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Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. Senator Ted Cruz leading an artificial intelligence hearing with tech leaders like Sam Altman behind ChatGPT. It's a scary world, but we'd like to be first. If we're on that path, if they're going to be killer robots, I'd rather they be American killer robots. I don't want killer robots, but we're not going to suddenly stop progress just because we're scared of it.
And the political storm on America's campuses. Scott Bach chaired the University of Pennsylvania board at the time of the October 7th Hamas attacks in Israel. And the wide response following. He weighs in on the high stakes facing higher ed now with or without the president's support.
Tax-exempt status is really the nuclear weapon. I mean, if you have to start paying property tax and your donors can't get tax deductions, I mean, I think it's sort of game over. Plus, the U.S. Federal Reserve stays put on interest rates. Today, the Federal Open Market Committee decided to leave our policy interest rate unchanged. In spite of some name-calling, Chairman Jay Powell. But we do the math on the economy and the market reaction to up-and-down tariff policy.
If the stag is more than the inflation, you would have cut. Senior economics reporter Steve Leisman has the details. April 2nd was maybe not the best day to be selling. It's Thursday, May 8th, 2025. Squawk Pod begins right now. Stand back, you buy in 3, 2, 1, cue, please.
Good morning, everybody. Welcome to Squawk Box right here on CNBC. We're live from the Nasdaq market site in Times Square. I'm Becky Quick, along with Joe Kernan and Andrew Ross Sorkin. Go ahead. What does it sound like? I have a lot of thoughts. As usual. Yeah.
Initially, well, I thought about the Fed yesterday. They said they're not going to do anything because of stagflation. That tells us nothing. Well, they also said they'd do nothing because of policy uncertainty. No, I know, but if you say stagflation, you're not showing your hand on whether you're more worried about growth or inflation. No, but they said the risks rose on both counts, on both the stag side of things and the inflation side. But if it rose more, if the stag is more...
then the inflation you would have cut. But not in the hard data, yeah. The hard data is on our side, though. Inflation doesn't look that bad, and unemployment doesn't look that bad. The hard data is there for the Fed to do nothing. And the other thing we talked about, this is reminding me of the pandemic. Yeah.
It's like the lows during the pandemic were right when we were scared to death. And shutting everything down. Then we shut everything down. We did everything. And the market went straight up almost the entire time. Because of massive government stimulation. That was a different situation. That helped.
I don't know if it was that different. The market doesn't care what it is. The market just does things based on how to fool the most people at the most time. And you've got to be in it to win it. And if you sold on Liberation Day, once again, you've missed the entire move back. How far have we come from Liberation Day? Because right now it looks like we're down by about 8.5% from the all-time highs, from the S&P 500.
front. Really? I didn't think it was that much. What's the highest? I thought it was 61.30. Oh, I added the futures in this morning. Oh, okay. This is before the futures. I did 5,700 on the S&P versus... I just did 61 minus 57. There we are. You're not down since Trump tariffs. We've come roaring back. You're right.
Yes, 60. 0.7%. Right. 61 minus 57, 4 divided by 6,100. I came out with like 6% down from the all-time high. That makes sense. I mean, we're within spitting distance of an all-time high, and none of the effects...
These terrible things haven't happened yet. And the market's already recovered. Well, the market priced in the worst things. Prices it in. And then if you go like this and, oh, I see these horrible things I'm selling, you look right in front of you and that's not the way the markets work. It's not the way they work.
You don't need to disagree with that. You can just say, yeah, it's weird. This is just, you always want facts. These are just the facts of what's happened so far. We're back to almost unchanged. Those are facts. I think that there's a larger question mark about whether the actual numbers are going to start to show up, though.
And there's this sort of optimism that may be misplaced. And China is not the U.K. A lot of so much of our trade is reliant on China. We'll see whatever the U.K. deal is today. But I will tell you, China does not like to see this because China has been warning other countries not to appease the United States because they're worried about what happens if the United States is not the country that's going to buckle under China so quickly.
