1 00:00:02,600 --> 00:00:08,600 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Well, thank you for 2 00:00:08,680 --> 00:00:11,760 Speaker 1: joining us. This is your first round of interviews one 3 00:00:11,800 --> 00:00:12,719 Speaker 1: year into the job. 4 00:00:12,960 --> 00:00:14,400 Speaker 2: Well here as of today. 5 00:00:14,440 --> 00:00:18,360 Speaker 1: Actually, yeah, the FED minutes that were out this week 6 00:00:18,440 --> 00:00:23,439 Speaker 1: suggested that a majority of the members agreed that it 7 00:00:23,440 --> 00:00:26,680 Speaker 1: would be worth cutting rates in September. But I presume, 8 00:00:26,760 --> 00:00:30,120 Speaker 1: given your comments after the meeting that you're waiting for 9 00:00:30,160 --> 00:00:31,960 Speaker 1: more evidence that you were not among them. 10 00:00:32,600 --> 00:00:35,880 Speaker 2: So yeah, I think it made sense, or it makes 11 00:00:35,920 --> 00:00:38,400 Speaker 2: sense for me to really look at some of the 12 00:00:38,520 --> 00:00:41,600 Speaker 2: data that comes in the next few weeks. And I 13 00:00:42,240 --> 00:00:46,159 Speaker 2: think this mandate on the inflation site's really important. I 14 00:00:46,200 --> 00:00:48,320 Speaker 2: think we seem to be getting some really good movement 15 00:00:48,400 --> 00:00:52,680 Speaker 2: that direction. But before we act, at least before I 16 00:00:52,720 --> 00:00:55,800 Speaker 2: act or recommend acting, I think we need to see 17 00:00:55,800 --> 00:00:56,720 Speaker 2: a little bit more. 18 00:00:56,640 --> 00:00:59,800 Speaker 1: Well we essentially on the path to it, in other words, 19 00:00:59,840 --> 00:01:04,520 Speaker 1: of we get as predicted inflation numbers, jobs numbers in 20 00:01:04,560 --> 00:01:06,600 Speaker 1: the next month. Would you agree it's time? 21 00:01:06,840 --> 00:01:10,920 Speaker 2: You know, I like the word path, and I also 22 00:01:11,000 --> 00:01:13,880 Speaker 2: believe that we've seen some cooling in the labor market 23 00:01:13,920 --> 00:01:16,440 Speaker 2: that also kind of works in tandem a little bit 24 00:01:16,480 --> 00:01:19,840 Speaker 2: with that. Not exactly sure, I would go there just 25 00:01:19,959 --> 00:01:24,400 Speaker 2: yet I think it kind of is the nature of 26 00:01:24,520 --> 00:01:27,800 Speaker 2: what happened with the inflation numbers and how much of 27 00:01:27,840 --> 00:01:31,080 Speaker 2: those inflation numbers were kind of supply driven that got cured, 28 00:01:31,120 --> 00:01:34,880 Speaker 2: and then how much is is the policy restrictive? And 29 00:01:35,080 --> 00:01:37,319 Speaker 2: I think while it's restrictive, I don't know if it's 30 00:01:37,360 --> 00:01:41,959 Speaker 2: overly restrictive. So you know, for me, policy as implies 31 00:01:42,080 --> 00:01:44,840 Speaker 2: patients and I would say, let's be patient. 32 00:01:44,760 --> 00:01:46,399 Speaker 1: Well, what are you worried about? What would be the 33 00:01:46,480 --> 00:01:49,400 Speaker 1: scenario that would drive inflation back up again? 