WEBVTT - Surveillance: Big Bank Results With Cassidy 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com, 0:00:23.920 --> 0:00:29.080 and of course on the Bloomberg terminal. Let's go to 0:00:29.080 --> 0:00:31.680 Gerard Cassidy, with decades of expert he always comes in 0:00:31.760 --> 0:00:34.479 swinging into the lobster restaurants of Portland, Maine. He's with 0:00:34.560 --> 0:00:38.320 RBC Capital Markets. Gerard Cassidy, I want to go to 0:00:38.680 --> 0:00:43.240 cost and geographic reduction as expense control. When you give 0:00:43.320 --> 0:00:46.479 up on retail in Vietnam and in Bay Wren, is 0:00:46.520 --> 0:00:51.040 that nothing more than a closeted cost reduction, Tom, I 0:00:51.080 --> 0:00:52.839 think it is. And when you take a look at 0:00:52.880 --> 0:00:56.680 the markets that they're exiting, the numbers that they've provided 0:00:57.040 --> 0:01:00.720 really do not have a material impact at the bottom line. Now, 0:01:00.760 --> 0:01:04.160 you might recall some years back they exited a handful 0:01:04.200 --> 0:01:07.720 of these consumer markets and they obviously didn't go all 0:01:07.760 --> 0:01:11.160 the way. And Jane Fraser with our first strategic move 0:01:11.520 --> 0:01:14.640 is trying to make the company more profitable by exiting 0:01:14.720 --> 0:01:18.199 these markets. Where they really don't earn very much money. 0:01:18.200 --> 0:01:21.880 What's left. What's more Today, it's gonna be interesting because 0:01:22.040 --> 0:01:24.800 this has been the one area that focus for many 0:01:24.840 --> 0:01:29.000 investors that they needed to really trimm down their global 0:01:29.040 --> 0:01:31.920 footprint on the consumer side. They just didn't have the 0:01:31.959 --> 0:01:34.840 scale in certain markets. So then the next question is, 0:01:35.040 --> 0:01:36.560 you know, how do you build up scale in the 0:01:36.680 --> 0:01:38.720 United States? When you take a look at two of 0:01:38.760 --> 0:01:42.240 their biggest piers, JP Morgan Chase in Bank America, they 0:01:42.240 --> 0:01:46.360 had consumer banking franchises in the United States have return 0:01:46.400 --> 0:01:51.000 on equities return unchangeable common equities of over thirty City 0:01:51.040 --> 0:01:53.560 does not match that number, so City, we'll have to 0:01:53.600 --> 0:01:55.160 take a look at how do we get bigger in 0:01:55.200 --> 0:01:57.560 the US? If we asked this question of sale and 0:01:57.600 --> 0:01:59.400 she answered it delicately, and you can answer it a 0:01:59.440 --> 0:02:01.600 little bit more recifuly on matching because here at OLYMPUG 0:02:01.640 --> 0:02:03.720 we have to be slightly diplomatic, of course, But do 0:02:03.800 --> 0:02:05.560 you see this as a big change from collbat to 0:02:05.640 --> 0:02:09.920 fright up? Absolutely? And you know she indicated on the 0:02:10.000 --> 0:02:13.200 last call, when she participated in the fourth quarter earnings call, 0:02:13.440 --> 0:02:16.120 that there were changes coming and were expect to hear 0:02:16.200 --> 0:02:20.280 more guidelines on new targeted return numbers, what they're going 0:02:20.320 --> 0:02:23.440 to expect to be able to achieve with these strategic changes. 0:02:23.680 --> 0:02:25.360 You know, City has a lot of work to do, 0:02:25.400 --> 0:02:27.480 a lot of heavy lifting, but now with the new 0:02:27.560 --> 0:02:30.200 leadership under Jane Fraser, I think they're gonna be a 0:02:30.240 --> 0:02:33.960 bit to accomplished new and better numbers for shareholders. Gerard, 0:02:34.200 --> 0:02:36.480 so far, who's winning in the capital market space? I mean, 0:02:36.520 --> 0:02:38.520 all of them have been beating across the board, and 0:02:38.520 --> 0:02:41.120 people have been talking about the frothy markets, But who's winning? 