WEBVTT - Big Tech, Bank of England, Amazon, and Barbie 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:05.240 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day we bring you interviews from CEOs, market pros, 0:00:09.760 --> 0:00:13.640 and Bloomberg experts, along with essential market moven news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.520 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:21.160 --> 0:00:23.800 We are joined now by Brian moynihan. He's chair and 0:00:24.480 --> 0:00:27.080 CEO of Bank of America. Brian, thanks for being here. 0:00:27.080 --> 0:00:30.159 We're here for the Aspen Economic Strategy Group meetings, of 0:00:30.160 --> 0:00:32.640 which you are apart. It is about the economy, and 0:00:32.800 --> 0:00:35.000 last time we talked, you were projecting at Bank of 0:00:35.000 --> 0:00:38.479 America a recession, mild recession, maybe Q four in the 0:00:38.600 --> 0:00:40.360 Q one next year. You've changed your mind. 0:00:40.400 --> 0:00:40.680 Why? 0:00:41.320 --> 0:00:43.159 Well, first of all, it's a great setting. It's a 0:00:43.200 --> 0:00:45.880 beautiful setting, and there's a lot of great people here 0:00:45.880 --> 0:00:48.680 to talk about the economy. But our team basically has 0:00:48.720 --> 0:00:52.000 moved from a slight recession to no recession. And so 0:00:52.560 --> 0:00:54.680 in the early next year first quarter, second quarter they 0:00:54.720 --> 0:00:57.240 had a slight negative quarters they now having positive one 0:00:57.280 --> 0:01:00.640 percent and a half of percent positive, but more importantly 0:01:00.680 --> 0:01:03.680 behind that is what's really going on. In terms of 0:01:04.360 --> 0:01:07.520 the unemployment rate projections, they're now four point three peak 0:01:07.680 --> 0:01:11.440 unemployment in the latter part of twenty four early twenty five. 0:01:12.000 --> 0:01:14.800 You're saying that's sort of an unemployment was slow down, 0:01:14.840 --> 0:01:17.080 which is really what's going on, and we can talk 0:01:17.120 --> 0:01:18.760 more about it, but that's what's really going on is 0:01:18.800 --> 0:01:21.120 people employed, they have money, they're spending money, and the 0:01:21.200 --> 0:01:22.920 FED is trying to slow down the economy, and it 0:01:22.920 --> 0:01:24.640 looks like we're reaching a pretty good equo. 0:01:24.640 --> 0:01:26.399 Aby you've said, it's hard to have a recession when 0:01:26.400 --> 0:01:28.600 you've got unemployment in the foes, that's all. 0:01:28.640 --> 0:01:29.200 They hard to do. 0:01:29.480 --> 0:01:31.360 But what are you seeing in terms of jobs? Is 0:01:31.400 --> 0:01:33.160 there any softening in the market at all? Are that 0:01:33.240 --> 0:01:35.480 you're seeing at Bank America or more broadly, well, if 0:01:35.520 --> 0:01:35.919 you look. 0:01:35.760 --> 0:01:37.440 At if you talked to our clients, you sort of 0:01:37.440 --> 0:01:40.639 see very specialized roles. Welders are still in high demand, 0:01:40.640 --> 0:01:43.399 even because construction is going on in the IRA and 0:01:43.400 --> 0:01:46.240 all the different building That's one thing, but in general, 0:01:46.440 --> 0:01:49.160 if you take our companies example, last year this time 0:01:49.160 --> 0:01:51.640 it was a great resignation. Turnover was back up to 0:01:51.680 --> 0:01:55.080 fifteen percent, which was higher than pre pandemic. It's now 0:01:55.120 --> 0:01:58.040 down to seventy eight percent. Last year we heard thirty 0:01:58.040 --> 0:01:59.840 seven hundred people in the month of June. This year 0:02:00.040 --> 0:02:03.240 hard nine hundred, I mean. And yet headcount keeps drifting down, 0:02:03.280 --> 0:02:05.480 and so I think a lot of employers are doing 0:02:05.480 --> 0:02:07.440 that same thing, which is managing headcount carefully. 