isn't just a claw or or they're not just
going to be like showing up to the press conference
and say five words and then go home and you
don't hear from them. You want them to promote this brand.
Speaker 5 (29:48):
So if we back up from this particular amazing case
a little bit, does this say anything do you think
about the state of sports right now and pay and
pay caps And I don't know what is your takeaway
from this.
Speaker 7 (30:02):
I don't think there's anything that huge that I would
take away. The only thing is that there's always going
to be money under the table, always, whether it be
at the high school level, the college level, and at
the pro sports level, that there are people.
Speaker 5 (30:14):
Who are willing finds a way exactly exactly.
Speaker 7 (30:17):
There's always going to be people who are willing to
pay you more should you not show up for a
job and you know, play thirty percent of the games
that you're required to. That's my biggest takeaway. If there
was a player that was worth there are players who
might be worth a no show job. I just don't
think Kawhi Leonard is the guy. So that's what I
made want.
Speaker 3 (30:37):
To not do anything.
Speaker 5 (30:38):
You think the person should be more qualified, exactly.
Speaker 7 (30:41):
Exactly, I don't look Kawhi Leonard's tenure at the Clippers
hasn't been great, but all seriousness, I think there's always
going to be money under the table, and this, allegedly
is is another example of that.
Speaker 5 (30:57):
We are too the part of the show where we
talk about underrated stories. Randall, thank you for sticking around
because you don't know what the story is. I also
do not know what it is. Apparently Max brought us something.
I am also a little nervous. I don't know what
is happening.
Speaker 4 (31:12):
This is a story that gets at the future of technology,
the future of branding, and also the future of cocaine
running shoes ure of cocaine. All right, So there were
some news reports earlier this week about a plane crash
in eastern Brazil. These are news reports that are coming
to us by way of the UK's Independent, by way
(31:35):
of El Globo, the Brazilian newspaper, and essentially a plane,
a small aircraft crashed in Brazil, killing the pilot and
authorities recovered two hundred kilos of cocaine and the cocaine
head branding.
Speaker 2 (31:51):
For SpaceX, Elon Musk's rocket company. Wow.
Speaker 4 (31:56):
Now, okay, I want to say, first of all, it's
not what you think. This does not prove that Elon
Musk has you know, put aside rockets and cars and
brain implants and all.
Speaker 2 (32:05):
The relation is not to answer the under the.
Speaker 4 (32:09):
Drug business, although as we know he's not like totally
averse to recreational drugs.
Speaker 2 (32:15):
I don't thinking y yes.
Speaker 4 (32:18):
But what I will say is what's interesting here is
and this came out of a report I read advice.
You know, elicit drug sellers have basically branded drugs with
tech companies for a really long time.
Speaker 2 (32:30):
Like is that true?
Speaker 3 (32:31):
Like used to cocaine, they were like Skype.
Speaker 4 (32:34):
The article that Skype had been used like like maybe
ten years ago. I guess, back when Skype was cooler.
I think it's actually kind of a way to see
how cool your tech company is.
Speaker 7 (32:45):
It's like if you have a under the table cocaine deal.
Speaker 4 (32:47):
If like drug dealers are like, this thing is so cool,
I'm gonna stick it on.
Speaker 5 (32:52):
That it makes cocaine even cooler than it already is.
Speaker 2 (32:55):
That's what I'm saying. Yeah, I thought cocaine.
Speaker 3 (32:58):
Kind of sold itself.
Speaker 7 (32:59):
It's in a ch Are you going to need SpaceX branding?
Speaker 2 (33:03):
Like, oh, I don't.
Speaker 5 (33:04):
I only I only snort SpaceX cocaine.
Speaker 3 (33:07):
I would never do.
Speaker 7 (33:09):
I don't even feel comfortable if, first of all, never
done cocaine ever. Mean what if I were, I would
not be doing Elon Musk branded cocaine.
Speaker 4 (33:17):
Now, Randall, Is that because you have questions about Elon
Musk's capacity to like achieve things or is it because
you have questions about the kind of person who would
stamp a SpaceX Oh?
Speaker 7 (33:28):
Both. I think that any person who has the time
to brand something like this, I look that that's just
not me.
Speaker 2 (33:34):
Look as as uh, elon ink listeners.
Speaker 4 (33:37):
If if you've come over to the everybody's business feed
by now well know I am deep in the lore
and I will say, looking at the pictures of the
cocaine that was stamped with the SpaceX branding. They didn't
do like a very good job. The colors aren't quite right,
Like it's kind of like a light blue.
Speaker 2 (33:52):
It just it just looks a little granny.
Speaker 7 (33:53):
Look.
Speaker 4 (33:53):
It really looks like someone took an inkjet printer that
was like a little low on.
Speaker 3 (33:57):
This is like a discerning client is sci in.
Speaker 4 (34:00):
Or whatever the blue color was, and like the toner
just doesn't quite look right.
Speaker 7 (34:07):
I just don't I think anyone who would be buying
SpaceX cocaine should just go to rehab. That's just what
I think. I don't think that branding something like this.
It's not appealing to me if I was doing to
be doing it elon muskt No.
Speaker 4 (34:24):
It's also funny to me because like I don't even
know the reason you do this, Like is it because
if the authorities like poking the plane, You're like, no, no, no,
we got SpaceX stuff.
