1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 2 00:00:14,000 --> 00:00:17,599 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,040 --> 00:00:23,560 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,640 --> 00:00:27,760 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. We're 5 00:00:27,840 --> 00:00:30,400 Speaker 1: joining us now is Paul Tucker. He's former Deputy Governor 6 00:00:30,520 --> 00:00:32,560 Speaker 1: of the Bank of England. Well, his latest book is 7 00:00:32,600 --> 00:00:34,960 Speaker 1: called Tom Unelected Power. I know this is going to 8 00:00:35,040 --> 00:00:38,280 Speaker 1: make Tom's must real list to the quest for legitimacy 9 00:00:38,280 --> 00:00:41,800 Speaker 1: and central banking and the regulatory state. Still with us 10 00:00:41,840 --> 00:00:44,320 Speaker 1: Rupert Harrison of Black Rock and John Norman of JP Morgan. 11 00:00:44,360 --> 00:00:46,239 Speaker 1: Where are your books? I need? I need books from 12 00:00:46,240 --> 00:00:48,960 Speaker 1: everyone on set. Paul Talker, thank you for joining us. 13 00:00:49,000 --> 00:00:51,919 Speaker 1: Congratulations on the book. First of all, when you look 14 00:00:51,960 --> 00:00:54,200 Speaker 1: back to Lehman's when you look back at just you 15 00:00:54,200 --> 00:00:56,520 Speaker 1: know that oh eight period, when did you first realize 16 00:00:56,520 --> 00:00:59,480 Speaker 1: about the scale of how enormous it was what we 17 00:00:59,480 --> 00:01:02,200 Speaker 1: were going through. I think when best Earns failed and 18 00:01:02,320 --> 00:01:04,720 Speaker 1: was rescued. I recall a meeting at the Bank of 19 00:01:04,760 --> 00:01:07,720 Speaker 1: England where I said that had it not been rescued, 20 00:01:07,760 --> 00:01:10,440 Speaker 1: there would have been mayhem, And a month later one 21 00:01:10,480 --> 00:01:12,120 Speaker 1: of the directors came back to me and said, that 22 00:01:12,160 --> 00:01:14,720 Speaker 1: was quite a thing to say. Defend it, and so 23 00:01:14,920 --> 00:01:17,480 Speaker 1: I did. I think the tragedy and I don't think 24 00:01:17,520 --> 00:01:20,400 Speaker 1: anyone has said anything intelligent about this, and I'm not 25 00:01:20,440 --> 00:01:25,120 Speaker 1: going to is the wasted six months between bes Starns 26 00:01:25,319 --> 00:01:29,200 Speaker 1: and Lehman. Why on both sides of the Atlantic, weren't 27 00:01:29,240 --> 00:01:35,320 Speaker 1: the big dealers, the big banks forced to deleverage in 28 00:01:35,360 --> 00:01:38,840 Speaker 1: the wholesale market commitments in a controlled way rather than 29 00:01:38,880 --> 00:01:42,319 Speaker 1: in their lending to the real economy. Why wasn't Lehman 30 00:01:43,160 --> 00:01:47,400 Speaker 1: is reputed to have been debating an equity injection from Korea. 31 00:01:47,480 --> 00:01:50,680 Speaker 1: Why didn't that happen? Why didn't the US authorities push 32 00:01:50,760 --> 00:01:52,760 Speaker 1: them to do it? And there's too much discussion about 33 00:01:52,760 --> 00:01:55,200 Speaker 1: all the liquidity measures that were taken, some of which 34 00:01:55,240 --> 00:01:57,640 Speaker 1: I devised, and of course central bankers think they were 35 00:01:57,680 --> 00:02:01,680 Speaker 1: quite good, and not enough discussion about out missed opportunities 36 00:02:01,720 --> 00:02:04,880 Speaker 1: by supervisors and regulators. But why because they didn't understand 37 00:02:04,880 --> 00:02:07,040 Speaker 1: the interconnected it or they didn't want to see it. 38 00:02:07,320 --> 00:02:10,200 Speaker 1: I don't know why. I think it's implausible to say 39 00:02:10,280 --> 00:02:15,520 Speaker 1: people didn't understand the interconnectedness. Loretta Mesta just said, um, 40 00:02:15,560 --> 00:02:18,480 Speaker 1: that we learned things about the interconnectedness. I don't think 41 00:02:18,480 --> 00:02:21,240 Speaker 1: we learned a great deal. If you go back and 42 00:02:21,280 --> 00:02:23,120 Speaker 1: look at things that the FED, the b I S, 43 00:02:23,200 --> 00:02:26,520 Speaker 1: the Bank of England said in the years before the crisis, 44 00:02:26,600 --> 00:02:30,280 Speaker 1: people knew the system was so horribly interconnected that they 45 00:02:30,280 --> 00:02:33,440 Speaker 1: wouldn't be able to understand how it would unravel. The 46 00:02:33,560 --> 00:02:37,840 Speaker 1: mystery and it is a mystery, um is why people 47 00:02:38,200 --> 00:02:41,360 Speaker 1: if you provide liquidity, you don't solve the ultimate problem, 48 00:02:41,480 --> 00:02:44,520 Speaker 1: but you buy time. How was the time used by 49 00:02:44,600 --> 00:02:47,799 Speaker 1: regulators and supervisors? I still I don't think we have 50 00:02:47,919 --> 00:02:51,000 Speaker 1: a good answer to that question on either side of 51 00:02:51,040 --> 00:02:54,079 Speaker 1: the Atlantic. Well, and the wonderful voices set that we 52 00:02:54,200 --> 00:02:56,720 Speaker 1: heard before you came on. We had Loretta Master of 53 00:02:56,720 --> 00:02:59,600 Speaker 1: the Cleveland FED, who is truly one of our best 54 00:02:59,639 --> 00:03:02,160 Speaker 1: myth maticians, and all this, and I go to a 55 00:03:02,280 --> 00:03:06,040 Speaker 1: chapter in your book the limits of design? Are we 56 00:03:06,200 --> 00:03:10,440 Speaker 1: asking too much of central banking? If the system lacks up, 57 00:03:10,480 --> 00:03:13,520 Speaker 1: as Lauretta talked about in at ten back look back, 58 00:03:13,760 --> 00:03:17,600 Speaker 1: If the system locks up, is the correlations become so tight? 59 00:03:18,080 --> 00:03:22,519 Speaker 1: Is there a limit to the design? Yes? Is the 60 00:03:22,600 --> 00:03:26,520 Speaker 1: simple answer if you expect central banks and agencies like 61 00:03:26,720 --> 00:03:31,079 Speaker 1: central banks to make the world a perfect place. UM, 62 00:03:31,080 --> 00:03:34,720 Speaker 1: this is doomed to fail. If you ask them to 63 00:03:35,280 --> 00:03:39,040 Speaker 1: deliver stable and low inflation over time, ensure that the 64 00:03:39,080 --> 00:03:42,400 Speaker 1: core of the banking system is resilient, they can do that. 65 00:03:42,520 --> 00:03:45,880 Speaker 1: They can't manage the credit cycle, they can't manage asset prices. 66 00:03:46,360 --> 00:03:48,920 Speaker 1: They can do those simple things. And in the years 67 00:03:49,360 --> 00:03:52,520 Speaker 1: during the crisis and since UM a lot of countries 68 00:03:52,560 --> 00:03:56,560 Speaker 1: have fallen into the trap of of expecting the central 69 00:03:56,560 --> 00:03:59,280 Speaker 1: banks too much. And that's not only the central banks fault. 70 00:03:59,320 --> 00:04:02,880 Speaker 1: It's because Paul Auditions, it's convenient for politicians to vacate 71 00:04:02,960 --> 00:04:06,960 Speaker 1: the space and leave the central banks as the US cavalry, 72 00:04:07,320 --> 00:04:11,400 Speaker 1: and it is very tempting central banks to occupy that. Actually, 73 00:04:11,400 --> 00:04:13,560 Speaker 1: it's terribly difficult for them not to try to do 74 00:04:13,720 --> 00:04:16,799 Speaker 1: something when the politicians don't step up to the plate. 75 00:04:17,080 --> 00:04:19,760 Speaker 1: In the United States, of course, this is centers around 76 00:04:19,760 --> 00:04:23,320 Speaker 1: the difficulty of fiscal policy of any kind. And Toto, 77 00:04:23,360 --> 00:04:25,400 Speaker 1: all three of you, John Norman jump in here if 78 00:04:25,400 --> 00:04:27,560 Speaker 1: you would please, and I think it's a question for 79 00:04:27,600 --> 00:04:30,560 Speaker 1: all three of you. Francy lead this discussion, which is 80 00:04:30,600 --> 00:04:34,560 Speaker 1: the solution is more capital on the bank's balance sheets. 81 00:04:34,800 --> 00:04:38,320 Speaker 1: That just seems too simplistic to me, John is it? 82 00:04:40,120 --> 00:04:42,400 Speaker 1: I think that is too simplistic. I think the underlying 83 00:04:42,440 --> 00:04:44,520 Speaker 1: problem at the end of every business cycle is a 84 00:04:44,600 --> 00:04:48,560 Speaker 1: leverage build up somewhere, and it is helpful to have 85 00:04:48,640 --> 00:04:51,359 Speaker 1: banks will capitalized. That's one less source of leverage. But 86 00:04:51,400 --> 00:04:55,119 Speaker 1: it's very difficult to keep households and corporates from building 87 00:04:55,200 --> 00:04:58,120 Speaker 1: up leverage doing a long business cycle with low interest rates. 88 00:04:58,160 --> 00:05:00,640 Speaker 1: And that's why you can always, i think, act some 89 00:05:00,720 --> 00:05:03,279 Speaker 1: kind of high volatility decline in asset prices when we 90 00:05:03,320 --> 00:05:05,320 Speaker 1: eventually go into a downturn, and there's only so much 91 00:05:05,360 --> 00:05:07,599 Speaker 1: that central bankers can do to try to manage their 92 00:05:07,640 --> 00:05:11,080 Speaker 1: their deleveraging process. I'd agree with that. I think that 93 00:05:11,560 --> 00:05:13,880 Speaker 1: you know, more capital obviously is a big part of 94 00:05:13,880 --> 00:05:17,320 Speaker 1: the solution, but that's never going to prevent failures or um. 95 00:05:17,839 --> 00:05:19,800 Speaker 1: The next crisis is going to going to be different 96 00:05:19,800 --> 00:05:21,320 Speaker 1: in some sets. I mean, I think Paul's point is 97 00:05:21,320 --> 00:05:23,039 Speaker 1: a very interesting one. I mean, I think the UK 98 00:05:23,200 --> 00:05:25,400 Speaker 1: is a good interesting example. Actually have a country where 99 00:05:25,520 --> 00:05:27,880 Speaker 1: we've probably gone further than almost any other country and 100 00:05:28,160 --> 00:05:30,560 Speaker 1: explicitly giving the bank of England now a remit to 101 00:05:30,960 --> 00:05:32,720 Speaker 1: not just protect the banks from the cycle, but to 102 00:05:32,760 --> 00:05:34,240 Speaker 1: try and protect the cycle from the bank. So you 103 00:05:34,279 --> 00:05:36,279 Speaker 1: have the kind of financial policy committee that is tasked 104 00:05:36,279 --> 00:05:38,320 Speaker 1: to try and step in and has already done that 105 00:05:38,360 --> 00:05:43,159 Speaker 1: in areas like Vitlet in the UK is increasingly getting 106 00:05:43,200 --> 00:05:46,400 Speaker 1: active in sort of counter cyclical capital measures to the banks, 107 00:05:46,839 --> 00:05:49,040 Speaker 1: and so far I think that I think that the 108 00:05:49,080 --> 00:05:51,320 Speaker 1: politics of that has been acceptable. I think the public 109 00:05:51,760 --> 00:05:54,440 Speaker 1: are willing to allow central banks to step in. Whether 110 00:05:54,520 --> 00:05:58,599 Speaker 1: that's politicians trying to push the responsibility away from themselves 111 00:05:58,600 --> 00:06:00,520 Speaker 1: towards the central banks, so you know, will only find 112 00:06:00,520 --> 00:06:04,080 Speaker 1: out the next time it really gets bad. Tucker, where 113 00:06:04,080 --> 00:06:06,560 Speaker 1: are we more vulnerable today than we were on the 114 00:06:06,600 --> 00:06:12,599 Speaker 1: eve of Leaming Brothers um shadow banking UM in China 115 00:06:12,800 --> 00:06:15,600 Speaker 1: or worldwide? Probably a bit in the United States as well. 116 00:06:15,600 --> 00:06:17,640 Speaker 1: I don't want to say more vulnerable in the United 117 00:06:17,680 --> 00:06:20,279 Speaker 1: States than before two thousand and seven eight, But I 118 00:06:20,320 --> 00:06:23,960 Speaker 1: think there's been a woefullly weak appetite to address shadow 119 00:06:24,000 --> 00:06:27,080 Speaker 1: banking in the in the States, and a policy of 120 00:06:27,160 --> 00:06:30,440 Speaker 1: will monitor it, spot the problems and then reform policy 121 00:06:30,440 --> 00:06:32,960 Speaker 1: to catch up is doomed to failure. By By the 122 00:06:33,000 --> 00:06:35,839 Speaker 1: time something is big enough to be a systemic threat, 123 00:06:35,920 --> 00:06:39,760 Speaker 1: it has a real lobbying power in Congress and and elsewhere. 