India and Japan may be disappointed that they're not first. It'll be the other countries before that. And if you look at all of these things, there's still going to be meaningful tariffs. I can't believe there's... People forget. And I keep going back to Smoot-Hawley. I'm sorry, 1930.
trade after a year fell by 60%. Global trade fell by 60%. I can't believe we haven't seen those numbers yet. I can't believe we haven't seen anything. I think the market at this point is convinced we won't see those tariffs. I don't know if that's a correct assumption or not. I understand that. Why has the uncertainty already shown up in the recession fear numbers? I mean, inflation, I think it's too early for tariffs to be causing inflation because there's a 90-day pause. But the uncertainty for CEOs and consumers...
That should already be to be reflected already in spending and deals and right now you're capital outlaying a lot more at the grocery store. You're not paying a lot more. But what about what about the uncertainty that CEOs are feeling? Aren't you isn't capital being capital allocation being delayed on things being delayed or isn't hiring being delayed? That's what you're going to start to see. That's what I mean. Maybe we haven't seen it yet, but.
But that's why I think the Fed-- and look at how the market reacted to what the Fed did. Up yesterday, 300, up another 300 today. But maybe it's the market thinking if the Fed really knew that economically we were-- They would have to cut.
If they are not seeing it. It's what Orszag told us yesterday, right? If the Fed cuts at this point, it's because there's some real trouble there. Leisman's probably champing at the bit right now to weigh in on this. Let's get to him. The Fed keeping interest rates on hold. The big question this morning, did it extend that holding pattern? Mr. Leisman, the professor, senior economics reporter for us, joining us with a look at the road ahead for the Fed and hopefully maybe can weigh in on the discussion that was just taking place, Steve.
Let me just do the Fed here first. Officials maintain that holding pattern that they've been in for monetary policy. Suggested they could be on hold for a little bit here until the fog from the economic impact of tariffs and other fiscal policies clear. The Fed said in its statement that the risk of both higher inflation and higher employment had risen. Even while the economy continues at a solid pace, unemployment stable at a low rate, inflation somewhat elevated.
In his press conference, Fed Chair Powell made clear the Fed's not going to be making policy here based on the sharp declines in business and consumer sentiment. Asked whether the Fed was any closer to figuring out which side of the inflation or the unemployment mandate was the most urgently need to be addressed. Powell said, too early to say.
I don't think we can say, you know, which way this will shake out. I think there's a great deal of uncertainty about, for example, where tariff policies are going to settle out. And also when they do settle out, what will be the implications for the economy, for growth and for employment? I think it's too early to know that. So, I mean, ultimately, we think our policy rate is in a good place to stay as we await further clarity on tariffs.
The market continued to price in the July rate cut, but a little bit less confidence at 66%. The second cut now is a toss-up.
uh maybe leaning more towards september but also october is in the play there and a third cut priced in for december uh as well but you a 23 probability on the june cut that showed the markets hearing the fed loud and clear june is too early for the fed to know how monetary policy is going to be steered or needs to be steered amid the uncertainty from these tariffs guys um
I do think you're still down, guys, from the all-time high. You're still down from the inauguration. I think where we are right now is very simple. We're back to pricing in a kind of 10% across-the-board tariff, which the market doesn't like. UK deal is a wonderful thing. Maybe it shows the way for other markets.
uh deals that could happen but um the market still doesn't like tariffs and the tariff we're still talking about this 10 across the board is still triple what the average u.s rate is so i think it's it's good it's good to be excited i think joe you're right about the idea that april 2nd was maybe not the best day to be selling
But let's see if we can get back to where we were on the all time high, where I think my calculation here is we're still 8.3 percent below that all time high. Yeah, you didn't add in the S&Ps. I added another 55 points in today on the futures and there's no guarantee it's going to close there. Well, on the June number, you said it said 69 on your on the board. Did you say 56? It was July. Oh, so what's June?
June 23, Joe. Yeah. OK. July. Then it was July. What's July? Sorry. July is six is 66. Yeah. It was June is actually 20. Sorry. Yeah. Yeah. OK. Yeah. Well, nothing. Sorry if it was wrong. You know what I mean? What I was saying yesterday, initially when it came out, when they said, you know, we're not going to do anything because of stagflation.
That's why I said, wait a minute. That's both sides of your mouth. You're not giving us anything. You're not saying you're more worried about stag or more worried about inflation. Because if you were more worried about stag, you would have cut. So obviously, I guess the risks are balanced and they just need more data to see what happens.