0:02:41.880 --> 0:02:44.640 It looks like so far when you compare all the numbers, 0:02:44.680 --> 0:02:47.800 Goldman Sacks came out on top in almost all the 0:02:47.840 --> 0:02:51.239 different categories, whether it was E c M, D c M, 0:02:51.400 --> 0:02:55.400 or in trading in markets for FICK or equity. They 0:02:55.440 --> 0:02:58.200 seem to have by far the best numbers out of 0:02:58.200 --> 0:03:00.639 all of them. But to your point, they're all very 0:03:00.639 --> 0:03:02.720 strong numbers, and there's a question of how long this 0:03:02.760 --> 0:03:04.480 can last. And I was looking at a headline about 0:03:04.480 --> 0:03:08.280 City groups incredible equity trading numbers following on the spack 0:03:08.400 --> 0:03:11.080 of spaka blos or whatever you want to call it. 0:03:11.400 --> 0:03:14.800 How long can these trends last to continue supporting their earnings. 0:03:15.919 --> 0:03:18.400 It's going to be more challenging as we get into 0:03:18.440 --> 0:03:22.239 this year unless we get continued volatility and strengths and 0:03:22.400 --> 0:03:24.880 the markets and they're that's hard to predict. But we 0:03:24.919 --> 0:03:28.920 should understand that the spack E c M business that 0:03:29.000 --> 0:03:31.760 has started to obviously slow down because the number of 0:03:31.800 --> 0:03:35.440 the investors and spacts. They've already allocated the money for 0:03:35.600 --> 0:03:38.440 that and there's not as much money to go into spacts. 0:03:38.480 --> 0:03:40.760 So now we need to see the de spacking. That's 0:03:40.760 --> 0:03:43.080 when they actually do the mergers. So that's gonna be 0:03:43.120 --> 0:03:46.080 a lift to advisory businesses as we get into the 0:03:46.120 --> 0:03:49.040 second half of this year. George Cassidy, we talked to 0:03:49.120 --> 0:03:52.680 Thomas Show. Do you know well from KBW earlier were 0:03:52.720 --> 0:03:55.840 reminisced on Bank of New England long ago and far 0:03:55.920 --> 0:03:59.760 away the ultimate roll ups that you were directly involved in. 0:04:00.240 --> 0:04:03.920 Do you presume another season of roll ups because of 0:04:03.960 --> 0:04:09.440 the technological superiority of these winners, Tom, I think you're 0:04:09.560 --> 0:04:12.320 you're right. We are going to see more consolidation. It's 0:04:12.360 --> 0:04:15.200 already started to pick up. As you might recall, Tom, 0:04:15.240 --> 0:04:17.440 when you and I were young men, we had eighteen 0:04:17.440 --> 0:04:20.760 thousand banks in the early nineteen eighties. Today we're down aft. 0:04:21.680 --> 0:04:26.159 We expect continued roll ups or consolidation to to continue 0:04:26.320 --> 0:04:28.360 over the next two to three years, and it will 0:04:28.440 --> 0:04:33.320 be small community banks uh like probably in acquiring USB 0:04:33.520 --> 0:04:36.240 one last year out of New Jersey, but also the 0:04:36.279 --> 0:04:39.000 big deals like we saw with M and T acquiring 0:04:39.080 --> 0:04:43.080 People's Bank of Connecticut. So we're going to see big 0:04:43.080 --> 0:04:46.080 regional deals, we believe over the next two to three years, 0:04:46.160 --> 0:04:48.920 and the Canadians will likely get stronger in the US. 0:04:49.040 --> 0:04:51.719 Stron Dominion has indicated they want to get bigger in 0:04:51.720 --> 0:04:54.160 the US and South. Gracious with your time on morning 0:04:54.160 --> 0:04:56.040 slid this morning, can I just squeeze another one in 0:04:56.320 --> 0:04:59.000 just rent for the quarta? We had Bank for America 0:04:59.040 --> 0:05:01.080 early this morning. It's we have the likes of Goldman 0:05:01.160 --> 0:05:02.920 JP Morgan too in the mix in the last twenty 0:05:02.920 --> 0:05:05.760 four hours. Who won the quarta? I would say, so far, 0:05:05.880 --> 0:05:08.160 you gotta put Goldman Sacks at the front of the list. 0:05:08.400 --> 0:05:10.360 They have won the quarter. But when you look at 0:05:10.360 --> 0:05:13.480 the universal banks, we've had three of the JP Morgan 0:05:13.640 --> 0:05:16.200 city in Bank America, and I would say JP Morgan 0:05:16.279 --> 0:05:18.440 probably came out they had, but they all had the 0:05:18.480 --> 0:05:21.760 same trends. John which is these loan loss reserve releases 0:05:21.920 --> 0:05:25.200 are very meaningful. They're gonna continue throughout the year and 0:05:25.240 --> 0:05:27.800 that's gonna be the bridge until we get loan growth 0:05:27.880 --> 0:05:30.600 and higher revenue growth in the second half of the year. Jed, 0:05:30.600 --> 0:05:31.920 