124 00:06:39,760 --> 00:06:42,920 Speaker 1: I think the policy makers have have ducked this. It's 125 00:06:42,960 --> 00:06:45,800 Speaker 1: it's difficult, but they've ducked it. And I think that's 126 00:06:45,800 --> 00:06:49,000 Speaker 1: been a mistake. Another one which I know preoccupies some 127 00:06:49,040 --> 00:06:53,000 Speaker 1: people in the Senate UM is so my generation of 128 00:06:53,040 --> 00:06:56,440 Speaker 1: policy makers have pushed forced a lot of the derivatives 129 00:06:56,480 --> 00:07:00,000 Speaker 1: markets to go our central counterparties. That's good. I still 130 00:07:00,040 --> 00:07:03,919 Speaker 1: support that policy. But what happens of a central counterparty fails. 131 00:07:03,960 --> 00:07:06,800 Speaker 1: We are ten years on um No one in the 132 00:07:06,839 --> 00:07:10,600 Speaker 1: United States has said anything compelling about that. It isn't 133 00:07:10,640 --> 00:07:13,720 Speaker 1: even clear that there are legal powers to address it. 134 00:07:13,760 --> 00:07:16,560 Speaker 1: In Europe, more has been said and done, but the 135 00:07:16,560 --> 00:07:18,720 Speaker 1: truth is that Europe is waiting to try to do 136 00:07:18,840 --> 00:07:22,120 Speaker 1: something jointly with the United States. This will be imagine 137 00:07:22,160 --> 00:07:23,960 Speaker 1: one of these things fails. I'm one of the few 138 00:07:23,960 --> 00:07:26,000 Speaker 1: people on the planet that have dealt with the failed 139 00:07:26,400 --> 00:07:30,480 Speaker 1: um CCP. This will be inexcusable. Well, there were one 140 00:07:30,520 --> 00:07:32,520 Speaker 1: of the lessons that we've learned here. We've got I 141 00:07:32,520 --> 00:07:36,080 Speaker 1: guess Phillips, Curb and DSG All the fancy phrases back 142 00:07:36,080 --> 00:07:40,040 Speaker 1: to the martiall and cross, where's behavioral economics and all this? 143 00:07:40,360 --> 00:07:43,400 Speaker 1: Are you guys still ignoring Robert Schiller? Are you still 144 00:07:43,440 --> 00:07:49,040 Speaker 1: ignoring failor of Chicago? I don't think actually that was 145 00:07:49,160 --> 00:07:52,320 Speaker 1: the problem before the crisis. I think it was partly 146 00:07:52,320 --> 00:07:55,440 Speaker 1: a problem in the FED. The Greenspan doctrine meant that 147 00:07:55,560 --> 00:07:59,200 Speaker 1: supervision and regulation was neglected in the FED. It wasn't 148 00:07:59,200 --> 00:08:03,120 Speaker 1: a um an enticing or sexy place to to work. 149 00:08:03,200 --> 00:08:06,120 Speaker 1: I think the difficulty is I think people have embraced 150 00:08:06,440 --> 00:08:09,680 Speaker 1: the importance of behavior economics, I'm not sure that they 151 00:08:09,720 --> 00:08:12,400 Speaker 1: know how to operationalize it. How do you how do 152 00:08:12,440 --> 00:08:14,680 Speaker 1: you make a part of day to day policy? It's 153 00:08:14,680 --> 00:08:18,120 Speaker 1: over value and I um sitting on television talking about 154 00:08:18,160 --> 00:08:20,560 Speaker 1: it if you actually had the job. How do you 155 00:08:20,760 --> 00:08:25,520 Speaker 1: How do you spot irrational exuberances from harmless exuberance? How 156 00:08:25,560 --> 00:08:28,440 Speaker 1: do you spot the telco debt bubble which nearly did 157 00:08:28,520 --> 00:08:31,120 Speaker 1: bring down banks in the early zeros, from the dot 158 00:08:31,120 --> 00:08:34,480 Speaker 1: com equity bubble which didn't. Frankly, Paul the heart of this, 159 00:08:34,559 --> 00:08:37,559 Speaker 1: and I go back to Merwyn King's historic speech in Scotland, 160 00:08:37,559 --> 00:08:41,559 Speaker 1: which I thought was an early financial crisis landmark. But Paul, 161 00:08:41,559 --> 00:08:44,280 Speaker 1: what is so important here is the theory of a 162 00:08:44,360 --> 00:08:48,640 Speaker 1: central bank somehow getting out front of being expost or 163 00:08:49,200 --> 00:08:52,880 Speaker 1: being ex anti. Are we delusional that we think central 164 00:08:52,880 --> 00:08:57,400 Speaker 1: banks can get out front of economic trends, economic data, 165 00:08:57,679 --> 00:09:01,880 Speaker 1: in the behavior of an economic system. We'd be delusional 166 00:09:02,120 --> 00:09:04,559 Speaker 1: to put all our chips on that. Yeah, sometimes they 167 00:09:04,559 --> 00:09:07,640 Speaker 1: can do that. I mean, I've just criticized Alan Greenspan, 168 00:09:07,720 --> 00:09:10,480 Speaker 1: but Alan Greenspan did a good job in spotting the 169 00:09:10,600 --> 00:09:14,000 Speaker 1: uplifting productivity in the late nineties and the early zero 170 00:09:14,200 --> 00:09:16,200 Speaker 1: Sometimes you get that right, but you can't rely on it, 171 00:09:16,240 --> 00:09:18,440 Speaker 1: Which comes back to me, we are not going to spot, 172 00:09:18,880 --> 00:09:21,640 Speaker 1: or we cannot rely on spotting where the next crisis 173 00:09:22,200 --> 00:09:24,720 Speaker 1: will come from and how bad it will be. All 174 00:09:24,800 --> 00:09:27,320 Speaker 1: we can do is make the system more resilient, and 175 00:09:27,360 --> 00:09:31,920 Speaker 1: that includes vitally being able to cope with failure. So 176 00:09:32,040 --> 00:09:34,800 Speaker 1: there should be much more attention um in all of 177 00:09:34,800 --> 00:09:38,080 Speaker 1: these programs on how are plans going to make the 178 00:09:38,120 --> 00:09:41,959 Speaker 1: big banks and dealers resolvable so that we can wind 179 00:09:41,960 --> 00:09:45,280 Speaker 1: them down or recapitalize them in a crisis, rather than 180 00:09:45,360 --> 00:09:48,800 Speaker 1: turning to the taxpayer. And I think it's your responsibility 181 00:09:48,800 --> 00:09:51,360 Speaker 1: both of you to sometimes make that sexy. People might 182 00:09:51,360 --> 00:09:53,240 Speaker 1: be aren't going to be good at making that sexy. 183 00:09:53,520 --> 00:09:55,600 Speaker 1: People like you are good at making at sexy, and 184 00:09:55,600 --> 00:09:59,199 Speaker 1: you should try. Then. Well, I can tell you that 185 00:09:59,480 --> 00:10:01,920 Speaker 1: the foreign years that I've done this show, nobody has 186 00:10:01,960 --> 00:10:06,640 Speaker 1: told me that baky gets sexy. Joining us, Christmas Santi 187 00:10:07,040 --> 00:10:09,560 Speaker 1: of Casanti Investments, yellmen, I own I renew this as 188 00:10:09,559 --> 00:10:12,000 Speaker 1: well from Bloomberg, who wrote so many of our important 189 00:10:12,040 --> 00:10:16,000 Speaker 1: stories on banking, on shadow banking, and she is timeless. 190 00:10:16,000 --> 00:10:18,280 Speaker 1: She has not aged a moment since two thousand and eight. 191 00:10:18,320 --> 00:10:23,040 Speaker 1: Susan Latt joins us from Washington with Mackenzie. Susan, congratulations 192 00:10:23,160 --> 00:10:27,720 Speaker 1: on your fourteen page jewel on what happened and what 193 00:10:28,000 --> 00:10:31,920 Speaker 1: didn't change? Tell us from Mackenzie Global Institute what is 194 00:10:32,040 --> 00:10:36,319 Speaker 1: not changed, Well, what's not changed is that the world 195 00:10:36,360 --> 00:10:39,400 Speaker 1: still has a lot of debt. It's a different kind 196 00:10:39,440 --> 00:10:43,600 Speaker 1: of debt. It's taken out by governments and corporations as 197 00:10:43,640 --> 00:10:47,520 Speaker 1: time instead of households. But after all of the tumult 198 00:10:47,600 --> 00:10:49,959 Speaker 1: of two thousand and eight, we really expected that there 199 00:10:49,960 --> 00:10:53,480 Speaker 1: would be what we call deleveraging or debt reduction, and 200 00:10:53,520 --> 00:10:58,040 Speaker 1: instead we've got seventy two trillion dollars more debt than 201 00:10:58,080 --> 00:11:00,800 Speaker 1: we had back then within this So this goes back, 202 00:11:00,840 --> 00:11:02,880 Speaker 1: of course to one of the great books of this era, 203 00:11:03,160 --> 00:11:06,080 Speaker 1: the Reinhardt and Rogoff effort. This time is different. The 204 00:11:06,120 --> 00:11:09,480 Speaker 1: two professors don't make a distinction. They say, you've got 205 00:11:09,480 --> 00:11:13,240 Speaker 1: to add private debt to public debt. When you add 206 00:11:13,280 --> 00:11:17,000 Speaker 1: those two together, how ugly is the picture. Well, it's 207 00:11:17,559 --> 00:11:20,520 Speaker 1: debt is higher in the United States, in the UK 208 00:11:20,840 --> 00:11:23,719 Speaker 1: and Ireland and Spain than it was on the eve 209 00:11:23,720 --> 00:11:26,040 Speaker 1: of the crisis. And I think of those as sort 210 00:11:26,080 --> 00:11:31,319 Speaker 1: of the core crisis countries that had very over indebted 211 00:11:31,360 --> 00:11:35,280 Speaker 1: household sectors and real estate bubbles that ended very badly. 212 00:11:35,800 --> 00:11:38,240 Speaker 1: Um in the rest of the world that was not 213 00:11:38,400 --> 00:11:43,079 Speaker 1: at the epicenter of the crisis, all forms of debt 214 00:11:43,120 --> 00:11:47,200 Speaker 1: have continued to grow. Um. In Canada, our neighbors to 215 00:11:47,240 --> 00:11:52,120 Speaker 1: the north, the land of very sound banking, their household 216 00:11:52,120 --> 00:11:54,880 Speaker 1: debt is now at the same level as the US 217 00:11:55,160 --> 00:11:58,520 Speaker 1: was back in two thousand and seven. When you look 218 00:11:58,559 --> 00:12:02,120 Speaker 1: at developing countries, the change has been even more dramatic. 219 00:12:02,160 --> 00:12:05,599 Speaker 1: And this is why now we're having problems in Turkey 220 00:12:05,640 --> 00:12:09,240 Speaker 1: and Argentina, UM and other countries that were able to 221 00:12:09,320 --> 00:12:13,360 Speaker 1: borrow because interest rates were so incredibly low, investors were 222 00:12:13,400 --> 00:12:17,040 Speaker 1: willing to take a little bit higher risk to get returns, 223 00:12:17,360 --> 00:12:20,760 Speaker 1: and so emerging markets, both companies and governments were able 224 00:12:20,800 --> 00:12:25,240 Speaker 1: to borrow UM at unprecedented levels. Now as we look 225 00:12:25,280 --> 00:12:29,319 Speaker 1: forward to rising interest rates UM and combined with in 226 00:12:29,360 --> 00:12:36,120 Speaker 1: some countries unsound macroeconomic policies, we're going to see some problems. Yeah, 227 00:12:36,440 --> 00:12:38,240 Speaker 1: where are we going to see problems? Susan? If you 228 00:12:38,240 --> 00:12:41,320 Speaker 1: look at the spaces which may be more more vulnerable 229 00:12:41,320 --> 00:12:43,920 Speaker 1: today than they were on the eve of the Lehman collapse, 230 00:12:44,440 --> 00:12:48,440 Speaker 1: where is it well, in developing countries, it's always a 231 00:12:48,480 --> 00:12:52,640 Speaker 1: combination of too much dead and then combined with some 232 00:12:52,720 --> 00:12:57,360 Speaker 1: macroeconomic shocks. So in Turkey we've seen the lira plunge 233 00:12:57,520 --> 00:13:00,320 Speaker 1: nearly fift since the start of the year, and a 234 00:13:00,360 --> 00:13:03,320 Speaker 1: lot of their debt is in foreign currency, So a 235 00:13:03,360 --> 00:13:06,760 Speaker 1: company that was paying a certain amount on debt service 236 00:13:06,840 --> 00:13:10,600 Speaker 1: now is paying nearly double what they were if they're 237 00:13:10,600 --> 00:13:14,680 Speaker 1: earning local currency revenues. Same problem in Argentina, which just 238 00:13:14,840 --> 00:13:19,200 Speaker 