Speaker 1: A FED chair, a former Treasury secretary, a former White
Speaker 1: House Chief economist, two CEOs who turned around their companies,
Speaker 1: and two private equity competitors with different takes on their business.
Speaker 1: This is a special best of additional Bloomberg Wall Street Week.
Speaker 1: I'm David Weston. Each week we bring you interviews with
Speaker 1: some of the top minds in government, economics, business and finance,
Speaker 1: with the goal of taking a broader and deeper look
Speaker 1: at the world of investing. As we head into the
Speaker 1: holiday season, we thought we'd pull together some of the
Speaker 1: highlights from the year so far across a range of subjects,
Speaker 1: and we start at the top with the person everyone
Speaker 1: on Global Wall Street talks about and speculates about just
Speaker 1: about every day. We had the rare opportunity to sit
Speaker 1: with FED Chair J Powell for an extended one on
Speaker 1: one covera focus not so much on what he thought
Speaker 1: the FED would do at any given meeting, but instead
Speaker 1: on how he approaches his job as steward of monetary policy,
Speaker 1: what his theory of the case is. We started with
Speaker 1: one of the big surprises even mysteries this year. While
Speaker 1: the US economy continues to charge ahead despite all those
Speaker 1: rate hikes, he's delivered at record speed.
Speaker 2: We certainly have a very resilient economy on our hands.
Speaker 2: We've got the economy growing strongly. If you think back
Speaker 2: a year, many forecasts called for the US economy to
Speaker 2: be in recession this year. Not only has that not happened,
Speaker 2: growth is now running for this year above its a
Speaker 2: longer run trend. So that's been a surprise, driven largely
Speaker 2: by consumer spending, driven by a very strong job market
Speaker 2: with people getting jobs with high first time nominal wages.
Speaker 2: And then as inflation has come down, real wages which
Speaker 2: is spurring spending, and we've also had inflation coming down.
Speaker 2: You know that's it really is a story of much
Speaker 2: stronger demand. There may also be there may be some
Speaker 2: ways in which the economy is.
Speaker 3: Less affected by interest rates.
Speaker 2: It's hard to know precisely, but for example, companies, many companies,
Speaker 2: any company with bond market access will have termed out
Speaker 2: its debt right and therefore may not be feeling the
Speaker 2: effects of higher rates.
Speaker 3: The same may be.
Speaker 2: True of homeowners who have a long term, fixed rate,
Speaker 2: low rate mortgage, who then are therefore not because it's
Speaker 2: not an adjustable rate or a higher rate. They're not
Speaker 2: feeling that increase in rates, so the economy may be
Speaker 2: somewhat less susceptible to the effects of rate increases. On
Speaker 2: the other hand, if you look at look at interrat
Speaker 2: sensitive spending, these are very much the the the places
Speaker 2: where we see where we expect to see and do
Speaker 2: see effects. So for example, in housing or in you know,
Speaker 2: the housing effector has been sector has been very affected
Speaker 2: by higher rates.
Speaker 3: As purchases of durable goods.
Speaker 2: If you look at surveys, people will not say that
Speaker 2: it's a good time to buy a car or a house.
Speaker 3: Quite the contrary.
Speaker 2: So we see policy working through its usual channels. It
Speaker 2: may just be that rates haven't been high enough for
Speaker 2: long enough. And again it's all happening in a context
Speaker 2: of very strong demand.
Speaker 1: We've heard other speculators maybe the terming out of debt,
Speaker 1: as you say, both corporate debt and hushole debt may
Speaker 1: diminish the effectiveness of rate hikes. Do you have a
Speaker 1: view on whether that's true, And if it is true,
Speaker 1: what does it say about mante posy. Does it mean
Speaker 1: you have to go farther in the rate hikes or
Speaker 1: do you just not have the power to affect it?
Speaker 2: So no, I don't think that there's a fundamental shift
Speaker 2: in the way that interest rates affect the economy. There
Speaker 2: may be some differences in this cycle because of what
Speaker 2: I mentioned. As I mentioned, we are seeing those the
Speaker 2: effects where we expect to see them, which is intrasensitive
Speaker 2: spending and also asset prices to some extent, and the
Speaker 2: exchange rate, which you're also seeing a strong exchange rate,
Speaker 2: which is disinflationary. I don't think there's a fundamental change
Speaker 2: in the way monetary policy affects the economy. And again
Speaker 2: it goes back to just very strong demand. We take
Speaker 2: the economy as it is, We take fiscal policy and
Speaker 2: the economy and all the things we don't control, they
Speaker 2: come to us, and we conduct policy always to achieve
Speaker 2: maximum employment and stable prices. So we just take what comes.
Speaker 2: The fact that we have a strong, growing economy, a
Speaker 2: strong growing labor market.
Speaker 4: And.
Speaker 3: Inflation coming down.
Speaker 2: These are the elements that we want to see that
Speaker 2: to achieve the outcome we want. It may take more time,
Speaker 2: but ultimately this is the kind of thing you would
Speaker 2: want to see along the path to getting through this
Speaker 2: without a big increase in unemployment.
Speaker 1: How much effect thus far has the FED had we
Speaker 1: all have memorized how long and variable lags? How long
Speaker 1: and how variable and where are you in that process?
Speaker 1: Are you at the twenty five percent point, the fiferent
Speaker 1: in terms of seeing it in the effect in the
Speaker 1: real economy, there's no precision in.
Speaker 3: Our understanding of how long legs are.
Speaker 2: One thing that has changed in the modern era is
Speaker 2: that markets now, over the course of the last thirty years,
Speaker 2: central banks that have decided, instead of being secretive, to
Speaker 2: be very transparent. And what that has meant is that
Speaker 2: markets move actually well in anticipation, well before our policy moves.
Speaker 2: So the transmission from policy moves to financial conditions actually
Speaker 2: happens before the moves now, whereas that was not the
Speaker 2: case fifty years ago when Milton Friedman coined the phrase
Speaker 2: along and variable legs. But now you have financial conditions
Speaker 2: changing and the questions how does it affect the economy.
Speaker 2: The standard channels are asset prices in such intrasensitive spending
Speaker 2: in the exchange rate, for example, And again we do
Speaker 2: see that happening, just not as fast as we would like,
Speaker 2: and I would attribute some of that to just stronger demand.
Speaker 2: Household savings were turned out to be higher household spending
Speaker 2: has been stronger, and that's by far the largest part
Speaker 2: of the economy.