I've gotta half from me, say, I know you gotta 0:05:31.960 --> 0:05:41.040 run J Cassidy that vom PC right now. My conversation 0:05:41.080 --> 0:05:43.839 of the day, I'm banking with Thomas Mchode. Thomas showed 0:05:44.080 --> 0:05:48.120 chief executive officer of Keith Briott in Woods, a stiffer company, 0:05:48.120 --> 0:05:50.640 and we're thrilled that Mr Michode could join us this 0:05:50.680 --> 0:05:54.960 morning because he knows you walk into a banker's office 0:05:55.160 --> 0:05:59.599 and you start to talk about consolidation. Tom, you guys 0:05:59.640 --> 0:06:03.359 invent of it. Back into it are all day and 0:06:03.440 --> 0:06:05.720 all that Tucker Anthony r all day and the merger 0:06:05.720 --> 0:06:10.440 into KBW. You guys literally invented the modern consolidation with 0:06:10.520 --> 0:06:13.119 the Bank of New England. Are we going to see 0:06:13.160 --> 0:06:18.360 a reduct in this bank boom of consolidation? Well, Tom, 0:06:18.360 --> 0:06:20.760 that's a great memory. You do remember a long way back, 0:06:20.800 --> 0:06:23.239 we did work on those deals for Bank of New England. 0:06:23.279 --> 0:06:27.359 But um so the industry has been consolidating for UH 0:06:27.440 --> 0:06:30.120 for many decades, and the question is what's the pace. 0:06:30.680 --> 0:06:34.400 But consolidation is an important theme here and we think 0:06:34.440 --> 0:06:36.800 it is going to continue, and we think it's going 0:06:36.800 --> 0:06:40.159 to continue for a couple of primary reasons. UH. Number 0:06:40.200 --> 0:06:42.760 one is it seems as if, for the first time, 0:06:42.760 --> 0:06:45.760 at least in my thirty five year career, the bigger 0:06:45.800 --> 0:06:48.359 banks are more profitable. You look at our earnings models 0:06:48.360 --> 0:06:51.480 for next year, we see them earning about two bass 0:06:51.520 --> 0:06:55.279 points more return on tangible common equity, and it feels 0:06:55.320 --> 0:06:57.560 like it's going to be consistent. It's not just a 0:06:57.560 --> 0:07:00.320 flash of the band. Those scale seems to be working. 0:07:00.360 --> 0:07:03.280 That's number one. Number two is we're in a really 0:07:03.440 --> 0:07:08.039 slow revenue growth environment and one way to grower costs out. 0:07:08.320 --> 0:07:11.640 And then the third reason is we thought fintech was 0:07:11.720 --> 0:07:15.520 important pre COVID. What we've learned during COVID, it's even 0:07:15.600 --> 0:07:18.440 more important than we thought. All the trends that we 0:07:18.440 --> 0:07:21.880 were seeing were accelerated by the pandemic, and that's going 0:07:21.920 --> 0:07:26.120 to try Even for investment, you're going to see more consolidations. 0:07:26.120 --> 0:07:27.440 So I knew you. I knew you were going there. 0:07:27.480 --> 0:07:29.720 I want to go, folks into some inside baseball here 0:07:29.720 --> 0:07:32.280 and we do this on Global Wall Street. What is 0:07:32.280 --> 0:07:37.360 the profitability Tomas showed of a digital dollar of revenue 0:07:37.520 --> 0:07:42.560 versus a traditional consumer banking or business loan banking dollar revenue. 0:07:42.600 --> 0:07:46.520 Is it like technology where it's not to the bottom line, 0:07:46.520 --> 0:07:50.520 where the competition the old technology is fift to the 0:07:50.520 --> 0:07:55.280 bottom line. Well, the way I would answer that question 0:07:55.280 --> 0:07:58.200 is I look at the efficiency ratios of the online 0:07:58.280 --> 0:08:02.520 banks versus the traditional what are they and they may 0:08:02.640 --> 0:08:07.480 end up being lower uh than the more traditional bank 0:08:07.600 --> 0:08:09.640 just you know, just in a big picture of you, 0:08:10.440 --> 0:08:12.920 once they hit a critical mask, you will see that 0:08:13.040 --> 0:08:16.720 they drive much lower efficiency ratios. And that's going to 0:08:16.800 --> 0:08:19.360 be the key, and that's why you're gonna see more 0:08:19.360 --> 0:08:23.720 and more branch rationalization around the country to try to 0:08:23.760 --> 0:08:25.840 get those costs out it's own. Kane. I think that's 0:08:25.880 --> 0:08:28.400 what's so interesting about the last twelve