34 00:01:51,040 --> 00:01:53,919 Speaker 2: So if we get any kind of spark and demand, 35 00:01:54,000 --> 00:01:57,000 Speaker 2: I mean I go around the tenth district quite a bit. 36 00:01:57,440 --> 00:02:02,280 Speaker 2: We still have employed numbers, unemployment numbers in the two 37 00:02:02,280 --> 00:02:04,880 Speaker 2: and a half three and a half percent range. I 38 00:02:04,880 --> 00:02:06,520 Speaker 2: think a lot of people are looking at how do 39 00:02:06,560 --> 00:02:12,080 Speaker 2: we hire skilled labor over the next twelve months. So 40 00:02:12,120 --> 00:02:14,920 Speaker 2: I still think we could see a little bit of 41 00:02:15,000 --> 00:02:18,680 Speaker 2: demand pick up if we're not careful with the decisioning, 42 00:02:19,560 --> 00:02:22,480 Speaker 2: at least from the tenth district standpoint. I'm a big 43 00:02:22,520 --> 00:02:24,600 Speaker 2: fan of the Beije book. I try to understand what's 44 00:02:24,600 --> 00:02:27,080 Speaker 2: happening in tenth district and then try to see what's 45 00:02:27,080 --> 00:02:31,799 Speaker 2: happening regionally. With the other eleven banks. And I think 46 00:02:31,840 --> 00:02:34,840 Speaker 2: there's from a trend standpoint, things look pretty good. But 47 00:02:35,080 --> 00:02:36,880 Speaker 2: I still think we have some time. 48 00:02:37,200 --> 00:02:40,280 Speaker 1: Well, in terms of trend, it seems that we are 49 00:02:40,320 --> 00:02:44,799 Speaker 1: seeing a slowdown in salaries and wages and that people 50 00:02:44,880 --> 00:02:47,440 Speaker 1: have spent a lot, if not all, of their pandemic 51 00:02:47,600 --> 00:02:51,520 Speaker 1: bonuses that they got. So what are the people in 52 00:02:51,520 --> 00:02:55,000 Speaker 1: your district saying, companies in your district saying about whether 53 00:02:55,040 --> 00:02:57,200 Speaker 1: there would be another spark of demand? 54 00:02:57,720 --> 00:03:01,880 Speaker 2: Yeah, so there everybody seems to be pretty busy still. 55 00:03:02,080 --> 00:03:04,519 Speaker 2: And I think in some cases, I would say the 56 00:03:05,160 --> 00:03:09,760 Speaker 2: housing market, the healthcare market is still has a high 57 00:03:09,760 --> 00:03:15,400 Speaker 2: demand factor for people skilled people, and I think, you know, 58 00:03:15,480 --> 00:03:19,440 Speaker 2: the margins and some of the healthcare industry are narrowing, 59 00:03:19,480 --> 00:03:23,240 Speaker 2: and so you could see some inflationary factor in some 60 00:03:23,280 --> 00:03:25,880 Speaker 2: of these areas. And I still think we've got to 61 00:03:25,919 --> 00:03:29,840 Speaker 2: fix this housing supply market, and I think there's going 62 00:03:29,880 --> 00:03:31,840 Speaker 2: to be more demand in that market over the next 63 00:03:31,960 --> 00:03:32,800 Speaker 2: two or three years. 64 00:03:32,919 --> 00:03:34,400 Speaker 1: Well that's going to be a question is how does 65 00:03:34,440 --> 00:03:37,880 Speaker 1: the FED get the housing market going again since the 66 00:03:37,920 --> 00:03:40,440 Speaker 1: FED essentially put a stop to it, or do you 67 00:03:40,440 --> 00:03:41,960 Speaker 1: think that's your responsibility? 68 00:03:42,520 --> 00:03:46,040 Speaker 2: So I would probably say that the rates are less 69 00:03:46,080 --> 00:03:51,240 Speaker 2: impactful about buying a home today than what's happened with 70 00:03:51,320 --> 00:03:54,440 Speaker 2: the cost of home through the pandemic. I mean, there 71 00:03:54,160 --> 00:03:57,240 Speaker 2: were the supply issues that we had in twenty two 72 00:03:57,280 --> 00:04:01,720 Speaker 2: and twenty three really show the housing market from a 73 00:04:01,720 --> 00:04:05,360 Speaker 2: cost standpoint. And I think as I go around the district, 74 00:04:05,800 --> 00:04:09,440 Speaker 2: the whole issue of that first time home buyer, affordable housing, 75 00:04:10,040 --> 00:04:13,440 Speaker 2: that seems to be the number one issue. So I 76 00:04:13,440 --> 00:04:15,640 Speaker 2: think we've got some work to do in that area, 77 00:04:15,640 --> 00:04:18,680 Speaker 2: but I think it's less rate sensitive as it is 78 00:04:18,760 --> 00:04:20,360 Speaker 2: just pure cost driven. 