Guest: Frank McKenna, Deputy Chair, TD Securities and Chris Kreuger, Washington Policy Expert, TD Cowen Washington Research Group
Host: Peter Haynes, Managing Director and Head of Index and Market Structure Research, TD Securities
Episode 45 comes at you straight from TD's 24th Annual Portfolio Management and Market Structure Conference, held November 2nd. Frank is joined on stage by Chris Krueger of TD Cowen's Washington Research Group for a panel discussion entitled The Washington Circus. Before Chris and Frank dig in on Washington, they first discuss the emerging threat of a broadening unrest in the Middle East, which Frank feels can and will be contained, but it is a dangerous situation. Chris plays the role of Washington Insider for an update on House negotiations for continued aid to Israel and Ukraine ahead of a potential Government shutdown on November 17th. Turning to the election cycle, Frank addresses the impact of third-party candidates such as RFK Jr., No Labels and Cornel West of the Green Party on both the Democrats and Republicans while Chris adds his thoughts on the likelihood of competition for Trump and/or Biden in the primaries. Frank finishes with an update on India-Canada relations and a passionate plea for Alberta to move on from the idea of separating from the CPP, earning him the first ever audience intra-session ovation in the 24-year history of our conference.
This podcast was recorded on November 2, 2023.
PETER HAYNES: OK. So welcome back. We're on our 24th Annual Portfolio Management and Market Structure Conference. As many of you know, one of the speakers on this panel, Frank McKenna to my immediate left, and I sit once a month to tape a TD Securities podcast entitled Geopolitics. Monday of this week was our regularly scheduled monthly taping session, which I decided to postpone because I figured we would double up with the conversation that we're having here today.
So welcome to episode 45 of our monthly Geopolitics series, and we look forward to having a guest join us again today. So Frank, again, as always, thank you for taking time to spend with me once a month, letting me grill you with questions. We're not talking about the Blue Jays today. I'm on strike on the Blue Jays. We'll wait for a few more months. I'm not going to give you that-- I'm not giving you that opportunity because I know you'd go on-- that might be a 45-minute rant.
And to Frank's left is Chris Krueger, a new colleague of ours from TD Cowen's Washington Research Group. I would just classify Chris-- the easiest way to describe him is to say he's a true Washington insider. So for all the hockey fans, we'll call him the Elliotte Friedman of Washington. And that's a little Canadian reference to the hockey insiders that we all follow here.
So welcome to TD, Chris. I know we spent quite a bit of time traveling around. In fact, we spent some time in Frank's home province in New Brunswick earlier this year, so you're getting a good cross-section of folks you're meeting here in Canada. I know you always joke that Canadians ask better questions and know more about politics than the people you meet in the US.
So I am going to start with you, Chris, and I'm going to just go back to a quote we heard on Jeopardy. By the way, two amateur Jeopardy specialists beside me here had all the answers when they're sitting down there and they did get the geopolitics questions right just so we justify having them up here. But I'm going to come back to a quote. And the question wasn't answered properly. Paul Tudor Jones was the person that said this is currently the most threatening geopolitical environment that he has ever seen. Chris, would you agree with that?
CHRIS KRUEGER: He's seen more than I have so, I mean, I wouldn't want to get sideways with him. I mean, I think from my seat anyway, being in Washington since the summer of 2001, this is certainly the most unsettled I think Washington has been in my lifetime. Starting with this year, 15 votes to elect a Speaker, preventing a government shutdown, but now having 23 days without a speaker.
The new speaker, Mike Johnson, the most inexperienced speaker in 150 years, given government service, with another shutdown around the corner looming with aid for Israel, Ukraine, US-Mexico all being decided in the next two weeks. So it's certainly some-- I see here the Washington circus, that's pretty good.
PETER HAYNES: You're good with that title.
CHRIS KRUEGER: Someone said, what's going on on Capitol Hill right now is a dumpster fire. And I said, that's not correct. I mean, a dumpster fire, by definition, is contained.
PETER HAYNES: Well, we did call this the Washington circus as Chris is pointing out in the title, Frank, but really before we get to the Washington circus, there's another geopolitical hotspot that's come up here since we last spoke on our regular podcast, and that's in the Middle East. So Frank, I'm just going to start with an editorial that I read in the Atlantic, which published on October 13 by a gentleman by the name of Hussein Ibish who warned that Israel-- warned Israel, and this was after the Hamas attacks, he warned Israel that Hamas's brutal attack on Israeli citizens was actually a trap.
Ibish worried that an overly emotional response by Israel would result in a prolonged war that over time will turn the rest of the world against Israel as images of the suffering, which we're all seeing in Gaza, will become too painful for the rest of the world to witness and that this may ultimately be a catalyst that draws in others in the Middle East battle. With Israel now starting its ground offensive, is Professor Ibish's concern a legitimate one to you? And how concerned are you that the Gaza situation might cascade into other conflicts in the region?
FRANK MCKENNA: Well, to start with, I just want to say how happy I am here to be with Chris. He's a bit of a legend. I read his stuff almost every day. And I was telling him I plagiarize it and use it in all my speech material. So those of you who are not on his list, make sure you are. Writes very good stuff.
Look, I'm just not going to blindly accept the word trap, but I'm going to substitute the word provocation. What Hamas did was certainly deliberately designed to be a provocation to Israel. And the sheer savagery of the attack and the fact that in many cases they actually carried video with them was intended to demonstrate the savagery and the barbaric nature of the attack. So it has certainly provoked Israel as one could expect.
So it's just a really controversial subject, but I'd say two or three things that I think are generally speaking true. One, whether it's a trap or a provocation, Israel has responded and, in my view, really had no choice. Domestically, they're being pushed to respond. Politically, they're being pushed to respond. And I would say from a security perspective, they feel they have to respond. So Israel is doing what one would have expected them to do.