Right? Yeah, I think that's where they're at, Joe. I think that you have both of these possibilities here. Look, in normal times, if we could sort of nail down what the terrorists would be,
The Fed could say, oh, it's a tax. When there's an increase of a tax, you don't normally count on inflation. But it's just a one-time rise in the price level. And that may be what it ends up being. I just think when I hear Powell talk, I hear him say, look, I still have a 4.2% unemployment rate.
I KNOW WHY FIRST QUARTER GDP WAS NEGATIVE BECAUSE OF THE SURGE OF IMPORTS. I STILL HAVE JOB LOSS CLAIMS PRETTY LOW. MY JOBS NUMBERS ARE STILL PRETTY GOOD. I DON'T SEE A REASON TO PANIC.
wants to cut here. I think it would like to have the all clear to land the plane. I just don't think they have it now, given the kind of, I guess, chaotic method by which these tariffs are being put in place and then negotiated away. Well, we're still scared about, you know, remember the jobs number. This is a big one unless it's not. And then the next one will be a big one. We're still scared that under the surface, there's something we don't know yet. And maybe people thought if the Fed
telegraph that they knew something, maybe that would have because the markets like what the Fed did. At this point, Steve, are we missing something in the in the economy because of all the uncertainty with consumers and CEOs and everything else? Are we just not seeing the slowdown or is there not a slowdown? I wake up every day knowing that the forecasts I talk about are wrong and asking myself how they will be wrong.
And I keep coming back to this thing, and I'm sorry if it sounds like a broken record, but it's the dynamism of the U.S. economy. It's the ability of the CFOs I get to talk to every six weeks and their ability to adapt to what's going on.
And, geez, if you could just give them a plan, they could start to pencil in the numbers. And the idea, Joe, that we have all of these companies saying, I can't even tell you what's going to happen, you know, that whole lack of clarity from...
goes over into the lack of clarity of the economic forecasters and goes over into the economic, the lack of economic clarity of what the Fed is saying. It's all part of one piece of this uncertainty. But I think that if we can settle it out, folks are ready to move. They're ready to invest. They're ready to do their job. They're ready to go into markets, expand, do CapEx, hire people, do what they do. If we can just kind of get some kind of clarity on where we're going.
President Trump announcing that the U.S. will strike a trade deal with the U.K. and moments ago he posted something additionally. The agreement with the United Kingdom is a full and comprehensive one that will cement the relationship between the United States and the United Kingdom for many years to come because of our longtime history and allegiance.
It is a great honor to have the United Kingdom as our first announcement. Many other deals which are in serious stages of negotiation to follow.
And this will be the first agreement since President Trump hit countries around the world with tariffs, slapped them, I think. Hit doesn't, because he slapped tariffs. Then paused them last month, unslapped them last month. Meanwhile, on the China front, a Chinese Commerce Ministry spokesman saying today that the U.S. needs to show sincerity. We said that yesterday in trade talks and be prepared to cancel unilateral tariffs, which we also said.
uh yesterday president trump said he wouldn't consider lowering 145 tariffs on china to spur those negotiations he said i think it was a flat out uh no it was he was asked by a reporter and there were one word answer no no treasury secretary scott besant uh is set to meet with his chinese counterpart in switzerland this weekend to talk trade and economic issues but can we just note
that for the most part, the UK, with the exception of certain goods, doesn't have... has a trade surplus, not a trade deficit. They only have like a 10% trade surplus. Is it overall a trade surplus? It depends how you measure it with goods. The services...
Let's just call it equal, if you want. Depending on the day, you could say it's up or down. They have one of the lowest tariffs. Wasn't it only 10% or something because of it? Well, no. It was 10% plus 25% steel and aluminum. There's a whole other sort of raft of items as well. Steel and aluminum is important for them. Cars are important for them. Pharmaceuticals are important for them. 10% is enough to be a problem. And that's the point. And this is not a country where there's a demonstrable deficit.
So you can't look at the UK and say, this is a country that we have a big problem with because they are raping and pillaging us the way maybe there's an argument to be made that some other countries are. This is not that country. So when you see a deal made on whatever terms they are, I can't even imagine, even if it goes to zero, then what? Looking at what the contour of this map is, right? If it's used as an example for other countries. Right.
You know, maybe they'll... You know, there's some talk about some of these digital rights and things like that. AI has been part of it, too. But my only point is...