79 00:04:20,880 --> 00:04:23,159 Speaker 1: Now you were a banker, your whole career has been 80 00:04:23,320 --> 00:04:26,880 Speaker 1: in banking. What's the banking side of the ledger look 81 00:04:27,040 --> 00:04:30,479 Speaker 1: like in the tenth district in terms of being able 82 00:04:30,520 --> 00:04:35,760 Speaker 1: to create and supply credit both to businesses and in 83 00:04:35,839 --> 00:04:38,000 Speaker 1: agriculture is a big deal, And of course that's sort 84 00:04:38,040 --> 00:04:39,279 Speaker 1: of a separate banking business. 85 00:04:39,360 --> 00:04:43,800 Speaker 2: It is. So I've been to several bank association groups, 86 00:04:44,240 --> 00:04:46,839 Speaker 2: I've visited with a lot of bankers one on one 87 00:04:46,880 --> 00:04:49,520 Speaker 2: and with their boards. The one thing I do say 88 00:04:49,600 --> 00:04:51,960 Speaker 2: is I'm actually pleased and quite proud of how the 89 00:04:52,000 --> 00:04:57,039 Speaker 2: industry is adapted itself through this kind of rate policy 90 00:04:57,200 --> 00:05:00,240 Speaker 2: move Since twenty two. It seems like they've adapted their 91 00:05:00,279 --> 00:05:05,920 Speaker 2: funding bases, their clients, their credit side, and so earnings 92 00:05:05,920 --> 00:05:08,920 Speaker 2: and capital seem to be in pretty good shape. And 93 00:05:09,000 --> 00:05:13,360 Speaker 2: so I think now the conversation comes around really the 94 00:05:13,400 --> 00:05:17,640 Speaker 2: liquidity funding. We talk a lot about the discount window 95 00:05:17,680 --> 00:05:21,560 Speaker 2: and how that integrates and so. But by and large, 96 00:05:21,600 --> 00:05:24,320 Speaker 2: the banking industry, not just in the tent district, but 97 00:05:24,600 --> 00:05:28,440 Speaker 2: by large numbers look pretty good. I don't see any 98 00:05:29,400 --> 00:05:34,720 Speaker 2: black clouds forming in that regard. Now. As the monetary 99 00:05:34,720 --> 00:05:39,000 Speaker 2: policy discussions continue, we'll see how it affects things like 100 00:05:39,080 --> 00:05:41,200 Speaker 2: the yield curve and things like that, which I think 101 00:05:41,200 --> 00:05:42,920 Speaker 2: are really important to the banking business. 102 00:05:43,279 --> 00:05:47,479 Speaker 1: Well, banks deal obviously in reserves, and right now there 103 00:05:47,480 --> 00:05:51,560 Speaker 1: are a lot of them. As that comes down, what 104 00:05:51,720 --> 00:05:53,760 Speaker 1: a lot of analysts say is it's going to come 105 00:05:53,760 --> 00:05:57,960 Speaker 1: down unequally, especially for smaller banks. Are you worried at 106 00:05:57,960 --> 00:06:03,200 Speaker 1: all about the smaller banks in your strict having liquidity problems? 