And it's playing out the same way the professor had forecast. We are in now to high levels of civilian casualties in Gaza. We're seeing the world shifting its sympathy, I think we can put it that way, to the Palestinians. In Europe it's causing grave domestic turbulence. In the United States, the Democratic Party is seeing a great deal of stress. And in Canada, we have stress fractures in the Liberal Party.
In Latin America, we've had at least three governments either withdraw their ambassadors or recalled them temporarily. So we are seeing that playing out around the world. There's no doubt about that. Having said that, I don't think Israel is going to change its direction based on that because of their overwhelming security requirements.
The second part of the question, will it spread? It's already spread. But the question is whether it's going to spread into a major regional war. I don't think so, but it's borderline at this stage. The way it would spread into a regional war, if Syria became completely engaged, that would become important but not totally consequential. More importantly would be whether Lebanon would become involved through Hezbollah, which is a proxy of Iran, which means Iran would have to deliberately loosen Hezbollah and send them against Israel.
I would say that that decision has not been made yet, and I don't think it's going to result in a full regional war, but we saw an escalation even a few minutes ago where Hezbollah dropped several munitions laden drones on top of an Israeli base in the contested Shebaa region on the border with Lebanon, causing considerable casualties. Israel has retaliated immediately. So we're seeing it escalate almost every day, but I think Iran--
And by the way, Hezbollah is a more dangerous enemy than Hamas in many ways. It's a better trained army. It's battle-hardened. It's better equipped. But it's also Iran's most important proxy. And I think Iran needs to conserve it for domestic protection security and all kinds of other needs. And I think Iran knows that if it gets into a full scale battle with Israel that Hezbollah will be largely decimated as an effective fighting force for the coming years. And I'm not sure they want that to happen.
The other thing, and I'll close on this, is the more you start bringing in Syria and/or Hezbollah and potentially pulling in Iran, the more likely the United States is to enter the fray, in which case Iran would end up seeing an extraordinarily serious decimation of its capabilities. And I don't think that that's going to happen. I don't think they're looking for that. So escalation around the margins, yes. A full scale regional war, I don't think so. But in the meantime, we're going to be seeing this full Gazan invasion taking place on the world stage and in the world media for the coming weeks and months.
PETER HAYNES: And as we've talked about before, Frank, it's different today than it would have been 20 or 30 years ago because the images are so real-time.
FRANK MCKENNA: No doubt about that. It's even different from the Ukraine. There is just so much more coverage taking place instantly. I've been watching Fox and CNN side by side and it's wall to wall coverage, whereas Ukraine it's not. I mean, what's happening in Ukraine is horrific, but it is not getting the kind of coverage that the Middle East is getting. And that does influence public opinion.
PETER HAYNES: So Chris, I know we're in the early days of this conflict and President Biden was very front-footed in terms of the US position on the war having traveled to Israel, being the first president I think to be in the middle of a war in the Middle East, foot on the ground to meet with Netanyahu. In fact, I know we mentioned earlier that Blinken and Biden sat in on one of the war room meetings that took place in Israel.
Do you have any sense how long the Biden administration can hold Washington's support? Frank just mentioned there's some fissures within the Democratic Party. And when you look at this being a long offensive and seeing continued protests around the world, and including in the US, how long do you think President Biden can hold his administration together as the US supports Israel?
CHRIS KRUEGER: I mean, candidly, probably as long as it takes. There are 100 senators, 435 members of the House. Probably 70 plus senators on board with what-- not a blank check but pretty close to a blank check. And those numbers in the House, probably out of 435, you're probably north of 300. There's supposed to be a vote today for $14.1 billion in aid to Israel that's largely to plus up Iron Dome and some of the other defensive measures.
That vote is probably going to be postponed. There's some attendance issues in the House. I know how ridiculous that sounds. But it's part and parcel of this November 17 deadline on the continuing resolution to keep the government funded. But the support for Israel in the Congress is quite strong.
PETER HAYNES: Can you explain Mike Johnson being the very right wing new House Speaker has, in that bill I believe you're referring to, delinked Israel and the Ukraine in terms of the support from the US? Do you feel as though this is the first indication that the House is going to really put its foot down with respect to how much money's going to Ukraine?
CHRIS KRUEGER: Right.
PETER HAYNES: And you can explain what that means, by the way.
CHRIS KRUEGER: Right. So Mike Johnson from Shreveport, Louisiana, very socially culturally conservative. Also, fiscally pretty conservative. During all of this, it was sort of a we're going to fund the government until the next fiscal year, which is September 30. Defense is going to get a 3.2% increase. Non-defense spending is going to be flat. And there's going to be $60 billion for Ukraine, call it $20 billion for Israel, call it $10 billion for US-Mexico border funding and enforcement.
And it was-- the plan was to move that all together because each of those bills have their own constituencies, have their own political alliances. Johnson's first move out of the gate was to delink Ukraine and Israel much to the objections of a lot of Senate Republicans. But for a lot of House Republicans who are much closer, both politically and philosophically to former President Trump, by not only delinking the two but then also offsetting the emergency aid to Israel in theory to be paying for it through other areas was candidly unprecedented.
Like when you have emergency supplemental appropriation bills for natural disasters, hurricanes, floods, et cetera, those are always off balance sheet. You never offset them. So it's fairly provocative that Johnson's first move, not only was to delink, but also to offset the package, which immediately drew a veto threat. And I mean, seeing all the images, et cetera too, it was unprecedented.
FRANK MCKENNA: I just want to add something because I think that President Biden is now navigating one of the most stressful situations we've seen recently. He's fending off attacks from the left on supporting Israel and on the right in supporting Ukraine. And I think at the end of the day, he's got to thread that needle, and I think he will. But there's also the dynamic between the House and the Senate because the Senate is not going to abandon Ukraine. I think you'd agree Chris--
CHRIS KRUEGER: Absolutely.