Speaker 2 (34:33):
In the plane. Like it's just like bricks of cocaine.
Speaker 3 (34:36):
I got to be people trying to get a marketing edge.
That's got to be what it is.
Speaker 5 (34:39):
People feel like their their cocaine will stand out in
the marketplace of cocaine.
Speaker 7 (34:43):
I gets with SpaceX branding. But I just can't see
someone being like, nah, man, I don't want the raw stuff.
I need the SpaceX and meerk exactly like this. This
is this isn't what I'm looking for. This is great
value versus.
Speaker 3 (34:58):
A brand markup right, I don't.
Speaker 4 (35:00):
I just think this is significant because we've been talking,
I've been talking and writing stories about the way that
Elon Musk has harmed his brand, his personal brand, as
well as the brands of his companies. You know, Tesla
sales are in the toilet, but in the marketplace obviously,
some people still think that that brand is very strong.
Speaker 7 (35:18):
He's winning somewhere.
Speaker 3 (35:24):
This show is produced by Stacy Wong.
Speaker 5 (35:26):
Magnus Hendrickson is our supervising producer, and Amy Kean is
our executive producer. Blake Maples is our engineer, and Dave
Purcell factchecks Sage Bauman heads Bloomberg Podcast special thanks to
Jeff Muscus, Julia Rubin and Maria Ling. If you have
a minute, please rate and review the show. It means
a lot to us. And if you have a story
that should be our business, email us at Everybody's at
(35:47):
Bloomberg dot net. That is Everybody's with An s at
bloomberg dot Net. Thank you for listening, and see you
next week.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:12):
This is Everybody's Business from Bloomberg BusinessWeek.
Speaker 3 (00:14):
I'm Max Schafkin and I'm Stacy Vanick Smith.
Speaker 4 (00:16):
And Stacy, we have a big conversation coming up about
your favorite topic, the Federal Reserve. Our guest is Rohit Chopra.
He was a big deal guy in the Biden administration
and he has provocative things to say about Jerome Powell.
Speaker 5 (00:29):
We're also talking about salary caps in professional sports leagues.
Teams and players have been finding some pretty interesting ways
around those limitations.
Speaker 4 (00:37):
And our underrated story, Stacy, I have a idea, a
brand idea for Elon Musk.
Speaker 2 (00:44):
Warning may not be leaked.
Speaker 3 (00:46):
I will keep that in mind.
Speaker 5 (00:50):
Okay, Obviously, the big economic news this week was the
Federal Reserve, but we also got some pretty big.
Speaker 3 (00:58):
Business news last night. We're recording Thursday morning.
Speaker 4 (01:01):
We should say, yeah, another late night host is down stage. Yes,
amid some political pressure from the Trump administration. Disney essentially
pulled Jimmy Kimmel, who is the ABC late night host,
a competitor to Stephen Colbert, off the air amid political
pressure from the Trump administration. For me, this story really
(01:21):
has echoes of the one that we talked about with
Felix Gillette a couple weeks ago with Stephen Colbert, where
you have a combination of factors. One is the threat
of regulation of not approving mergers, and the other is,
like this format, the late night format is basically failing,
and all of these late night shows are not doing well.
So Trump is giving these networks essentially an excuse to
(01:44):
kill a product.
Speaker 2 (01:45):
That is not working super well.
Speaker 5 (01:47):
I would argue the bigger story in a certain way,
could be a potential threat to free speech and news
organizations feeling like if one of their hosts or commentators
says something or does something that the administry disagrees with,
they might end up facing the very real wrath of
like governmental regulation.
Speaker 2 (02:05):
Yeah, one hundred percent.
Speaker 4 (02:07):
And we have another story related to political pressure that
just so happens to.
Speaker 2 (02:11):
Me going on right now.
Speaker 5 (02:12):
We have another story related to political pressure, which is
the Federal Reserve.
Speaker 3 (02:16):
For the first time this year, the Federal Reserve cut
interest rates, which we were all kind of expecting.
Speaker 2 (02:20):
But there was a cut it by three hundred percent,
right as Donald Trump want.
Speaker 5 (02:23):
Yeah, a quarter of a percenta which was like what
was expected but by economists. Yes, well there were there
was a lot of drama around this. We will get
into kind of what was going on behind the scenes
with Row hitch Chopra in just a minute. But the
Fetchair did say something that I thought was kind of
interesting for the rest of us, us in the economy,
(02:43):
which is he he started to talk about stagflation, how
prices are going up, how the economy is slowing down,
and this is a really dangerous combination. And so I
thought I would like ask people how they were feeling
about the economy right now. How do you feel about
the economy right now?
Speaker 6 (03:01):
I'm not good. All the prices are going up and up,
especially food shopping. Before you could just put everything in
your cart, and now you have to start cutting back
on things.
Speaker 2 (03:11):
What's your real have and have not economy?
Speaker 5 (03:13):
And you know, you look around, people are making a
lot of money, and some professions and the champagne's flowing
and in others, you know, things are definitely a lot tighter.
Speaker 1 (03:23):
I kim here because this is the only not going
to fall right now.
Speaker 3 (03:26):
The pizza the dolephi to be slice.
Speaker 7 (03:28):
Yeah. Yeah, when I get the job, I think I'm
going to go back to like chicken and eggs.
Speaker 3 (03:33):
Eggs are like a luxury a little bit.