months, the holdouts 0:08:28.440 --> 0:08:31.000 to people that didn't do want to do the online banking, 0:08:31.040 --> 0:08:33.480 the digital banking. They were forced to do it something 0:08:33.480 --> 0:08:35.920 they had no other choice. Thomas show, you've talked about 0:08:35.920 --> 0:08:38.160 the rationalization. Just how big is that going to be 0:08:38.200 --> 0:08:41.440 and how many jobs will be lost? Well? There will well, 0:08:42.080 --> 0:08:45.560 there will be consolidation and lots of jobs out in 0:08:45.559 --> 0:08:49.400 those facilities. At the same time, you're seeing an incredible 0:08:49.400 --> 0:08:52.280 amount of hiring happening in the I T groups of 0:08:52.320 --> 0:08:55.520 these companies. Uh, and so I do think that head 0:08:55.559 --> 0:08:58.600 count will come down over time in the banking industry, 0:08:59.200 --> 0:09:01.280 but it will be somewhat of a mixed shift at 0:09:01.320 --> 0:09:04.480 the same time, Tom Kane, that has been the story, 0:09:04.559 --> 0:09:09.880 hasn't it the rationalization that loss that your help, Yes, 0:09:09.960 --> 0:09:12.040 you're right, and we all see that at the four 0:09:12.080 --> 0:09:14.679 branches on the five corners of any I should say, 0:09:14.720 --> 0:09:17.199 the five branches on the four corners of the street. 0:09:17.280 --> 0:09:19.880 That's when young mchowd came out of Middlebury and we 0:09:19.880 --> 0:09:23.319 were over banked. Tomas showed to John's point, is it 0:09:23.520 --> 0:09:27.240 one for one? What's the ratio? Because because we're just 0:09:27.280 --> 0:09:29.880 talking about one half of the equation, John, which is 0:09:30.280 --> 0:09:33.440 what's happening at the core the traditional banks. At the 0:09:33.480 --> 0:09:37.600 same time, you look at somebody like Galaxy Digital, what's 0:09:37.600 --> 0:09:39.960 happening at that company? I I've heard a quote from 0:09:39.960 --> 0:09:42.360 the CEO that in the last few months they've hired 0:09:42.360 --> 0:09:46.920 over seventy people. These companies that are standing up as competitors, 0:09:46.960 --> 0:09:49.160 we didn't even know about three or four years ago. 0:09:49.480 --> 0:09:52.960 They're hiring, hiring like crazy, so and they're still within 0:09:53.000 --> 0:09:56.120 the financial services industry. So it's all about a shift 0:09:56.440 --> 0:09:58.960 that's occurring, which I think in some ways it's healthy, 0:09:59.120 --> 0:10:02.800 that's evolving as the economies evolved. Tom Tomma show. One 0:10:02.840 --> 0:10:05.200 thing you talked about was the big question is how 0:10:05.280 --> 0:10:08.439 much can they actually increase profits going forward? That really 0:10:08.480 --> 0:10:10.439 will stem from loan growth. We've heard from a lot 0:10:10.440 --> 0:10:13.640 of the big banks already that has been a challenging area. 0:10:13.840 --> 0:10:16.800 How concerned are you about the lack of loan originations, 0:10:16.800 --> 0:10:19.360 the lack of demand as a result of cash flush 0:10:19.400 --> 0:10:23.880 consumers and corporations. You hit the tension nail right on 0:10:23.920 --> 0:10:26.560 the head because that is the question. So just to 0:10:26.640 --> 0:10:29.079 set up what the tension is, I think with investors 0:10:29.080 --> 0:10:32.959 in the market right now, is credit quality far better 0:10:33.000 --> 0:10:38.160 than anyone expected, and results continue to exceed expectations. Negative 0:10:38.200 --> 0:10:41.200 low loss provisions. I saw some banks recently had practically 0:10:41.320 --> 0:10:46.480 zero net charge offs. Remarkable. Capital is building eighty years strong, 0:10:46.600 --> 0:10:50.840 balance sheets getting stronger. There's eight hundred billion dollars of 0:10:50.880 --> 0:10:54.080 excess liquidity we think in the banking system right now, 0:10:54.520 --> 0:10:57.400 that's the fuel for we think a lot of growth. 