1: asked for an I m F bailout. So we will 239 00:13:19,280 --> 00:13:22,719 Speaker 1: see some tremors. Um, I think in emerging markets as 240 00:13:22,760 --> 00:13:26,960 Speaker 1: we look ahead beyond that in the US and in Europe, 241 00:13:27,040 --> 00:13:30,720 Speaker 1: I think that the troubles are more specific pockets, for 242 00:13:30,760 --> 00:13:36,440 Speaker 1: instance US retail, But overall the picture doesn't look so bad. 243 00:13:38,000 --> 00:13:40,719 Speaker 1: Um Yamen. Three, your your reporting. So Tom and I 244 00:13:40,760 --> 00:13:42,920 Speaker 1: have been asking a lot of guests. You know, first 245 00:13:42,920 --> 00:13:46,360 Speaker 1: of all, what the consequences have been from the financial crisis, 246 00:13:46,640 --> 00:13:49,160 Speaker 1: And I've heard everything from you know, this was actually 247 00:13:49,400 --> 00:13:52,200 Speaker 1: the stepping stone of populism because of the central bank 248 00:13:52,200 --> 00:13:56,400 Speaker 1: action to banks being overregulated. What do you see as 249 00:13:56,520 --> 00:14:00,000 Speaker 1: as the kind of definitive consequence of the financial crisis 250 00:14:00,000 --> 00:14:03,080 Speaker 1: and the living collapse? I mean, the banks have definitely 251 00:14:03,080 --> 00:14:06,600 Speaker 1: been regulated more and overregulated. That's a debate. You know 252 00:14:06,720 --> 00:14:11,360 Speaker 1: that the banks say they're overregulated. Some critics say they're 253 00:14:11,360 --> 00:14:14,360 Speaker 1: still not regulated enough, but they're definitely more regulated, which 254 00:14:14,360 --> 00:14:17,720 Speaker 1: means they have their they're safer. After the crisis, you 255 00:14:17,760 --> 00:14:20,800 Speaker 1: know a lot of regulation worldwide, not just US, Europe 256 00:14:20,800 --> 00:14:27,640 Speaker 1: but everybody. Bossil Committee in Switzerland they did increase cap requirements, 257 00:14:27,840 --> 00:14:30,280 Speaker 1: could it requirements, all kinds of things that make the 258 00:14:30,320 --> 00:14:34,520 Speaker 1: banking systems safer, which meant things shifted to shadow banks 259 00:14:34,520 --> 00:14:37,200 Speaker 1: a little bit. Shadow banks, they're everything that is not 260 00:14:37,280 --> 00:14:40,440 Speaker 1: a bank, but that's still you know, is involved in 261 00:14:40,480 --> 00:14:43,280 Speaker 1: the landing, So that that's that's an area that's harder 262 00:14:43,320 --> 00:14:46,840 Speaker 1: to monitor. Regulators known less about it. They pay more 263 00:14:46,880 --> 00:14:49,640 Speaker 1: attention to it. They didn't before. They pay more attention 264 00:14:49,680 --> 00:14:52,480 Speaker 1: to it. But you know, and there have been political 265 00:14:52,520 --> 00:14:56,840 Speaker 1: and economic repercussions as well, inequality rising everybody. A lot 266 00:14:56,880 --> 00:15:00,360 Speaker 1: of analysts has say that's because of what happened after 267 00:15:00,400 --> 00:15:04,080 Speaker 1: the crisis, which is the easy monitary policy that lowered 268 00:15:04,120 --> 00:15:07,040 Speaker 1: interest rates and and and bought trillions of dollars of 269 00:15:07,840 --> 00:15:12,960 Speaker 1: bonds by the FEDS and and other central banks European, Asian, 270 00:15:13,280 --> 00:15:16,760 Speaker 1: and so all these things. You know, it has changed 271 00:15:16,800 --> 00:15:19,840 Speaker 1: the world. We have we have risks shift from from 272 00:15:19,840 --> 00:15:22,040 Speaker 1: the maybe the banking system to other corners of the 273 00:15:22,040 --> 00:15:25,960 Speaker 1: financial system. You know, so the dangers are still there 274 00:15:26,040 --> 00:15:28,880 Speaker 1: as as don't want saying there's so much more debt 275 00:15:29,280 --> 00:15:32,160 Speaker 1: that it's clearly not safe enough in the world. And 276 00:15:32,200 --> 00:15:34,480 Speaker 1: then you and Mark Pittman let our coverage on this 277 00:15:34,840 --> 00:15:37,080 Speaker 1: what was going on at the time, it was hugely 278 00:15:37,120 --> 00:15:40,960 Speaker 1: forensic reporting as well. And part of that forensic reporting 279 00:15:41,080 --> 00:15:44,320 Speaker 1: is whether the banks from where you sit. Do we 280 00:15:44,360 --> 00:15:48,720 Speaker 1: need greater bank concentration in America or do we need 281 00:15:48,760 --> 00:15:51,760 Speaker 1: to diffuse the two big defails that great Andrew Ross 282 00:15:51,800 --> 00:15:54,680 Speaker 1: Sorkin phrase, Do we need to diffuse the two big 283 00:15:54,720 --> 00:15:59,360 Speaker 1: defails to the regional banks? I felt, you know that 284 00:15:59,520 --> 00:16:02,440 Speaker 1: when I came to the US five years ago, I 285 00:16:02,480 --> 00:16:04,960 Speaker 1: thought there were too many little banks around the country. 286 00:16:04,960 --> 00:16:11,000 Speaker 1: And because there were, there were one my bank, my 287 00:16:11,160 --> 00:16:13,680 Speaker 1: first bank in the US, Wayne County National Bank, had 288 00:16:13,720 --> 00:16:17,160 Speaker 1: one branch, even if it didn't have to um. But then, 289 00:16:17,400 --> 00:16:20,720 Speaker 1: you know, as I've covered banking in this country and 290 00:16:20,800 --> 00:16:23,320 Speaker 1: around the world, I've looked at banking systems around the world. 291 00:16:23,520 --> 00:16:27,800 Speaker 1: I've realized that, of course smaller banks. The biggest advantage 292 00:16:27,800 --> 00:16:31,160 Speaker 1: of having all those smaller banks is that risk is 293 00:16:31,800 --> 00:16:34,800 Speaker 1: spread out. You know, one bank fails, we have FD 294 00:16:35,920 --> 00:16:38,160 Speaker 1: if they see if they takes care of him. But 295 00:16:38,280 --> 00:16:41,760 Speaker 1: so the big banks are threatening, and it's always tough 296 00:16:41,840 --> 00:16:44,400 Speaker 1: to to make sure that their risks are not too 297 00:16:44,440 --> 00:16:47,200 Speaker 1: much and when they fail. Can I got to make 298 00:16:47,240 --> 00:16:49,160 Speaker 1: some money out of Chris? Can you buy the banks 299 00:16:49,160 --> 00:16:51,920 Speaker 1: in which flavor of banks is where the value is? 300 00:16:52,400 --> 00:16:54,280 Speaker 1: I think it can time, But but I get an 301 00:16:54,280 --> 00:16:57,360 Speaker 1: overall feeling in this conversation that we're talking about the 302 00:16:57,440 --> 00:16:59,840 Speaker 1: last crisis almost like talking about would imagine old line. 303 00:17:00,080 --> 00:17:04,280 Speaker 1: That's the theme today, Chris get But but where is 304 00:17:04,320 --> 00:17:06,040 Speaker 1: the weak point? It's probably not going to be the 305 00:17:06,359 --> 00:17:09,560 Speaker 1: big US banks. I I look at emerging markets, I 306 00:17:09,640 --> 00:17:13,240 Speaker 1: look at where the stress points are today, and yeah, 307 00:17:13,240 --> 00:17:15,200 Speaker 1: we have more debt, but their GDP is a little higher. 308 00:17:15,200 --> 00:17:18,320 Speaker 1: It's it's China that's really levered up. So that's a 309 00:17:18,359 --> 00:17:21,440 Speaker 1: big concern, and we've nationalized that. They're taking it from 310 00:17:21,440 --> 00:17:23,879 Speaker 1: the private sector moving into the public sector, which is 311 00:17:23,880 --> 00:17:27,480 Speaker 1: exactly what we wanted to do. Frins, right, Yeah, Susan. 312 00:17:27,520 --> 00:17:29,359 Speaker 1: So one of the you know, we had Paul Tucker, 313 00:17:29,440 --> 00:17:32,320 Speaker 1: deputy former Deputy Governor of the Bank of England, and 314 00:17:32,359 --> 00:17:34,760 Speaker 1: he was saying, what we should really be watching out 315 00:17:34,800 --> 00:17:38,480 Speaker 1: for is shadow banking in the US and China. What 316 00:17:38,560 --> 00:17:42,320 Speaker 1: do we do? What should we do with shadow banking? Well, 317 00:17:42,320 --> 00:17:45,560 Speaker 1: shadow banking by a definition is always a bit of 318 00:17:45,600 --> 00:17:47,960 Speaker 1: a troublesome area because we just don't know a lot 319 00:17:48,000 --> 00:17:51,200 Speaker 1: about it. So at this point in the United States, 320 00:17:51,359 --> 00:17:54,680 Speaker 1: half of all new mortgages are coming from non bank 321 00:17:54,840 --> 00:17:59,919 Speaker 1: entities UM and those mortgages are going largely into Ginny May, 322 00:18:00,280 --> 00:18:04,040 Speaker 1: which is the third government owned mortgage securitizer that you 323 00:18:04,040 --> 00:18:06,840 Speaker 1: don't hear a lot about. So that's definitely an area 324 00:18:06,880 --> 00:18:10,240 Speaker 1: worth watching in the US. But I'll tell you what's different, 325 00:18:10,320 --> 00:18:13,239 Speaker 1: and maybe I'm just always an optimist, but there are 326 00:18:13,280 --> 00:18:16,679 Speaker 1: some positive changes in the financial system. For one, we 327 00:18:16,760 --> 00:18:20,800 Speaker 1: don't have the trillions and trillions of dollars of derivatives 328 00:18:20,920 --> 00:18:26,000 Speaker 1: and collateralized dead obligations CDEO squares credit default swaps that 329 00:18:26,040 --> 00:18:29,040 Speaker 1: were built on the U S subprime mortgages, and that's 330 00:18:29,080 --> 00:18:32,200 Speaker 1: what allowed UM, a small corner of the U S 331 00:18:32,240 --> 00:18:36,280 Speaker 1: mortgage market, uh to then create this global damage and 332 00:18:36,800 --> 00:18:39,320 Speaker 1: you know, throw the world into a global recession. All 333 00:18:39,359 --> 00:18:42,440 Speaker 1: of that has disappeared, so that's very good news. So 334 00:18:42,520 --> 00:18:44,960 Speaker 1: the risks that are out there could create losses, but 335 00:18:44,960 --> 00:18:47,600 Speaker 1: it's not gonna have the ripple effects that we saw UM. 336 00:18:47,600 --> 00:18:52,639 Speaker 1: In China, they've got a different story altogether. Talking to 337 00:18:52,680 --> 00:18:56,199 Speaker 1: me about China season quickly sorry. Uh. So, China has 338 00:18:56,280 --> 00:18:59,479 Speaker 1: levered up, as was mentioned. The good news for at 339 00:18:59,560 --> 00:19:01,760 Speaker 1: least the US of the world is that all of 340 00:19:01,760 --> 00:19:05,439 Speaker 1: that debt is coming from Chinese investors in Chinese banks, 341 00:19:05,840 --> 00:19:07,840 Speaker 1: So if there were to be a crisis, it's going 342 00:19:07,920 --> 00:19:12,240 Speaker 1: to be a domestic financial crisis within China. Now it 343 00:19:12,320 --> 00:19:17,679 Speaker 1: doesn't have obvious international repercussions through financial channels. Of course, 344 00:19:17,720 --> 00:19:20,480 Speaker 1: it's the world's second largest economy, so if China's growth 345 00:19:20,480 --> 00:19:23,320 Speaker 1: were to slow down, that would affect lots of countries 346 00:19:23,359 --> 00:19:29,760 Speaker 1: around the world. We're thrilled to develop that conversation this 347 00:19:29,800 --> 00:19:33,160 Speaker 1: morning with Jean call Is, a former president of European 348 00:19:33,200 --> 00:19:36,000 Speaker 1: Central Bank. Were honor that Mr Tuche could join in 349 00:19:36,080 --> 00:19:39,520 Speaker 1: US and joining us as well the great euro optimist 350 00:19:39,800 --> 00:19:43,480 Speaker 1: Eric Nielsen of unic Credit. When Europe was flat on 351 00:19:43,520 --> 00:19:46,960 Speaker 1: its back. Nielsen was pounding the table next to Francine 352 00:19:46,960 --> 00:19:51,200 Speaker 1: in London, saying, no, Tom, it's not that grim. Let's 353 00:19:51,200 --> 00:19:54,160 Speaker 1: start with Mr Nielsen. We're supposed to start with Mr Triche, 354 00:19:54,160 --> 00:19:57,200 Speaker 1: but Eric, I'm gonna start with you. Brief Mr Triche 355 00:19:57,359 --> 00:19:59,880 Speaker 1: on the state of Europe right now. Is at euro 356 00:20:00,040 --> 00:20:03,520 Speaker 1: sclerosis or Eric Nielsen? Is it a Europe of growth? 