0:02:07.440 --> 0:02:08.120 And that's why you've. 0:02:07.960 --> 0:02:10.919 Seen job openings drop by twenty percent in the last 0:02:11.200 --> 0:02:13.480 twelve months or so. It doesn't mean people laying a 0:02:13.520 --> 0:02:15.639 lot of people off. That's happening here and there, really 0:02:15.680 --> 0:02:18.840 specialized industries, but people are being much more of conservative 0:02:18.840 --> 0:02:20.639 their employment. Last year, it was your post to every 0:02:20.680 --> 0:02:22.280 job known de mand because you didn't know what was 0:02:22.320 --> 0:02:25.840 going to happen. Now, with the lower turnover, the labor 0:02:25.880 --> 0:02:27.720 market is a lot looser this year that was last year, 0:02:27.720 --> 0:02:29.680 although the unemployment rate is still low. 0:02:29.919 --> 0:02:31.560 One of the things you have a lot of vantage 0:02:31.600 --> 0:02:34.880 into is consumer spending. At back of America, what are 0:02:34.880 --> 0:02:37.520 you seeing in consumer spending? The commersumer seems to still 0:02:37.520 --> 0:02:39.760 be spending, maybe softening a little bit, But how much 0:02:39.840 --> 0:02:41.800 dry powder do they have? Because we had thought that 0:02:41.919 --> 0:02:44.119 a lot of excess savings they can still express. We're 0:02:44.120 --> 0:02:46.480 now hearing for example, credit card bounces are really going up. 0:02:46.600 --> 0:02:46.760 Yeah. 0:02:46.760 --> 0:02:49.359 So if you think about a consumer, it's their wages 0:02:49.400 --> 0:02:51.080 and wage growth, it's the money they have in their 0:02:51.080 --> 0:02:53.160 accounts from the stimulus and other things that went into 0:02:53.160 --> 0:02:56.480 their accounts during the pandemic. It's their ability to borrow, 0:02:57.000 --> 0:02:58.160 and then it's a rate at which they have to 0:02:58.160 --> 0:02:59.920 pay to borrow. And so if you think about all that, 0:03:00.320 --> 0:03:02.440 what we see is consumer spending. If we were talking 0:03:02.520 --> 0:03:04.480 last year's time, it was ten percent year every year, 0:03:04.800 --> 0:03:09.200 and that was inconsistent with a low inflation economy. That 0:03:09.240 --> 0:03:10.959 now is down to five percent. So you've seen to 0:03:11.040 --> 0:03:13.400 drop by half and so year to date it's five percent. 0:03:13.480 --> 0:03:15.320 Month of July it's four and a half percent, so 0:03:15.360 --> 0:03:17.240 you're seeing it slow down. And what is spending at 0:03:17.240 --> 0:03:19.320 in the month of July is consistent. 0:03:18.880 --> 0:03:20.040 With a lower inflation. 0:03:20.440 --> 0:03:22.519 It's very much like it was in seventeen, eighteen and 0:03:22.600 --> 0:03:25.280 nineteen as a FED raised rates in economy sort of 0:03:25.280 --> 0:03:27.840 settled in. And so I think there's always been this 0:03:27.880 --> 0:03:31.000 battle between the consumer and the FED, and the consumer 0:03:31.040 --> 0:03:33.600 has pushed the won the battle back a bit, but 0:03:33.639 --> 0:03:35.440 they got to be careful of overwinning it now and 0:03:35.480 --> 0:03:38.000 now the risk really goes to overtightening and slowing down 0:03:38.000 --> 0:03:39.720 the consumer too much, and then we would have a recession. 0:03:39.760 --> 0:03:41.320 Well, let me take the flip side of that a second. 0:03:41.560 --> 0:03:44.040 I want to talk about soft landing. Also, some people 0:03:44.080 --> 0:03:45.960 are saying maybe they won't won't have a landing now 0:03:46.280 --> 0:03:49.440 is what's the risk actually of inflation reaccelerating here because 0:03:49.440 --> 0:03:50.520 they haven't gone far enough. 0:03:50.760 --> 0:03:53.200 Well, I think I think our economy is sincs A. 0:03:53.280 --> 0:03:54.720 Chances that are low, and I think I agree that 0:03:54.760 --> 0:03:57.440 personally and our team under Cannas Browning Platt is one 0:03:57.480 --> 0:03:59.040 of the best teams in business and they're good at 0:03:59.240 --> 0:04:02.520 But what there's see what the drag of higher rates 0:04:03.080 --> 0:04:07.040 comes through very quickly in housing instantaneously transmitted car purchases, 0:04:07.080 --> 0:04:10.440 things which happen faster. But with a line share, the 0:04:10.440 --> 0:04:14.880 mortgage is half for more undred three percent, And you 0:04:14.960 --> 0:04:17.240 really think about only half of the who people who 0:04:17.240 --> 