0:10:57.600 --> 0:11:00.600 The problem is you're not seeing it right now because 0:11:00.679 --> 0:11:04.360 the demand for for credit from the private sector just 0:11:04.520 --> 0:11:07.520 isn't there. And so if the economy is as strong 0:11:07.559 --> 0:11:10.400 as many people think, and we think what the industry 0:11:10.440 --> 0:11:13.280 is saying is some of this excess liquidity will will 0:11:13.360 --> 0:11:15.840 will be soaked up, and we'd like to think that 0:11:16.000 --> 0:11:17.840 by the end of the year you'll start to see 0:11:17.920 --> 0:11:20.960 revenues begin to grow as core loans begin to grow. 0:11:21.320 --> 0:11:23.199 If it doesn't happen a year and I think it's 0:11:23.200 --> 0:11:26.199 a question of when, not if, And that's what investors 0:11:26.200 --> 0:11:28.839 are looking for right now because you're not seeing it 0:11:29.000 --> 0:11:31.120 right now in the industry. But the industry is in 0:11:31.240 --> 0:11:34.560 great shape to grow when that demand comes back. That's 0:11:35.080 --> 0:11:37.320 the next leg at this rally. But the rally we've 0:11:37.360 --> 0:11:40.760 had since last September is the credit improvement rally. The 0:11:40.800 --> 0:11:43.560 next rally is going to need to be the revenue 0:11:43.559 --> 0:11:47.280 growth rally, which really hasn't started yet, but people believe 0:11:47.320 --> 0:11:49.520 it will. And this is the tension right now, this 0:11:49.600 --> 0:11:53.000 question of how hot can the economy run if that 0:11:53.080 --> 0:11:56.120 loan demand doesn't pick up materially by year end. What 0:11:56.240 --> 0:11:58.520 you're saying is is different from what I'm hearing from 0:11:58.520 --> 0:12:00.560 other analysts. You're saying that if it doesn't pick up 0:12:00.559 --> 0:12:02.760 by your end, it just as a matter of when. 0:12:02.880 --> 0:12:05.280 It's not a question of whether the economy is truly 0:12:05.320 --> 0:12:07.960 hot or not. Do you think, for example, that we 0:12:08.040 --> 0:12:11.320 are going to see banks be able to profit from 0:12:11.320 --> 0:12:13.600 this hot economy in a way that perhaps people are 0:12:13.679 --> 0:12:17.720 discounting as a result of not seeing that loan demand. Yeah, 0:12:17.760 --> 0:12:20.520 I I do. I do think that banks will participate, 0:12:20.559 --> 0:12:22.840 but I think that you're gonna really start to see 0:12:23.360 --> 0:12:26.959 a separation between the winners and the losers. And I 0:12:27.520 --> 0:12:30.800 really believe that if you're an old school bank that 0:12:31.080 --> 0:12:34.280 is in an area that's not a faster growth area 0:12:34.640 --> 0:12:37.040 and haven't really invested in a lot of the new 0:12:37.400 --> 0:12:42.040 engagement of technology platforms, there's a chance your growth curve 0:12:42.120 --> 0:12:45.040 could be left behind. But I think that the major players, 0:12:45.080 --> 0:12:47.600 and that's why you're seeing the consolidation. You're seeing bigger 0:12:47.600 --> 0:12:50.840 banks stand up so they can compete with really the 0:12:50.920 --> 0:12:54.000 non banking challenge that's happening. And I think that's the 0:12:54.040 --> 0:12:56.520 big surprise, and that's what Jamie Diamond talked about in 0:12:56.559 --> 0:13:00.000 his annual letter to shareholders. I do think the growth 0:13:00.040 --> 0:13:01.920 will be there. I think it's a matter of when, 0:13:02.040 --> 0:13:04.160 not if. And I think the banks have done a 0:13:04.200 --> 0:13:06.960 good job of keeping their companies in good shape to 0:13:07.040 --> 0:13:08.840 be ready for it. I tell me, it's always tried 0:13:08.880 --> 0:13:10.280 to catch out with these sets. Get you throw us 0:13:10.280 --> 0:13:12.240 on this sector. Always appreciate your time, you know that. 0:13:12.320 --> 0:13:20.840 Tell me show that of KVW. Right now, we're gonna digress. 0:13:20.880 --> 0:13:22.720 And this is exactly who I want to talk to 0:13:22.720 --> 0:13:25.120 you about all this coin based stuff, and that is 0:13:25.160 --> 0:13:29.600 Michael Wolf. He has a wonderful cross section of experience 0:13:29.600 --> 0:13:32.760 and new technology. There is a tilt to entertainment, has 0:13:32.760 --> 0:13:36.440 acclaimed books on entertainment and technology. But we're thrilled at 0:13:36.440 --> 0:13:39.920 the gentleman from activate UH could join us this morning. 