357 00:20:05,520 --> 00:20:08,840 Speaker 1: I think it's uh, it's by far closer to the 358 00:20:08,920 --> 00:20:12,280 Speaker 1: latter point you made Europe of growth. We have had 359 00:20:12,880 --> 00:20:15,480 Speaker 1: years of one and a half to two percent growth 360 00:20:15,520 --> 00:20:18,600 Speaker 1: not as much as you kind of would wish. But 361 00:20:18,600 --> 00:20:20,560 Speaker 1: but if you look at it in per capita terms, 362 00:20:20,600 --> 00:20:23,359 Speaker 1: we're doing basically as well as the US, and certainly 363 00:20:23,400 --> 00:20:26,199 Speaker 1: if you look at for ninety of the population, because 364 00:20:26,680 --> 00:20:29,040 Speaker 1: in America the growth really sits for the top ten 365 00:20:29,119 --> 00:20:31,720 Speaker 1: and and we don't have the same income distribution issues 366 00:20:31,760 --> 00:20:33,959 Speaker 1: as they have. Mr Trouchet, where us through this half far? 367 00:20:34,040 --> 00:20:36,040 Speaker 1: And yes we'll talk about brutal moves in the m 368 00:20:36,119 --> 00:20:40,040 Speaker 1: but Mr Trichet on Lehman, one of the great observations 369 00:20:40,160 --> 00:20:44,919 Speaker 1: interview to interview is that the europe banking system is 370 00:20:45,040 --> 00:20:50,680 Speaker 1: behind the United States system. What does European banking need 371 00:20:50,760 --> 00:20:54,560 Speaker 1: to do to modernize to catch up with what the 372 00:20:54,600 --> 00:21:00,720 Speaker 1: giants of the United States are doing. Of course, you're 373 00:21:00,760 --> 00:21:06,200 Speaker 1: absolutely right. There is a big domination of the investment 374 00:21:06,200 --> 00:21:09,639 Speaker 1: bank in New York and banks in the US in particular, 375 00:21:10,520 --> 00:21:14,160 Speaker 1: which is very part toxical, because after all, the crisis 376 00:21:14,359 --> 00:21:17,760 Speaker 1: was born in Wall Street. The epicenter of the crisis, 377 00:21:17,800 --> 00:21:21,040 Speaker 1: of the big big crisis, which is as gray, wasn't 378 00:21:21,240 --> 00:21:25,520 Speaker 1: as gray as the twenty nine thirties in the twentieth century, 379 00:21:26,080 --> 00:21:29,239 Speaker 1: is really born in the US. But what you have 380 00:21:29,400 --> 00:21:32,560 Speaker 1: to get in mind, is that there is a big 381 00:21:32,600 --> 00:21:36,119 Speaker 1: structural difference between the US and Europe. In the US, 382 00:21:36,280 --> 00:21:39,480 Speaker 1: at the moment of the birst of the crisis, the 383 00:21:39,560 --> 00:21:42,280 Speaker 1: financing of the U S economy was made through banks 384 00:21:42,760 --> 00:21:46,400 Speaker 1: with only twenty five of the final SINGE and through 385 00:21:46,440 --> 00:21:50,879 Speaker 1: markets with seventy five. It is it was exactly the 386 00:21:50,920 --> 00:21:55,000 Speaker 1: reverse in Europe, twenty five for the markets, seventy five 387 00:21:55,000 --> 00:21:57,959 Speaker 1: percent of the financing for the banks. And that, of 388 00:21:58,000 --> 00:22:02,240 Speaker 1: course is the first explanation because the recapitalization of banks 389 00:22:02,280 --> 00:22:06,800 Speaker 1: in Europe was much more costly in terms of percentage 390 00:22:06,800 --> 00:22:09,200 Speaker 1: of GDP than it was the case in the United 391 00:22:09,240 --> 00:22:12,440 Speaker 1: States of America. There are many reasons for those differences. 392 00:22:12,560 --> 00:22:15,480 Speaker 1: One important reason is the existence of Freddie mac and 393 00:22:15,520 --> 00:22:20,600 Speaker 1: Fannie May, which we are mentioned previously in On Your Skin, 394 00:22:21,200 --> 00:22:25,320 Speaker 1: and that explains why a very large part of the 395 00:22:25,400 --> 00:22:29,680 Speaker 1: financing of the U. S economy comes out of I 396 00:22:29,720 --> 00:22:34,080 Speaker 1: would say, see my public institution, and not through the banks. 397 00:22:34,680 --> 00:22:37,960 Speaker 1: But that being said, of course, the European have a 398 00:22:38,000 --> 00:22:39,720 Speaker 1: lot of hard work to do, and as you know, 399 00:22:40,240 --> 00:22:45,359 Speaker 1: structural reforms of first importance have been decided, including the 400 00:22:45,600 --> 00:22:50,480 Speaker 1: Single Supervision Authority, with the ultimate decision taken by the 401 00:22:50,520 --> 00:22:55,119 Speaker 1: central banks, so the European where at I would say 402 00:22:55,359 --> 00:23:00,080 Speaker 1: disadvantage in terms of structural difference with the US. It 403 00:23:00,200 --> 00:23:02,600 Speaker 1: took a number of decisions, and I'm very much on 404 00:23:02,680 --> 00:23:06,119 Speaker 1: the side of the optimism that was explaced by the 405 00:23:06,160 --> 00:23:11,760 Speaker 1: previous speaker, Mrs the concern at the time when Lehman collapses, 406 00:23:11,760 --> 00:23:16,879 Speaker 1: and actually market participants overall, regulators, even central bankers to 407 00:23:16,920 --> 00:23:22,080 Speaker 1: some extent, did not realize the intercondectedness of the banking system. 408 00:23:22,119 --> 00:23:24,639 Speaker 1: What do we know about the banking system now? Is 409 00:23:24,640 --> 00:23:26,480 Speaker 1: there a danger that actually we could go back to 410 00:23:26,520 --> 00:23:31,520 Speaker 1: that oh eight financial crisis. Well, what we know is 411 00:23:31,560 --> 00:23:36,359 Speaker 1: that we have decided to reinforce considerably the resilience of 412 00:23:36,440 --> 00:23:41,680 Speaker 1: the banks at a global level and through appropriate institutions 413 00:23:41,720 --> 00:23:44,600 Speaker 1: in Basil, in particular with the backing of the G twenty. 414 00:23:44,760 --> 00:23:48,520 Speaker 1: So a lot has been done to reinforce resilience. But 415 00:23:48,680 --> 00:23:53,639 Speaker 1: that does not that does not suggest that if we 416 00:23:53,760 --> 00:23:59,280 Speaker 1: had a big new shock, we wouldn't have contation. And 417 00:23:59,640 --> 00:24:03,160 Speaker 1: I thing that this is one of the emerging property 418 00:24:03,280 --> 00:24:06,680 Speaker 1: which comes out of what you just said, the generalized 419 00:24:06,760 --> 00:24:13,400 Speaker 1: interconnectedness not only between institutions, but between markets and between economies. 420 00:24:13,600 --> 00:24:17,959 Speaker 1: At a global level. So that is that is suggesting 421 00:24:18,000 --> 00:24:21,920 Speaker 1: that we must be very prudent, very cautious in all respect. 422 00:24:22,600 --> 00:24:26,720 Speaker 1: And I must confess I am not that toron kill 423 00:24:26,880 --> 00:24:31,640 Speaker 1: myself when I look at the overall global indebtedness which 424 00:24:31,680 --> 00:24:35,160 Speaker 1: continues to grow. When we know that the crisis came 425 00:24:35,440 --> 00:24:40,000 Speaker 1: from many many causes. In particular, of course, one of 426 00:24:40,040 --> 00:24:43,439 Speaker 1: the main cause was the indebtedness public and private at 427 00:24:43,440 --> 00:24:48,160 Speaker 1: a global levels. This is an important point. Indebtness, where 428 00:24:48,359 --> 00:24:50,520 Speaker 1: is it globally and are you talking about shadow banking? 429 00:24:53,560 --> 00:25:00,160 Speaker 1: To two I would say, go to the bottom line. 430 00:25:00,840 --> 00:25:05,960 Speaker 1: From two thousand up to two two eight, we had 431 00:25:06,040 --> 00:25:11,000 Speaker 1: a very big augmentation of overall indebtedness public and private 432 00:25:11,359 --> 00:25:15,560 Speaker 1: coming from the advanced economy ten pc for the em 433 00:25:15,720 --> 00:25:20,439 Speaker 1: from the emerging economy. After the crisis, we continue to 434 00:25:20,600 --> 00:25:25,560 Speaker 1: grow leverage at a global level, public and private, not 435 00:25:25,560 --> 00:25:29,120 Speaker 1: not exactly the same in various countries. And the big 436 00:25:29,160 --> 00:25:35,199 Speaker 1: difference is that it's this global leverage augments because of 437 00:25:35,320 --> 00:25:40,159 Speaker 1: the advanced economy and because of the emerging economy. So 438 00:25:40,400 --> 00:25:44,479 Speaker 1: that makes an enormous difference. Still, if there is something 439 00:25:44,560 --> 00:25:50,520 Speaker 1: like a global economy, if the global indebtedness as a 440 00:25:50,600 --> 00:25:55,400 Speaker 1: percentage of global GDP is a good indicator of vulnerability. 441 00:25:55,520 --> 00:25:58,720 Speaker 1: Then we are in a very vulnerable situation. Mr. And 442 00:25:58,800 --> 00:26:01,159 Speaker 1: I want to go to your engineering background here and 443 00:26:01,200 --> 00:26:04,600 Speaker 1: talk about leakages, which is Newtonian physics. But let's go 444 00:26:04,720 --> 00:26:08,199 Speaker 1: leakages within the financial system. Jean Collatricia, one of the 445 00:26:08,240 --> 00:26:11,080 Speaker 1: great themes of our lookback of ten years has been 446 00:26:11,080 --> 00:26:14,720 Speaker 1: the price in the cost of quantitative easy. What is 447 00:26:14,760 --> 00:26:19,399 Speaker 1: the impact of these balance sheets that Draggy Powell and 448 00:26:19,480 --> 00:26:22,560 Speaker 1: others have to face. What is the impact of those 449 00:26:22,600 --> 00:26:29,400 Speaker 1: balance sheets, and particularly Mr Tricia on emerging markets. Well, 450 00:26:29,480 --> 00:26:31,800 Speaker 1: first of all, it seems to me that the central 451 00:26:31,880 --> 00:26:34,679 Speaker 1: banks did what they had to do. They were in 452 00:26:34,720 --> 00:26:39,280 Speaker 1: a crisis, which had not the central banks been bold 453 00:26:39,440 --> 00:26:44,280 Speaker 1: and swift, we would have had a great depression and 454 00:26:44,440 --> 00:26:46,920 Speaker 1: we would have been in a dramatic situation for all 455 00:26:47,000 --> 00:26:51,320 Speaker 1: our fellow citizens in all advanced economy. So the banks, 456 00:26:51,520 --> 00:26:55,000 Speaker 1: the central banks did what they had to do because 457 00:26:55,040 --> 00:26:59,359 Speaker 1: the situation was absolutely dramatic. And of course when the 458 00:26:59,400 --> 00:27:04,120 Speaker 1: situation is much less dramatic, they have to withdraw progressively, 459 00:27:04,160 --> 00:27:11,760 Speaker 1: which is being done successively because the sequence of events 460 00:27:11,760 --> 00:27:14,199 Speaker 1: we are not the same in the US and in Europe. 461 00:27:14,200 --> 00:27:18,240 Speaker 1: But we you see that they are progressively withdrawing so 462 00:27:18,760 --> 00:27:21,840 Speaker 1: that there is nothing to say about that. It seems 463 00:27:21,840 --> 00:27:24,760 Speaker 1: to me that the central bank did their job, and 464 00:27:25,160 --> 00:27:28,160 Speaker 1: in any case, the counter factual would have been much 465 00:27:28,240 --> 00:27:33,320 Speaker 1: more dramatic. That's absolutely obvious. Now it's true that there 466 00:27:33,400 --> 00:27:35,359 Speaker 1: is not on these central banks. They are not the 467 00:27:35,440 --> 00:27:38,439 Speaker 1: only game in town. You also have, of course, all 468 00:27:38,480 --> 00:27:43,520 Speaker 1: the other partners, private sector, the other institutions, the governments 469 00:27:43,600 --> 00:27:47,080 Speaker 1: under parliament, and there I have to say things we 470 00:27:47,119 --> 00:27:50,720 Speaker 1: are not are not done as they should. In my opinion, 471 00:27:50,800 --> 00:27:56,240 Speaker 1: structural reforms are lagging, and the most of the advanced 472 00:27:56,240 --> 00:28:01,679 Speaker 1: economy and also the emerging economy uh not doing a 473 00:28:01,760 --> 00:28:05,399 Speaker 1: good job in terms of fiscal policies, in terms of 474 00:28:05,440 --> 00:28:09,160 Speaker 1: precisely augmentation of leverage in the public data and so forth. 