Speaker 1: In order to conduct monetary policy effectively, do you need
Speaker 1: at least hypothesis about how much has already hit the economy,
Speaker 1: because it's hard to know how much more you need
Speaker 1: to do if you don't know how far you've come.
Speaker 2: So on lags, I think if you think back, it's
Speaker 2: been a year now since the last seventy five basis
Speaker 2: point hike we did. It was the November meeting in
Speaker 2: twenty twenty two. The first one was in June, so
Speaker 2: it's more than a year, so we should be seeing
Speaker 2: the effects. By the way, they don't all just arrive
Speaker 2: on one day. They arrive and then they're thought to
Speaker 2: peak and then to diminish. So there's a lot of
Speaker 2: uncertainty around lags, and one of the reasons why we
Speaker 2: have slowed down significantly this year is to give monetary
Speaker 2: policy time to work. The truth is, though you can
Speaker 2: find academic support for different speeds and duration of lags,
Speaker 2: So we have to use our eyes and a little
Speaker 2: bit of risk management in patients in slowing down the
Speaker 2: pace to make sure that we we are seeing the
Speaker 2: full effects, and I think again that's part of why
Speaker 2: we've slowed down this year. We went very quickly in
Speaker 2: twenty twenty two to catch up to where we needed
Speaker 2: to be, and now we're moving carefully with these decisions.
Speaker 1: After we spoke with Chair Powell, our special Wall Street
Speaker 1: Week contributor and former treasure Secretary Larry Summers warned us
Speaker 1: about what he thought Powell had not given sufficient attention
Speaker 1: to that looming federal deficit and what it means for
Speaker 1: the economy and for monetary policy.
Speaker 5: I didn't find anything to strongly disagree with in what
Speaker 5: Chairman Powell said, but there was a big newfoundland of
Speaker 5: a dog that wasn't barking as he was speaking. And
Speaker 5: that's everything about the federal fiscal situation. That matters two ways.
Speaker 5: If there's more debt and much bigger deficits, that means
Speaker 5: more demand in the economy, and that raises the neutral
Speaker 5: rate now and raises even more the prospective neutral rate
Speaker 5: in the future.
Speaker 6: That's one important length.
Speaker 5: The other important length is that when you're trying to
Speaker 5: sell huge amounts of long term debt because you have
Speaker 5: very big.
Speaker 6: Deficits, its price goes down, and that.
Speaker 5: Means longer, higher long term yields, a rising term premium.
Speaker 6: And I think you've got.
Speaker 5: Both of those phenomena going on, and realization that the
Speaker 5: neutral rates likely to be higher because of fiscal policy
Speaker 5: and the supply absorption aspect. And I understand that the
Speaker 5: Fed's job is not to get involved in fiscal policy,
Speaker 5: but I think over time, the FED is going to
Speaker 5: have to, as the monetary authority of the country, going
Speaker 5: to have to engage on some of these questions about
Speaker 5: treasury debt, especially given the magnitude of its own balance
Speaker 5: sheet and the magnitude of the losses that acting as
Speaker 5: the agent of the treasury and taxpayers, the very substantial
Speaker 5: losses that have been taken in a marked to market
Speaker 5: sense on the Fed's balance sheet. So those fiscal issues
Speaker 5: have to be at the center, it seems to me
Speaker 5: of a discussion of interest rate issues.
Speaker 1: So pick up on exactly what that means for the FED,
Speaker 1: because J. Paul didn't deny that, although he said there
Speaker 1: are a lot of factors, he thinks that's just one
Speaker 1: factor going into what's going on the twenty five year yield,
Speaker 1: for example, or thirty year yield. Right now, he said
Speaker 1: it's too complicate. He doesn't really know, but he said,
Speaker 1: we have to take that as it is. It doesn't
Speaker 1: change our policy if you are exactly right.
Speaker 7: And I assume you are.
Speaker 1: How does it change the Fed's policy monetary policy right now?
Speaker 6: Well, I think there are two separate parts of it.
Speaker 5: Insofar as the neutral rate is being pushed up by
Speaker 5: higher fiscal deficits, that's a thing that means the FED
Speaker 5: has to raise the actual rate in order to keep
Speaker 5: the same degree of balance between the accelerator and the brakes.
Speaker 6: Insofar as the interest rate.
Speaker 5: Is going up because of some kind of term premium,
Speaker 5: and that's important. That's restraint that's being applied to the economy.
Speaker 5: That's the break, and it might substitute for a break
Speaker 5: the FED would otherwise have to provide. So it's not
Speaker 5: enough for the FED to recognize that rates are going up.
Speaker 5: It has to implicitly be forming a view as to
Speaker 5: what the cause is. And I don't think that's analytically
Speaker 5: easy at this point. And it's sort of the first
Speaker 5: rule of mine fields to step gingerly.
Speaker 1: That was special Wall Street Week contributor Larry Summers of Harvard.
Speaker 7: Coming up.
Speaker 1: We turned to another economist, doctor Cecilia Rouse about where
Speaker 1: the economy is headed as we head into an uncertain
Speaker 1: twenty twenty four. That's next don Wall Street Week on Bloomberg.
Speaker 1: This is a special additional Wall Street Week bringing you
Speaker 1: some of the most important interviews from twenty twenty three.
Speaker 7: I'm David Weston.
Speaker 1: Earlier this year, Cecilia Rouse stepped down as chair of
Speaker 1: President Biden's Council of Economic Advisors and agreed to take
Speaker 1: over as president of the Brookings Institution as of the
Speaker 1: first of the year.
Speaker 7: We talked with her earlier this.
Speaker 1: Month after US jobs numbers came in a bit lower
Speaker 1: than expected, and asked what they told us about where
Speaker 1: the economy is headed.
Speaker 8: I think we are seeing the slowing of the labor market,
Speaker 8: which has been long anticipated. Some might say what took
Speaker 8: so long, But what we see is that employees growth
Speaker 8: remains healthy. Like if we were to talk pre pandemic.
Speaker 8: An average job growth if we look over the last
Speaker 8: three months, has been just over two hundred thousand jobs
Speaker 8: a month. This month it came in at one hundred
Speaker 8: and fifty. That number will be revised, but what we
Speaker 8: see is healthy job growth, which is consistent with an
Speaker 8: economy that is powering along, but which is coming down
Speaker 8: from the very high growth we had as the economy
Speaker 8: recovered from the pandemic. I think these numbers will be
Speaker 8: welcomed by the FED. As I said, I think many
Speaker 8: economists will see this as the natural course of the
Speaker 8: economy getting back to normal.