FRANK MCKENNA: Completely. Whereas the House Republicans seem prepared to do that. On the Israel side, we've got not only the traditional support in the United States for Israel, but a very strong evangelical loyalty, a sense of loyalty to Israel. So I don't think that much is in doubt. But it's the Ukraine dynamic here that's going to be interesting. And I personally think at the end of the day, the Senate Republicans will be strong enough to push back on that. Would you agree, Chris?
CHRIS KRUEGER: I would, but it's-- I mean, I think just now that there's a new speaker and there's this sense, oh OK, we have a new speaker. The House is functioning again, the risk of a shutdown in two weeks is a lot higher than it should be. And if we can figure something out, the best case scenario is it's a kick the can to January 15. So I think the risk of a-- the threat of a government shutdown candidly is probably with us until April 30.
On Ukraine, yes. I mean, this is also probably the last window. Mitch McConnell, the Senate Republican leader, this is sort of his swan song. I mean, he is holding the line in his mind that you have a Republican Party that's sort of at war with itself on foreign policy with McConnell representing more of a Reagan, Jim Baker internationalist wing versus the ascendant Trump America first isolationist wing. So this is probably the last window for that $60 billion for Ukraine and then see what happens next November.
PETER HAYNES: So Frank, in his home country, president Netanyahu was a Minority Leader who was changing laws in their government in order to weaken the Supreme Court or to essentially put himself in a position where he could create rules that would keep him in power. And one of the issues that he was concerned about was that if he wasn't in power, he may be arrested due to things that had happened: corruption scandals and things like that.
He has managed to put together a coalition war government. So it seems as though he's got himself in a good position. Although, you still read about some calls for him to resign. What is the future of President Netanyahu post this war?
FRANK MCKENNA: So I was in Israel, as you know, quite recently and met with some of the former-- met with at least one of the former prime ministers and also met with King Abdullah in Jordan. So we talked a lot about exactly these issues. There will be no-- there will be no daylight between Netanyahu and the rest of Israel and the prosecution of this war. To say that right now, Israel is totally united around Netanyahu on this, on the prosecution of this war.
And remember, when it comes to military matters, he has some credentials. He was a member of the special forces and his brother was killed in the raid on Entebbe. So people of Israel are well aware of that. So I'll say that quite categorically. I'll say quite categorically as well that I think that it's unlikely he'll be able to survive after the war.
And there are at least three reasons. One, it's well known and well documented that the massive amounts of aid that have come in from Qatar particularly have been funneled by Netanyahu to some extent actually to Hamas because he had always felt that he could keep Hamas strong enough that it would keep the PLO at bay and he would have two different Palestinian communities, neither of which would be strong enough to challenge Israel. That chicken has come home to roost. That's number one.
Secondly, there's the security breach that allowed this to happen. Whoever the leadership is of Israel at a time when this sort of attack takes place is going to be under extraordinary pressure. And thirdly, there's a feeling that Israel has got to get its domestic house in order and that the six-month paralysis of Israel as a result of Netanyahu pushing the boundaries of governance in that country, people say that's got to come to an end.
And the kind of coalition that he's formed that resulted in a major escalation of power in the hands of an ultra-orthodox party, which is committed to pushing out the settlement process in the West Bank and provoking Arabs, a lot of Israelis say that's got to come to an end as well. So I'd say for a variety of reasons, Netanyahu will have a major struggle to survive after the prosecution of the war.
PETER HAYNES: OK. So let's switch gears to what we'll call the Washington circus here. We've definitely prosecuted that discussion at length. So Frank, next election cycle. I guess we always talk about the fact that we're always in an election cycle in the United States, but the next election cycle is for the president. RFK Jr. announced that he's running as an independent. Who does this hurt more? Trump, assuming he is the Republican nominee next November, or Biden, assuming he is the nominee for next November.
FRANK MCKENNA: Well, Chris, well correct me when I'm through, but I would say this, that Kennedy was hurting Democrats more when he was running against Biden for the nomination. I think that's pretty clear. Republicans now think that he's hurting them more that he's running as an independent, and they've immediately gone from supporting him both financially and rhetorically to attacking him. So sometimes you just have to follow the money to know where things are going.
So I would say Kennedy probably hurts Republicans marginally more by running as an independent. But I don't know if it's timely to talk about this, but I would have to say this-- this could end up becoming a decisive factor in the prosecution of this next election. Not Kennedy per se, but the advent of third parties. I don't think there's any doubt that Jill Stein ended up-- of the Green Party ended up costing Hillary Clinton victory in 2016. And I don't think there's any doubt that Ralph Nader cost Al Gore being the president in 19-- or--
PETER HAYNES: 2000.
FRANK MCKENNA: 2000. In the year 2000. And there's no doubt that Ross Perot affected that election. So third parties can make a difference. And in this case, we're looking at not only Kennedy, but we're looking at a No Labels party. And I think the polls indicate that if that were led by a Democrat, that would hurt the Democrats. If it was led by a Republican, probably hurt them a little more.
But on balance, more likely to hurt Democrats than Republicans. And then we'll have a Green Party, potentially with Cornel West running it, that'll siphon off a couple of million votes, which almost assuredly will come from the Democratic Party. So I don't think that there's any doubt that third party machinations here and mischief will end up potentially costing the Democrats their best chance at the White House.
PETER HAYNES: So Chris, No Labels is on 12 states, I believe. I know you keep track of this in your regular research. Three of them are contested. Can you just explain-- Frank just mentioned leadership of No Labels. Can you just walk through how we can anticipate learning more about the No Labels leadership. And in terms of those contested states, in your view, are they going to be a material factor?