Speaker 7 (03:35):
Exactly.
Speaker 5 (03:36):
Is there something that, like, if you had more money
or felt better about the economy, something.
Speaker 3 (03:40):
That you would buy.
Speaker 2 (03:41):
It's a new car.
Speaker 3 (03:43):
What's your car like now?
Speaker 6 (03:44):
It's a terrible Nissan that keeps having one hundred problems
because it's almost at ninety thousand miles.
Speaker 4 (03:50):
Prices going up, economic opportunities stagnating. There's a word for
that stacy that is that's Stagflation's stagulasi.
Speaker 5 (03:59):
It's the worst all the inflations, I think. And it's
like kind of a trap for the Federal Reserve because
if they cut interest rates, it does help grow the economy,
but it can also make inflation worse, so it puts
everybody in tough position.
Speaker 4 (04:14):
Yeah, and it's not clear to me what the what
the fix is at this point. I mean, we are
we've got economic challenges that I don't know, you know,
whatever you feel about Jerome Powell or whoever's running the Fed, Like,
I don't know how fixable it is at this point.
Speaker 5 (04:27):
Well, I agree, and like prices are going up and
with tariffs are going to go up more at least
a little bit more. It could be a one time thing,
but it is a really tough position, Like it's not
obvious what they should do. But the Federal Reserve yesterday
said jobs right now are the most important, and I
think most of us would probably agree, although if inflation
gets out of control, it can be really bad. So Max,
(04:56):
we talked earlier in the show about the big economic
news of the week, which is the Federal Reserve and
interest rate cuts, and somehow everyone in the country like
knows about the Federal Reserve and interest rates.
Speaker 3 (05:07):
Now it has become huge news.
Speaker 4 (05:09):
Yeah, And we've also been talking about this question of
like FED independence and the sense that Trump and members
of his administration are doing things to kind of attack
the FED or to push them in various directions. And
I was excited about the conversation we're gonna have because
we've been sort of talking about the FED. And I
know this is kind of partly how you feel, but
(05:31):
some of it has to do with conventional was whatever,
like that there is this beautiful jewel of public policy
that is the US Federal Reserve.
Speaker 5 (05:39):
I am a huge fan of the Central Bank and
like the structure of it and the system.
Speaker 4 (05:43):
And I appreciate that, but I also thought it'd be
fun to have a guest who would kind of challenge
that a little bit fair enough.
Speaker 5 (05:51):
Yes, I mean, I think it's it's good to challenge
these things. That's what they're there for, all right.
Speaker 4 (05:55):
So we have Rohit Chopra, who was the director of
the Consumer Financial Production Bureau under Joe Biden. He served
on the FTC under Trump. He helped actually set up
the CFPB as its assistant director. Basically, he is a
heavyweight on the kind of like progressive left, and he
has kind of an interesting perspective on these issues, and
(06:17):
I thought it'd be fun to kind of hash it
out here.
Speaker 2 (06:19):
Rohit, thanks for being here.
Speaker 1 (06:21):
Thanks so much for having me.
Speaker 5 (06:22):
So we got the rate cut, that was the big
headline quarter of a percentage point rate cut, but there
was a lot of stuff going on behind the scenes
that was also making news. Do you might just kind
of laying out some of the things happening in the
FED right now, which has always loomed very large in
my world, but is somehow also looming large in the
regular world now.
Speaker 3 (06:43):
Very strange.
Speaker 1 (06:44):
Yes, Stacy, there had these sets of meetings to determine
what to do with those interest rates.
Speaker 7 (06:49):
And it had to have been a really.
Speaker 1 (06:51):
Awkward meeting because one of the governors who was going
to vote there, sitting deliberating and voting, was actually the
target of an attempted firing by President Trump. That's Lisa Cook,
who is battling in court. She has won many rounds
of that courtroom battle and cast a vote. Another person
(07:12):
sitting in that room is newly confirmed Governor Stephen Myron,
who is currently the chair of the Council of Economic
Advisors and is in some ways dual hatting taking both jobs,
which is unusual.
Speaker 2 (07:30):
Now anyway, just in general in the work for economy.
Speaker 3 (07:33):
It's for everybody now.
Speaker 1 (07:35):
Yeah, And this comes after, of course, months and months
of the President targeting j. Powell, essentially trolling him online
and infamously showing up in hard hats to do a
site inspection of a construction project. So right now there
is a lot of debate about what's the right role
for the President and Congress in the Federal Reserve, and
(07:59):
a lot of people are fiercely defending the status quo.
But I think the story is sometimes triggier than that.
Speaker 5 (08:07):
Well, also, we should say that Stephen Myron who was
in his new role this is his first time voting
on interest rates, was the loan dissenter and very much
in line with what the President has said he wanted.
Myron said he wanted like.
Speaker 2 (08:21):
A bigger cut.
Speaker 3 (08:23):
Bigger cut, Yes, bigger cut.
Speaker 4 (08:25):
So Rohit, you have thoughts about the FED, and and
we've talked, you know, off off this podcast about this
a little bit. But I'd love for you to just
explain when you say like they're sort of assuming everything's
great or whatever, like what you mean or like at
a high level, like what is wrong with the FED today?
Speaker 2 (08:44):
Yeah, Well, I would put it this way.