Speaker 1: Well, no offense to the economists such as you, but
Speaker 1: and you've been off on some few things recently, and
Speaker 1: let me talk about that specifically, the relationship between the
Speaker 1: labor market on the one hand and inflation on the other.
Speaker 1: We thought we knew what that was, that it seemed
Speaker 1: to really the relationship went away, that Phillips currency knew
Speaker 1: really flat.
Speaker 7: Where are we now?
Speaker 1: Do we have a theory about what the labor market
Speaker 1: means for inflation?
Speaker 8: So you know, the reality is that in economics there's
Speaker 8: not a fabulous theory and one theory of inflation. And
Speaker 8: I think that is part of the challenge. Another part
Speaker 8: of the challenge is what was the source. We know
Speaker 8: that we had unprecedented supply challenges due to the pandemic,
Speaker 8: both in terms of getting goods to people manufacturing goods
Speaker 8: because people have a part of that process and with
Speaker 8: the pandemic they couldn't show up to work. And then
Speaker 8: we also know we had unprecedented demand because of the
Speaker 8: remarkable support that the federal government here and abroad provided
Speaker 8: to consumers and businesses to get them through the pandemic.
Speaker 8: So we know we had this mismatch of supply and demand.
Speaker 8: The question is which was going to win in terms
Speaker 8: of sort of regularizing faster. So I think this goes
Speaker 8: back to we hadn't seen inflation for a long time.
Speaker 8: Economics doesn't have one solid, well established theory of inflation,
Speaker 8: and the fact that we had an unprecedented shock to
Speaker 8: our domestic economy and the global economy.
Speaker 6: What we're seeing.
Speaker 8: Now is monetary authorities stepped in, the federal government stepped in,
Speaker 8: They pulled back appropriately, and the economy is getting back
Speaker 8: to normal.
Speaker 1: And as a labor economist, which you are, what about
Speaker 1: what I would call the cross tabs beyond just the
Speaker 1: overall numbers, the top line numbers. We had been having
Speaker 1: a pattern, I believe, of having some of the lower
Speaker 1: income people and people of color, some of the minorities
Speaker 1: benefit disproportionately. Is it a last in, first out sort
Speaker 1: of thing, where as you start to slow the labor
Speaker 1: market actually those are the people that get hurt the most.
Speaker 8: Well, that is a bit to remain to be seen.
Speaker 8: You are absolutely right that traditionally strong labor markets benefit
Speaker 8: those who traditionally are not helped in labor markets. So
Speaker 8: we had narrowing of, for example, racial gaps in unemployment
Speaker 8: and employment. We saw women have benefited tremendously in this recovery.
Speaker 8: What we saw in today's job report suggested a bit
Speaker 8: of a tick up in unemployment for African Americans Hispanics,
Speaker 8: but we saw overall a tickup as well, So.
Speaker 6: This remains to be seen.
Speaker 8: There have been, and you know, there are some changes
Speaker 8: in our labor market. We still have very strong growth
Speaker 8: in employment, I think overall, especially given where we are,
Speaker 8: and we see labor having more of a voice traditionally,
Speaker 8: when we see unions being stronger, that helps those who
Speaker 8: are the lower wage workers as well. We've seen increases
Speaker 8: in the minimum wage, so I think it depends. We
Speaker 8: will have to see. One thing we do believe we've
Speaker 8: also seen for African Americans is that the wage increases
Speaker 8: and the labor market increases are changes in occupations. So
Speaker 8: if they stick there, that could be more enduring. But honestly,
Speaker 8: we will see as we go. Hopefully what we see
Speaker 8: now is a labor market that is cooling. The Federal
Speaker 8: Reserve is able to pause the interest rate increases and
Speaker 8: maybe even start to decrease at some point in the
Speaker 8: future when in place inflation needs to come down a
Speaker 8: bit more. But that we maintain this strong labor market
Speaker 8: even as inflation continues to cool.
Speaker 1: You mentioned the labor unions, and certainly that has been
Speaker 1: a development through the course of this. We've had the
Speaker 1: Writers Guild, We've had the actors, we had ups and
Speaker 1: now we had the UAW with the autoworkers. More yet
Speaker 1: to come. There's still some issues depending out there. Do
Speaker 1: you have a sense or a hypothesis whether this is
Speaker 1: a fundamental shift, perhaps over the longer term, of the
Speaker 1: power between labor on the one handed capital and the other,
Speaker 1: or whether this is labor basically doing what it should
Speaker 1: be doing, which is selling at the top of the market,
Speaker 1: if you would, This is when they have the most
Speaker 1: power so get the best deal they can.
Speaker 7: But it will come back down.
Speaker 6: Again. Remains to be seen.
Speaker 8: I think in a healthy economy we have both labor
Speaker 8: has voice and we have capital the owners and the
Speaker 8: managers also have agency, and that they work together and
Speaker 8: they negotiate, because fundamentally, we want a strong economy that
Speaker 8: benefits all, but we also don't want to leave workers behind.
Speaker 8: We understand shareholders and managers have to get their returns
Speaker 8: as well. So I hope that we we rebalance that
Speaker 8: negotiation and so that we don't we have this increasing
Speaker 8: income and equality, this increasing wealth inequality, which I think
Speaker 8: is not healthy for our society, both economically nor politically.
Speaker 1: That was doctor Cecilia Rouse, who takes over as president
Speaker 1: of the Brookings Institution on January first. This is a
Speaker 1: special best out of edition of Wall Street Week. I'm
Speaker 1: David Weston. When Brian moynihan took over as CEO of
Speaker 1: Bank of America in twenty ten, his company was still
Speaker 1: reeling from the acquisition of Merrill Lynch and countrywide.
Speaker 7: Today, the second.
Speaker 1: Largest bank in the country is making record profits. Brian
Speaker 1: sat down with us at the Aspen Economic Strategy Group
Speaker 1: meetings in August against the backdrop of beautiful Mountains, the
Speaker 1: failure of several regional banks in March, and recurrent uncertainties
Speaker 1: overfunding the federal government. But throughout the year, Brian came
Speaker 1: back to the overall strength of the US.
Speaker 4: Economy because in the day, the consumption power of the
Speaker 4: United States drives economies around the world. Therefore, there's you know,
Speaker 4: US consumers spend dollars, so if you're selling stuff in dollars,
Speaker 4: you got to be exposed a dollar. And so I
Speaker 4: think the idea of some of this debate about reserve
Speaker 4: currency status, it's been tightening in the flight to quality,
Speaker 4: and the US tends to come. Now ten year bonds
Speaker 4: moved up and everybody gets moved on up. We're talking
Speaker 4: about the difference between you know, three eighty three ninety
Speaker 4: and four ten, four twenty.