CHRIS KRUEGER: Yeah. All due respect to the other 45 states, they're really only five states that matter. In the US, it's the electoral college. It's not really a national election. It's the electoral college. The five states that matter are the five states that mattered in 2016, and they're the five states that mattered in 2020. It's Arizona, Georgia, and then Michigan, Wisconsin, and Pennsylvania.
No Labels is-- candidly, it's kind of like a Wall Street creation. It's a lot of folks believe that there is this silent majority of Americans who are sort of socially more progressive liberal, fiscally more conservative. And so No Labels has made a pledge they will make a decision by March that they will run a split party candidate. So there will be a Republican or a Democrat as the president and a Republican or a Democrat as the vice president.
And some of the names you hear a lot mentioned, someone like Joe Manchin, the West Virginia Democrat; Joe Lieberman; Jon Huntsman, former Republican governor of Utah; et cetera. The White House has been pretty focused on this challenge because it-- and in our estimation, there's no question that this would draw from Biden's support if they're on the ballot in Arizona.
PETER HAYNES: Can you just explain how do they get on the ballot for us Canadians?
CHRIS KRUEGER: Sure. So the Republican Party, the Democratic Party, the Green Party, the Libertarian Party, they have ballot access in all 50 states. It's very hard as an independent to get on the presidential ballot. Every state runs its own election. But by and large, to get on a ballot if-- not that I would ever but let's say I wanted to run for office from Virginia as an independent. It's typically a combination of signatures.
Typically it's sort of-- let's say that the state has a population of two million folks. You need 20,000 signatures from voters in that state to put you on the ballot. Takes a lot of money, takes a lot of organization to get ballot access as a unaffiliated candidate.
Robert Kennedy Jr. has a lot of money, doesn't really have an organization, but you can buy that with money. So Kennedy will-- my presumption is will shoot at those five states that matter. And absolutely, you could see-- I mean, that was by and large how Biden won in 2020. They kept Green Party and Libertarian candidates at bay. And it was still super close. It was 42,000 combined votes in three states: Arizona, Wisconsin, and Georgia.
2022, the midterms, even closer. Less than 20,000 votes in five congressional districts flipped the House. So the US remains a very regionalized but very divided. And that's reflected in the Congress. We have historically tight margins in the Congress. Four seats in the House and a 51-49 Senate.
PETER HAYNES: OK. So let's move on to the leader of each of the Democrat and Republican parties. Is there any chance Trump is not running for the 2024 election or is there a possibility like a dark horse, such as a Glenn Youngkin or even a Nikki Haley, who might not be doing well in the polls but is very well liked, comes out of nowhere to win the Republican primary? You're looking at Frank. You don't want to answer that one?
CHRIS KRUEGER: The Youngkin question is a good one. We'll know the answer to that next Tuesday. So Tuesday is the off cycle elections in the US. It's a handful of governors' races. Kentucky and Mississippi get the most attention. But the Virginia State legislature, it's the oldest democratically elected body in the US. This is the General Assembly, Patrick Henry, et cetera.
But so you've got the Republicans in a very slim majority in the General Assembly in Richmond. The Democrats have a very tight majority in the state Senate. If Republicans under Youngkin can sweep those elections next Tuesday, there will be a real concerted effort to get Youngkin to file in New Hampshire, South Carolina, et cetera.
Nikki Haley is basically-- she's set herself up to be the alternative to Trump if you look at the consolidation with Mike Pence dropping out and others. We've got the third Republican debate next week. Trump's not attending because he doesn't have to because he's the prohibitive front runner.
The Des Moines Register Poll, excellent poll, and Seltzer, one of the better pollsters. The surprise in that poll wasn't that Trump-- and Iowa was the first Republican State on January 15. The surprise in that poll wasn't that Trump is North of 50% among Iowa Republicans. The surprise was that DeSantis has really fallen. He's second. The surprise, though, was when Seltzer asked DeSantis voters who is your second favorite choice after Governor DeSantis, they overwhelmingly said Trump.
So I think like 2015, 2016 within the party, within the Republican Party, there was this sense, all right, a third of the party is all in on Trump, a third of the party's never Trump, and a third of the party is sort of all right, we like Trump's policies but, oh my God, can he shift to decaf and just put the Twitter machine away? Fast-forward, I'd say probably 2/3 of the party is Trump. One third is Trump policies but tone it down. And I mean, I think most of the Never Trumpers are Democrats now.
PETER HAYNES: OK. So Frank, I'll take the Democratic question for you. From time to time, there's talk about the competency for Joe Biden and that he needs to step aside, just about everybody. I think you spoke to Secretary of State Clinton at one of your events recently who I think the message from the Clinton family was that Biden would definitely be running regardless. I'll let you chime in on that. But if there was a situation where Biden was not running, who do you see as the presumptive leader of that party? Would it be a Gavin Newsom, or is there someone else in the Democrats that you would think would pick up the mantle?
FRANK MCKENNA: I'm just going to pick up on what Chris said because it's increasingly looking like Trump's either going to be in the jailhouse or the White House. It may be both. It's got very strong momentum. I don't think there's any doubt about that. So yeah, so what I would say is this, I think it's a really hypothetical question because, quite frankly, I think that if Joe Biden is vertical and could put breath on a mirror, he's going to be the candidate as simple as that.
And it's hard to unwind that situation because if you were to try to unwind it, you'd take the best known Democrat off the board, but then you have to deal with the vice presidential issue. And theoretically, Kamala Harris would be the presumptive heir if Biden wasn't to run. And most people feel that she's more unpopular than he is. On the other hand, she is a woman of color. And those are two vital constituencies to Democrats. So you don't particularly want to ignore those constituencies.
