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Welcome to Financial Freestyle. I'm Ross Mack, and this is sponsored by Vanguard.Welcome to Financial Freestyle here on Yahoo Finance, and I'm your host, Ross Mack. Now look, no matter where you are on your journey to obtaining wealth, you always got to start somewhere and that's why you're at the right place because I'm talking to some of the most influential people and uncovering their world to success, and today's no different, as I'm talking to Fred Hochberg, former chairman of the Export Import Bank. Fred, how you doing, man? Thanks so much for joining us.

Good to

be here.

Good to be here with you today.

So listen, obviously your resume is extremely thick, but I think to my guests, to our audience, please explain who is Fred Hochberg.

Wow, sometimes people think I'm thick, not just my resume. Uh.

You and I both, I, I, I need to go to the gym rightnow.

So, um, well, I'm a New Yorker originally. I actually now live in Florida and um I'm a very lucky guy in many ways. Uh, I have a partner of 32 years, uh who we actually met at a political fundraiser for David Dinkins back in '93, um and I'm fortunate I served in the both Clinton and Obama administrations and actually nine days in the Bush administration, but we'll get back to that if you want, and uhUm, I was in business for 20 years. I started a what was a small family business, and, uh, worked there for just under 20 years and became the president and took it public, uh, in 1987, company called Lillian and Vernon.And um and also I I wrote a book a few years ago about trade, which is pretty relevant today. It's called Trade is not a Full Letter Word, and we all talk about tariffs and trade, you would think that trade is one of the worst things we could do, but uh I beg to differ.Well,

I think this is going to really help shape our conversation today. But before we even dive into kind of trading tariffs, right, let's actually talk about what the Export and Import Bank is, right? Like what exactly is it and kind of let's talk about your tenure there, because clearly you were the longest tenured chairman in the history, so I would love to one.You know, hopefully talk about what you did in that role and also what the uh the Export Import Bank is.

So the Export-Import Bank was started by Franklin Delano Roosevelt, FDR in the in the depths of the depression, and FDR realized that one of the things that wouldHelp our country grow is get more people working, and how do we get more people working? Well, exports are one way to do that. Why aren't companies and people exporting? Well, sometime there's either a a perceived fear or real fear of the risk and the financing. So that's how the Export Import Bank got started, 1934.There was about 1 or 2 others, United Kingdom had one as well. And um the first transaction the Export-Import Bank ever did, first of all, it was actually chartered to do business with Russia, believe it or not, and that did not go forward. Then the real first transaction was to Cuba, also a country that we do not trade with today.And what we did for Cuba, interestingly, we took American silver mined in America, and minted coins for the Cuban government to use as currency, and we did that in Philadelphia. So the actual first export was American silver coinage that we actually minted in Philadelphia. But today, the Export Import Bank supports American companies to be competitive globally.Sometime when they're selling products overseas, and 90% of the customers were small businesses, small but even food companies, you name it, um, or large companies like Boeing or GE, but their customer overseas may not be able to get financing. Um, 2/3 of the customers lost were in developing countries which have a harder, less banking, less of a loan.Uh, of origination support. So the export input bank stands ready for a fee. We will guarantee a loan to a foreign buyer so they could buy American goods. We rather than buy American goods like American Boeing planes than buy Airbus planes, for example. So we would provide the financing, we would essentially insure the loans, so the bank would feel more comfortable making a loan knowing it's insured by the US government. And in the end,We made a profit.Uh, under my term there in the eight years, as you mentioned, we made $3.8 billion in profit in cash, we sent to the American taxpayers. So we actually did it at a profit and also supported something like 200 1.4 million jobs through that period of time.

That's extremely impressive. So one, congrats, obviously, right? You had the longest standing tenure there. So in your eight years, what would you say, I mean, you might have already said it, right, actually having a, uh, you know, to the tune of a little over 3 billion, but what would you say your best memory is, and you call it your proudest accomplishment in those eight years?