0:04:20.640 live in America have a mortgage. It tied up in 0:04:20.640 --> 0:04:22.719 our housing they rent and other things it's rent and 0:04:22.800 --> 0:04:25.640 its new home purchases. Those both are UNDERTA those have 0:04:25.720 --> 0:04:28.200 now mitigated. So you're seeing inflation come under control. Even 0:04:28.240 --> 0:04:30.560 these places are rate sensive. What you haven't seen is 0:04:30.560 --> 0:04:32.359 the impact in corporate Yet that's still ahead of us. 0:04:32.400 --> 0:04:35.880 Because corporations, barring costs went up, they're starting to their 0:04:35.880 --> 0:04:38.800 activity is that they're using the lines less, which means 0:04:38.839 --> 0:04:41.440 they are finding less opportunities which overcome that borrowing cost. 0:04:42.040 --> 0:04:44.080 They're being more conservative on their debt. They've got to 0:04:44.080 --> 0:04:46.440 refinance some stuff. Good news is a lot of finance 0:04:46.520 --> 0:04:48.080 at lower rates and that has turned to it. 0:04:48.200 --> 0:04:48.960 But commercial real. 0:04:49.000 --> 0:04:51.440 Estate, the debate is so a lot of the fiscal drag, 0:04:52.440 --> 0:04:54.960 the drag from raising rates is still ahead of us. 0:04:55.000 --> 0:04:57.000 And that's why I think people forgetting that. They're still 0:04:57.000 --> 0:05:00.560 a pretty constraining lending conditions are tighter. Just at the 0:05:00.600 --> 0:05:02.560 Senior Loan Officers survey. 0:05:02.279 --> 0:05:02.720 Just said it. 0:05:02.760 --> 0:05:05.159 So the impact is more in front of us for 0:05:05.200 --> 0:05:07.120 some of the rate increases and behind us. Yet you're 0:05:07.120 --> 0:05:10.039 seeing it already tip inflation flattening out, not down yet 0:05:10.040 --> 0:05:12.200 with flattening out, and we still say it takes till 0:05:12.240 --> 0:05:14.600 twenty five to get back to the target rates. 0:05:14.720 --> 0:05:16.320 What does all that mean for Bank of America the 0:05:16.360 --> 0:05:18.039 way you run your business. You had a very strong quarter, 0:05:18.040 --> 0:05:20.719 particularly in trading and sales last quarter. Are you doubling 0:05:20.760 --> 0:05:22.800 down on that or are you being a little more conservative. 0:05:22.839 --> 0:05:24.680 Well, the trading and sales team, Jimmy Tomorrow, the team 0:05:24.680 --> 0:05:26.680 have done a great job and they had the best 0:05:26.680 --> 0:05:29.320 first half they've had and we've earned fifteen billion dollars 0:05:29.360 --> 0:05:31.320 plus in the first half of this year. The team's 0:05:31.320 --> 0:05:35.440 performing strong, the credits in great shape. Stress test just 0:05:35.480 --> 0:05:37.240 went on and our losses were lower than they were 0:05:37.320 --> 0:05:39.840 last year. And we're been the lowest of our peers 0:05:39.839 --> 0:05:42.200 for almost every year except for one. Have the last 0:05:42.200 --> 0:05:44.760 twelve or thirteen stress tests. So you put that all together, 0:05:44.839 --> 0:05:46.760 we're well prepared for whatever comes at us, and that's 0:05:46.800 --> 0:05:48.400 what we do. Jimmy and the team had done a 0:05:48.400 --> 0:05:50.320 great job in training, but about three or four years ago, 0:05:50.520 --> 0:05:53.080 first under Tom Montaggon and Jimmy took over all the trading. 0:05:53.400 --> 0:05:55.880 We increased the size of balance, the scope, the capitol, 0:05:55.880 --> 0:05:58.240 committed to business, the talent, and they've been able to 0:05:58.240 --> 0:06:00.560 get a good payback on that. You know, the way 0:06:00.560 --> 0:06:02.040 they do it is, you know, we made money every 0:06:02.040 --> 0:06:04.440 trading day. If you look back across the last several years, 0:06:04.600 --> 0:06:06.520 it's very rare. Maybe a couple of times a quarter 0:06:06.560 --> 0:06:09.159 will lose money. We just basically the team runs a 0:06:09.160 --> 0:06:10.560 great business and they're doing a great job. 0:06:10.800 --> 0:06:13.120 The markets woke up yesterday to announcement of the Fitch 0:06:13.200 --> 0:06:16.000 downgrade in the US sovereign debt and there's a debate 0:06:16.080 --> 0:06:18.280 debate about whether that was the right timing, was the 0:06:18.400 --> 0:06:21.880 right thing, and the bomb marker now is actually responding 0:06:21.920 --> 0:06:23.520 a little bit to that. What's your take on that 0:06:24.080 --> 0:06:24.560 D rating? 