So I think most people would feel that if Biden were to leave, he would have to leave with Kamala Harris so that you'd have a whole new slate to present to the American people. The chances of that happening are almost negligible. If that were to happen, there's certainly the governor of California would probably be a candidate, and I guess he would be a strong candidate, but California is of a very different hue from a lot of the rest of America.
And it's ultra progressive, you could say. Many parts of it, not all. But I don't know that that would cut much weight in the Midwest, for example, and in the South. I mean, he would have maybe appeal on the East Coast to people and so on. So that would be an issue.
There are others that are interesting. Christine Whitman would be interesting in Michigan. I would say that Amy Klobuchar would still be interesting. And they're positioned geographically and perhaps ideologically. And Pete Buttigieg would be interesting. There are some governors-- I don't pretend to know them all, but the governor of Colorado--
PETER HAYNES: Jared Polis.
FRANK MCKENNA: Jared Polis seems to be an interesting choice. The former governor of Rhode Island would be interesting. So there are candidates who might emerge and become interesting, but it's getting to be in the late stages to do that. And so if you had to ask me now, I would say that it's President Biden and Kamala Harris that's going to be the ticket.
PETER HAYNES: So Chris when we look at how this presidential election will actually play out, Frank and I have spent quite a bit of time on our podcast-- or on his podcast I should say. I just going to ask the questions-- is around gerrymandering. And it's a practice in the US. We have to literally Google the word in Canada to understand exactly what it means.
But you're in the trenches in Washington. I know you follow the court hearings that are happening regularly related to cases where governments locally are redistricting in order to favor their party. That's the term, I think, if I've defined it right. Just correct me where I'm wrong there. And can you update some of the recent court cases that may impact how those states are redrawn and how that affects the House vote?
CHRIS KRUEGER: Sure. So the Senate, there are 100 senators. Every state gets two elected for six-year terms. There are 435 members of the House. Every state gets at least one and then it's based off population. Every state does it a little bit differently, but we take the census in the US every 10 years and then those numbers dictate based on population growth how many elected representatives go to each state. Back of the envelope, it's about 700,000 in a congressional district.
Coming out of the Civil War, a lot of the Southern states used this to prevent minority representation from their states, that you would go into a majority-minority carrier and you would splinter it up. So you'd have districts that literally looked like a hand drawing and et cetera. That changed with the Civil Rights Acts in the '50s and '60s by the Department of Justice mandating that you had to have majority-minority districts.
Fast-forward and the courts-- one of the most conservative courts we've ever had mandated that a number of the Southern Republican led states were not sufficient to the Voting Rights Act. So Democrats should pick up between Alabama, Wisconsin, and a couple others, call it a half dozen seats, based on those maps when they redraw the lines.
So just on redistricting, Democrats will probably pick up the House. Both parties are guilty of this. The New York Democrats are also likely to really redraw their map as well. So they should probably pick up a couple of seats there. So that's gerrymandering 101.
PETER HAYNES: And are all of these gerrymandering cases that are being heard right now all going to be completed such that the maps will be known, like are known before we actually vote--
CHRIS KRUEGER: They're going to have to. Well, it makes it super awkward because there are a lot of members in the New York delegation and other delegations who are going to wake up tomorrow and find out that their colleague, they now share that district. So you're going to have a lot of member on member primaries and et cetera. I forget when-- I would guess the maps will be done by the spring of next year.
PETER HAYNES: If there's a lawsuit on a map that's been redrawn and it hasn't been heard by November, do they go with the one that's been redrawn?
CHRIS KRUEGER: Generally, the big fight will now be North Carolina and New York. Those will be the two big ones to watch.
FRANK MCKENNA: The--
PETER HAYNES: Go ahead, Frank.
FRANK MCKENNA: I think, Peter, normally you could stonewall on this. But in the case of Alabama, it's been sent back twice basically rejecting what they've attempted. It was flagrant, I mean, in Alabama. Essentially, I don't know what the population of Alabama is probably 30% African-American or--
PETER HAYNES: Or higher maybe.
FRANK MCKENNA: And they were basically almost shut out of the potential for winning seats. So it was sent back at least several times. And the Supreme Court, much to my surprise, has really been quite hostile to efforts to try to undermine their authority on this issue. So I suspect in a lot of cases this is now becoming more settled jurisprudence, and I think there's going to be less latitude for you to keep kicking things down the road. Supreme Court has become fairly definitive on this.
CHRIS KRUEGER: I totally agree.
PETER HAYNES: OK. I'm going to ask Frank a couple of made-in-Canada questions. Just before we leave Washington, I want to see if there's anyone-- is there any online questions? Does anyone in the audience have a question for the situation in Washington, any aspect of it? The back of the room. If we can just get a microphone to the back of the room, please.
CHRIS KRUEGER: Or yell. Used to being yelled at. Two little kids.
PETER HAYNES: We got to have it on the podcast so--
CHRIS KRUEGER: Oh, sorry.
AUDIENCE: Would you give any sense to Senator's Tuberville blocking of the military nomination? Is there any impact to America's readiness or anything like that?
PETER HAYNES: You're referring to Senator Tuberville and the--
CHRIS KRUEGER: So this is a--
PETER HAYNES: --risk being in that situation.
CHRIS KRUEGER: Yeah. Yeah. On the podcast, shout out to Clementine and Clark, my two kids. They won't listen to it but I'll tell them they-- tell them I said hey. So the US Senate has to confirm the cabinet, regulators, ambassadors, also any flag officers. So any generals or admirals and actually full colonels and full captains.
And it's typically they kind of sail through unless there's some high provocation or otherwise. And so Tommy Tuberville is a Republican Senator from Alabama. And he has led an unprecedented hold on all flag officer nominations and elevations.