Speaker 1 (08:46):
There's lots of reasons why in a democratic society we
create some anti democratic features in certain parts of our government.
For example, we make sure the judges are confirmed for
the idea being this should stand for election all the time,
be subjected to the political process.
Speaker 4 (09:06):
And we also coordon off some of.
Speaker 1 (09:10):
Our regulators to make sure that they're not put in
the middle of a total political slugfest. That's some of
the agencies I've served at, the CFPB, the FTC, others.
And then you really have the Federal Reserve system, which
has in many ways an enormous amount of power. We
(09:31):
talk about it as a central bank, but another way
to put it, it's a price control agency. It sets
the price and supply of money that has so much
effect throughout the entire economy. And one of the things
that is important to me is that even if an
agency is independent, it can't be unaccountable. And I think
(09:55):
there is questions about whether the FED has always been
bable to the public or if it's often serving the
interests of a narrow set of financial stakeholders and really
prime Among those examples is the Fed's lack of preparation
(10:15):
when it came to an epidemic of subprime mortgage lending,
for which the Federal Reserve had an enormous amount of
authority to crack down on, chose not to, and the
results were really catastrophic.
Speaker 5 (10:30):
So what would your vision be for a FED going forward?
If it's not a politicized FED, but it's not the
FED it is? Now, Like what if you were designing
it and.
Speaker 7 (10:41):
The CFPB is part of the fund?
Speaker 3 (10:44):
Is it technically part of the FED?
Speaker 5 (10:45):
Or Okay, yeah, so you've been in the I don't
want to say the belly of the beast, but I'll just.
Speaker 3 (10:50):
Say it, belly of the beast.
Speaker 7 (10:51):
How would I want it?
Speaker 1 (10:53):
I actually do think it's really important for us to
think what is the role of these federal reserve banks.
Remember it's not just a Federal Reserve Board appointed by
the President. There are also federal reserve banks.
Speaker 2 (11:08):
We're sitting to some of them all over the that's straight.
Speaker 1 (11:10):
We're sitting uptown from an extremely powerful one at the
Federal Reserve Board of New York. I think we also
have to make sure that do we have the right
structure in terms of allocating what powers the FED should
use as to what powers should be located elsewhere. I
think there are some legitimate criticisms about the fed's expansive
(11:35):
view of its interpretation of law, including its interventions in
money markets and other actions that have moved the flow
of credit away from local banks toward the global money markets.
That has a real impact.
Speaker 7 (11:53):
On our economy.
Speaker 4 (11:54):
I mean, one thing that I find really interesting is
on some level, Stephen Meran, the new governor, is like
a total He's like a trunk guy, right, He's a
White House economic advisor. He seems like a loyalist. On
the other hand, he in addition to being those things.
He has advocated for some of the very things that
(12:14):
you're talking about right now, and like reading there was
an Elizabeth Warren op ed that you pointed me to
back in August essentially bring up some of these issues
that you're talking about right now. And there was an
op ed by Scott Besson in the Journal just a
couple of weeks later that has kind of a very similar,
very different words like Besen is using kind of conservative buzzwords.
Speaker 2 (12:36):
He accuses the FED of like.
Speaker 4 (12:38):
Gain of function, monetary policy, little little COVID hat tip there,
but kind of ultimately pointing in the same direction.
Speaker 2 (12:46):
Right, Yeah, I.
Speaker 1 (12:48):
Think what you're seeing is not a political debate about it,
but what's the right place for this institution. When the
financial crisis occurred, there was a lot of discussion about
whether core consumer regulation should ever be at the FED.
Every FED governor I have spoken to you likes to
(13:11):
say I'm glad the Fed's powers were stripped and a
CFPB was created because that was last on our list
of attention.
Speaker 5 (13:21):
Well, yeah, you've got inflation, you've got unemployment numbers like
those are two big I mean, the.
Speaker 2 (13:26):
Dual manda totally.
Speaker 1 (13:27):
It's a big deal, and I think that there's there
we got to ask ourselves what do we want them doing.
I think what we want them doing is stewarding the
money supply in ways that creates stability that still create
the conditions for growth. And I would also argue trying
to ensure that the United States has a currency that
(13:51):
a payment system that is working. But there's a lot
of things that they do, including on the regulatory front,
where there's long been concerned that they are captured by
big Wall Street interests rather than representing the borrowers and
the business owners that are really affected by their decisions.
Speaker 4 (14:12):
It feels like what you're saying partly is like, hey,
there's there's a lot at play right now. It's kind
of an opportunity to think about where where should the
FED go? Like what what what what should the.
Speaker 2 (14:22):
FED look like?
Speaker 4 (14:23):
And part of me wonders if like we're just sort
of playing fantasy politics here, because like the CFPB is
gone basically, I mean CFPP is still technically.
Speaker 2 (14:31):
Exists there, but it's not doing anything.
Speaker 4 (14:33):
And and Trump, you know, maybe like there are there
are a bunch of these like populist ideas that are
are floating around the Trump administration, but he's actually doing
is like goosing the stock market. And it's like this
conversation we're having feels very far away from what's actually happening.
And I was wondering, like, do you see opportunities for
change that that could actually happen in this direction during
(14:54):
you know, the next whatever three years.
Speaker 2 (14:56):
So Max I would I would push.