Speaker 9: These are not very big moves in a grand scheme
Speaker 9: of things.
Speaker 4: It is tapping quickly, and people get excited about who
Speaker 4: trade bonds is living from the grand or impact in economy.
Speaker 4: Those moves are needed to get the ultimately yeld curve
Speaker 4: has to get back and sink or else we aren't
Speaker 4: taming the inflation or we're going to drive into a recession.
Speaker 7: When you talk about the strengthen the US dollar.
Speaker 1: Is it stronger today as a reserve currency globally than
Speaker 1: it was ten twenty years ago?
Speaker 4: And if so, whid because I think the opportunities in
Speaker 4: the US are the strongest. And that's why, you know,
Speaker 4: with a great financial system we have, with a great
Speaker 4: set of companies and innovation, we have the research universities,
Speaker 4: we have the things like if we keep investing in
Speaker 4: all that and like capitalism and you know, United States
Speaker 4: style capitalism drive, the US will always be a favorite
Speaker 4: place because other places are struggling with different systems that
Speaker 4: proved not to be as beneficial, with less innovation, less
Speaker 4: ability tackle problems, and so yes, it's interesting from time
Speaker 4: to time all what goes on. But if you think about,
Speaker 4: you know, think about the late sixties to now, we've
Speaker 4: doubled them amount of people work United States. We were
Speaker 4: supposed to be taken over by Japan inkeewers, the computers
Speaker 4: are going to get rid of all the people. The
Speaker 4: people are still working. We had to more in Vietnam.
Speaker 4: We had the political constitutional crisis and Nixon presidency.
Speaker 9: You had an oil and bark.
Speaker 4: All that stuff happened in the early seventies and still
Speaker 4: a dec you know, fifty years later, we have twice
Speaker 4: as many people work in this country.
Speaker 1: Since we talked last Brian, and we now have the
Speaker 1: proposed regulations on capital requirements from the Federal Bank regulators.
Speaker 1: We talked before, and you said one hundred basis points.
Speaker 1: As I recall, a difference in the capital requirements would
Speaker 1: amount to one hundred fifty billion dollars lest year long. Now
Speaker 1: we have the proposals. What would it mean for Bank
Speaker 1: of America and for our banking system.
Speaker 4: Well, what it does is it's not to get too
Speaker 4: technical in the grand scheme of things, but it changes
Speaker 4: the calculation of risk.
Speaker 9: Weighted assets RWA. And so the idea is that the.
Speaker 4: Estimates by the FED is it's fifteen to twenty percent
Speaker 4: of RWA increase. When you do that, then ten percent
Speaker 4: of RWA at X and ten percent of URWA at
Speaker 4: one point one times X means you have to have
Speaker 4: more capital, and so the amount of capital goes up.
Speaker 4: That then constrains lening because you can't do anything with
Speaker 4: that capital. If you did, then you'd have more rw
Speaker 4: and you have to have more capital. But I think
Speaker 4: if you step back, this industry is well capitalized. It
Speaker 4: just proved it again in another crisis. It's well managed,
Speaker 4: it's well regulated. You've had successive FED regime of chairs
Speaker 4: and people working in the chair supervision vice chair over
Speaker 4: the years say the capital is adequate. Industry, it's well,
Speaker 4: it's well managed as well capitalized. They'll be banks will fail.
Speaker 4: They fail, they failed throughout history.
Speaker 9: That happens.
Speaker 4: But since the financial crisis, more people under the tent
Speaker 4: because the issue of financial crisis, a lot of stuff
Speaker 4: wasn't a tent. The problem is if you get the
Speaker 4: capital regulations of banking system to tight, you push stuff
Speaker 4: back outside the tent.
Speaker 9: And that's a concern.
Speaker 4: So as I look at it, one, give a set
Speaker 4: of rules, we'll live with it too. It won't, you know,
Speaker 4: bank Americal adjustice business model to make it work. But
Speaker 4: what's been interesting about this is it's competitive position.
Speaker 9: United States versus Europe and others.
Speaker 4: This is making the bank industry, all banks less competitive
Speaker 4: to mid sized US companies than foreign banks are to
Speaker 4: mid sized US companies participating in the same global supply
Speaker 4: chains in those countries. That's more of a trade question
Speaker 4: and a balance of power question.
Speaker 9: That's one.
Speaker 4: And then second, I've surprised by the amount of descent
Speaker 4: that the governors of Federal Reserve. I've been working on
Speaker 4: Federal Reserve stuff for my whole career forty years now,
Speaker 4: and I was just surprised the amount of debate, which
Speaker 4: shows you that, you know, whether it's mortgage loans on
Speaker 4: one side, whether it's at tax benefits for and treatment
Speaker 4: for energy clean energy investments, or whether it's the basic
Speaker 4: trading and things like that. There's got a lot of
Speaker 4: water that's got to go over the dam here to
Speaker 4: get these rules right, because there's a debate even among
Speaker 4: the governors themselves about what the right answer.
Speaker 1: Is over the years. Brian, you said there's a role
Speaker 1: for regulation, and you'll live with the regulation as you
Speaker 1: say you will with capal parts. But what is the
Speaker 1: problem it's being addressed. That's what I don't quite understand
Speaker 1: about the crisis we had the back in March with
Speaker 1: the banks.
Speaker 7: I'm not sure this addresses that well.
Speaker 4: And that's been the debate, and that's go read the
Speaker 4: descents in the debate and the things.
Speaker 9: So strong regulation is important.
Speaker 4: Rapid growth in banks tends to come from things that
Speaker 4: turn out to be not so interesting after the fact,
Speaker 4: and so I think, you know that's the thing they
Speaker 4: need to sort of come to a common agreement on
Speaker 4: Basil three. Across the world we're just applying it with
Speaker 4: much more rigidity and requirements. And so if you look
Speaker 4: at the largest bank in France, UK and Germany, they
Speaker 4: have about half the capital requirements in the largest banks
Speaker 4: in US do. So that gets send a competitive question,
Speaker 4: and so I think people just have to look at
Speaker 4: it seriously, look at it relative to what we're trying
Speaker 4: to do here. We want the strongest banking industry. Our
Speaker 4: bank conustry has better returns, has better things. But on
Speaker 4: the other hand, our multiples are half or less than
Speaker 4: the SMP multiples. There's a reason for that, which as
Speaker 4: investors are saying, wait a second, if the capital demands
Speaker 4: don't stop, we don't sure that we can continue to invest.