And his stated policy objection is that following the Roe v. Wade decision on abortion, a number of US military personnel are in states where abortion services are no longer provided, and the Department of Defense is paying for those service members to cross state lines. And this is an objection of Tuberville.
This has been going on six, seven months. Last night, a number of Tuberville's Republican colleagues-- Lindsey Graham from South Carolina, Dan Sullivan from Alaska, and others-- straight up called him out on it on the Senate floor. And now they're trying to figure out how to lift these holds. I think it unquestionably has had a negative impact on the military.
One of the flag officers, I want to say Marine Corps, was literally working three jobs, had a heart attack two days ago. We don't have a Marine Corps commandant. And yeah, in terms of force readiness, I think it's unquestionably had an impact. Tuberville thus far hasn't moved on it, though. But if all the issues going on in the House weren't happening, this would probably be a much-- it'd probably be getting a lot more attention.
It sounds like there's a way around it, that there's going to be one vote on all of the stalled nominations. It's something like 400 or so. I would guess that happens in the next couple of weeks, but it's, again, the questions in Canada on politics are always--
PETER HAYNES: Anyone else? Yep. Can we grab a mic here for the-- thank you, Scott.
AUDIENCE: This one's for Chris primarily. In Canada, I think there's a perception that historically we used to punch above our weight internationally. And we're recognized as doing so. There's also I think a broad consensus within the country now that over the course of the last seven, eight years, we've fallen away from that, and we haven't been well represented in terms of what we used to be expect.
In America, is the perception that we've lost our ranking where we don't seem to be consulted on a lot of the strategic initiatives anymore. We get shut out of Five Eyes. We get shut out of a lot of things that before we used to always count on being part of. Is that a real-- is that just an in-house Canada perception or is it real down South that we've changed?
CHRIS KRUEGER: I mean, I think certainly in the Trump years, just because Trump and Trudeau weren't exactly best friends. But no, I mean, I think with Biden anyway, that coming in, the-- sorry. I'm not sure that's the case with this administration. It was interesting though.
I mean, with both, with previous administrations, the first foreign trip abroad was generally always either to Mexico or Canada. Biden's first trip abroad was to London and Brussels. I think that was largely a NATO statement. The first two foreign leaders Biden hosted at the White House were the leaders of Japan and South Korea, more on a united front against China. But no, I'm not sure. I'm not-- I don't think that would be the case currently. But if there's a second Trump administration, that could be the case.
PETER HAYNES: Frank, do you feel like Canada's insecurities from inside the country are leading us to feel this way or is there some truth to the question?
FRANK MCKENNA: Yeah. I think there's probably more to the first than the second. I'm not sure that there's much-- in Canada, we tend to get fixated on what everybody thinks of us. It's a bit of an insecurity complex we have. I can tell you, Biden and Trudeau are very tight. And Mélanie Joly, our Global Affairs Minister and Blinken are joined at the hip. They speak almost daily. They actually speak in French. May not be well known, but he's quite fluent in French. So they-- but they're very, very tight on the issues.
At the military level, we're absolutely joined on the hip. Absolutely joined at the hip. And when it comes to intelligence sharing, we're a complete member of the Five Eyes arrangement. And I'd say that all of that is going well. So no, I don't think that's the case.
I don't think there's any doubt that under the Trump administration, the entire world, with the exception of North Korea and Russia, were at odds in terms of relationships because like it or leave it, Trump was more of an isolationist and nativist America first and he issued-- the Paris Accords got them out of that-- got the United States out of TPP, almost destroyed WTO, and was very close to tearing NATO apart and tried to unwind NAFTA. So you can understand why the rest of the world would not have put him down as their BFF. But I think things are more normal now.
PETER HAYNES: Anyone-- any other questions here on the-- yep, at the back of the room.
AUDIENCE: Yeah. Hi. Fascinating discussion on US politics. So and understanding this is totally unprecedented so this is a difficult question to get through. If you take the presumption of one interesting comment made that for the Republican presumptive candidate, it's either the jailhouse or the White House, do you assign any significant probability to the jailhouse scenario? And if so, how does that play out in--
CHRIS KRUEGER: 14 minutes to go. I thought I was going to get out of here. Yeah. So just start starting at the top, there are only three requirements to be president of the United States in the Constitution. You have to be 35 years old. You have to have been a resident of the country for 14 years. And you have to have been a natural born citizen. So there's no prohibition on being president, either under indictment or in Federal Housing.
I think that's largely because I can't imagine like James Madison is sitting there when they're writing the framers and they're like, you know what, maybe we should have a carve out here for convicted felons. Like I can't imagine they ever thought this would be the case. So we've also had candidates run for president from jail. Eugene Debs in 1920 was a progressive candidate. Got almost a million votes.
Former President Trump will be in four separate criminal trials in four separate jurisdictions next year. On March 4th, two trials begin. There's a trial in Washington, DC dealing with election interference in January 6. Then the trial in Atlanta over the election certification in Georgia. Later in March, the trial in New York begins over the so-called hush money case. And then in May, in Florida, you have the documents case dealing with Mar-a-Lago that most legal experts would say, of the four, is airtight.
FRANK MCKENNA: Right.
CHRIS KRUEGER: The Georgia case is the most problematic for Trump because presidential pardon powers only apply to federal crime. Trump has said he will pardon himself if he wins. The Georgia case, though, there's no get out of jail free card there. There's no-- even the governor doesn't have the ability to pardon. You have to go to a Georgia State parole board and you have to serve for five years before you can even apply there.
There's not a lot of case law on this. But as has been explained to me in theory-- so also, he has Secret Service protection for the rest of his life. So the idea that he's going to be in gen pop with a phalanx of Secret Service agents around, like I don't-- so is he in some type of home confinement situation? In theory, maybe.