Speaker 1 (14:59):
Back a little on that, which is that, of course
it's idiotic to defund and defang the CFPB. That's just stupid,
and I agree with that. But the truth is is
that the FED has changed dramatically over the years without
any legal change. It happens because of those governors and
(15:21):
chairs who sit in those seats. The concept of federal
reserve independence actually is relatively new. It's from the last
generation where there was acceptance around the world that some
insulation from politics was beneficial to achieving stable prices. But
you'll start seeing with people who are now sitting in
(15:44):
those seats, many of them who want to salute the
president rather than really focus on their mandate. That's going
to change this FED. There are going to also be
people who really are thinking differently about what those tools are.
And I think we have to pay attention to that.
(16:04):
There's already rumblings what's going to be the Fed's role
in stable coin and crypto? Would the FED potentially not
just target one interest rate but intervene in the market
with their balance sheet in other ways. I don't think
you need a law change on some of that's fort
to witness that change occurring. And frankly, a great example
(16:28):
is that Donald Trump has not changed a lot of
laws in this country, but he has changed a lot
of agencies pretty dramatically, and we need to really think
and debate what is it that we want our FED
to be doing, Because again, I just don't think independence
should ever mean unaccountable.
Speaker 3 (16:49):
I mean, obviously things are changing a lot right now.
Speaker 5 (16:52):
If you kind of project forward, looking at some of
the changes that are possibly going to happen, and some
of the changes that I've already happened, like what does
the Federal Reserve look like in five years?
Speaker 1 (17:05):
I think there should be quite less power when it
comes to bailouts and backdoor bailouts. Especially Congress did was
very angry about the FEDS backdoor bailouts and frankly, front
door bailouts during the financial crisis, curtailed that. I do
think it is important to really limit the power to
(17:29):
backstop and pick and choose winners and losers in the
financial sector. I think we have to do things that
give them less ability to subsidize certain types of activities
borrowing by hedge funds, borrowing by some other financial institutions,
and get them focused on their core mandate, especially when
(17:52):
it comes to making sure that they are a lender
of last resort for local banks, running a stable monetary policy,
and not being seen by presidents as a cure all
to enact their agendas with no consent from the governed.
Speaker 2 (18:10):
Have you converted?
Speaker 5 (18:11):
I mean, I still am I this is quite a look.
Speaker 2 (18:15):
I'm I'm sorry.
Speaker 3 (18:17):
I mean, I don't. I'm not sure, I like totally,
I'm not sure.
Speaker 1 (18:21):
I really think a good central bank is like really
good for democracy and really good for people. But I
think it has to also change with the time so
that it is responsive and that it is not seen
as a group of priests and priestesses who make determinations
about our lives without really understanding how the economy is
(18:43):
working on the ground.
Speaker 5 (18:44):
There is something of an ecclesiastical vibe around the FED
that is true.
Speaker 7 (18:49):
Yeah, I worry about this.
Speaker 1 (18:51):
Actually, I worry about that many of them spend their
time traveling around the world to economics conferences. In reality, Stacey,
back in the day, there was actually a Fed governor
who was a hog farmer. They really represented a broader
swath of America, and I don't think that's a bad thing.
Speaker 4 (19:09):
See, I think if they're going to be so above
the fray, they should wear cool outfits like the Catholic Church.
They should have robes and ceremonies and just either really
lean into it or bring.
Speaker 2 (19:20):
Back the hog.
Speaker 5 (19:21):
It would make the press conferences a lot more exciting
to kind.
Speaker 4 (19:25):
Of like a purple gown that he had to wear
like whenever.
Speaker 3 (19:28):
He said it, just the tie he went full down.
Speaker 1 (19:31):
And by the way, you know, I'm not sure that
we should be happy that usually they take unanimous votes
and usually that everything is scripted. We should probably want
a degree of debate when it comes to issues that
are so important to our economy.
Speaker 7 (19:49):
Yeah, that's true.
Speaker 3 (19:50):
There should be descent, especially to a moment like now,
when the.
Speaker 5 (19:53):
Path forward is really is unclear and it seems like
there are valid reasons to go in a bunch of directions.
Speaker 2 (19:59):
Ro hitch Ora, thank you for being here. Thanks again, Stacey.
Speaker 4 (20:08):
I don't know if you've been following this, but there
is a huge story in the world of sports happening
right now, sports business in particular, involving one of the
biggest stars in basketball, Kawhi Leonard, one of the richest
people in the world, Steve Baumer, the longtime executive Microsoft
I think he's the seventh richest person in the world,
and a massive tech company that the Justice Department described
(20:33):
as a quote two hundred and forty eight million dollar
scheme to defraud investors and lenders. In brief, the NBA
is investigating whether Bomber, the owner of the La Clippers,
funnel payments through this weird tech company, which is called Aspiration,
to Kawhi Leonard, and in so doing circumvented the salary cap.
I know it sounds like really complicated, but like I'm
(20:53):
telling you, this is everyone is talking about this, and
so I thought we would have.
Speaker 3 (20:56):
To talk about it, okay, okay, And.
Speaker 4 (20:58):
To do that we have Rundall Williams here, Bloomberg BusinessWeek
sports columnist, Everybody's business regular.
Speaker 2 (21:04):
Randall, how are you?
Speaker 7 (21:05):
I'm doing all right, doing all right, thank you for having.