This is, I mean, to look at this as a template for anything. You're saying that this is the low-hanging fruit. The lowest of the low-hanging. This is like not even hanging. It shouldn't have been tariffed to begin with. This is like when we tariffed, what was that island that doesn't produce anything that we have no trade with? Basically, on a mathematical basis, it's almost the equivalent. The cynics on Twitter are saying it's reversing a self-inflected move that didn't make sense in the first place. Well, that's true, too. Well, that's what the...
Cynics are saying I'm looking at you, but that's what the cynics are saying. Market's pretty smart. Maybe it's misguided. Could close lower today, but market likes it so far. Let's see the details. Cheese will be next.
Coming up, the president calls the chairman of the Federal Reserve a fool. Other than that, I like him very much. And Senator Ted Cruz is urging President Trump to use his tariff leverage. There are a number of other people, including Scott Besson, Nealon Musk, who are urging the president, you have an opportunity to win one of the biggest wins for American workers we've seen in our lifetimes. Plus, a big AI hearing on Capitol Hill. Squawk Pod will be right back.
This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information-packed daily market preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash market update podcast or find Schwab Market Update wherever you get your podcasts.
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Welcome back to Squawk Pod. Here's Andrew Ross Sorkin. Here is what President Trump just said moments ago. President Trump taking to Truth Social saying too late, Jerome Powell, that's what he's now nicknamed Jerome Powell, too late, is a fool, he says, who doesn't have a clue. Other than that, I like him very much.
Oil and energy way down, almost all costs, groceries and eggs down, virtually no inflation, tariff money pouring into the U.S., the exact opposite of too late. Enjoy! Exclamation point. So the Federal Reserve chair being called a fool who he likes. What I don't understand is if the economy is great.
And the market is not a problem. Whenever the Fed does something, whether they cut or don't cut, it's always like, what's the market? And it closed nicely yesterday up 300. It's up this morning. The economy is great. Why does the Fed need to cut rates at this moment? That's the question where if if inflation were zero.
You'd always want to have your foot on it. You'd want mortgage. You'd want everything in a perfect world. No, it's not zero. And lower rates. Economy is good in the job. Lower rates cause. It's hard to argue. Lower rates are stimulative. They're stimulative. It's hard to argue that the economy is great and we need lower rates.
I don't think it's that hard. Either you believe the tariffs are going to be a real problem or you don't. I didn't think we should have cut the... Well, if you're telling me that he thinks the tariffs are going to be a real problem... Well, he thinks that the money is coming from other countries. Correct, but my point is if he thinks the tariffs are a real problem, we can have a debate about whether you should lower interest rates to offset... Who thinks they're a problem? If Trump thinks that his tariffs are a problem, yes. He doesn't, though. Hold on. If he does, this is the incongruity of it all.
which is what Becky's getting at. If he thinks the tariffs are going to hurt... On both sides. If he thinks the economy is going to hurt... The tariffs are going to hurt the economy, then you can make a valid argument that maybe Jay Powell should be moving ahead. Right. Faster. Right. And that's already having an impact. If you think things are fabulous...
then it absolutely makes no sense. If the economy is so great, eggs are down, blah, blah, blah, blah, blah, then you don't need inflation. That's the inflation side of things. But if you don't think tariffs are having an impact on the economy, then there's probably not a dire need to go ahead and cut rates right now.
It's a Rorschach on whether you... And we do it too. It's pick your poison. I will say, I didn't think the Fed should cut 50 basis points the last time they did before the election. And rates went up when they did. But if you purely were looking at inflation, you would think that the Fed could cut. In the back of his mind...
You know, when he was asked, will there be a recession? He said, I can't rule it out. And there's been the vegetables with the dessert. You got to eat your vegetables in your term. So there are at least voices in his administration that are saying that you need to.
Elon Musk, you may need some near term pain to rebalance trade. So, I mean, I can see the rationale. I can see the rationale if he admits it, that this could hurt the economy. Right. And so we want lower rates. They've kind of admitted it. And he did say there might be near term, could be a recession. Then I think when he said that, it got all that press that he hasn't said it since. Yeah. I don't think. But I would look at the market response to what the Fed did and be happy. A gift horse in the mouth.