475 00:28:09,440 --> 00:28:13,800 Speaker 1: So we really have to mobilize old partners to be 476 00:28:13,920 --> 00:28:16,800 Speaker 1: much more aware of the fact that if we want 477 00:28:16,880 --> 00:28:20,760 Speaker 1: to avoid the repetition of the drama which took place 478 00:28:20,840 --> 00:28:27,960 Speaker 1: ten years ago, we have to step in. This is 479 00:28:28,000 --> 00:28:30,679 Speaker 1: a special moment for us in economics. We've done that 480 00:28:30,760 --> 00:28:33,040 Speaker 1: with Milton Freeman and Robert Lucas, we did that with 481 00:28:33,080 --> 00:28:36,879 Speaker 1: Stiglets and Rogoff Otabos and now joining Professor Rogoff of 482 00:28:36,920 --> 00:28:41,720 Speaker 1: Harvard University. Marianna Masakado. She is at the University College 483 00:28:42,080 --> 00:28:45,720 Speaker 1: London and a very very important and controversial book out 484 00:28:46,040 --> 00:28:48,360 Speaker 1: The Value of Everything. I'm gonna make it as clear 485 00:28:48,400 --> 00:28:51,400 Speaker 1: as I can. The first forty pages of this book 486 00:28:51,440 --> 00:28:57,800 Speaker 1: should be read by every single economic student worldwide. Ken Rogoff, 487 00:28:57,840 --> 00:29:01,640 Speaker 1: as it traces the history of economics. Mariana, I want 488 00:29:01,640 --> 00:29:03,960 Speaker 1: to go to Ken on the Value of Everything. What 489 00:29:04,120 --> 00:29:07,840 Speaker 1: she leads with here Ken is history, matters and economics 490 00:29:08,000 --> 00:29:12,480 Speaker 1: from mercantilism, not the neo mercantilism of Trump, the mercantilism 491 00:29:12,520 --> 00:29:15,200 Speaker 1: to Jevons and onto the modern age. Are we teaching 492 00:29:15,320 --> 00:29:19,960 Speaker 1: enough Massicado history in our economics? No, we're not. I 493 00:29:20,200 --> 00:29:23,360 Speaker 1: say we're not. That you'd be people now think economic 494 00:29:23,480 --> 00:29:27,440 Speaker 1: history was something before two thousands. EXCEP trying to tell them, 495 00:29:27,560 --> 00:29:29,840 Speaker 1: you know that, you know what people thought about these 496 00:29:29,840 --> 00:29:32,920 Speaker 1: issues for a long time. Our ancestors weren't so full. Uh. 497 00:29:33,080 --> 00:29:37,560 Speaker 1: The rap, Marian is the idea here that you are 498 00:29:37,640 --> 00:29:41,680 Speaker 1: touting some form of a Marxist agenda, and yet a 499 00:29:41,720 --> 00:29:45,600 Speaker 1: careful read of your book is no, that's not the case. 500 00:29:45,920 --> 00:29:49,040 Speaker 1: Give us the nuance here of inequality as you see it. 501 00:29:49,640 --> 00:29:52,240 Speaker 1: So what I argue is basically that value used to 502 00:29:52,240 --> 00:29:56,040 Speaker 1: be hotly debated between economists. Today we have basically one 503 00:29:56,120 --> 00:29:58,480 Speaker 1: theory of value that passes for econ one oh one 504 00:29:58,800 --> 00:30:01,080 Speaker 1: and the value debates. Angeley has actually just gone to 505 00:30:01,120 --> 00:30:03,400 Speaker 1: business school. So the word is talked about in terms 506 00:30:03,440 --> 00:30:07,280 Speaker 1: of shareholder value, value chains, shared value. But we have 507 00:30:07,320 --> 00:30:10,080 Speaker 1: a problem in economics that we actually have this tautology. 508 00:30:10,120 --> 00:30:13,120 Speaker 1: We measure value by basically prices, which are supposed to 509 00:30:13,120 --> 00:30:16,800 Speaker 1: reveal value. But that's actually what allows someone like Lloyd Blankfeed, 510 00:30:16,880 --> 00:30:20,040 Speaker 1: one year after Layman that we were just talking about two, 511 00:30:20,040 --> 00:30:23,160 Speaker 1: with a straight face, say that Goldman sax workers are 512 00:30:23,200 --> 00:30:26,800 Speaker 1: the most productive in the world. Because that's a Harvard faculty, 513 00:30:27,320 --> 00:30:30,280 Speaker 1: we won't go there. Um. And so this is also why, 514 00:30:30,280 --> 00:30:34,360 Speaker 1: by the way, yesterday the head of Nostrom Pharmaceuticals, again 515 00:30:34,440 --> 00:30:36,760 Speaker 1: with a straight face, said that he had the moral 516 00:30:36,840 --> 00:30:40,040 Speaker 1: imperative to increase the price of the antibiotic that his 517 00:30:40,080 --> 00:30:44,280 Speaker 1: company is producing by right to please the shareholders. So 518 00:30:44,360 --> 00:30:48,240 Speaker 1: when we focus so much on, you know, maximizing shareholder value, 519 00:30:48,240 --> 00:30:51,080 Speaker 1: which many people have criticized, but they haven't, I think 520 00:30:51,160 --> 00:30:54,560 Speaker 1: on the full way to really debunk the underlying period 521 00:30:54,640 --> 00:31:00,000 Speaker 1: of value that maximizeholder value assumes. Yeah, good morning from London. 522 00:31:00,040 --> 00:31:02,479 Speaker 1: It's frenzy. How would you measure it then? I mean, 523 00:31:02,720 --> 00:31:05,560 Speaker 1: you know, forget shareholder value. It's a price that you 524 00:31:05,600 --> 00:31:09,800 Speaker 1: can measure with minimum wage, with everything. So if it's 525 00:31:09,840 --> 00:31:12,160 Speaker 1: not a price that you want to fixate on, how 526 00:31:12,200 --> 00:31:15,880 Speaker 1: do you measure everything that's around us. Well, it's funny 527 00:31:15,920 --> 00:31:18,080 Speaker 1: because Tom just mentioned up marks. But you know, we 528 00:31:18,080 --> 00:31:20,400 Speaker 1: could also go back to Adam Smith and David Ricardo. 529 00:31:20,520 --> 00:31:22,960 Speaker 1: They actually did something that in some ways is in 530 00:31:23,040 --> 00:31:26,920 Speaker 1: the popular debate today. They really worried about production, the 531 00:31:26,960 --> 00:31:30,040 Speaker 1: division of labor, mechanization and the fact that this had 532 00:31:30,040 --> 00:31:33,400 Speaker 1: on the profit wage relationships. So they had an understanding 533 00:31:33,440 --> 00:31:36,480 Speaker 1: of value that was tied to the objective conditions of production. 534 00:31:36,760 --> 00:31:39,240 Speaker 1: Forget whether it was the labor theory value or something else, 535 00:31:39,280 --> 00:31:42,920 Speaker 1: but it had a fundamental connection to how we actually 536 00:31:42,960 --> 00:31:46,640 Speaker 1: produce goods, how we organized production itself again through the 537 00:31:46,680 --> 00:31:49,800 Speaker 1: division of labor. Adam Smith pin factory, and their understanding 538 00:31:49,840 --> 00:31:53,160 Speaker 1: of value actually then determined their understanding of price. Today 539 00:31:53,160 --> 00:31:55,560 Speaker 1: we have the reverse logic, we start with price and 540 00:31:55,560 --> 00:31:57,680 Speaker 1: we assume that reveals value. So it's not that we 541 00:31:57,680 --> 00:32:00,920 Speaker 1: should throw prices away, that's not the point, but that's 542 00:32:00,960 --> 00:32:04,800 Speaker 1: that that's very different from thinking that prices themselves, um 543 00:32:05,000 --> 00:32:07,520 Speaker 1: are are or what value is? I we just think 544 00:32:07,520 --> 00:32:10,240 Speaker 1: of how we measure GDP. You know, it doesn't actually 545 00:32:10,280 --> 00:32:12,520 Speaker 1: include all sorts of things that we know we're valuable, 546 00:32:12,600 --> 00:32:15,440 Speaker 1: from care work to you know, if you marry, you're cleaner. 547 00:32:15,800 --> 00:32:20,000 Speaker 1: GDP goes down um because something that was being paid 548 00:32:20,000 --> 00:32:22,480 Speaker 1: for all of a sudden perhaps isn't. When we pollute, 549 00:32:22,480 --> 00:32:25,440 Speaker 1: GDP goes up because we have to clean that pollution. 550 00:32:25,600 --> 00:32:28,440 Speaker 1: So but you know, this problem is somehow has actually 551 00:32:28,520 --> 00:32:31,560 Speaker 1: been talked about by feminists and environmentalists. What we haven't 552 00:32:31,600 --> 00:32:34,560 Speaker 1: talked about is how GDP is full of rent. There's 553 00:32:34,600 --> 00:32:37,719 Speaker 1: a difference between rents and profits and when when we 554 00:32:37,760 --> 00:32:40,120 Speaker 1: have a subjective theory of value, and by that I 555 00:32:40,160 --> 00:32:43,920 Speaker 1: mean really based on preferences again, so it's preferences and 556 00:32:43,960 --> 00:32:48,000 Speaker 1: prices that are revealing value, then it becomes really easy 557 00:32:48,040 --> 00:32:51,640 Speaker 1: for rent extraction and I would call value extraction activities 558 00:32:51,840 --> 00:32:55,840 Speaker 1: to present themselves as value creation activities simply because they 559 00:32:55,840 --> 00:32:59,320 Speaker 1: have prices and so on a concrete level, what does 560 00:32:59,320 --> 00:33:02,080 Speaker 1: that change? So if we measure it differently, does it 561 00:33:02,240 --> 00:33:05,040 Speaker 1: mean that we talk more about redistribution. Does it mean 562 00:33:05,120 --> 00:33:09,280 Speaker 1: that actually would help with inequality and therefore with populism. Well, first, 563 00:33:09,520 --> 00:33:12,920 Speaker 1: and I'd say the first most, foremost, we should admit 564 00:33:13,000 --> 00:33:15,440 Speaker 1: that value is created collectively. So just coming back to 565 00:33:15,440 --> 00:33:18,440 Speaker 1: the pharmaceutical drugs, which is really concrete, because people do 566 00:33:18,560 --> 00:33:21,360 Speaker 1: die when they can't afford the drugs for such essential 567 00:33:21,400 --> 00:33:24,960 Speaker 1: medicines like antibiotics. You know, in the United States, the 568 00:33:25,080 --> 00:33:28,360 Speaker 1: National Institutes of Health spend over thirty two billion a 569 00:33:28,440 --> 00:33:32,000 Speaker 1: year on the research that actually leads to these drugs. Now, 570 00:33:32,360 --> 00:33:36,480 Speaker 1: the prices of these drugs should obviously reflect the contribution 571 00:33:36,520 --> 00:33:39,160 Speaker 1: of the taxpayer, which is enormal in the higher risk stage. 572 00:33:40,080 --> 00:33:42,200 Speaker 1: A few years ago, there were a set of doctors 573 00:33:42,200 --> 00:33:45,760 Speaker 1: at Strong Memorial Hospital in Rochester, New York, including your father, 574 00:33:46,080 --> 00:33:49,680 Speaker 1: who had the government support of medicine. She's saying in 575 00:33:49,680 --> 00:33:54,160 Speaker 1: her book it's evaporated. I mean, essentially, we're not using 576 00:33:54,280 --> 00:33:57,240 Speaker 1: government like we used to use government in the days 577 00:33:57,240 --> 00:34:00,400 Speaker 1: when Strong, where your father was, was a massive research center. 578 00:34:00,760 --> 00:34:04,840 Speaker 1: Is that true? First, honestly, congratulations on a wonderful book, 579 00:34:04,920 --> 00:34:09,040 Speaker 1: and I agree people people should read it. Um you know, 580 00:34:09,160 --> 00:34:12,080 Speaker 1: there are two separate issues here. One, I think is 581 00:34:12,120 --> 00:34:15,400 Speaker 1: the rise of monopoly in the economy, which is producing 582 00:34:15,400 --> 00:34:19,560 Speaker 1: the rents that Marianna is talking about the failure of 583 00:34:19,560 --> 00:34:24,400 Speaker 1: economists to define antitrust policy in this new wage of ideas. 