I think my proudest to come first of all was meeting American entrepreneurs, going into company after company factory, you know, there's a company in Ohio that makes uh basketball courts, and we would actually they would uh take the American lumber, mill it, create it in basketball court, pack it into a pallet, and we'd ship it overseas. So the idea that we were exporting.Basketball courts is not something you would normally think about as a US export. Um, so one meeting all these small businesses and entrepreneurs were making innovative products that we were able to sell overseas. That was, that was exciting. And the other thing that I tried to do there.Uh, and I felt successful at Ross, I will tell you is that is making sure we acted like a business. When I got to Export-Import Bank, we had some transactions, someThat were sitting in-house, I'm not exaggerating, for 2 or 3 years, and I said that is not providing good customer service. So we put in a program that we wanted and we got 99% of all transactions out within 3 months, and something like 98% out in 30 days to make sure that we did fast turnaround, so that if you're trying to sell goods overseas and create jobs in America, we were there to support you.

Right? You've seen.Especially in your 8 years, right? Excuse me, running XM, right? You obviously seeing kind of a deficit when it might be, you know, more imports and exports. And now, in our current administration, there's a huge focus and crackdown on effectively trying to curb certain uh imports and actually kind of spur, you know, more, you know, I don't know if you want to call it, you know, US jobs and US exports, butIf you were currently running XM right now.What would your view be on tariffs and how would you effectively try to keep uh American businesses competitive?

Well, the big problem with the tariffs right now is what people call, and it's not always understood so well, intermediate goods, and what do I mean by that?If we're taxing steel and aluminum and things like that coming into our country, it makes the exports we make more expensive because all of a sudden the steel you're buying is 25% more expensive. And it's not just foreign steel. What happens is, of course, is the US steel manufacturers, they raise their prices to meet the tariffs. So there's no bargain by buying US made steel. They just simply got an opportunity to raise their prices 25%, andBecause why they don't need to undercut foreign competition. But what's that doing is, it will make when we want to export cars or airplanes, or many, many products that you steal and aluminum just to name two products, more expensive and makes US exports less competitive and actually hurts job growth. So, from anExport Import Bank, I would, I was opposed to the tariffs. They don't really help us, and they also hurt consumers. They're raising the cost of buying groceries, uh, putting food on the table, uh, and ultimately raising the cost of buying a car, it's going to raise the cost of air travel because those airplanes are gonna cost more money.Mm.

So, right, and I would clearly you've seen this at the highest level, right, to get a sense of kind of what all of our uh trade deficits would be kind of respective to all different countries and trade partners, but kind of putting it in layman's terms, right? AndWhen this came out, I think the average person was like, oh my, oh my God, we're tariffing 150 countries all at once, you know, in countries some people may not have even heard, like, wait, why are we tariffing them this much? But there are a lot of people that are in favor of the tariffs and their argument would be, well, hey, you guys don't even realize it, but they're, they've been, they have been tariffing US goods coming into their country, soObviously you stated that you aren't a favor, in favor of terrorists, but could you make an argument that one.What this current administration is doing can be helpful, however, maybe the way they're going about it isn't helpful.

Well, we could consider a couple some industries where we say we need more capacity here. Chips is a good example. It's one of the things President President Biden did was the Chips Act. How do we encourage more chip manufacturing in America? So there are many ways of encouraging manufacturing in America without tariffs, for one.Uh, we probably have a deficit right now or not enough sort of military industrial capacity. Um, we've, you know, so we would need to have more, we probably need more of that for national security here in the United States. I'm not sure that tariffs are the way to get there. I think we may have to find other incentives, whether they be tax incentives or others to encourage more that kind of manufacturing. But let's remember one thing about8 or 9%, maybe 10% of the American workforce is involved in manufacturing. So first of all, that's it. And let's remember, half of those people are not in factories. They're the people, they're the lawyers, human resources, uh, marketing, sales, uh, accounting, uh, finance, so maybe 5% of people are actually in factories. So we have to think about what are we really trying to do.And I'm sorry to say if you ask parents, would you like your son or daughter to work in manufacturing in a factory, it's like 80% say, no, I don't want my kid doing that. I want them doing other things, so it's not clear that that's really gonna do what we're looking to do.