Speaker 4: So there's a little bit of a counter veil here
Speaker 4: that people have to pay attention to. And then back
Speaker 4: to your point, every hundred base of points of capitals,
Speaker 4: one hundred fifty billion less loans we have Bank America
Speaker 4: could do, and this applies across what they can't be
Speaker 4: done other places.
Speaker 9: Those companies aren't that size man.
Speaker 1: That was Bank of America Chair and CEO Brian moynihan.
Speaker 7: This is a special edition of Wall Street.
Speaker 1: Week reprising some of the most important interviews we've had
Speaker 1: this year. Private equity and other forms of alternative investing
Speaker 1: has had a pretty rough time recently, going from a
Speaker 1: record year in twenty twenty one to almost freezing up
Speaker 1: in twenty twenty two and just getting going again this year.
Speaker 1: We talked to two leaders in the sector about there's
Speaker 1: somewhat different takes on a challenging business, starting with Blackstone
Speaker 1: CFO Michael cha who says the challenges may benefit his firm.
Speaker 10: Our business model is really made for times like this.
Speaker 10: At its core, you know, we're all about long term,
Speaker 10: locked up committed capital through funds structures, and what that
Speaker 10: allows us to be is patient, and it allows us
Speaker 10: obviously to have capital and time when capital is short.
Speaker 10: And indeed we have nearly two hundred billion dollars of
Speaker 10: dry powder to invest opportutunistically in the coming time period.
Speaker 10: And our history has shown that those couple of years
Speaker 10: coming out of a cycle are some of the best
Speaker 10: times to invest. So we're excited about what the future
Speaker 10: will bring.
Speaker 1: As you see that thaw, and if I can draw
Speaker 1: the analogy the green shoots coming up through the ice,
Speaker 1: more or less is the nature of the deals changing.
Speaker 1: We saw a piece in the Wall Street Journal this week.
Speaker 1: Actually Blackstone has mentioned it, the suggestive private equity is
Speaker 1: doing more smaller deals, maybe because of the uncertainty of
Speaker 1: the price of financing, even regulatory overhang. Are you Are
Speaker 1: you seeing smaller deals than you did before?
Speaker 10: I think, well, we have our own particular perspective. We
Speaker 10: scale as one of our big advantages in our private
Speaker 10: allows us to do things others can't do in our
Speaker 10: private equity business. You know, we've successfully in the last
Speaker 10: couple of years been able to engineer a couple of
Speaker 10: really large deals of partnership with Emerson in the climate
Speaker 10: technologies area. Does the name the business recently a five
Speaker 10: billion dollar take private of a business called Seevent. So
Speaker 10: we do think that's one of our edges, and so
Speaker 10: you can't paint with the broad brush that the deals
Speaker 10: are getting smaller. I do think that the development of
Speaker 10: the direct lending market, which there's been a lot of
Speaker 10: focus on in the private credit area, you know, has
Speaker 10: in this cycle, and I think secularly allows for deal
Speaker 10: making to continue, including at relative scale, in a way
Speaker 10: that maybe five ten years ago is less doable.
Speaker 7: As you look at the.
Speaker 1: Landscape out there where are the investment opportunities and how
Speaker 1: dependent on the assumptions that were done or close to
Speaker 1: done with the hiking of the rates.
Speaker 10: Sure, well, it's a multifaceted answer, and we have a
Speaker 10: broad business and so we have sort of a balanced
Speaker 10: attack and aren't relying on one single strategy. But I
Speaker 10: think for sure on the on the credit side, lending
Speaker 10: money right now in this environment is a very compelling
Speaker 10: thing to do with very good risk reward, probably some
Speaker 10: of the best risk ard we've seen in a long
Speaker 10: time in the credit area. So in things like direct lending,
Speaker 10: you know, you can generate double digit returns given where
Speaker 10: base rates are and spreads for being in the very
Speaker 10: senior most part of the capital structure with a lot
Speaker 10: of equity beneath you. So that is very attractive. In
Speaker 10: other forms of private credit, whether it's asset back credit
Speaker 10: or real estate credit, similarly, it's a very good time
Speaker 10: to investment a risk award standpoint. So that's one big theme.
Speaker 10: And then on the equity side, a little bit apropos
Speaker 10: what I talked about when I went through the deals
Speaker 10: we're doing, I'd say we're still applying some of our
Speaker 10: same key themes around sort of the sectors and areas
Speaker 10: we want to invest in, but now we think we'll
Speaker 10: do it in a more interesting environment, maybe somewhat more
Speaker 10: dislocated environment to find value. So that's really how we're
Speaker 10: approaching it.
Speaker 1: For a different approach to private equity, we talk with
Speaker 1: KKR CO head of Global Private Equity Pete Stavros about
Speaker 1: their use of shareholder capitalism to generate value well.
Speaker 11: Stakeholder capitalism for me is finding a way to not
Speaker 11: only deliver great outcomes for shareholders, but doing right by
Speaker 11: workers and the climate. And I have to say, there's
Speaker 11: tons of brilliant people working on climate issues. Obviously it's critical,
Speaker 11: there's not enough people focused on labor and so that's
Speaker 11: really my passion.
Speaker 7: A lot of it has to do with how I
Speaker 7: grew up.
Speaker 11: My dad was a construction worker for forty years, earned
Speaker 11: an hourly wage and really taught my sister and I
Speaker 11: around the dinner table what it's like being an hourly worker.
Speaker 11: You know, you don't have a voice, nobody listens to you,
Speaker 11: there's no incentive alignment, and you have no stake in
Speaker 11: the outcomes. So that ignited a passion in me from
Speaker 11: a very early age to think about these labor issues.
Speaker 11: And then when I became an investor, you know, wow,
Speaker 11: what an opportunity because you're responsible for all of these
Speaker 11: companies with all of these many employees, and if you
Speaker 11: can cascade change through a variety of a number of companies,
Speaker 11: which private equity as well suited to do, you can
Speaker 11: impact you know, thousands, if not hundreds of thousands of people.
Speaker 1: So that sounds fine, but you'll forgive me if many
Speaker 1: of us who don't understand private equity the way you do,
Speaker 1: don't associate that approach with private equity. You tend to
Speaker 1: think you go and you buy the company, you strip
Speaker 1: out costs, you'll leverage it up, you sell it.