584 00:34:25,120 --> 00:34:28,360 Speaker 1: How do you define whether Amazon's monopoly Google to monopoly 585 00:34:28,400 --> 00:34:31,759 Speaker 1: They obviously are an economists haven't figured out a good 586 00:34:31,760 --> 00:34:34,200 Speaker 1: way to say it. A separate issue is the size 587 00:34:34,239 --> 00:34:39,200 Speaker 1: of government in a world where trade, where technology is 588 00:34:39,360 --> 00:34:44,279 Speaker 1: producing things that always has but faster, and taxes and 589 00:34:44,320 --> 00:34:48,120 Speaker 1: transfers need to compensate for that, or payments and kind 590 00:34:48,239 --> 00:34:53,680 Speaker 1: in the case of health care, schooling is our next 591 00:34:53,680 --> 00:34:56,880 Speaker 1: guest poses that this question was the financial crisis wasted 592 00:34:57,120 --> 00:35:00,360 Speaker 1: writing a project syndicates him and how would say these 593 00:35:00,680 --> 00:35:05,319 Speaker 1: shares these thoughts. While financial regulation has been materially strengthened, 594 00:35:05,560 --> 00:35:09,040 Speaker 1: which is clearly the most important thing, it's implementation remains 595 00:35:09,040 --> 00:35:12,680 Speaker 1: in the hands of a patchwork quilt of national agencies. 596 00:35:12,880 --> 00:35:15,280 Speaker 1: And that's how Davis joins us now here on set 597 00:35:15,400 --> 00:35:18,239 Speaker 1: in London. Very good morning to you and thanks for 598 00:35:18,280 --> 00:35:20,520 Speaker 1: joining us. So when you refer to this patchwork quilt. 599 00:35:21,160 --> 00:35:25,120 Speaker 1: Can we talk about the world in one conversation here 600 00:35:25,239 --> 00:35:27,680 Speaker 1: or do we have to break this conversation up into two, 601 00:35:27,719 --> 00:35:30,240 Speaker 1: Because of course the US did its thing on regulation, 602 00:35:30,280 --> 00:35:32,279 Speaker 1: the UK did something different. I mean in the UK 603 00:35:32,600 --> 00:35:34,040 Speaker 1: a lot of the power was put into the Bank 604 00:35:34,080 --> 00:35:36,960 Speaker 1: of England, wasn't it. Yes? And the main point that 605 00:35:37,160 --> 00:35:39,120 Speaker 1: I was making, well, I think there are two two 606 00:35:39,160 --> 00:35:42,560 Speaker 1: main points. One is about the United States specifically, and 607 00:35:42,600 --> 00:35:45,560 Speaker 1: there I think people should pay more attention to what 608 00:35:45,600 --> 00:35:48,359 Speaker 1: Paul Volca has been saying. Paul Boker, in my long 609 00:35:48,400 --> 00:35:51,480 Speaker 1: experience of financial markets, is usually right, and he has 610 00:35:51,480 --> 00:35:54,000 Speaker 1: pointed out that all of the analyzes of the crisis 611 00:35:54,080 --> 00:35:57,480 Speaker 1: points to the fact that the US regulatory system was 612 00:35:57,560 --> 00:36:01,680 Speaker 1: vulcanized and it was very hard to produce one coherent view. 613 00:36:02,160 --> 00:36:04,839 Speaker 1: And that remains the case. The US remains the one 614 00:36:04,880 --> 00:36:09,480 Speaker 1: country on the planet which regulates cash, equities and derivatives 615 00:36:09,520 --> 00:36:12,680 Speaker 1: by different regulators. It's the one country where there is 616 00:36:12,680 --> 00:36:16,320 Speaker 1: a multiplicity of banking agencies, the Federal Reserve, the o 617 00:36:16,480 --> 00:36:19,840 Speaker 1: c C, the fd i C, the state regulators, and 618 00:36:19,880 --> 00:36:22,920 Speaker 1: where almost nothing has been done since the financial crisis 619 00:36:23,200 --> 00:36:27,680 Speaker 1: to rationalize that system. There's a second point at global level, 620 00:36:28,560 --> 00:36:30,200 Speaker 1: and I think the two dimensions of that one that 621 00:36:30,280 --> 00:36:34,440 Speaker 1: Gordon Brown has made today, which is, at the time 622 00:36:34,440 --> 00:36:36,719 Speaker 1: of the crisis in two thousand and eight nine, there 623 00:36:36,920 --> 00:36:40,239 Speaker 1: was a coming together globally of people who saw the 624 00:36:40,280 --> 00:36:42,760 Speaker 1: world in the same way, who understood each other's problems, 625 00:36:42,760 --> 00:36:46,400 Speaker 1: and who acted decisively. Can we say that the basis 626 00:36:46,440 --> 00:36:49,960 Speaker 1: of international trust is there at the moment with the 627 00:36:49,960 --> 00:36:53,640 Speaker 1: war of words between Donald Trump and the EU, the 628 00:36:53,760 --> 00:36:58,399 Speaker 1: UK splitting from the EU, not exactly warm relationships with 629 00:36:58,800 --> 00:37:01,680 Speaker 1: Russia and China on these rants, and so would there 630 00:37:01,680 --> 00:37:05,360 Speaker 1: be the basis for common agreements internationally if there was 631 00:37:05,360 --> 00:37:07,239 Speaker 1: another crisis? And is this a real fear then within 632 00:37:07,320 --> 00:37:10,080 Speaker 1: financial services? Because I saw those words from Gordon Brown today, 633 00:37:10,160 --> 00:37:12,320 Speaker 1: I also spoke to Sir John give X of the 634 00:37:12,320 --> 00:37:14,520 Speaker 1: Bank of England, of course, was there during the crisis, 635 00:37:14,640 --> 00:37:18,120 Speaker 1: and he made the same point. He said, George Bush 636 00:37:18,280 --> 00:37:20,799 Speaker 1: Junior at the time was President President George Bush, and 637 00:37:20,880 --> 00:37:24,080 Speaker 1: he was the one who approved some of the fed's action, 638 00:37:24,160 --> 00:37:26,359 Speaker 1: even though he said Congress stood in the way and 639 00:37:26,400 --> 00:37:28,800 Speaker 1: could we rely on the President of the United States 640 00:37:28,840 --> 00:37:31,840 Speaker 1: to allow the FED to do what was needed in 641 00:37:31,920 --> 00:37:34,719 Speaker 1: terms of cooperation? How deep seated. Is this fear then 642 00:37:34,760 --> 00:37:37,600 Speaker 1: in financial services here, I think people are concerned and 643 00:37:37,880 --> 00:37:42,880 Speaker 1: they're also concerned about what weapons the authorities now have 644 00:37:43,680 --> 00:37:46,960 Speaker 1: because interest rates remain extremely low. At the time, if 645 00:37:47,000 --> 00:37:49,520 Speaker 1: you remember, there was quite a lot of headroom for 646 00:37:49,560 --> 00:37:51,720 Speaker 1: the Federal Reserve and the Bank of England the ECB 647 00:37:52,080 --> 00:37:55,560 Speaker 1: to bang interest rately quick down and to engage in 648 00:37:55,600 --> 00:37:57,879 Speaker 1: a large amount of QI. Well, they're still all over 649 00:37:57,880 --> 00:38:00,440 Speaker 1: the financial markets through QUI and in the straight so 650 00:38:00,600 --> 00:38:02,200 Speaker 1: hey they have started to go up in a bit 651 00:38:02,200 --> 00:38:04,879 Speaker 1: more in the US than here in Europe. Nonetheless, there's 652 00:38:04,960 --> 00:38:09,439 Speaker 1: not much weaponry left in that arsenal, so I think 653 00:38:09,560 --> 00:38:12,520 Speaker 1: those two concerns are linked to Sir Howard, good morning. 654 00:38:12,520 --> 00:38:14,319 Speaker 1: I want to talk here a little bit about Lehman, 655 00:38:14,360 --> 00:38:16,160 Speaker 1: and then we're gonna have to migrate to Turkey. With 656 00:38:16,239 --> 00:38:19,040 Speaker 1: the movement and lira that we see in Turkish lear. Right, 657 00:38:19,120 --> 00:38:21,040 Speaker 1: let's bring up the interdaan Leer. I really want to 658 00:38:21,080 --> 00:38:24,400 Speaker 1: keep up to date on this worldwide Mr Arijuana speaking, 659 00:38:24,440 --> 00:38:27,319 Speaker 1: and we've got a real explosion in Turkish lear as 660 00:38:27,400 --> 00:38:31,920 Speaker 1: six thirty six out to sixty two. Howard, back to Lehman. 661 00:38:32,239 --> 00:38:35,640 Speaker 1: If we could you took a commanding heights position as 662 00:38:35,640 --> 00:38:39,359 Speaker 1: ahead of the f s A before the crisis more 663 00:38:39,400 --> 00:38:41,759 Speaker 1: than anyone else. I know, you were the one that 664 00:38:41,840 --> 00:38:44,719 Speaker 1: was supposed to maybe see it coming. By no means 665 00:38:45,000 --> 00:38:48,880 Speaker 1: all right, were you wrong in your insight at the time. 666 00:38:49,200 --> 00:38:54,440 Speaker 1: But to me, it was the amplitude that surprised Howard Davies, 667 00:38:54,480 --> 00:38:59,399 Speaker 1: the amplitude that surprised Noil Rabini and others. What did 668 00:38:59,400 --> 00:39:05,000 Speaker 1: we get wrong at the time about scope and scale? Well, look, 669 00:39:05,040 --> 00:39:08,480 Speaker 1: I don't want this to be an exercise and self justification, 670 00:39:08,520 --> 00:39:10,320 Speaker 1: but just to be clear, I did leave the regulator 671 00:39:10,360 --> 00:39:12,520 Speaker 1: in two thousand and three, and if you look at 672 00:39:12,560 --> 00:39:15,720 Speaker 1: the explosion of leverage, it took place between two thousand 673 00:39:15,719 --> 00:39:21,880 Speaker 1: and three. Johnson has nailed this. You're absolutely right in June, 674 00:39:22,440 --> 00:39:26,439 Speaker 1: in June of oh four, we saw this, So, sir 675 00:39:26,520 --> 00:39:29,919 Speaker 1: Howard very clearly or tell us about that moment when 676 00:39:30,040 --> 00:39:35,040 Speaker 1: leverage exploded. Well, what was surprising, and I think we 677 00:39:35,120 --> 00:39:37,319 Speaker 1: did see the beginning of it in two thousand and three, 678 00:39:37,680 --> 00:39:42,640 Speaker 1: was the arrival on the scene of derivatives like CDs 679 00:39:43,040 --> 00:39:48,800 Speaker 1: in particular, but also the tranching of securities which allowed 680 00:39:48,880 --> 00:39:53,960 Speaker 1: people to magnify credit. And as you know, the these 681 00:39:54,600 --> 00:39:57,520 Speaker 1: c d os and CDOs squares had just started to 682 00:39:57,560 --> 00:40:00,120 Speaker 1: come on the scene, and I did comment at the 683 00:40:00,200 --> 00:40:04,239 Speaker 1: time that I was concerned about the toxic waste, which 684 00:40:04,320 --> 00:40:07,319 Speaker 1: I've described a rather vivid phrase. I guess at the 685 00:40:07,360 --> 00:40:11,080 Speaker 1: bottom of this system, whereby the lower tranches of the 686 00:40:11,160 --> 00:40:16,560 Speaker 1: securitizations were nonetheless being traded as if they were fairly 687 00:40:16,640 --> 00:40:20,400 Speaker 1: solid assets. Indeed through some magical process though some of 688 00:40:20,440 --> 00:40:22,800 Speaker 1: them were given triple A status by the rating agencies. 689 00:40:23,040 --> 00:40:25,520 Speaker 1: So I think we did see the germs of that, 690 00:40:26,120 --> 00:40:28,919 Speaker 1: but the way in which it exploded over the next 691 00:40:28,960 --> 00:40:32,719 Speaker 1: three or four years was a surprise to everyone. And 692 00:40:32,760 --> 00:40:35,960 Speaker 1: I think looking back, you have to say, well, should 693 00:40:36,040 --> 00:40:39,719 Speaker 1: monetary policy have been tougher, because monetary policy is, after 694 00:40:39,800 --> 00:40:44,000 Speaker 1: all the most effective thing, And I think that in retrospect, 695 00:40:44,280 --> 00:40:46,680 Speaker 1: interest rates in the U S should have risen more, 696 00:40:47,160 --> 00:40:52,560 Speaker 1: and should regulators also have started to embrace these derivatives. 