Speaker 4 (21:07):
Me so, Randal, what can you just give us the
kind of like quick the one oh one on what
this controversy is about?
Speaker 2 (21:15):
What is accusation here?
Speaker 7 (21:16):
Sure?
Speaker 4 (21:16):
And like why why is it like causing people to
sort of lose their minds.
Speaker 7 (21:21):
It's a big deal because sports leagues like the NFL
and the NBA have something called the salary cap. A
salary cap is set up so that players are paid
a specific amount and teams can only play players a
specific amount. And so what Bamber is accused of doing
is going outside of that through this company called Aspiration
and then paying Kawhi Leonard even more than what he's
(21:43):
already paid. And I'm sure if we looked up Kawhi
leonard earnings, he's probably made close to half a billion
dollars and he's making even more because of these accusations.
Speaker 4 (21:51):
And this we should say this was originally reported on
a podcast Pablo Torre Finds.
Speaker 7 (21:55):
Out Right, the Great Pablotori.
Speaker 4 (21:57):
Yeah, but the basic allegation is that Balmer, a rich
guy who like he has more money than he knows
what he could do with, is like using his personal
wealth to funnel money and essentially cheat all right, right,
like this is this is this would be like a
cheating thing in some ways.
Speaker 7 (22:15):
Yes, I mean that salary cap issue is very fundamental
to all the leagues because if you are able to
pay someone outside of the salary cap, then then what
could happen is that an owner could persuade a player, hey,
don't go play here, because on top of the money
that I'm already going to be paying you through the
salary cap system, I'll get you a deal on the side.
And so why this is against the rules is that
(22:38):
what happens is a sponsor can go to an owner
and say, hey, I want to do a deal with
let's just say Smow Joe from California, and the owner
is then supposed to be like, okay, that's fine, I'll
connect you to and the owner's supposed to move out
of the way. In this case, that's not what's happening.
There's three parties involved. Allegedly it's Balmber, it's asked for,
(23:00):
and Kawhi Leonard all working together to make sure that
Kawhi Leonard gets paid. And that's against the world. If
Baumber had said, hey, here is aspiration, you two make
a deal. I think this will be perfectly fine, but
that's not what's being alleged.
Speaker 5 (23:11):
So essentially this player was hired by this company Aspiration,
like what what is this company supposed to do?
Speaker 2 (23:18):
Saying like what was he paid twenty eight million dollars to?
Speaker 7 (23:20):
Yeah?
Speaker 2 (23:21):
Yeah, what exactly was he? What does the company do?
Speaker 3 (23:23):
And what's he supposed to be endorsing?
Speaker 7 (23:24):
So I'll read straight from ESPN because I think they
summarize it the best. Okay, this is think of Aspiration
as a digital bank, but environmentally conscious. The company's product
includes savings accounts and debit cards with cash back from
a select number of businesses who were quote doing the
right thing, plus an option to plant a tree with
every purchase. Roundup. The company also offered access to investment
(23:48):
funds that are one hundred percent fossil fuel free.
Speaker 4 (23:51):
So they were essentially as iron or stand it, getting
paid to plant trees for businesses that wanted to.
Speaker 3 (23:57):
Like click an online bank, do good.
Speaker 7 (24:00):
Or something sounds good?
Speaker 2 (24:01):
Right?
Speaker 4 (24:02):
Oh yeah, And this is where I should say Balmer
has denied wrongdoing. Of course, Kawhi has said nothing, but
I don't think anyone that's kind of his thing, right
saying nothing, But I don't even know if anyone's accused
him of wrongdoing in this case because he just signed
a sweetheart deal. Also, Andre Cherney, who is the other
co founder of Aspiration, has essentially disputed the story as well,
(24:26):
saying this contract, which has been characterized as a no
show job, was not in fact a no show job.
Speaker 2 (24:31):
Just getting all that stuff out of the way, go ahead, Stacy.
Speaker 1 (24:34):
So, I guess my.
Speaker 3 (24:35):
Question is why is this such a big deal. First
of all, why are their salary caps in place?
Speaker 5 (24:41):
And why is it a like, why is it a
big deal that they're going over the salary Sure.
Speaker 7 (24:46):
Salary caps are fairness. I mean, if you look at
baseball in particular, there are baseball teams that just can
afford to Baseball does not have a salary cap to
MLB does not, and so moneyball right, Yes, I mean
that's a good example. But if you look at the Yankees,
if you look at the Dodgers, there are two of
the highest spending teams in the MLB. Now do they
always win, No, but they win a lot and it
(25:09):
is in some ways some people say it is an
advantage in the NFL and the NBA not so much.
There is a salary cap, so everybody has the exact
same money to spend. Now you'll have owners who some
fans would argue are not in the business of winning
because the leagues are naturally profitable. But at the same time,
as it pertains to the salary cap, yes, the players
(25:29):
are being paid a lot more. But for the owners
who really want to win, who this is their pride
and joy. If you find out that someone is manipulating
the system and you were in the running to sign
Kawhi Leonard, and Kawhi Leonard went to the Clippers because
of the fact that he was offered an extra twenty
eight million dollars to not show up. That's a problem
and a job exactly. And another thing about this is
(25:51):
it is a no show job I have never seen.
And as Pabulatory reported, there are no tweets about from
Kawhi Leonard about aspiration, there was.