Speaker 11: Yeah, well, but private equity is not perfect. Capitalism's not
Speaker 11: not perfect. But this is a superior way of operating
Speaker 11: a company in every respect. You can align incentives not
Speaker 11: just of the senior team, but of all of the employees,
Speaker 11: help them create wealth for themselves and create a better culture.
Speaker 11: I mean, if you can figure out a way, and
Speaker 11: we think we're on the right path here to have
Speaker 11: employees less likely to quit their jobs, more engaged on
Speaker 11: the job, you've got a better opportunity to deliver on
Speaker 11: value creation initiatives, which is the core of private The
Speaker 11: core of private equity is transformation. Take a good business,
Speaker 11: make it great, and you're not going to be as
Speaker 11: effective as you could be in that effort if you
Speaker 11: don't have everyone aligned.
Speaker 1: So that sounds great, also sounds fairly simple, is it
Speaker 1: when you actually do it? Because often the implementations were
Speaker 1: the tricky part.
Speaker 7: Lot Ye, it's incredibly difficult.
Speaker 11: So if this were easy, this would have been done
Speaker 11: fifty years ago, and there's many challenges starting with So
Speaker 11: let me just define the program.
Speaker 7: The program that.
Speaker 11: We've been working around around employee ownership is about much
Speaker 11: more than handing out stock. If it's just handing out stock,
Speaker 11: then we're in a compensation discussion, which is important, but
Speaker 11: that's not going to change cultures. As my friend Dove
Speaker 11: Seidman Alway says, you can triple people's compensation and not
Speaker 11: get ownership behaviors, which I think is very true. So
Speaker 11: we are taking ownership as the foundation as an ethos,
Speaker 11: and then on top of that, we are building a
Speaker 11: robust employee engagement effort, teaching financial literacy, opening up the
Speaker 11: business plan to all employees, financial information, sharing financials with
Speaker 11: all employees and teaching basic corporate fans so they can
Speaker 11: understand the information being shared with them. All of this stuff,
Speaker 11: taken together is what can move a culture. And to
Speaker 11: your point, it's hard. You know, day one, people say,
Speaker 11: I don't believe it. I don't believe I'm gonna have
Speaker 11: a voice in my work. I don't believe this dock's
Speaker 11: ever going to be worth anything. To your point, I've
Speaker 11: read about private equity. You know, I'll believe it when
Speaker 11: I see it. Another challenge is CEOs are overwhelmed. A
Speaker 11: lot of CEOs will say to me, okay, let me
Speaker 11: just get this straight.
Speaker 7: You want me to double my profits.
Speaker 11: You want the financials by the twelfth of the month,
Speaker 11: the metrics packaged by the fifteenth of the month. You
Speaker 11: want me to decarbonize, add diversity to the board, change
Speaker 11: the way I recruit so we add diversity deep into
Speaker 11: the organization. And now you want teach financial literacy, drive
Speaker 11: eplay engagement, make everyone an owner in the business. You know,
Speaker 11: come on, pete, what are the real priorities? And so
Speaker 11: CEOs are overwhelmed. The unlock is and this enables all
Speaker 11: of it is for CEOs to understand. If you do
Speaker 11: these last four things, right, it's going to make everything
Speaker 11: else easier. So no, it's not easy, but it's it's
Speaker 11: worth the effort.
Speaker 1: Does it also hurt their cost structure when you start
Speaker 1: talking about sharing and comp and things like that, does
Speaker 1: that actually add to their cost structure? Or do you
Speaker 1: offset in the compensation and the salary and benefits.
Speaker 11: Well, one important thing to understand is this is never
Speaker 11: a trade for wages and benefits. So this is not
Speaker 11: about pushing risk onto workers. So we're not asking workers,
Speaker 11: here's some stock, can we take some compon benefits back.
Speaker 11: It's always incremental, it's always free. We're not asking workers
Speaker 11: to invest out of pocket. So to your question, it's
Speaker 11: not an incremental fixed cost. It's sharing in upsides, so
Speaker 11: there's no payout if there's no value creation. And in
Speaker 11: our experience, this pays for itself when it's done well.
Speaker 11: And I don't want to make it sound like it's easy.
Speaker 11: When your patient and you put years of effort into this,
Speaker 11: this pays for itself many times over.
Speaker 7: Let me give you an example.
Speaker 11: So public company that we bought in twenty thirteen was
Speaker 11: called Gardner Denver. So we took it private in twenty thirteen,
Speaker 11: there were six thousand employees at the company. Out of
Speaker 11: six thousand people, eighty six people had ownership, which is
Speaker 11: what we see typically it's one to five percent. We've
Speaker 11: done an employee engagement survey, ever, massively high quit rates.
Speaker 11: When we started measuring engagement, twenty percent was that we
Speaker 11: measured in the twentieth percentile according to Gallup. We brought
Speaker 11: in a new leadership team, totally changed the way the
Speaker 11: company ran. We shared openly the business plan, financials, We
Speaker 11: made huge improvements and things like worker safety. And when
Speaker 11: I give you the results, I want to stress this
Speaker 11: took us almost ten years, but the engagement scores went
Speaker 11: from the twentieth percent out to the ninetieth and the
Speaker 11: quit rate went down ninety percent.
Speaker 1: That was Pete Stavros of KKR. Coming up, we'll hear
Speaker 1: from GE CEO Larry Colt about the remarkable turnaround of
Speaker 1: a corporate icon and how it happened. That's next on
Speaker 1: Wall Street Week on Bloomberg. This is a special best
Speaker 1: of edition of Wall Street Week.
Speaker 7: I'm David Weston.
Speaker 1: G has gone through a remarkable transformation selling assets on
Speaker 1: the way to breaking up into three different publicly traded companies.
Speaker 7: And increasing value all along the way.
Speaker 1: But when Larry Culp took on the role of CEO
Speaker 1: five years ago, it didn't look like it was going
Speaker 1: to turn out this way. When we talked with him
Speaker 1: about how the turnaround came to be, we started with
Speaker 1: why he took the job in the first place.
Speaker 12: GE an incredibly important company to our country, into the world.
Speaker 12: GE a company that I had long admired through the
Speaker 12: course of my career, and given what I had heard,
Speaker 12: given what I had learned as a director, clearly a challenge,
Speaker 12: perhaps the challenge of my generation. And it was really
Speaker 12: those three reasons that ultimately led me to say, yes,
Speaker 12: I'll put my uniform back on, and here we are.