But then if he wins, my suspicion is he would file with the Supreme Court and say, look, like this court is blocking my democratically elected constitutional responsibilities as commander in chief. So in theory, again, in theory, the court would grant him a stay for four years. He would be president for four years and then go back. I don't know.
The Georgia case per Georgia law is going to be televised. And think about who's going to be testifying in these cases too. It's going to be Mike Pence, Rudy Giuliani, Mark Meadows, Trump. Gives me a lot of anxiety, but it starts March-- they start March 4th. There are a number of other civil trials as well. He's in a civil trial in New York right now. But yeah, that's where we are.
PETER HAYNES: Frank, what do you make of Sidney Powell and some of the other insiders who have turned on Trump and gone to the state? Do you do you consider that to be an important win for the state or was that what you would have expected?
FRANK MCKENNA: Well, the United States, the prosecutorial services are very good at crushing people. Basically, when they walk into you and say, look, you've got your choice of being out with your family for the rest of your life or spending 10 years behind bars, it becomes a fairly easy choice to make. These people don't generally make the greatest witnesses because all of this comes out in the witness stand.
But I think it's damaging to Trump to have, especially if Mark Meadows were to really flip, and I'm not sure that's the case, but if he were to. But having the other ones flipping on him, his lawyers and in the case of Alice particularly. She's been quite vocal about how she was misled and so on. That goes to the heart of his defense in a way that, look, you might all think this was wrong, but I really believed the election was stolen. If he's got people who are in the room saying, no, he knew the election wasn't stolen.
So all of that goes to the heart of the case, the mens rea as we would say in law and so on. I still think this is more a theoretical exercise that it's fun to talk about. At the end of the day, this will play out, and he's not going to be in jail and be the President of the United States. That's just not going to happen. And it either gets sorted out in the Republican primaries or cases get advanced, as Chris mentioned, or something of that nature, or we just keep kicking this down the road.
I think by the way, I'll close on this one, I totally agree. I think the Florida case is almost airtight, but I think the judge is likely the most likely there to kick it down the road. And so it may not end up getting decided before the election.
CHRIS KRUEGER: Right. I mean, he-- I mean, he's been sued something like 1,300 times in his life. I mean, he's been a professional litigant for 50 years. So delaying the cases, et cetera, is certainly plausible. But yeah, I mean, to live in precedented times, it'd be a nice change. But yeah, I mean, it's just it's going to be a lot.
PETER HAYNES: OK. So Frank, I'm going to finish up with a couple of made-in-Canada issues here. I'm going to-- and those two issues are India and CPP. You knew that was coming. So let's start with the CPP. We did have Marlene Puffer. Dr. Puffer is the CIO of AIMCo who spoke earlier today and made it clear when I asked her what AIMCo's position was, that it has nothing to do with AIMCo.
This is a political matter at the government level where the government wants to leave CPP because they feel like they are owed a significant share of the fund and that if they were to leave, it would be much cheaper for their citizens in terms of contributions to a provincial plan. Companies making contributions would go down dramatically. And that was the salvo. The study came out that they had commissioned. It came out as suggesting over 50% of the assets should go to Alberta. Obviously, the rest of Canada has pushed back on that.
And now I believe the ministers will be meeting tomorrow. Chrystia Freeland, the Minister of Finance for Canada, will have a meeting of the various finance ministers. And I believe Alberta is now saying they want Canada to tell them what their share is before they take it to a vote, which I think is a bit of a stretch here. So tell us how this, in your mind, is going to play out.
FRANK MCKENNA: Well, I'm going to take a very different approach on this, Peter. I was in Alberta for the last couple of days and heard a lot about it. I think that the people of Alberta are patriotic Canadians, quite frankly, and I don't think that they want to have this fight. I think in a way this is a proxy for other battles taking place, a lack of respect to them from Ottawa and energy resource issues, et cetera, et cetera. And if those could be resolved, I think maybe this could be resolved. So I'll say that.
But having said that, I don't think that we should look at this issue as a balance book issue. We could easily walk out and say, Trans Mountain is going to cost $30 or $40 billion, and it's all to the benefit or largely the benefit of Alberta. Therefore, Ontario PI shouldn't be paying in that. So that goes on our side of the ledger. I could say New Brunswick Orphan Wells, I don't have any, all the Orphan Wells money's going to Alberta. I want my share of Orphan Well money. That would be stupid. You could do that.
I think we've got to get away from the balance sheet issues, and I think we've got to look at it as a national issue of concern to this entire country and goes to the definition of who we are as a country. First of all, our pension plans and asset managers are, in my view, the best reputed in the world. I don't know why we would want to do anything that would impugn their credibility.
Secondly, it's a frigging country. And I'm proud that we have a highway that goes coast to coast. I'm proud that we have a railroad that goes coast to coast. I'm proud that I can get my healthcare and have it anywhere in Canada, totally portable. I don't have to worry about where I'm born or how much money I have in my pocket. And I'm proud that I have a pension plan that covers me from coast to coast in this country. What I'd like to see is a prime minister or leader to stand up and say, it's a friggin' country, not a collection of provincial entities, for God's sakes. Stop the whining and complaining and let's concentrate on things that are more important. That's right. Well--
PETER HAYNES: That I've never had happened at this conference before. I'll tell you right now.
FRANK MCKENNA: I get carried away.
CHRIS KRUEGER: Feedback on the podcast will be good.
PETER HAYNES: Yeah. It'll definitely be good, for sure. Well, OK. So I got you on that one. We're going to move on, but we will have the ministers talking. They'll hear more about this in the press over the next little while. Let's finish up on India. We have a row with India. And there will be people in this audience who may not be fully up to speed, may not be from Canada, who don't understand why Canada and India are not getting along right now. Can you-- this is something that happened over a month ago, but can you, for the audience's benefit, bring us forward to where we are today with respect to the relationship between Canada and India?