697 00:40:52,600 --> 00:40:55,600 Speaker 1: And I think that actually goes back to my Balkanized 698 00:40:55,680 --> 00:40:59,200 Speaker 1: regulation point, because as we know now, there were lively 699 00:40:59,280 --> 00:41:01,360 Speaker 1: debates in the S between the FED and the o 700 00:41:01,480 --> 00:41:05,280 Speaker 1: SEC and the CFTC and the SEC who couldn't agree 701 00:41:05,400 --> 00:41:08,160 Speaker 1: on quite how these derivative products should be regulated. And 702 00:41:08,200 --> 00:41:10,120 Speaker 1: I think that's the point, like coming back to my 703 00:41:10,200 --> 00:41:13,880 Speaker 1: first point that Paul Volkers making. Has that changed and 704 00:41:13,960 --> 00:41:19,560 Speaker 1: you say, he's right, we should to him, we are 705 00:41:19,600 --> 00:41:21,960 Speaker 1: honored to have a morning with Brad Hints. I think 706 00:41:22,000 --> 00:41:24,200 Speaker 1: who's stayed with us through TV and staying with us 707 00:41:24,200 --> 00:41:27,200 Speaker 1: through radio as well, Brad Hints the former Lehman CFO 708 00:41:27,800 --> 00:41:30,440 Speaker 1: and n Y you professor joint us now can monitor Brad, 709 00:41:30,600 --> 00:41:34,120 Speaker 1: good morning. Let's look back ten years solvency crisis or 710 00:41:34,160 --> 00:41:38,160 Speaker 1: aquidity crisis? What did that bank actually face liquidity, no 711 00:41:38,320 --> 00:41:42,760 Speaker 1: question about it. You lost repo which you lost commercial paper. 712 00:41:42,960 --> 00:41:47,640 Speaker 1: Your clients were selling back long term debt. Your counterparties 713 00:41:47,719 --> 00:41:54,200 Speaker 1: were asking for more collateral um. Typically, financial institutions don't 714 00:41:54,239 --> 00:41:56,600 Speaker 1: die for lack of equity, They die because of a 715 00:41:56,680 --> 00:42:00,719 Speaker 1: funding run. What is the response ten his on look like? 716 00:42:00,880 --> 00:42:03,680 Speaker 1: Because what strikes me is amazing ten years on is 717 00:42:03,680 --> 00:42:06,920 Speaker 1: there's still huge debate about whether the response was the 718 00:42:07,000 --> 00:42:10,719 Speaker 1: right response from regulators, from government officials to allow this 719 00:42:10,800 --> 00:42:14,520 Speaker 1: bank to fail. There was a mistake to to let 720 00:42:14,520 --> 00:42:18,080 Speaker 1: the let it fail. The you you scared the market, 721 00:42:18,320 --> 00:42:21,480 Speaker 1: and in scaring the market, it was that uncertainty which 722 00:42:21,560 --> 00:42:24,440 Speaker 1: led to the next thing, right, which was everybody pulls 723 00:42:24,480 --> 00:42:28,799 Speaker 1: in their lending, everyone pulls in their counterparty risk, and 724 00:42:28,920 --> 00:42:32,640 Speaker 1: you have a global credit reduction. Did it fail because 725 00:42:32,640 --> 00:42:35,239 Speaker 1: there wasn't a Jamie Diamond there to write the check 726 00:42:35,280 --> 00:42:38,960 Speaker 1: because he was preoccupied with a previous failure bear Stearns? 727 00:42:40,320 --> 00:42:43,399 Speaker 1: Was it just somebody? There wasn't somebody else equivalent? In 728 00:42:43,400 --> 00:42:46,440 Speaker 1: other words, there weren't there There wasn't There was a 729 00:42:46,480 --> 00:42:49,520 Speaker 1: marriage partner, Yeah, there was all or a divorce partner, 730 00:42:49,560 --> 00:42:51,360 Speaker 1: whatever you want to call it. But I don't know 731 00:42:51,360 --> 00:42:54,920 Speaker 1: where I got that. But but but Brad Mr Diamond 732 00:42:55,000 --> 00:42:58,319 Speaker 1: was exhausted from bailing out bear Stearns, and there was 733 00:42:58,400 --> 00:43:02,600 Speaker 1: no obvious candidate to take out Lehman. Is that right? Well, 734 00:43:02,760 --> 00:43:06,560 Speaker 1: you you had Barclay's at one point, right, you had 735 00:43:06,760 --> 00:43:10,040 Speaker 1: UM and and and certainly you had Bank of America 736 00:43:10,200 --> 00:43:13,000 Speaker 1: as another name. We we've all read the history on 737 00:43:13,000 --> 00:43:15,279 Speaker 1: this that there were a number of things going on. 738 00:43:15,680 --> 00:43:18,040 Speaker 1: I think the the issue you have as a management 739 00:43:18,040 --> 00:43:20,279 Speaker 1: team at Lehman that was looking at this versus the 740 00:43:20,360 --> 00:43:23,480 Speaker 1: history of other liquidity events. Right. As a result, their 741 00:43:23,520 --> 00:43:28,799 Speaker 1: balance she continued to rise through nineteen through two thousand eight. Right, 742 00:43:28,960 --> 00:43:32,000 Speaker 1: you said earlier, this was an opportunity for Mr. Full 743 00:43:32,120 --> 00:43:35,920 Speaker 1: That's how they looked at it. Well, in terms of 744 00:43:37,000 --> 00:43:40,240 Speaker 1: liquidity events are an opportunity in fixed income. In essence, 745 00:43:40,280 --> 00:43:43,319 Speaker 1: you're buying good assets at a troubled price. If you 746 00:43:43,400 --> 00:43:47,160 Speaker 1: have enough funding to make it through the crisis, you're fine. 747 00:43:47,600 --> 00:43:52,480 Speaker 1: Lehman had twelve months in their liquidity plan. And who 748 00:43:52,520 --> 00:43:56,440 Speaker 1: would have guessed that a liquidity event in mortgage backs 749 00:43:56,719 --> 00:43:59,400 Speaker 1: would swing across the entire credit market ultimately into the 750 00:43:59,400 --> 00:44:02,920 Speaker 1: government mark. So you know, there was the the issue. 751 00:44:02,960 --> 00:44:04,560 Speaker 1: I think we have an example. I mean, there's an 752 00:44:04,600 --> 00:44:08,640 Speaker 1: example of Solomon Brothers um facing a liquidity event in 753 00:44:08,640 --> 00:44:12,400 Speaker 1: the ninety nineties and their CFO put their raised their 754 00:44:12,440 --> 00:44:14,960 Speaker 1: internal costs to fund to put their balance sheet into 755 00:44:14,960 --> 00:44:18,360 Speaker 1: a nose dot shed assets and that bought hom time 756 00:44:18,400 --> 00:44:21,040 Speaker 1: and they made it through that liquidity crisis. Had Lehman 757 00:44:21,120 --> 00:44:23,080 Speaker 1: done the same thing, I think of what Goldman did. 758 00:44:23,160 --> 00:44:26,040 Speaker 1: Goldman not only did they made a bet against it, 759 00:44:26,200 --> 00:44:29,560 Speaker 1: but they also did not grow their balanche. Goldman pulled 760 00:44:29,560 --> 00:44:33,920 Speaker 1: in their horns. Lehman did not. Leman and and and 761 00:44:34,200 --> 00:44:37,520 Speaker 1: that was that that really set the stage as the 762 00:44:38,320 --> 00:44:42,000 Speaker 1: as the markets became ever ill liquid. Lehman was stuck 763 00:44:42,000 --> 00:44:46,000 Speaker 1: with a concrete side of its balanche. Its assets side froze, 764 00:44:46,320 --> 00:44:50,319 Speaker 1: its liability side ran off, and you know, the end 765 00:44:50,320 --> 00:44:52,400 Speaker 1: of the you know, the end of Lehman occurred. That 766 00:44:52,520 --> 00:44:55,319 Speaker 1: the surprise was the FED right. Because the FED had 767 00:44:55,360 --> 00:44:58,120 Speaker 1: taken action with Bear, and the FED had taken action 768 00:44:58,160 --> 00:45:01,279 Speaker 1: by allowing the broker dealers to have excess to the 769 00:45:01,520 --> 00:45:07,480 Speaker 1: to the discount window. The assumption among observers was the 770 00:45:07,520 --> 00:45:11,120 Speaker 1: FED was going to make sure that this was orderly, 771 00:45:11,760 --> 00:45:15,279 Speaker 1: and the Lehman balance failure was not orderly, and there 772 00:45:15,360 --> 00:45:17,400 Speaker 1: was the problem. So let's pick up on that, and 773 00:45:17,480 --> 00:45:21,440 Speaker 1: a final question, use the word panic. Officials now believe 774 00:45:21,560 --> 00:45:24,480 Speaker 1: they have the structures, the regulations to allow for an 775 00:45:24,560 --> 00:45:28,680 Speaker 1: orderly failure of a bank when it actually comes to it, 776 00:45:29,560 --> 00:45:31,719 Speaker 1: if we ever have to face a crisis like this again, 777 00:45:31,719 --> 00:45:34,200 Speaker 1: whether it's in ten years, twenty thirty years, wherever it is, 778 00:45:35,120 --> 00:45:39,239 Speaker 1: do you actually see the government and officials applying the 779 00:45:39,320 --> 00:45:42,480 Speaker 1: rules that they currently have to allow for an orderly 780 00:45:42,520 --> 00:45:45,280 Speaker 1: failure of a bank? Ever? Again, in the United States, 781 00:45:45,640 --> 00:45:50,280 Speaker 1: the the FED needs to be able to lend wherever 782 00:45:50,320 --> 00:45:54,680 Speaker 1: they wherever there is a need they're they're tied up 783 00:45:54,800 --> 00:45:57,759 Speaker 1: too much at this point. In essence, we've established a 784 00:45:57,760 --> 00:45:59,400 Speaker 1: set of rules that will be just perfect in the 785 00:45:59,480 --> 00:46:02,600 Speaker 1: last crisis, and they we don't know what the next 786 00:46:02,600 --> 00:46:04,719 Speaker 1: crisis will be. I mean, what this It goes back 787 00:46:04,760 --> 00:46:07,040 Speaker 1: to Badget, folks. For those of you are not keeping score. 788 00:46:07,040 --> 00:46:11,360 Speaker 1: Badget was a London banker that uh in journalists who 789 00:46:11,520 --> 00:46:13,880 Speaker 1: decided we have to be the lender of the last resort. 790 00:46:14,360 --> 00:46:17,000 Speaker 1: If Mr Paulson was sitting here and Mr Guitner, they 791 00:46:17,040 --> 00:46:19,719 Speaker 1: would state to you that they had a lender of 792 00:46:19,840 --> 00:46:24,920 Speaker 1: last resort responsibility to bail out the system. Obviously they 793 00:46:24,920 --> 00:46:28,279 Speaker 1: did that with an expanded balance sheet. In all that, 794 00:46:28,400 --> 00:46:33,640 Speaker 1: in hindsight, how do we get forward as we look back, 795 00:46:34,160 --> 00:46:38,280 Speaker 1: all with the luxury of hindsight, what's the key lesson 796 00:46:38,640 --> 00:46:43,800 Speaker 1: ten years from now? What is the key lesson? What 797 00:46:43,960 --> 00:46:46,400 Speaker 1: do we learn from ten years ago? It's going to 798 00:46:46,480 --> 00:46:49,520 Speaker 1: be the key lesson when this happens ten years forward. 799 00:46:49,640 --> 00:46:53,279 Speaker 1: You need you need a strong team like we had 800 00:46:53,880 --> 00:46:58,759 Speaker 1: those uh the three gentlemen who who who ran the crisis, 801 00:46:59,600 --> 00:47:02,520 Speaker 1: step up and put their own careers on the on 802 00:47:02,560 --> 00:47:05,840 Speaker 1: the line. Had they sucked their head in the sand, this, 803 00:47:06,080 --> 00:47:08,040 Speaker 1: you know we would have had it faced a depression. 804 00:47:08,120 --> 00:47:11,000 Speaker 1: They didn't. They moved very very quickly. We can argue 805 00:47:11,200 --> 00:47:14,520 Speaker 1: about whether Lehman was a mistake or an under resumation, 806 00:47:14,640 --> 00:47:17,239 Speaker 1: but they clearly moved which and you can see it 807 00:47:17,280 --> 00:47:19,439 Speaker 1: right to US economy. US economy has come back better 808 00:47:19,440 --> 00:47:21,600 Speaker 1: than others. Red Hits, thank you so much, honor to 809 00:47:21,640 --> 00:47:27,120 Speaker 1: have you with us New York University. If you are 810 00:47:27,120 --> 00:47:30,520 Speaker 1: in Paris, you have to send someone to America b 811 00:47:30,719 --> 00:47:35,760 Speaker 1: MP Perry, but three decades ago sent Jean eve Fion. Critically, 812 00:47:35,800 --> 00:47:38,399 Speaker 1: he was involved in the b MP for this transaction 813 00:47:38,719 --> 00:47:41,040 Speaker 1: and has done tours of duty in Los Angeles where 814 00:47:41,040 --> 00:47:43,719 Speaker 1: he worked on his tennis game, in Chicago, where on 815 00:47:43,840 --> 00:47:46,759 Speaker 1: Lake Michigan he went sailing a lot, and wandered over 816 00:47:46,800 --> 00:47:49,800 Speaker 1: to New York to command the b MP Perry BA 817 00:47:49,920 --> 00:47:54,279 Speaker 1: flagship in America. Johnny Fion joins us this morning. We 818 00:47:54,320 --> 00:47:57,520 Speaker 1: are thrilled to have you here at this tumultuous time 819 00:47:57,560 --> 00:48:00,480 Speaker 1: for banking. Much to talk about in the hour. First 820 00:48:00,480 --> 00:48:03,160 Speaker 1: of all, what was a single lesson you've learned from 821 00:48:03,160 --> 00:48:05,640 Speaker 1: the lemon tobacco? Well, by the way, thank you for 822 00:48:05,719 --> 00:48:07,560 Speaker 1: having me. It's