0:13:40.160 --> 0:13:43.000 Michael Wolf. I look at coin base and as Cathy said, 0:13:43.080 --> 0:13:47.840 it's a distributional force as well. It is set up 0:13:47.960 --> 0:13:53.240 based on an invented scarcity. Bitcoin has a structured scarce 0:13:53.440 --> 0:13:58.640 asset feature. How does coin based deal with the fragility 0:13:58.720 --> 0:14:01.920 of an invented scarcity? How are they going to deal 0:14:01.920 --> 0:14:06.040 with that strategically forward? Well, the way to think about 0:14:06.080 --> 0:14:10.320 about point base is as an exchange and it takes 0:14:10.559 --> 0:14:14.880 half a percentage on point on every transaction. So the 0:14:14.960 --> 0:14:19.400 real comparison is to the is the New York Stock 0:14:19.480 --> 0:14:23.880 Exchange nazac UH. And in fact, by the way point 0:14:23.880 --> 0:14:27.800 basis valuation is UM is about the same as the 0:14:27.840 --> 0:14:31.800 other two's added up. So so it's not a question 0:14:31.920 --> 0:14:34.200 that we when we look at point is we should 0:14:34.240 --> 0:14:38.320 not be worried about the volatility the underlying cryptocurrencies. We 0:14:38.400 --> 0:14:41.640 really should be looking at is the number of transactions 0:14:41.680 --> 0:14:45.120 which are likely to increase. Michael, how much we'd be 0:14:45.160 --> 0:14:49.400 worried about regulation? What regulation? There's there's a lot to 0:14:49.400 --> 0:14:52.520 be ironed out, and one of the issues is is 0:14:52.560 --> 0:14:55.600 tax treatment. The I r S is said that bitcoin 0:14:55.760 --> 0:15:00.880 is not currency but rather property. Um the the regulation 0:15:01.000 --> 0:15:04.560 has always taken a while to catch up with technology. 0:15:04.680 --> 0:15:08.560 In this case, it looks like it's keeping keeping paste. 0:15:08.960 --> 0:15:13.000 The bigger issue is that this offering is really more 0:15:13.080 --> 0:15:17.640 about the sort of coming out party, or the first 0:15:17.680 --> 0:15:21.120 public listing of of a currency, which is going to 0:15:21.160 --> 0:15:26.600 be an inflection point for the rest of all digital currencies. Michael, 0:15:26.600 --> 0:15:28.160 I gotta say, I hope I have a hundred billion 0:15:28.160 --> 0:15:32.800 dollars party coming out to some new America. I wonder though, 0:15:32.840 --> 0:15:36.360 going forward, just generally, whether the whether the valuations are 0:15:36.360 --> 0:15:39.840 incredibly inflated based on everybody trying to get ahead of 0:15:39.880 --> 0:15:42.200 growth and the next big thing. How do you parse 0:15:42.240 --> 0:15:44.800 that out at a time when you've got banks flush 0:15:44.840 --> 0:15:47.840 with cash looking to buy fintech, when you've got individuals 0:15:48.120 --> 0:15:51.880 looking for the next way of making efficient payments. The 0:15:52.320 --> 0:15:56.800 what what what's fascinating a backcoin base is this is 0:15:56.840 --> 0:16:01.680 the first way in which individuals can take to take 0:16:01.840 --> 0:16:07.600 part of this new market for cryptocurrencies without being subject 0:16:07.680 --> 0:16:10.720 themselves to the volatility of those currencies. So I think 0:16:10.720 --> 0:16:14.080 we're gonna see that the coin base is going to 0:16:14.160 --> 0:16:16.920 be held widely at this market cap, It's going to 0:16:16.960 --> 0:16:19.920 be held by index funds, and so it's going to 0:16:20.000 --> 0:16:24.800 allow smaller investors as well as individuals to take part 0:16:24.840 --> 0:16:29.800 of this entire move towards cryptocurrencies. Michael Wolfe isn't like 0:16:29.840 --> 0:16:33.880 an eBay equivalent of years ago, where there's been a structure, 0:16:33.960 --> 0:16:37.720 there's been a launch, there's been a huge price repricing, 0:16:37.880 --> 0:16:42.280 an advancement in price, and now basically it's dead money forward. 0:16:44.040 --> 0:16:46.320 I don't think so. I think that this is once 0:16:46.360 --> 0:16:50.320 again this is an exchange, it's likely to be one 0:16:50.320 --> 0:16:55.640 of the few exchanges that dominates this business. It's actually um, 0:16:55.680 --> 0:16:59.200 the second largest exchange world Why the largest is a 0:16:59.200 --> 0:17:03.400 company called by ITTs and UM. And so this we're 0:17:03.400 --> 0:17:06.640 going to cease so much more activity. We've only seen 0:17:06.800 --> 0:17:10.600 so far Bitcoin as as really a vehicle of investment 0:17:10.640 --> 0:17:14.800 and speculation. It's only beginning as a vehicle of payment. 