I love that response. We're going to take a quick break, but when we come back, we're gonna have more from Fred Hochberg, former chairman of Export Import Bank.Welcome back to Financial Freestyle. I'm your host, Ross Smack. And listen, we are in the midst of a very nice debate. I won't even call it a debate, right, because it's very informational for me, informative because one,I'm an investor and I think in the 1st 100 days of this new administration, we have one of the worst stock market starts to the year. And so you ask why, well, it's based on our trade policy. It's based on tariffs, etc. So, you know, Fred, obviously you just wrote an article that was in a Fortune magazine, right? And it's pretty much your view on tariffs. Can you please elaborate on it?

Well, I think tariffs, let's be tariffs begin with the word tea, it's a tax. It's nothing more than a tax. It's a tax on goods coming into America, and by and large, American consumers and American companies pay that tax. It's not paid by foreigners, it's paid by us.Now, it's true, some companies, maybe a Walmart can go to their supplier overseas and say, hey, can you make this a little cheaper, so the tariff will have less of an impact on the retail, but basically it's a tax on American consumers and gonna cost them.Estimates are $1000 to $1500 per year as those tariffs go in.And, you know, we, a lot of things we import, we don't make here anymore, nor do we want to make here anymore. We're not making sneakers and sweatshirts and t-shirts like that. We don't make that anymore, and I'm not sure we're gonna want to be making that again, so it's not clear why we would wanna go that route. Um.So, and I think it does, it makes us less competitive. We talked a little bit before, on exporting, because if you, if it costs more to produce the goods, you're gonna have to sell it at a higher price, and we are the 2nd largest exporter in the entire world, second only to China. So, and in many ways, we may be a bigger exporter than China because we export a lot of services.This, this TV show, movies, uh, entertainment, financial services, and those are a little harder to calculate, so we're the second largest, and I believe we've undercounted our services a little bit. So, it hurts us competitively, and lastly, we are really angering a lot of our regular customers, and the last thing you want to do in business is make your customer angry with you. Uh, I live in Florida, uh, Canadian tourists.They are not coming to Florida. They've cut back drastically.Tourism is a major export. It's a service export. People come to our country from overseas, they eat in our restaurants, they go to McDonald's, they stay in hotels, they fly in American Airlines, they ride in taxis. So if that pulls back a little bit, that actually hurts everyday workers. Um, give you another example, Chinese tourists spent more in our country per visitor per capita than from any other country, like $5000 per capita.Well, we have been the last few years giving it a bad idea for Chinese tourists to come here. They don't feel as welcome. And I think that's bad for our economy. And you know what? It's also bad because the more we get to know Chinese people, the more Chinese people would get to know everyday Americans would actually be better about finding ways to build bridges versus greater and greater divides.

Great perspective, right? I, I don't disagree with anything you said, right? And obviously, you know, I don't want to date this episode because it had come out, you know, in a week or two. But just yesterday, there was a report that, uh, as you bring up China, there was a report that, you know, China is willing to effectively come to the negotiating table, right? And obviously, there have been reports that other countries are close to a deal. And so kind of using your umKind of your experience, obviously at the helm of Export-Import Bank and understanding, you know, effectively the leverage when it comes to negotiating and maybe game theory. Where do you see kind of, and obviously this was extremely abrupt and it took a lot of people by storm with the exception of Warren Buffett.Who started to liquidate a lot of his portfolio pretty early on. I think I need to call him and actually understand why he didn't tell me that. But right, understanding of what you know, where do you think us as America ends up when it comes to negotiating? Because obviously you talked about the trickle down effect, which effectively, like you said,We are angering our trade partners and more importantly, that might impact tourism, right? But do you think America comes out on top, uh, or does this actually hurt us in the long run?