Speaker 1: So you put your uniform back on. What did you
Speaker 1: set up to do first? What were your priorities? Is
Speaker 1: you sat down the first day in that desk. So often,
Speaker 1: even if you're close to the job, until you've had
Speaker 1: the job, you haven't had it.
Speaker 9: That's right. I don't remember sitting down much that first day.
Speaker 7: Right.
Speaker 12: There was a lot happening, but I knew relatively quickly
Speaker 12: that we had to do two things. One, we had
Speaker 12: to get our arms around the balance sheet issues. We
Speaker 12: had over one hundred and forty billion of debt outstanding.
Speaker 12: That was a crushing load in a host of different ways,
Speaker 12: and we needed to get to a better place in
Speaker 12: terms of the day to day operation of the business,
Speaker 12: and those turned out to be priorities that really took
Speaker 12: us through the first couple of years deleveraging and running
Speaker 12: the businesses better.
Speaker 9: It was somebody that simple.
Speaker 1: As I say, you were on the board for a
Speaker 1: short time before it took over, so some of the
Speaker 1: problems you knew about, but you couldn't anticipate Boeing seven
Speaker 1: thirty seven, Max, couldn't anticipate the pandemic, couldn't anticipate supply
Speaker 1: chain or in Ukraine. Did that change your plan?
Speaker 12: Well, I think early on we knew that we needed
Speaker 12: the utmost sense of urgency around the deleveraging. When a
Speaker 12: number of us had joined the board through the course
Speaker 12: of twenty eighteen, the plan of record was to actually
Speaker 12: spend our healthcare business, much as we did earlier this year.
Speaker 12: But I think we found as we dug into it
Speaker 12: that while that was a good idea, we couldn't possibly
Speaker 12: pull it off given the leverage level and given the
Speaker 12: performance of the other businesses, which is why we made
Speaker 12: the quick pivot through the fall into early twenty nineteen
Speaker 12: to actually sell a small part of healthcare, our biopharma business,
Speaker 12: for twenty billion dollars. And that was really the first
Speaker 12: big step we took toward the deleveraging. All the while
Speaker 12: I was spending time with the team, touring facilities, talking
Speaker 12: to customers, trying to get my arms around in terms
Speaker 12: of what we were doing day in and day out
Speaker 12: and why we weren't anywhere close to our full potential operationally.
Speaker 1: As you say, Larry, you had to deleverage. You really
Speaker 1: had to take a hard look at the balance sheet
Speaker 1: and really clean it up as quickly as you could.
Speaker 1: To draw a strained analogy, It's like give them a gin.
Speaker 1: You have to figure out which cards to hold and
Speaker 1: which ones to lay down. As you went through your
Speaker 1: operations in gluting, healthcare, but others as well, what was
Speaker 1: your criteria for saying this one we're going to hold,
Speaker 1: I think this one we can give up.
Speaker 12: Well, I think we wanted. I looked at all three businesses.
Speaker 12: I was new to the business. I hadn't really been
Speaker 12: deep into aerospace or energy, had had some exposure to healthcare.
Speaker 12: I thought all three businesses were terrific leaders in their
Speaker 12: own right, solving significant global challenges, businesses that we could
Speaker 12: run better than we were at the moment, and we
Speaker 12: need we needed really everybody contributing, again, given the debt load.
Speaker 12: So what we did with Biopharma was really look for
Speaker 12: a small business that would yield a high multiple, so
Speaker 12: we didn't give up much, but we knew given the
Speaker 12: growth potential of the business, we could make a meaningful
Speaker 12: step forward in de leveraging, which is exactly what we did,
Speaker 12: all the while staying focused on the basics, improving our
Speaker 12: dayly operations so we could be better for our customers.
Speaker 12: We could throw off more cash and begin to carry
Speaker 12: that debt load in addition to some of the asset
Speaker 12: sales that we were involved in.
Speaker 1: You've mentioned a couple of times improving the operations, which
Speaker 1: sounds easy, but in my experience, it's really hard. So
Speaker 1: how could you, as something of an outsider, come in
Speaker 1: and understand where you needed to improve operations? And that,
Speaker 1: of course is not just what people do, but who's doing.
Speaker 9: It well exactly right.
Speaker 12: And for me, David, my approach has always been it's
Speaker 12: about the team first and foremost. Fortunately, we inherited I
Speaker 12: think a tremendous team at GE in each of the
Speaker 12: three businesses at Corporate up and down the org chart.
Speaker 12: So what we did is we set about making sure
Speaker 12: we knew where we were organizationally. We dove in deeply
Speaker 12: to make sure we understood how we were running the businesses,
Speaker 12: not just in the c suite, but all the way
Speaker 12: down to the factory floor. And there were a host
Speaker 12: of opportunities that we as a team identified.
Speaker 9: Areas where we could do better.
Speaker 12: We could do better for our customers, reduce cycle times,
Speaker 12: improve our delivery performance, all the while taking a lot
Speaker 12: of waste out of the system. Wasted often frankly, helped
Speaker 12: us improve our profitability in our cash flows. It was
Speaker 12: a daily battle, it was a game of inches, but
Speaker 12: over the course of time we really were able to
Speaker 12: lay in our lean operating model so that today we're
Speaker 12: able to perform at much higher levels across General Electric
Speaker 12: in ways that I think are going to serve all
Speaker 12: three of our businesses very well going forward.
Speaker 1: I think I hear you saying you don't think it
Speaker 1: was the team that was at fault. The team was
Speaker 1: basically a solid team you could work with. So that
Speaker 1: makes you ask exactly what was wrong with the operation?
Speaker 1: And let me start with one thing that's terribly important
Speaker 1: as metrics. Was it a metrics issue? Did you bring
Speaker 1: in a new set of metrics? Where'd you get them from?
Speaker 12: Well, the team that we have a GE as a
Speaker 12: team that I've just really been thrilled to be a
Speaker 12: part of.
Speaker 9: Over these last five years.
Speaker 12: We brought in a number of new people, we mixed
Speaker 12: it up, but by and large, the team that you
Speaker 12: see on the field today a GE is the team
Speaker 12: that was there five years ago. I give that team
Speaker 12: very high marks, David. With respect to metrics, one of
Speaker 12: the things that we worked hard to do was to
Speaker 12: make sure that we had a shared definition of winning.
Speaker 12: It's very easy in a large company for everybody to
Speaker 12: think that they're doing what has been asked of them.
Speaker 12: In turn, that developed their own scorecards to their own metrics.