0:17:16.480 --> 0:17:18.960 Good to catch out, Michael, as always gonna hate from me, 0:17:18.960 --> 0:17:27.320 said Michael jay Will of activate joining us right now. 0:17:27.440 --> 0:17:30.720 Andy Barr, he was a congressman from Lexington, that would 0:17:30.720 --> 0:17:33.720 be the sixth Congressional district of Kentucky. Andy, I first 0:17:33.760 --> 0:17:36.600 got to go to the most exciting two minutes in sports. 0:17:36.880 --> 0:17:39.960 You are going to do the Kentucky Derby on May one. 0:17:40.000 --> 0:17:42.879 Tell us about the crowd they're given the pressures of 0:17:42.920 --> 0:17:47.439 this pandemic. Well, Churchill Downs is excited to return the 0:17:47.480 --> 0:17:50.320 Derby to the first Saturday in May. That's the traditional day. 0:17:50.359 --> 0:17:54.679 It's always been run, with two exceptions, uh, once in 0:17:54.880 --> 0:17:59.119 nineteen during World War two and the other was last 0:17:59.200 --> 0:18:02.199 year during the pandemic. So we're excited, even if the 0:18:02.240 --> 0:18:06.080 crowd will be a little limited because of social distancing requirements. 0:18:06.560 --> 0:18:09.199 Maybe half maybe a little less than half capacity, but 0:18:09.280 --> 0:18:12.600 still the most exciting two minutes in sports will be 0:18:12.640 --> 0:18:15.920 returning to Churchill Downs on the first Saturday and May 0:18:16.480 --> 0:18:20.040 Karison Bar. Some of my ancient ancestors were named after 0:18:20.080 --> 0:18:23.520 a gentleman named Henry Clay. There were two generations of 0:18:23.640 --> 0:18:27.200 Henry Clay. Keen. You went to the Henry Clay High 0:18:27.240 --> 0:18:29.960 School in Kentucky, and it is a symbol of the 0:18:30.040 --> 0:18:33.600 tensions of race in this nation back well over a 0:18:33.680 --> 0:18:39.520 hundred years and forever. Please discuss reparations and the tensions 0:18:39.520 --> 0:18:43.119 that you see between the two parties as we engage 0:18:43.200 --> 0:18:48.160 this debate again. Well, no doubt there's so much partisanship 0:18:48.200 --> 0:18:51.560 in Washington, and you know President Joe Biden, who is 0:18:51.680 --> 0:18:54.719 a member of the other party for me, gave I 0:18:54.760 --> 0:18:59.160 think an uplifting inaugural address calling for unity and bipartisan solution. 0:18:59.200 --> 0:19:03.199 It's unfortunate only ever since that speech we've seen a 0:19:03.280 --> 0:19:07.160 president governed from the hard left, as Uh Karl Rove 0:19:07.320 --> 0:19:11.240 observed recently in the Wall Street Journal. Uh, this so 0:19:11.320 --> 0:19:14.400 called infrastructure plan, which is really more of the Green 0:19:14.480 --> 0:19:17.720 New Deal and tax increases with no real effort to 0:19:17.760 --> 0:19:24.520 reach out to Republicans. It's really solidifying President Biden's reputation 0:19:24.600 --> 0:19:28.280 as the most profligate and partisan president in history. That's 0:19:28.320 --> 0:19:31.200 a strong statement, but unfortunately there's really not been any 0:19:31.320 --> 0:19:34.480 genuine outreach to the other side of the aisle. Look, 0:19:34.600 --> 0:19:37.439 both parties deserve blame for this, but I would like 0:19:37.600 --> 0:19:41.120 to see this president and congressional Democrats in the majority 0:19:41.480 --> 0:19:45.680 reach out and just at least entertain some of our ideas. Congressman, 0:19:45.680 --> 0:19:48.119 you said, both parties deserve some blame for this, and 0:19:48.160 --> 0:19:50.240 this does seem to be the playbook that every time 0:19:50.280 --> 0:19:52.840 there's a new president, the other side says it's not 0:19:52.880 --> 0:19:55.720 bipartisan at all, and that president goes it alone and says, well, 0:19:55.720 --> 0:19:57.520 we couldn't get anything done if we actually tried to 0:19:57.560 --> 0:20:00.480 do it in a bipartisan level. What could re Publicans 0:20:00.520 --> 0:20:03.320 do right