107 00:06:03,880 --> 00:06:07,080 Speaker 2: I don't see that today there is. I would say 108 00:06:07,160 --> 00:06:12,200 Speaker 2: that we talk a lot at the monetary policy table 109 00:06:12,240 --> 00:06:15,800 Speaker 2: about the balance sheet about abundant reserve reserves. I think 110 00:06:16,320 --> 00:06:20,640 Speaker 2: over time, the analytics about what abundant reserves is and 111 00:06:20,680 --> 00:06:26,280 Speaker 2: then we have a really robust supervisory team that keeps 112 00:06:26,400 --> 00:06:29,560 Speaker 2: very close track of things like liquidity and reserves. There 113 00:06:29,560 --> 00:06:32,920 Speaker 2: doesn't seem to be a lot of concern in the industry, 114 00:06:32,920 --> 00:06:36,920 Speaker 2: and I think, frankly, maybe even after the Silicon Valley experience, 115 00:06:37,200 --> 00:06:39,839 Speaker 2: I think bankers are generally a little bit more conservative 116 00:06:40,040 --> 00:06:42,800 Speaker 2: on the whole liquidity metrics in their banks. 117 00:06:43,000 --> 00:06:45,320 Speaker 1: I have to ask you, I think I know the answer, 118 00:06:45,400 --> 00:06:47,880 Speaker 1: but I'll let you tell me what you thought of 119 00:06:47,920 --> 00:06:51,440 Speaker 1: the report that the euro of Labor Statistics put out 120 00:06:51,440 --> 00:06:54,599 Speaker 1: at eight hundred and eighteen thousand fewer jobs over the 121 00:06:54,640 --> 00:06:56,560 Speaker 1: twelve months to the first quarter of this year. 122 00:06:56,680 --> 00:06:59,080 Speaker 2: Yeah, So the first thing that comes to mind is 123 00:07:00,040 --> 00:07:02,960 Speaker 2: are we getting the data wrong in that regard? The 124 00:07:03,000 --> 00:07:06,360 Speaker 2: second is, if you look at it seems like a 125 00:07:06,440 --> 00:07:08,680 Speaker 2: large number until you put it in perspective of the 126 00:07:08,720 --> 00:07:13,520 Speaker 2: twelve months, and so you know, while it's a big number, 127 00:07:14,000 --> 00:07:16,400 Speaker 2: it doesn't really change the path of the way I 128 00:07:16,440 --> 00:07:19,960 Speaker 2: think of things when I think about monetary policy and 129 00:07:20,360 --> 00:07:22,400 Speaker 2: the effect of the labor force and what's going on. 130 00:07:22,720 --> 00:07:27,320 Speaker 2: I'm actually really interested in the dynamics of the labor 131 00:07:27,360 --> 00:07:30,680 Speaker 2: force really coming out of the pandemic. You know, the behaviors, 132 00:07:31,320 --> 00:07:37,360 Speaker 2: the compensation structures, the demographics. I think studying those relative 133 00:07:37,400 --> 00:07:40,080 Speaker 2: to the future labor force, maybe thinking a little bit 134 00:07:40,080 --> 00:07:43,960 Speaker 2: about what AI generated AI does to things like productivity. 135 00:07:44,200 --> 00:07:46,800 Speaker 2: I think those are important things to look at. Now 136 00:07:46,840 --> 00:07:48,840 Speaker 2: we have to look at some of the data relative 137 00:07:48,880 --> 00:07:51,000 Speaker 2: to what we do with policy in the labor force. 138 00:07:51,040 --> 00:07:55,120 Speaker 2: But the recent print here isn't a big concern for me. 139 00:07:55,360 --> 00:07:57,880 Speaker 1: So you wouldn't agree with the argument that some make 140 00:07:57,920 --> 00:07:59,920 Speaker 1: on Wall Street that the FED is behind the curve. 141 00:08:00,960 --> 00:08:03,720 Speaker 2: No, I don't really agree with that. I mean here 142 00:08:03,960 --> 00:08:06,720 Speaker 2: here again, I think we've got to get as a 143 00:08:06,760 --> 00:08:10,600 Speaker 2: FED better at at the data sets that we're using. 