Our next guest will host Sam Altman, Lisa Su, Brad Smith, and other tech leaders on Capitol Hill today at a congressional hearing focused on AI regulation, the supply chain, and much more. And we're
We're getting spun off, Senator, for there's a lot of streaming stuff going on. You're even weighing in on that. You are a true renaissance man. Senator Ted Cruz of Texas, he is the chairman of the Commerce Committee. Let's start with what you want to talk about today. And chairman of the Commerce Committee, maybe we can talk about the economy and tariffs and everything else as well, Senator. Well,
Well, Joe, good morning. Good to be with you. As you noted, I'm going to be chairing a hearing this morning at 10 a.m. on AI. And I think AI is utterly transformative, much like in the 1990s. The Internet changed America and changed the world. I think AI is going to change the world even more than the Internet did. And I got to say, I think AI was one of the sleeper issues in the last election.
because there is a marked difference between Joe Biden and the Democrats' approach to AI compared to President Trump and my approach as chairman of the Commerce Committee. Joe Biden and the Democrats were approaching AI basically mirroring the EU, wanting to have a heavy-handed regulatory approach
a prior approval model. Now, we've seen this game before. In the 1990s, Bill Clinton, a Democrat, signed an executive order that embodied a light-touch regulatory approach to the Internet. The EU went the other way and said, "We're going to do heavy-handed regulation," and the proof has been in the pudding. In 1993, the U.S. economy and the EU's economy were virtually identical in size.
Today, the American economy is more than 50% larger than the EU's. And the two major drivers of that are tech and the shale revolution. Well, Joe Biden and the Democrats were about to make the same mistakes the EU made in the 1990s with AI. Instead, the American people elected President Trump and Republican majorities. And I want America to win the race for AI, to
beat China. And in fact, I'm going to be introducing legislation to create a regulatory sandbox mirroring what Bill Clinton did to the internet to stop heavy-handed nanny state regulators from hampering AI innovation.
Senator, can I ask that? I agree with your analogy of what happened with the Internet, but I feel like this is a little bit different just because the people who are the smartest about this have themselves kind of compared AI to weapons of mass destruction, that this is something that...
put in the wrong hands could destroy humanity. I realize that we can't set the rules for the world. And if China is going full steam ahead, are you looking at this in some ways as a Manhattan Project type of situation where we have to build it first and see what it can do because we don't know how this weapon is being used by others? Are you looking at this purely from a commercial point of view? And what would you say to those who have worried about what this does just in terms of...
the potential use for a weapon? Well, listen, I would say both. I do think there's a national security imperative. If we lose this, we're in real trouble. But I don't think a Manhattan Project is the right approach because I don't think the federal government is going to drive this. The innovation is going to come from the private sector. And you're right. Some of the big tech leaders have said, gosh, this technology is so dangerous, we need to regulate the hell out of it.
I actually think a lot of that is an invitation for regulatory capture. If you're one of the big boys and the regulators come in with a very heavy-handed regulation, you know what it'll stifle? It'll stifle the innovators. It'll stifle the new and small companies and lock in a couple of giant big tech companies. That's a recipe for losing. And I think the consequence, listen, are there risks to AI?
Absolutely yes, but at the end of the day, you're not going to stop progress. I'm not a Luddite. Do I wish we lived in a world where nuclear weapons didn't exist? Sure.
But we don't. And so you can't stick your head in the sand. You know, I interviewed Elon Musk on my podcast, Verdict with Ted Cruz. I asked him, I said, what are the chances that AI will destroy humanity? And I got to say, Elon said 10 to 20 percent. That kind of scared the hell out of me. But my view is simple. If we're on that path, if they're going to be killer robots.
I'd rather they be American killer robots. I don't want killer robots, but we're not going to suddenly stop progress just because we're scared of it. Senator, let's just shift gears quickly if we can. I mean, all things tariffs, I'll direct you into a talk about Medicaid and some of the stuff we're hearing. I mean, the title of the piece is...
is Trump's worst idea since tariffs, and it has to do with price controls on Medicaid drugs. You know, the Journal has been negative on tariffs all along. There are a lot of populist things coming out of the administration, well-intentioned because of what's happened to, you know, to a lot of working people across the country. We understand all that, but that doesn't mean you should embrace populist ideas that are more
popular or had been more popular in the Democratic Party than the Republican Party. Can you put a governor on some of this drift? Yeah. So let me take there was a lot of things in that question. Let me take a couple of pieces of it.