The tariffs, I think the tariffs are gonna hurt us in the long run. It's gonna hurt us in a couple, one, it is raising the cost for everyday Americans, and I, my hunch is, at the end of the day, I don't know how this will end, but tariffs will be basically higher than they were last year, because Trump believes in tariffs. They may not be as high as the kind of over 100% he has in China, but it's not gonna be, it's not going down to 0%.So one, that's gonna cost us more money in the end, andI think it will impede some trade. I mean, one of the things that's really made us distinct from China and many other countries, we have also welcomed in the innovation that uh foreign goods and imported goods bring, whether it be the foods we eat, whether it's the iPhone that we rely on, whether it's cars, American cars are better today, and I think part of the reason they're better today is we've had, they had foreign competition that they had to meet.You know, but nowadays, you know, Honda, Mercedes, BMW, Toyota, they all manufacture in America, but they've also improved the quality and the reliability of American cars. So we've benefited by the trade going back and forth. That shouldn't be open and free, but we have benefited by that, and I think that's at risk now. And we've also benefited, you know, the whole idea of originally NAFTA, the North America Free Trade Agreement, and then as President Trump renegotiated the US.Mexico-Canadian agreement, USMCA was to make the United States, Mexico, and Canada a competitive force globally. Believe it or not, it was started by Ronald Reagan. He's the one who was afraid of Europe getting together and said, we better band together with Canada and Mexico, so we can meet the competition and take advantage of the resources in 3 countries. I think that was the right way to go.

Well,as we talk about trade, I think it's only right, kind of on this latter half of our episode, right, to segue and talk about your book, right? Trade, it's not a four letter word. Tell us about the book and what can our viewers get by actually buying yourbook.

So, by the way, Father's Day is coming up, Mother's Day is coming up, a perfect time to buy trade is not a full letter word. Uh.So I wrote the book, um, I had never planned on writing a book. I was actually uh at the University of Chicago. I was a fellow and uh I was there for eight weeks, and you run a seminar and uh I wasn't sure the Export-Import Bank would get a lot of college students super excited.So I came up with the idea of, let me call my seminar, trade is not a full letter word, and we'll talk about trade. Uh, I didn't want to call it resetting America's trade agenda in the 21st century, that would put you and me and everybody else to sleep. So I came up with trade is not a full letter word, and the students and a couple of the guest speakers said,So you're gonna make this a book, aren't you? And I go, no. And after 3 or 4 weeks ago, all right, I guess I should really think about this. I mean, people keep saying, why don't you write a book about it? So that's why I wrote the book, and I tried to do it to explain in everyday language, how does trade work, what are tariffs about, and I talk about different products, whether it's American cars, I talk about the banana.The most popular American fruit, we consume 27 pounds per capita of bananas a year per person. That's a lot of bananas. Um, I talk about a college education and things like Disney World, those are exports, uh, TV shows are exports. I wanted people to understand.You know, trade is not just a a foreign car on the streets of America, it is goods we buy and sell. And if we want to sell goods, we also need to buy goods cause that creates relationships with these different countries. So that was the idea behind the book, um.It got a lot of great notices, um, it was featured in The Wall Street Journal, The Washington Post, The New York Post, was on a couple of TV shows, so, uh, and we're talking about it today.

I love it. Well, one, congrats. I look forward to checking it out. And then if I was to say our last question, right?Fred, if you could go back in time and have a conversation with your 18 year old self, what advice would yougive yourself?

Well, two thoughts I have. One, and I really wish I did this, I wish I kept the journal, you know, it sounds like an old fashioned idea, but, you know, right, keeping a journal of what your impressions are, what your feelings are, what you learned on a different day, and keeping that is really would have been really valuable, um, as I got older in life to sort of think back, you know, nowadays with email it's a little easier because it's all in your email and you can keep it, you know, we we're used to writing a lot. So that's one thing.The other thing I would tell you, I was very fortunate, Ross, to um work for both President Clinton and President Obama, and as I told you, 9 days for President Bush, but I'll get it, but working in government was a great experience, and whether you get a job at a high school or college and work for a city council person, or a member of Congress, or someone who's on the board of education, I think it that kind of exposure about how our country works.Uh, was invaluable, and I wish I had done that before I got to the age of 40.

Well, one,You have, uh, lived a remarkable life and uh I just want to thank you for being a guest here. But that's it for this episode of Financial Freestyle. I'm your host, Ross Mack. If you're watching this on YouTube, make sure that you click that or put your phone out and actually hit that QR code. Make sure you share this with a friend, a family member, a cousin, a former teacher, the class clown, whatever it is, but make sure you're here every Monday.And I'll see you next

week. This content was not intended to be financial advice and should not be used as a substitute for professional financial services.