Speaker 12: We really tried to keep things very simple. Start with safety, quality, delivery, cost,
Speaker 12: that's the operational core of any business, and then we
Speaker 12: look to growth. We looked to some of the financial
Speaker 12: metrics like cash flow, generation, margin expansion.
Speaker 6: So it was a shorter list.
Speaker 12: It was a more compactless accessible to people throughout the organization,
Speaker 12: and then we just got focused on driving the critical few.
Speaker 7: Well.
Speaker 1: It was often is conducive to actually communicating because you
Speaker 1: have too many priorities.
Speaker 7: It's hard for the organization really follow it.
Speaker 1: But how do you once you have those make sure
Speaker 1: that everybody in the organization is getting it because too
Speaker 1: often people at the top they say things and it
Speaker 1: gets down a level, maybe two levels, It doesn't get
Speaker 1: down actually out of the shop floor.
Speaker 12: Well, you communicate until you're tired of hearing yourself say
Speaker 12: the same things, and then you keep going. That's what
Speaker 12: I've learned over time. But we tried to be hands
Speaker 12: on and that's really the way that we've operated. So
Speaker 12: it's not just using the CEO's bully pulpit to communicate
Speaker 12: those metrics or our leadership behaviors more broadly, humility, transparency,
Speaker 12: and focus, but through every operating review, through every customer visit,
Speaker 12: time on a factory floor, time on a lab, having
Speaker 12: the same conversation with the team, where are we with
Speaker 12: respect to safety, quality, delivery and cost? How are we
Speaker 12: better today than we were yesterday? How do we get
Speaker 12: better tomorrow? And that really begins to turn the flywheel.
Speaker 12: It takes time, and as you mentioned earlier, we had
Speaker 12: a lot of Kurr balls thrown at us given some
Speaker 12: of the tragedies with the seven three seven Max COVID Ukraine.
Speaker 9: But this is a resilient team. This is a talented team.
Speaker 12: It's a team that loves the mission, loves the company,
Speaker 12: and we've just kept doing that type of work day
Speaker 12: in and day out, and I think that's where you
Speaker 12: see us today.
Speaker 1: That was Larry Colp, Chairman and CEO of GE. Finally,
Speaker 1: one more thought, and it comes from economist Melissa Karney
Speaker 1: of the University of Maryland, whose new book The Two
Speaker 1: Parent Privilege addressed an economic challenge we have in the
Speaker 1: United States today, and that is the number of children
Speaker 1: growing up in single parent families.
Speaker 13: I have been studying US in comminequality and poverty and
Speaker 13: social mobility for over twenty years, and I've been in
Speaker 13: countless at this point, policy conversations and academic conversations about
Speaker 13: these issues, and it has become abundantly clear to me
Speaker 13: that what's happened to families in the US, and in
Speaker 13: particular the rise and the share of kids living with
Speaker 13: one parent households. How this has primarily happened outside the
Speaker 13: college educated class. These trends are really important to what
Speaker 13: we're seeing with child poverty, inequality, undermining social mobility. College
Speaker 13: educated adults over the past forty years, as their earnings
Speaker 13: have gone up, as their incomes have gone up, they
Speaker 13: have continued to marry each other, have their kids in
Speaker 13: two parent married households, and shower an abundance of resources
Speaker 13: on their kids. But outside the college educated class, there
Speaker 13: has been a huge decline in the share of kids
Speaker 13: living with two parent households. And we're not just talking
Speaker 13: about teen moms or the most disadvantage groups. Teen childbearing
Speaker 13: is way down. If we just look at the kids
Speaker 13: born to high school educated moms, moms with a high
Speaker 13: school degree, maybe some college moms we would have considered
Speaker 13: parents we would have considered middle class, in the middle
Speaker 13: of the education distribution, the likelihood that their kids are
Speaker 13: growing up been a married parent home has declined from
Speaker 13: eighty six percent to sixty three percent in a forty
Speaker 13: year period. This is massive, and this has not been
Speaker 13: good for kids. This really isn't saying that single moms
Speaker 13: aren't doing everything they can to take care of their
Speaker 13: kids and to give them the best shot in life.
Speaker 13: But having two parents in the home means two sources
Speaker 13: of income, two people with time to invest in kids,
Speaker 13: you know, two people keeping an eye out on you,
Speaker 13: investing in you. And so that decline is really is
Speaker 13: really important. It's not been good for kids. And because
Speaker 13: there really is now over the past forty years, this
Speaker 13: emergence of a wide gap by education group. This is
Speaker 13: really accentuating income inequality, inequality and outcomes and contributing to
Speaker 13: class gaps in our society. So what do we see
Speaker 13: in the data. We see that there's this massive income gap,
Speaker 13: but it's not just income. We also see differences in
Speaker 13: parental time. So kids who are growing up in married
Speaker 13: parent households, they get more time with parents, and we
Speaker 13: think that matters. Parents are reading to their kids, they're
Speaker 13: driving them, the activities, they're doing all these things that
Speaker 13: developments that colleges tell us or developmentally appropriate at different
Speaker 13: ages and set kids up to do better in school,
Speaker 13: to avoid getting in trouble in school and basically be
Speaker 13: on a better path. And then we see that difference
Speaker 13: in outcomes. Again, higher income, higher educated parents are more
Speaker 13: likely to be married, but even adjusting for that and
Speaker 13: comparing kids who are in otherwise similar situations but for
Speaker 13: this difference in whether they have two parents or one
Speaker 13: parent in the home, we see that kids with two
Speaker 13: parents they're more likely to go to college, they're more
Speaker 13: likely to graduate college, they're more likely to have higher
Speaker 13: earnings and be married themselves as adults. Once we recognize
Speaker 13: the policy urgency there, we should have the same sort
Speaker 13: of public and private and philanthropic investments in programs in
Speaker 13: policies that are focused on strengthening families as we do
Speaker 13: on policies that are looking at schools or training programs,
Speaker 13: are all all of these other institutions that in many
Speaker 13: ways now are trying to make up for the deficits
Speaker 13: of broken families. And so I think we need both
Speaker 13: economic investments and social changes and a commitment to strengthening
Speaker 13: families as a way to improve kids' outcomes and to
Speaker 13: build a stronger society and future for our country.
Speaker 1: That was Melissa Karney, professor of economics at the University
Speaker 1: of Maryland and author of The Two Parent Privilege. How
Speaker 1: Americans stopped getting married and started falling behind.
Speaker 7: That does it?
Speaker 1: For this episode of Wall Street Week, I'm David Weston,
Speaker 1: This is Bloomberg.
Speaker 7: See you next week.