Let me start on the tariff piece and then go to the Medicaid piece. On the tariff piece, I think we're at a fundamental fork in the road. And there's one path that is very, very good and one path that is very, very bad. The path that is good is President Trump has greater leverage right now than any president in our lifetime to negotiate lower tariffs with our trading partners. We're expecting an announcement about the UK later this morning. And they're
And what I have been urging President Trump, use that leverage, negotiate dramatically lower tariffs with our trading partners. Use the fact that you've threatened these tariffs to lower them in exchange. And if we end up 30, 60, 90 days from now with significantly lower tariffs worldwide, that will be an historic win, an economic win for jobs and American business and productivity that we've never seen before. That's the path I want President Trump to take.
There is another path, and there's a camp within his administration that doesn't see tariffs as a means to an end, doesn't see them as leverage, but rather sees them as the end, is happy with high tariffs as a permanent feature of economic system. I think path number two would be an utter disaster. So I am regularly and daily urging the president, use the leverage to get this win.
Now let's shift to Medicaid. You asked about Medicaid. I think we are going to see significant Medicaid reforms as Congress takes on budget reconciliation and extends the tax cuts. And there are two elements that I think are critical. Number one, rooting out fraud in Medicaid. There's massive fraud, particularly blue states. States like California and New York have really exploited the Medicaid system, exploited the federal taxpayers.
and i think we're going to see congress crack down on the fraud on people who aren't eligible for medicaid nonetheless being on it but secondly and i think this is another thing we will get done is work requirements putting work requirements in place for medicaid i think is hugely important because you are not helping people by having them sit at home on the couch
And the best thing you could do for someone who is not working is incentivize them to get back to work, to get a job, to provide for their families. I think we'll see Congress do that as well. Senator, maybe the same group that's whispering in the president's ear about what to do with the tariffs, the permanent tariffs, maybe they're the same ones talking about not working.
extending all the tax cuts from 2017. There are some that are talking about a millionaire tax, which is a Democrat idea. They forget that small businesses use that they would get a tax increase under that. And then this this most favored nation idea for drug pricing, you know, for Medicaid, that's akin to to importing drug price controls. Very.
from Europe, which hasn't innovated on a drug in I don't know how many years. Maybe with Govee or Zempik or something.
So, Joe, you are exactly right. It's the exact same people in the administration that are arguing, number one, for high tariffs forever. And look, they're fundamentally tariffs or taxes. If you leave tariffs in place forever, they're just taxes on the American people. So I'm all for tariffs as leverage to get lower tariffs from other countries and to open up their markets. That's good for Texas. It's good for America.
but there are those in the administration who just like tariffs want trillions in new taxes and they're the exact same people who are saying, "Gosh, we should raise taxes on the top level and that would be a tax on every small business, every job creator." And you know what? That's what Kamala Harris campaigned on. That's what she promised. And I got to say, the folks in the administration, they've decided to call themselves populists, but just being a Democrat and wanting higher taxes,
and more regulation. That's not populist. That's embracing the failed ideas of Jimmy Carter and Joe Biden. Let's not do that. Let's be real populist, which means fighting for blue collar workers and jobs. That's what I'm doing every day. And I think that's exactly what President Trump is doing as well. Well, Senator, have you had that conversation with President Trump? Because clearly he's not doing exactly what you're saying. On which piece?
A couple of them. Well, a whole bunch of them. Right. There's still a conversation. The tariff piece is right there. You just said that you don't like the tariffs and you'd like them to be negotiations. He is trying to negotiate, I guess. But I think we still don't know. If you look at some of the tweets or social truth, social posts this morning, he's very happy about all the revenue that he's bringing in as a function of those tariffs. So it's.
So remember, we've had this sort of incongruity about what's really happening here. So, Andrew, your point is fair. There is a divide in this administration. There are two camps on tariffs. By the way, there are also two camps on raising taxes. And I think the same camp is wrong on both of those.
I believe that President Trump has an historic opportunity. I can tell you we have over 130 nations who have come to the White House, said, let's make a deal. We want to lower tariffs. We want to open up our markets. That is extraordinary. And I don't know which path we'll go down. I pray we don't go down the path of massive taxes and massive tariffs forever. If we go down the former path,
of using this leverage. There would be a rich irony if Donald J. Trump ended up the most free trade president that this country has ever seen. He has the opportunity to do that. You're right, we don't know yet, but I gotta say a lot of folks in the media are ready to say, "Oh, we won't see that happen."