now? Better to actually move closer to a 0:20:03.359 --> 0:20:08.000 bipartisan solution. Well, look, this is not an infrastructure bill 0:20:08.080 --> 0:20:11.240 that the president is proposing. It's a three trillion dollar 0:20:12.040 --> 0:20:15.720 left wing wish list. Only five to six percent can 0:20:15.760 --> 0:20:20.000 be adequately described as financing roads and bridges, which is 0:20:20.000 --> 0:20:23.480 what both parties say. We need. The most generous definition 0:20:23.480 --> 0:20:29.680 of infrastructure, which would include things like high speed internet, broadband, ports, airports, uh, 0:20:29.800 --> 0:20:35.120 even electrical grid reliability upgrades. Those kinds of infrastructure investments 0:20:35.160 --> 0:20:37.520 I think would earn bipartisan support, but in this bill 0:20:37.960 --> 0:20:41.000 only account for about thirty percent of the total spending. 0:20:41.400 --> 0:20:44.960 We have a new definition of infrastructure, including the care infrastructure, 0:20:45.000 --> 0:20:48.359 which is really just a massive expansion of Medicaid. And 0:20:48.400 --> 0:20:52.440 then you have some of these other unrelated items green 0:20:52.480 --> 0:20:55.399 New Deal items that were included. But then on top 0:20:55.440 --> 0:20:58.960 of that, there's no consideration of Republican ideas on financing 0:20:59.240 --> 0:21:04.080 public private partnerships and streamlining of permitting and regulatory reform. 0:21:04.200 --> 0:21:07.640 None of those Republican ideas are being even entertained. It's 0:21:07.680 --> 0:21:12.240 just more big government tax and spending, and unfortunately, a huge, 0:21:12.320 --> 0:21:15.359 massive tax increase that will bring us back to the 0:21:15.359 --> 0:21:19.560 bat old days of corporate inversions, moving jobs overseas, stagnant wages, 0:21:19.560 --> 0:21:23.360 and I would argue much lower wages. The National Association 0:21:23.359 --> 0:21:26.199 of Manufacturing says we're gonna lose a million jobs in 0:21:26.240 --> 0:21:29.919 the first year if these corporate tax increases go into effect. 0:21:30.000 --> 0:21:32.520 Congress Banner, if there was some sort of agreement that 0:21:32.600 --> 0:21:35.119 was smaller, saying eight hundred billion dollars six hundred and 0:21:35.160 --> 0:21:39.119 fifty billion dollars. Some Republicans are asking for bipartisan infrastructure 0:21:39.160 --> 0:21:41.320 built targeting the areas that are more commonly thought of 0:21:41.440 --> 0:21:44.200 as infrastructure. Would you be willing to raise taxes to 0:21:44.240 --> 0:21:47.600 pay for it? Well, I think we we ought to 0:21:47.640 --> 0:21:50.920 consider user fees as a way to finance infrastructure. That's 0:21:50.960 --> 0:21:52.800 the way we've always done it in this country. But 0:21:52.880 --> 0:21:57.960 to make America less competitive by not just increasing the 0:21:58.000 --> 0:22:03.320 corporate rate from to but taking our corporate tax rate 0:22:03.640 --> 0:22:07.320 to a level, uh that's higher than the tax rate 0:22:07.359 --> 0:22:10.600 in communist China, raising it to a level that's the 0:22:10.680 --> 0:22:14.600 highest among all developed nations. Because remember, it's not just 0:22:14.720 --> 0:22:18.760 raising the rate from that the President is proposing. He's 0:22:18.760 --> 0:22:22.600 proposing to do so without removing the base broadening reforms 0:22:22.640 --> 0:22:25.000 that we put into place in the Tax Cuts and 0:22:25.119 --> 0:22:27.679 Jobs Act. And when you add on top of the 0:22:27.720 --> 0:22:32.080 federal income tax rates, the state and local corporate tax rates, 0:22:32.119 --> 0:22:36.040 that's where you push American corporations into a very non 0:22:36.080 --> 0:22:39.520 competitive position. Congress, And one final question, and I do 0:22:39.600 --> 0:22:43.120 this after President Trump gave support to the Senator from 0:22:43.160 --> 0:22:45.359 Florida a few days ago and a course, with your 0:22:45.400 --> 0:22:49.359 lifelong work with Senator McConnell, I want you to frame 0:22:49.440 --> 0:22:53.440 for us how you perceive your Republican Party right now. 0:22:54.320 --> 0:22:59.840