Speaker 5 (25:59):
Any jobs supposed to be he was in this company right,
it was an endorsement.
Speaker 4 (26:03):
Basically, there are all these things that Kawhi could or
could not do, depending on how he felt about it.
Speaker 2 (26:09):
So it's like some autographs he could tweet.
Speaker 4 (26:13):
But there are no there were no mechanisms in the
contract essentially forcing him to do it, whereas in I
think in most endorsement contracts.
Speaker 7 (26:20):
You're required, you've got to do something. So an example
of this, like a big endorsement deal, would be Nike
with Lebron James. He's everywhere that they ask him to be.
A smaller one is like nil deals in college name
image and likeness deals in college often are just like
post on Instagram a couple of times and then we'll
pay you out and that's that. But Kawhi is not
on social media. I mean even in his new Balanced advertisements,
(26:41):
he's he doesn't say a lot, and even in press
conference like no one has heard from him because outside
of his media obligations, he does not speak. To be clear,
athletes are allowed to do endorsement deals. It's just that
your owner cannot be paying them outright.
Speaker 2 (26:56):
To you without counting it against the right.
Speaker 7 (26:58):
Without counting it against against the cap. And there are
there have been plenty of deals with teams, players and
owners where again an owner will introduce someone to a
sponsor and they go and do a deal, and then
there's a billboard outside of a stadium with said sponsor
and an athlete. There's no NBA rules to prohibit that.
It's just in what pablatory reports is like Balmber has
(27:19):
invested in this company, some of his co owners have
also invested in this company, and so the NBA has
to do some due diligence and they're taking us very seriously.
Speaker 5 (27:27):
I mean, do are CAP's a good idea or is
it a better idea to just not have them, to
not try to end up with like a baseball model.
Speaker 7 (27:34):
I think cap systems are great because they stabilize things,
like everyone can a team can spend a certain amount
of money, and that's what it should be in my opinion.
I think that when you have different markets like New York,
like Los Angeles, like let's say Houston, some of the
bigger markets who have big billionaires who are ready to
spend on this because this is their business, then that
(27:56):
can create some sort of inequality. Now, at the same time,
the players still have to get out on the field
and perform all the same, but I think that it
creates more more stability when you have a cap system
where this player is making this and this player is
making that.
Speaker 2 (28:12):
It's funny Stacy's reaction to this.
Speaker 4 (28:14):
I think we were talking earlier is like, these are
such big numbers, you know, and like wow, like seven
million dollars for a no show job or an alleged
no so job, Like that seems crazy.
Speaker 2 (28:24):
The whole thing seems crazy.
Speaker 4 (28:25):
My reaction was actually like it, like I guess Kawhi
Leonard is underpaid, and like and and like didn't this
to me feels like a evidence that the players negotiated
a bad deal with the owners, Like that the salary
cap should be a lot higher if there's just like
twenty eight million dollars slashing around and you're probably lots
(28:46):
more like like the players should just get just get
paid more money, because clearly they're worth more money.
Speaker 7 (28:52):
I hear you. But I think in what various outlets
ESPN the Athletic have reported over the years is that
Kawhi Leonard was sarch for money outside of the cap system.
Even before this, when his free agency happened after he
won the title in Toronto, there was there was reports
that he was asking for private jet, a private jet access,
and he was asking for deals outside of the salary.
Speaker 2 (29:14):
Can say he's worth it, I don't know.
Speaker 7 (29:16):
I would argue that he isn't because of the fact
that he's been injured a lot, he doesn't play a lot.
He's not therest brand ambassador. And when you have someone
that you're spending I mean, look, that's putting a lot
and being kind here, I'm being kind. But when you
have someone that you're paying let's say, three hundred million
dollars to, you do want them on the billboards. You
do want them to have some sort of a personality
(29:38):
that isn't just a claw or or they're not just
going to be like showing up to the press conference
and say five words and then go home and you
don't hear from them. You want them to promote this brand.
Speaker 5 (29:48):
So if we back up from this particular amazing case
a little bit, does this say anything do you think
about the state of sports right now and pay and
pay caps And I don't know what is your takeaway
from this.
Speaker 7 (30:02):
I don't think there's anything that huge that I would
take away. The only thing is that there's always going
to be money under the table, always, whether it be
at the high school level, the college level, and at
the pro sports level, that there are people.
Speaker 5 (30:14):
Who are willing finds a way exactly exactly.
Speaker 7 (30:17):
There's always going to be people who are willing to
pay you more should you not show up for a
job and you know, play thirty percent of the games
that you're required to. That's my biggest takeaway. If there
was a player that was worth there are players who
might be worth a no show job. I just don't
think Kawhi Leonard is the guy. So that's what I
made want.
Speaker 3 (30:37):
To not do anything.
Speaker 5 (30:38):
You think the person should be more qualified, exactly.
Speaker 7 (30:41):
Exactly, I don't look Kawhi Leonard's tenure at the Clippers
hasn't been great, but all seriousness, I think there's always
going to be money under the table, and this, allegedly
is is another example of that.
Speaker 5 (30:57):
We are too the part of the show where we
talk about underrated stories. Randall, thank you for sticking around
because you don't know what the story is. I also
do not know what it is. Apparently Max brought us something.
I am also a little nervous. I don't know what
is happening.