I am hopeful. I've had that conversation multiple times with President Trump. There are a number of other people, including Scott Besson, Nealon Musk, who are urging the president, you have an opportunity to win one of the biggest wins for American workers we've seen in our lifetimes.
Yeah, you're right. And we we can see it playing out that there are obviously on any given day who's who's spoken to the president last. It seems like there's there's opposing. Maybe it's good. You don't want everyone. You know, that's another thing we might see on some of the other sides where they're all they all seem to be, you know, the board collective every time they vote. All right. Yeah. Senator Cruz, thank you. Thank you. Thanks, guys. OK.
Up next on Squawk Pod, the politics of higher education with former chair of the University of Pennsylvania board, Scott Bach. He was in the seat when the university's president was forced out following the start of the Israel-Hamas war in 2023. There were people who talked about, you know, 10 or 20 years of really changing culture of Penn, deterioration of Penn, you know, too woke, you know, too DEI, etc. I mean, look, Liz McGill was there for one of those 10 or 20 years.
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crushed it but if you need someone who can actually help protect your growing business just say like a good neighbor state farm he's there and just like that your state farm agent can help you get the coverage you need for your new space for your small business insurance needs like a good neighbor state farm is there this is squawk pod up and becky cute
And you're watching Squawk Box right here on CNBC. I'm Becky Quick, along with Joe Kernan and Andrew Ross Sorkin. Our next guest has a unique insight into the tensions between the White House and higher education. Joining us right now, Scott Bach, who's a longtime CEO and now chairman of Greenhill and Company. He resigned as board chair at UPenn following a so-called donor revolt over concerns of
on-campus hate in the university response. And he's written about his experience at UPenn and about his four decades in finance. And his new book, it is out today, is called "Surviving Wall Street: A Tale of Triumph, Tragedy, and Timing." And who would have ever thought, after close to 40, 50 years in the business, that your role on the board at the university would be the thing that people talk about?
So true. I mean, it's remarkable that people join those boards thinking it's going to be fun, it's going to be interesting, they're going to meet interesting people. It's kind of a networking thing. They're going to feel good about the place they give money to. And most people don't enter those things thinking that there may come a crisis and it may get very contentious and very difficult. Of all of the crises and transactions that you worked on and sort of complicated boardrooms,
Is that the top? I would say that is the top because it really had national issues at stake. I mean, I believe then, and I think clearly it's played out now, that what was at stake was far more than free speech and anti-Semitism. I mean, it was clear to me in the very, very early days that, you know, what has now played out, what is now playing out about just the role of
of elite higher education in America, how it's financed, how it chooses students, how it hires faculty, et cetera, was all at play. But you were under the gun in large part because you were very supportive of the prior head of the university at a time when there were a lot of people, including people like Mark Rowan, who was coming on our set saying,
this is not, this is a problem. And in fact, I think he was calling you behind the scenes. Oh, yes, he was. And we met during that time as well. But yes, I was supportive of her. I mean, look, she, there were people who talked and, you know, he was one of them who talked about, you know, 10 or 20 years of really changing culture at Penn, deterioration of Penn, you know, too woke, you know, too DEI, et cetera. I mean, look, Liz McGill was there for one of those 10 or 20 years.
uh... you have very little influence in that in that period of time so if she she got caught in the crossfire and really a culture war that really you know erupted out of nowhere at pan out of a board that had been incredibly harmonious for all the nearly twenty years i was on that board what what what's the solution i mean what where where is it fixable are these institutions can get slash and away with other stuff to talk about your book but it's you know i i i look i i i think it is i think
Look, the reality is, I think a lot of misconceptions really developed in that period. One misconception is that most students are sort of social activists and woke and so on. I mean, less than 1% of students at Penn ever appeared at a protest in relation to Gaza. Very, very small group of people. Most students are majoring in things like economics and finance and engineering and
and other fields that are really quite technical. I mean, they're not even taking courses. - Those are the ones the faculty didn't get to, Scott. What about the faculty?
Well, but the faculty are teaching those courses. I mean, most, if you look at, you know, Google the top 10 majors at Penn, obviously Wharton's very influential there, but top 10 majors at Harvard. I mean, it's mostly things that sound like they're going to get you a great job, which is what they are. You know, the number of students taking history, politics, English, et cetera, it's really declined.