144 00:08:10,680 --> 00:08:16,280 Speaker 2: I'm a new central banker. I'd like to see us 145 00:08:16,520 --> 00:08:20,160 Speaker 2: move toward a more real time data set versus there 146 00:08:20,240 --> 00:08:23,000 Speaker 2: still seems to be some lags, some serious lags in 147 00:08:23,080 --> 00:08:26,760 Speaker 2: some of the data that we get. So using new technologies, 148 00:08:27,240 --> 00:08:30,000 Speaker 2: maybe some of the AI technologies, maybe we get better 149 00:08:30,120 --> 00:08:32,200 Speaker 2: data as we move forward. But we've got to really 150 00:08:32,280 --> 00:08:35,600 Speaker 2: focus on that with our economists and our and our 151 00:08:35,679 --> 00:08:38,480 Speaker 2: analysts about you know, where's the data coming from and 152 00:08:38,520 --> 00:08:39,880 Speaker 2: can we rely on it well? 153 00:08:39,920 --> 00:08:42,079 Speaker 1: To follow up on that as as sort of and 154 00:08:42,080 --> 00:08:46,000 Speaker 1: wrap things up. We have the framework review coming up 155 00:08:46,040 --> 00:08:49,120 Speaker 1: this fall. Is that number one for you? Is the 156 00:08:49,200 --> 00:08:51,680 Speaker 1: data or what else would you like to see looked at? 157 00:08:51,760 --> 00:08:53,720 Speaker 1: I realized generally to say what would change, but what 158 00:08:53,760 --> 00:08:54,920 Speaker 1: would you like to see looked at? 159 00:08:55,000 --> 00:08:59,080 Speaker 2: So Joe Gruber is our chief economist and head of research, 160 00:08:59,120 --> 00:09:04,400 Speaker 2: and his team came up with this transmission of monetary 161 00:09:04,440 --> 00:09:09,040 Speaker 2: policy subject matter for this Jackson Hole event. Perfect timing. 162 00:09:09,160 --> 00:09:12,360 Speaker 2: So I think we're going to some of these research 163 00:09:12,480 --> 00:09:14,840 Speaker 2: All these researchers are going to release their paper soon, 164 00:09:15,160 --> 00:09:16,720 Speaker 2: and I think there's going to be some really good 165 00:09:16,720 --> 00:09:20,960 Speaker 2: insights into the data collection, the analytics, and how we 166 00:09:21,040 --> 00:09:25,880 Speaker 2: transmit and communicate monetary policy going forward. So I think 167 00:09:25,880 --> 00:09:29,160 Speaker 2: there's going to be a very robust discussion about how 168 00:09:29,200 --> 00:09:30,880 Speaker 2: that's done as we move into the future. 169 00:09:31,160 --> 00:09:33,320 Speaker 1: Well, one aspect of that that really interests people on 170 00:09:33,360 --> 00:09:36,040 Speaker 1: trading desk on Wall Street is, and you would experience 171 00:09:36,120 --> 00:09:39,280 Speaker 1: this as a banker. The whole financial system has changed 172 00:09:39,440 --> 00:09:42,320 Speaker 1: since the Great Financial Crisis, and now everything's run on 173 00:09:42,400 --> 00:09:46,319 Speaker 1: repo and you need a lot of paper out there 174 00:09:46,679 --> 00:09:49,560 Speaker 1: to satisfy the banks, and you've set up all these 175 00:09:49,600 --> 00:09:54,160 Speaker 1: systems to make sure it works. Has it gotten too complex? 176 00:09:55,840 --> 00:09:58,440 Speaker 2: I don't think so. I mean, look, I came from 177 00:09:58,440 --> 00:10:03,600 Speaker 2: that world. You can overcomplicate it if you're not careful. 