a pleasure to be here, and you're 823 00:48:07,680 --> 00:48:11,560 Speaker 1: very well informed by the way my tennis game. Um. 824 00:48:11,640 --> 00:48:15,880 Speaker 1: I think the first lesson was not all the crisis 825 00:48:15,880 --> 00:48:20,560 Speaker 1: are predictable, and it was very well said before the 826 00:48:20,600 --> 00:48:24,799 Speaker 1: world got a little bit caught by surprise, even though 827 00:48:24,960 --> 00:48:28,840 Speaker 1: some signals were already there. I think the second dimension 828 00:48:29,200 --> 00:48:32,400 Speaker 1: we all learned was I don't think we had collectively 829 00:48:32,480 --> 00:48:38,560 Speaker 1: to reassessed the interconnectivity between the various uh you know, 830 00:48:38,800 --> 00:48:45,239 Speaker 1: entities and countries, and the world was already very interconnected. Otherwise, 831 00:48:45,960 --> 00:48:48,160 Speaker 1: I believe that the world today is so different from 832 00:48:48,200 --> 00:48:51,400 Speaker 1: ten years ago. It was already said, um, you know, 833 00:48:51,440 --> 00:48:56,719 Speaker 1: the banking industry specifically, it's better capitalized, as more liquid, uh. 834 00:48:56,800 --> 00:48:59,560 Speaker 1: The stress the stress testing being implemented here in the 835 00:48:59,640 --> 00:49:02,920 Speaker 1: United States now in Europe. I think I've provided a 836 00:49:03,480 --> 00:49:06,680 Speaker 1: lot of improvements as well as all the work that 837 00:49:06,719 --> 00:49:10,840 Speaker 1: has been done around living well resolution planning. I'm not 838 00:49:10,880 --> 00:49:12,960 Speaker 1: saying this is a risk less I'm just saying it's 839 00:49:13,000 --> 00:49:16,759 Speaker 1: a it's it's a very different governance at well. Up 840 00:49:16,760 --> 00:49:19,239 Speaker 1: for American artists want to make their BNP very well. 841 00:49:19,280 --> 00:49:22,880 Speaker 1: It's the dominant bank of France and with a huge 842 00:49:22,880 --> 00:49:27,200 Speaker 1: European platform, a retail platform, but also an expanse of 843 00:49:27,280 --> 00:49:30,800 Speaker 1: and early vision to Asia as well. And the message 844 00:49:30,880 --> 00:49:34,880 Speaker 1: this week Jane has been that Lehman was opportunistic in 845 00:49:34,960 --> 00:49:36,920 Speaker 1: trying to get out front and to do do do 846 00:49:37,640 --> 00:49:41,160 Speaker 1: Your bank is the polar opposite. Are do you worry 847 00:49:41,200 --> 00:49:45,520 Speaker 1: now that in other banks we're seeing too much opportunistic 848 00:49:45,600 --> 00:49:49,240 Speaker 1: tone that could get them into trouble. You know, Tom, 849 00:49:49,480 --> 00:49:51,759 Speaker 1: it's an excellent point. At the end of the day, 850 00:49:52,200 --> 00:49:55,239 Speaker 1: it's sunny about sides, it's donny about business model. It's 851 00:49:55,239 --> 00:49:59,919 Speaker 1: really about risk management, risk capitide, and risk identification, which 852 00:50:00,040 --> 00:50:02,799 Speaker 1: I think the banking industry as a whole has made 853 00:50:02,840 --> 00:50:06,360 Speaker 1: a significant progress to your point as it relates to 854 00:50:06,440 --> 00:50:09,560 Speaker 1: be in PRIBA. What has worked well of the many 855 00:50:09,600 --> 00:50:16,680 Speaker 1: years is UH diversification. Diversification in terms of geographical diversification Europe, 856 00:50:17,040 --> 00:50:21,400 Speaker 1: European leader, America's were deeply involved here in Asia, but 857 00:50:21,480 --> 00:50:24,960 Speaker 1: diversification as well in terms of product mixed and in 858 00:50:25,040 --> 00:50:29,160 Speaker 1: terms of activity. If if I go to our platform 859 00:50:29,239 --> 00:50:33,040 Speaker 1: here in the United States, UM, it's a diversified platform. 860 00:50:33,080 --> 00:50:35,080 Speaker 1: As you just said. You know, we have retail, we 861 00:50:35,160 --> 00:50:38,560 Speaker 1: have wholesale, retail is Bank of the West, UM, we 862 00:50:38,680 --> 00:50:42,080 Speaker 1: have two and a half million clients. We do lending 863 00:50:42,560 --> 00:50:47,560 Speaker 1: consumer finance wholesale based in New York is serving corporates 864 00:50:47,760 --> 00:50:54,400 Speaker 1: UH domestically internationally sixteen thousand people and six billions sixteen 865 00:50:54,440 --> 00:50:56,640 Speaker 1: thousand dependent the United I don't know that in the 866 00:50:56,719 --> 00:51:00,759 Speaker 1: United experiencing Yeah, ivelean talk to me a little bit 867 00:51:00,800 --> 00:51:04,200 Speaker 1: about whether the French bank differently to the Americans and 868 00:51:04,280 --> 00:51:07,240 Speaker 1: so do you need to speak to your customer differently 869 00:51:09,200 --> 00:51:13,160 Speaker 1: in terms of uh, you know, UH sixteen thousand people 870 00:51:13,200 --> 00:51:16,239 Speaker 1: in the United States UH six billion of revenues. This 871 00:51:16,320 --> 00:51:19,920 Speaker 1: is the largest balanciet a location uh for the bank 872 00:51:20,600 --> 00:51:24,480 Speaker 1: after France. Then in terms of speaking to clients here, 873 00:51:24,480 --> 00:51:27,319 Speaker 1: we we feel very part of the fabric of the 874 00:51:27,440 --> 00:51:31,560 Speaker 1: U S. Having said that, UH or I think one 875 00:51:31,600 --> 00:51:35,320 Speaker 1: of our differentiating factors here is we can serve clients 876 00:51:35,400 --> 00:51:39,000 Speaker 1: domestically UH probably as well as any other banks in 877 00:51:39,000 --> 00:51:41,400 Speaker 1: the product suite we have. But when it's time to 878 00:51:41,560 --> 00:51:44,360 Speaker 1: cover them outside of the United States, let's say do 879 00:51:44,520 --> 00:51:49,200 Speaker 1: capturizing acquisition financing for logeate log reates corporates in the 880 00:51:49,440 --> 00:51:53,440 Speaker 1: urban market where we lead. This is where we probably 881 00:51:53,480 --> 00:51:57,399 Speaker 1: can add even more contribution to the client base here. 882 00:51:57,800 --> 00:52:00,600 Speaker 1: But to your point. From seeing UH based in London, 883 00:52:00,640 --> 00:52:04,520 Speaker 1: I'm sure you see that. Conversely, we've been very active 884 00:52:04,520 --> 00:52:08,720 Speaker 1: in taking US European clients into the deep US market, 885 00:52:09,520 --> 00:52:14,560 Speaker 1: leveraging or large distribution capabilities, particularly that distribution capabilities in 886 00:52:14,600 --> 00:52:17,560 Speaker 1: the United States and having an ability to raise you know, 887 00:52:17,719 --> 00:52:22,360 Speaker 1: US or or capital here and and euro UH in 888 00:52:22,520 --> 00:52:24,760 Speaker 1: on the other side of the Atlantic has has worked 889 00:52:24,760 --> 00:52:29,880 Speaker 1: pretty well, while the Transatlantic flow and dynamic has been 890 00:52:29,960 --> 00:52:33,080 Speaker 1: quite active over the last few years. But how will 891 00:52:33,120 --> 00:52:35,759 Speaker 1: finance change over the next ten years? Is it to 892 00:52:35,840 --> 00:52:40,000 Speaker 1: five ten years? Is it digitalization? Is it the way 893 00:52:40,160 --> 00:52:42,440 Speaker 1: we work or is it the way that banks actually 894 00:52:42,480 --> 00:52:46,240 Speaker 1: learn to each other? You mean you mean looking forward 895 00:52:47,280 --> 00:52:51,919 Speaker 1: over exactly in the next ten years, how will finance change? Well, 896 00:52:51,920 --> 00:52:54,759 Speaker 1: it's I love the question from seeing Think. At times 897 00:52:54,760 --> 00:52:56,719 Speaker 1: I feel one year is a really long term for me. 898 00:52:56,840 --> 00:53:00,279 Speaker 1: But I think said that, I believe that the the 899 00:53:00,320 --> 00:53:03,239 Speaker 1: future of banking here. Obviously it's around business model, it's 900 00:53:03,280 --> 00:53:07,000 Speaker 1: around serving clients, but it's I think it's around other 901 00:53:07,120 --> 00:53:10,759 Speaker 1: dimensions that maybe we don't speak enough. I think, for instance, 902 00:53:11,120 --> 00:53:17,040 Speaker 1: obviously the first UH dimension is a technology. It's automatization, 903 00:53:17,200 --> 00:53:23,040 Speaker 1: it's electronification, artificial intelligence. I believe that technology, if it's 904 00:53:23,080 --> 00:53:26,480 Speaker 1: well done, is going to provide a safer world. And 905 00:53:27,320 --> 00:53:29,760 Speaker 1: the concept of low touch and high uch to serve 906 00:53:29,800 --> 00:53:33,360 Speaker 1: clients more efficiently is happening. But this is part of 907 00:53:33,400 --> 00:53:36,200 Speaker 1: the future. There is another dimension which I believe is 908 00:53:36,280 --> 00:53:39,320 Speaker 1: very connected with what you do here at Bloomberg. This 909 00:53:39,520 --> 00:53:44,319 Speaker 1: is sustainability. The banking industry as the real world to 910 00:53:44,400 --> 00:53:50,560 Speaker 1: play in this field, to support the planet and the 911 00:53:50,560 --> 00:53:52,680 Speaker 1: future of the planet better and I think to be 912 00:53:52,840 --> 00:53:56,920 Speaker 1: really even closer to our clients value. This is really important. 913 00:53:56,960 --> 00:53:59,760 Speaker 1: Because I was in Paris with Francine for the parents 914 00:53:59,800 --> 00:54:02,480 Speaker 1: of Reeman and Courseworks, we should state that Michael Bloomberg, 915 00:54:02,920 --> 00:54:06,520 Speaker 1: the owner Bloomberg and these radio and TV properties, was 916 00:54:06,760 --> 00:54:09,960 Speaker 1: very much part of that agreement. Does the Paris agreement 917 00:54:10,080 --> 00:54:13,840 Speaker 1: still stand? Even as President Trump says no, I believe 918 00:54:13,920 --> 00:54:16,680 Speaker 1: the Paris agreement, you know, Cup twenty one, Cup twenty 919 00:54:16,680 --> 00:54:19,880 Speaker 1: two still stands more than ever as you know, actually 920 00:54:19,920 --> 00:54:21,480 Speaker 1: in a few days here there was going to be 921 00:54:21,560 --> 00:54:24,600 Speaker 1: the sustainable a week from the United Nations. I think 922 00:54:24,680 --> 00:54:28,640 Speaker 1: Michael Bloomberg, with his forearm, is going to be extremely active. 923 00:54:28,680 --> 00:54:31,279 Speaker 1: My group CEO jama Fe will be in New York 924 00:54:31,560 --> 00:54:34,719 Speaker 1: and we will be very proactive here. Listen, you love 925 00:54:34,760 --> 00:54:37,640 Speaker 1: statistics and metrics, Tom and Francine. If you look at 926 00:54:37,680 --> 00:54:41,200 Speaker 1: the world today, you have over twenty trillions of savings 927 00:54:41,440 --> 00:54:45,600 Speaker 1: every year, new savings to reach the United Nations as 928 00:54:46,000 --> 00:54:49,800 Speaker 1: as DJs you between quotes only need five to seven 929 00:54:49,840 --> 00:54:55,000 Speaker 1: trallion a year to reach the objectives. That's very doable. 930 00:54:55,280 --> 00:54:57,960 Speaker 1: But the finance industry as a real world to play here. 931 00:54:58,440 --> 00:55:01,960 Speaker 1: This bank BNDPIE has been one of the very first 932 00:55:02,000 --> 00:55:05,680 Speaker 1: global financial institutions to actually commit to the u n 933 00:55:06,080 --> 00:55:11,759 Speaker 1: to provide over ten billion off financing. Links to sustainability 934 00:55:12,239 --> 00:55:18,799 Speaker 1: seems to talk about here of BNP parabout Thanks for 935 00:55:18,880 --> 00:55:23,279 Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to 936 00:55:23,440 --> 00:55:29,200 Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 937 00:55:29,719 --> 00:55:33,080 Speaker 1: I'm on Twitter at Tom Keane before the podcast. You 938 00:55:33,080 --> 00:55:36,480 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.