So these schools are largely meritocracies, and they are trying to train students, and I think they do that very well, for jobs in important positions in America. You made the observation just moments ago that you think this is a lot more or is a bigger issue than DEI.
or anti-Semitism. What do you mean by that? Well, I think I viewed it early on that it was more than about free speech and anti-Semitism, that it really was about the issue of so-called woke or DEI gone too far, however you want to phrase that. I mean, there clearly was a backlash against that. I don't really think an appropriate one. I mean, you know, I've talked about how when I was at Pana Freshman, I met my freshman resident advisor last night at an event. I hadn't seen her in decades. They were
There were 25 students on my floor. Every single one was white. No black, no Latino, no Indian, Chinese, Korean. I mean, Penn was a pretty white place. And so they made some efforts to try to create a more diverse student body. So what do you make then of what this administration is doing as it relates to questions about not-for-profit status of universities, Harvard in particular, rolling back grants to universities, Harvard in particular?
in particular, but you could put Columbia on that list as well, around schools that they don't think are doing the job.
Look, I'm very much against what the administration is doing to those schools. I mean, I view a big part of why America is kind of on top of the world economically and leading in almost every industry sector is we have these great universities. And even my friends from around the world all want to send their kids to America's elite universities. So I would not want to see that system get undermined.
And look, the tax exempt status is really the nuclear weapon. I mean, if you have to start paying property tax and your donors can't get tax deductions, I mean, I think it's sort of game over. But even things like changing research funding for all the medical research and so on, you know, a bigger endowment tax, things like that are very, very high risk. This is an effort. You know, the president was down in Alabama. How much do you think this is an effort to sort of shift education?
sort of the significance or influence of certain schools over other schools? - There's probably some element of that here, but I think those schools are gonna get hurt as well. I mean, those schools get a lot of research dollars for various types of medical research as well.
So it's not just an Ivy League thing, but I think it's a great risk for these schools. And I think these schools are part of what has made America really pull away from the rest of the world over the last generation. Let me ask you a different question, talking about generation. I think I met you close to 25 years ago. The banking business in Wall Street was a very different place. Yes.
What do you think it's like today? I mean, you live it today, but what do you think Wall Street even is five or 10 years from now? And I think to myself, the role that bankers played in America and corporate America
25 years ago, the sort of consigliore to the CEO, there was real influence. And I think today it's a very different thing. And I'm curious what you... I would very much agree with that. Look, if you were the founder of my firm, Bob Greenhill, I was the CEO of the firm for many, many years. Great golfer, by the way, Jim. Bob was a great golfer. I remember Bobby's come on all the time. Bob loved golf.
and still plays golf by the way. Look, when he founded the M&A department at Morgan Stanley, he had three people. He was asked, hey Bob, maybe we can sell people advice on M&A deals. So he was chosen four people.
Even 25 years ago, it was very different. I mean, today, what's really evolved, it's kind of remarkable, is kind of a huge transaction ecosystem, right? Lawyers, bankers, by the thousands doing trillions of dollars of deals a year. It's a little more mechanical than it once was. It's a little more processing oriented than it once was, but it certainly is high volume. Whether it continues to be that way, I don't know. It feels like that's just part of our economy right now is this churning. And what about people
people going into the business itself, which is to say, if you were a
A brilliant kid, 25 years ago, Wall Street was actually a place you wanted to go. Yes. Today, you may want to go somewhere else. Tech? I don't know. What do you think is happening just to the culture of it all? I still feel, look, part of why I wrote my book, I think for younger people trying to chart a career in the future, I still think it's a great place to start. I think Wall Street gives you a broad understanding of how value is created, how companies make decisions,
how to structure transactions, and I think it's great training. Many of those kids after two years as an analyst go on to do something completely different, and that's great. - Scott Bach, it's a cool book, it's fascinating, and you've had a fascinating career, so thank you for coming on. - Thank you, my pleasure.
That is Squawk Pod for today. Thank you, as always, for listening. Squawk Box is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Tune in weekday mornings on CNBC at 6 Eastern to get the smartest takes and analysis from our TV show right into your ears. Please follow Squawk Pod wherever you like to get your podcasts. We'll meet you right back here tomorrow. We are clear. Thanks, guys.
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