178 00:10:04,200 --> 00:10:08,199 Speaker 2: I just think that community bankers understand their markets, They 179 00:10:08,280 --> 00:10:12,880 Speaker 2: understand the demands that their clients have, that they understand 180 00:10:12,960 --> 00:10:16,439 Speaker 2: how to move capital and credit to build their communities 181 00:10:16,440 --> 00:10:20,040 Speaker 2: and regions. So I don't see the business as over complicated. 182 00:10:20,280 --> 00:10:22,240 Speaker 2: I do believe there are some things that are happening, 183 00:10:22,360 --> 00:10:25,880 Speaker 2: let's say FORED like for instance, FED now, where you're 184 00:10:25,960 --> 00:10:29,440 Speaker 2: going to see money moving twenty four hours, seven days 185 00:10:29,480 --> 00:10:32,880 Speaker 2: a week. People are going to do business on Sundays 186 00:10:33,000 --> 00:10:37,360 Speaker 2: relative to banks and the business they do with banks. 187 00:10:37,520 --> 00:10:40,160 Speaker 2: So there is some complexities in there. But I think 188 00:10:40,160 --> 00:10:43,600 Speaker 2: some of the technology, some of the policies, conversations we're 189 00:10:43,600 --> 00:10:46,520 Speaker 2: going to have around things like modernizing the discount window 190 00:10:46,840 --> 00:10:48,679 Speaker 2: on their behalf, I think those are going to be 191 00:10:48,760 --> 00:10:50,600 Speaker 2: really net ads for the banking business. 192 00:10:50,760 --> 00:10:55,679 Speaker 1: One last question on this subject, Buzzle Vazzel endgame as 193 00:10:55,720 --> 00:10:57,200 Speaker 1: they call it, which we know is never going to 194 00:10:57,200 --> 00:11:00,280 Speaker 1: be an endgame. But as a banker and now a 195 00:11:00,360 --> 00:11:01,680 Speaker 1: central banker, what's your. 196 00:11:01,559 --> 00:11:05,400 Speaker 2: Perspective, So you know, in my former life as a 197 00:11:05,400 --> 00:11:08,400 Speaker 2: community banker. It was always interesting to me, we really 198 00:11:08,440 --> 00:11:12,240 Speaker 2: need to try to understand as regulators, how do we 199 00:11:12,320 --> 00:11:16,719 Speaker 2: even the playing field. Capital is a big one. I've 200 00:11:16,760 --> 00:11:21,000 Speaker 2: talked to bankers around my district and they believe that, look, 201 00:11:21,080 --> 00:11:22,960 Speaker 2: we've got to try to figure out how to make 202 00:11:23,000 --> 00:11:26,240 Speaker 2: that field equal. That you've got tangible capital ratios with 203 00:11:26,280 --> 00:11:29,520 Speaker 2: small banks that are running at nine ten percent, some 204 00:11:29,559 --> 00:11:31,760 Speaker 2: of the larger banks run it at you know that, 205 00:11:31,880 --> 00:11:34,880 Speaker 2: six and seven. So I think the capital conversation is 206 00:11:34,880 --> 00:11:37,640 Speaker 2: an important one. I think Vice Chair bar On the 207 00:11:37,640 --> 00:11:40,199 Speaker 2: Board is on his team and along with a lot 208 00:11:40,200 --> 00:11:43,800 Speaker 2: of our supervisors around the Federal Reserve System, are having 209 00:11:43,800 --> 00:11:46,400 Speaker 2: a very active conversation about it. I think we also 210 00:11:46,480 --> 00:11:49,760 Speaker 2: have to align things like the Community Reinvestment Act to 211 00:11:49,800 --> 00:11:52,520 Speaker 2: what's happening in community banks. I think those are real, 212 00:11:52,559 --> 00:11:56,440 Speaker 2: big policy matters that we need to really get aligned 213 00:11:56,480 --> 00:11:57,480 Speaker 2: well with the industry.