FRANK MCKENNA: Well, I'll try to give a shorthand version because it's a long tale. But the bottom line is we have a large Sikh population in Canada, second largest outside of India. In fact, we have more Sikhs in our cabinet in Canada than they do in India. So it's a large-- and it's also concentrated in a number of communities. So 18 constituencies federally have a large proportion of Sikh population. So it's influential politically. So that.
And now there's a movement within India, which is really largely being suppressed in India, to try to declare Khalistan a separate state. In Canada, we have taken the view that we respect one India, that we are not supporting a separation in India. Would be crazy for us to do otherwise. But we're saying that in a fairly muted voice.
If the government of Modi in India thinks that Canada is being excessively lenient with this Indian separatist movement, which doesn't even reflect all Sikhs in Canada, may not even reflect a minority, but they think that we've been too lenient in allowing this dissent to take place. We have votes taking place this week in Surrey on this Khalistan separation movement. We've had votes taking place before in Brampton, Mississauga, for example. So the Indian government has not been happy about this.
So we start with that as a backdrop. And then we flip forward to the fact that a Canadian citizen was assassinated in Surrey a month or two ago. And then it turns out the government of Canada feel they have credible evidence linking it directly to the Indian government. Our Prime Minister took this to Modi, which is the respectful thing to do. Our intelligence services took it to their intelligence services. Our diplomats took it to their diplomats, explaining that this is the case.
And the government of Canada did not want this to become a public issue, but they were threatened. I use those terms by the press who knew about this because of an intelligence leak, that unless you go public with this, we are going to publish this in the next 24 hours.
So the government, in my view, making a mistake, went public with it. And the bottom line is the government of Canada has ended up exciting the government of India to retaliate. They have expelled 41 of our diplomats, and they've really called us out. We've expelled one diplomat, that being the head of the India Intelligence Services who is in Canada.
So to cut to the chase, we've got a big problem now with India, which will get worse when charges are actually laid if those charges really directly relate the assassins of this Sikh leader to the government of India. So that's where we stand.
PETER HAYNES: And I know in our previous podcast you'd indicated you hoped that the timeline for these types of cases can't be controlled, but realistically the hope is that it would be sooner than later. Have you read anything or heard of anything that suggests that this is sooner than later or do we have a long time to wait before it gets--
FRANK MCKENNA: Well, on that one, I'm going to try to be careful here. Information has been given to me that it'll be sooner rather than later.
PETER HAYNES: OK.
FRANK MCKENNA: I'll leave it at that. But it's just not good news. In fairness, both governments are now, I think, pulling back a little bit. The government of Canada did not do a major expulsion in retaliation. The government of India is now processing visas in a kind of a normal way. So we're hoping to normalize things, but right now it's a bit of a red hot dispute.
PETER HAYNES: Well, we're right at our time here. Obviously, we could spend an entire day on these topics, but we certainly have a Washington insider with lots of insights that all of us at TD are proud to have as part of our team. Chris, thanks. And you brought your green tie, I noticed. I should have mentioned that earlier.
CHRIS KRUEGER: Got the memo.
PETER HAYNES: That was impressive.
CHRIS KRUEGER: And the pen.
PETER HAYNES: And the pen. Excellent. And obviously, Frank, I appreciate your passion as always, and we'll look forward to our chat again next month. And for everyone in the audience, thank you.
FRANK MCKENNA: Thank you.
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Deputy Chair, TD Securities
Deputy Chair, TD Securities
Deputy Chair, TD Securities
As Deputy Chair, Frank is focused on supporting TD Securities' continued global expansion. He has been an executive with TD Bank Group since 2006 and previously served as Premier of New Brunswick and as Canadian Ambassador to the United States.
Managing Director, Washington Research Group - Macro, Trade, Fiscal & Tax Policy, TD Cowen
Managing Director, Washington Research Group - Macro, Trade, Fiscal & Tax Policy, TD Cowen
Managing Director, Washington Research Group - Macro, Trade, Fiscal & Tax Policy, TD Cowen
Chris Krueger joined TD Cowen Washington Research Group in August 2016 as the Washington Strategist. Mr. Krueger and the TD Cowen Washington Research Group were recently named #2 in the Institutional Investor Washington Strategy category, where he had been consistently ranked for the past decade along with WRG. Mr. Krueger publishes the DC Download, a must-read daily for Wall Street portfolio managers who want a quick look at the top Washington stories and their impact on the capital markets. Mr. Krueger covers DC macro, fiscal, tax and trade policy.
He held similar positions at Guggenheim Securities, MF Global, Concept Capital, and Potomac Research Group. Earlier he worked for nearly four years on the senior staff of the House of Representatives. He has also worked on several local, state, and federal political campaigns across the country.
Mr. Krueger holds a BA from the University of Vermont and an MA in international relations from King’s College London. He appears frequently on CNBC and Bloomberg and is widely quoted in The Wall Street Journal, FT, Axios, New York Times, Washington Post, and POLITICO. He also speaks regularly at industry events and conferences, including the Milken Institute Global Conference, National Organization of Investment Professionals, and the New York Stock Exchange.
Managing Director and Head of Index and Market Structure Research, TD Securities
Managing Director and Head of Index and Market Structure Research, TD Securities
Managing Director and Head of Index and Market Structure Research, TD Securities
Peter joined TD Securities in June 1995 and currently leads our Index and Market Structure research team. He also manages some key institutional relationships across the trading floor and hosts two podcast series: one on market structure and one on geopolitics. He started his career at the Toronto Stock Exchange in its index and derivatives marketing department before moving to Credit Lyonnais in Montreal. Peter is a member of S&P’s U.S., Canadian and Global Index Advisory Panels, and spent four years on the Ontario Securities Commission’s Market Structure Advisory Committee.