Speaker 4 (31:12):
This is a story that gets at the future of technology,
the future of branding, and also the future of cocaine
running shoes ure of cocaine. All right, So there were
some news reports earlier this week about a plane crash
in eastern Brazil. These are news reports that are coming
to us by way of the UK's Independent, by way
(31:35):
of El Globo, the Brazilian newspaper, and essentially a plane,
a small aircraft crashed in Brazil, killing the pilot and
authorities recovered two hundred kilos of cocaine and the cocaine
head branding.
Speaker 2 (31:51):
For SpaceX, Elon Musk's rocket company. Wow.
Speaker 4 (31:56):
Now, okay, I want to say, first of all, it's
not what you think. This does not prove that Elon
Musk has you know, put aside rockets and cars and
brain implants and all.
Speaker 2 (32:05):
The relation is not to answer the under the.
Speaker 4 (32:09):
Drug business, although as we know he's not like totally
averse to recreational drugs.
Speaker 2 (32:15):
I don't thinking y yes.
Speaker 4 (32:18):
But what I will say is what's interesting here is
and this came out of a report I read advice.
You know, elicit drug sellers have basically branded drugs with
tech companies for a really long time.
Speaker 2 (32:30):
Like is that true?
Speaker 3 (32:31):
Like used to cocaine, they were like Skype.
Speaker 4 (32:34):
The article that Skype had been used like like maybe
ten years ago. I guess, back when Skype was cooler.
I think it's actually kind of a way to see
how cool your tech company is.
Speaker 7 (32:45):
It's like if you have a under the table cocaine deal.
Speaker 4 (32:47):
If like drug dealers are like, this thing is so cool,
I'm gonna stick it on.
Speaker 5 (32:52):
That it makes cocaine even cooler than it already is.
Speaker 2 (32:55):
That's what I'm saying. Yeah, I thought cocaine.
Speaker 3 (32:58):
Kind of sold itself.
Speaker 7 (32:59):
It's in a ch Are you going to need SpaceX branding?
Speaker 2 (33:03):
Like, oh, I don't.
Speaker 5 (33:04):
I only I only snort SpaceX cocaine.
Speaker 3 (33:07):
I would never do.
Speaker 7 (33:09):
I don't even feel comfortable if, first of all, never
done cocaine ever. Mean what if I were, I would
not be doing Elon Musk branded cocaine.
Speaker 4 (33:17):
Now, Randall, Is that because you have questions about Elon
Musk's capacity to like achieve things or is it because
you have questions about the kind of person who would
stamp a SpaceX Oh?
Speaker 7 (33:28):
Both. I think that any person who has the time
to brand something like this, I look that that's just
not me.
Speaker 2 (33:34):
Look as as uh, elon ink listeners.
Speaker 4 (33:37):
If if you've come over to the everybody's business feed
by now well know I am deep in the lore
and I will say, looking at the pictures of the
cocaine that was stamped with the SpaceX branding. They didn't
do like a very good job. The colors aren't quite right,
Like it's kind of like a light blue.
Speaker 2 (33:52):
It just it just looks a little granny.
Speaker 7 (33:53):
Look.
Speaker 4 (33:53):
It really looks like someone took an inkjet printer that
was like a little low on.
Speaker 3 (33:57):
This is like a discerning client is sci in.
Speaker 4 (34:00):
Or whatever the blue color was, and like the toner
just doesn't quite look right.
Speaker 7 (34:07):
I just don't I think anyone who would be buying
SpaceX cocaine should just go to rehab. That's just what
I think. I don't think that branding something like this.
It's not appealing to me if I was doing to
be doing it elon muskt No.
Speaker 4 (34:24):
It's also funny to me because like I don't even
know the reason you do this, Like is it because
if the authorities like poking the plane, You're like, no, no, no,
we got SpaceX stuff.
Speaker 2 (34:33):
In the plane. Like it's just like bricks of cocaine.
Speaker 3 (34:36):
I got to be people trying to get a marketing edge.
That's got to be what it is.
Speaker 5 (34:39):
People feel like their their cocaine will stand out in
the marketplace of cocaine.
Speaker 7 (34:43):
I gets with SpaceX branding. But I just can't see
someone being like, nah, man, I don't want the raw stuff.
I need the SpaceX and meerk exactly like this. This
is this isn't what I'm looking for. This is great
value versus.
Speaker 3 (34:58):
A brand markup right, I don't.
Speaker 4 (35:00):
I just think this is significant because we've been talking,
I've been talking and writing stories about the way that
Elon Musk has harmed his brand, his personal brand, as
well as the brands of his companies. You know, Tesla
sales are in the toilet, but in the marketplace obviously,
some people still think that that brand is very strong.
Speaker 7 (35:18):
He's winning somewhere.
Speaker 3 (35:24):
This show is produced by Stacy Wong.
Speaker 5 (35:26):
Magnus Hendrickson is our supervising producer, and Amy Kean is
our executive producer. Blake Maples is our engineer, and Dave
Purcell factchecks Sage Bauman heads Bloomberg Podcast special thanks to
Jeff Muscus, Julia Rubin and Maria Ling. If you have
a minute, please rate and review the show. It means
a lot to us. And if you have a story
that should be our business, email us at Everybody's at
(35:47):
Bloomberg dot net. That is Everybody's with An s at
bloomberg dot Net. Thank you for listening, and see you
next week.
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