0:06:25.200 --> 0:06:27.640 Well, I think it's a bit of a non event 0:06:27.720 --> 0:06:29.800 in the sense that, you know, the US has the 0:06:29.839 --> 0:06:32.560 ability to pay its debts and has shown that ability. 0:06:32.680 --> 0:06:34.640 It's sometimes interesting how we get there with a debt 0:06:34.640 --> 0:06:36.839 ceiling increase and things like that, but they get there. 0:06:37.480 --> 0:06:39.800 It's the strongest economy world by a lot. It's the 0:06:39.800 --> 0:06:42.240 biggest economy, strongest economy. It's worth capital comes to them 0:06:42.240 --> 0:06:44.599 from around the world. Great incentives in the US for 0:06:45.520 --> 0:06:47.359 companies around the world to invest and grow here at 0:06:47.400 --> 0:06:50.080 the IRA, the Infrastructure Act, A, Chips Act, et cetera, 0:06:50.080 --> 0:06:53.040 et cetera. The tax rates are lower, which makes it 0:06:53.080 --> 0:06:56.599 more competitive. So I don't worry about the fundamental ability 0:06:56.600 --> 0:06:59.279 of PAARA debts. But if you separate the downgrade into 0:06:59.279 --> 0:07:02.200 two PAGs, is one is you know, sort of the 0:07:02.279 --> 0:07:05.400 debts that continue to accumulate, and will they start to 0:07:05.400 --> 0:07:07.839 outstrip the growth in the economy because right now, with inflation, 0:07:07.920 --> 0:07:10.840 they've been kept at a lower level. That's a question. And 0:07:10.840 --> 0:07:13.120 then secondly, is their willingness to deal with that, and 0:07:13.160 --> 0:07:15.440 that's that's an honest debate. But the two sides have 0:07:15.520 --> 0:07:17.440 to have that debate, and that's a political process and 0:07:17.480 --> 0:07:19.560 they have to have it. But the reality is the 0:07:19.600 --> 0:07:22.280 action downgrades a person holds three hundred million dollars more treasuries, 0:07:22.280 --> 0:07:24.480 it doesn't change our opinion of the US's credit winess. 0:07:24.480 --> 0:07:26.840 Well what about that holding the US treasure Because as 0:07:26.840 --> 0:07:28.880 you suggest, there is an issue at some point down 0:07:28.920 --> 0:07:30.440 the road, it's not clear what it would be. I mean, 0:07:30.480 --> 0:07:32.520 you talk about the process, the political process, it doesn't 0:07:32.560 --> 0:07:33.720 give a lot of comfort. That's one of the things 0:07:33.760 --> 0:07:35.559 that Fitch said, Actually, you know, we got a problem, 0:07:35.600 --> 0:07:37.120 but also we got a process that doesn't seem to 0:07:37.120 --> 0:07:37.840 be able to deal with it. 0:07:37.960 --> 0:07:40.000 Yeah, And I think that goes back to the structural 0:07:40.080 --> 0:07:42.920 changes in America. You know, the demographics, the demands on 0:07:42.960 --> 0:07:44.960 social security and the t you know so called and 0:07:45.000 --> 0:07:47.440 title what's over time as a percentage demands, Those are 0:07:47.760 --> 0:07:50.280 serious issues. That you know, the political process and the 0:07:50.320 --> 0:07:53.559 citizenry has to be involved in not solvable in ten minutes. 0:07:54.080 --> 0:07:56.200 And so that's all good, and that's what we're talking 0:07:56.200 --> 0:07:58.640 about here at the Aspen Economic Strategy Group. You know, 0:07:58.680 --> 0:08:02.119 what are the thought processes between balancing those outcomes better? 0:08:02.400 --> 0:08:04.240 But you know, those are long term questions. In the 0:08:04.520 --> 0:08:07.120 near term, there's much bigger risk of some of the 0:08:07.160 --> 0:08:09.040 things that go on outside the United States to the 0:08:09.080 --> 0:08:11.120 economies of the world than there is inside the United States. 0:08:11.160 --> 0:08:14.760 We're growing, people are employed, people are spending, and that's 0:08:14.760 --> 0:08:17.280 good news, and that will get mean that the fiscal 0:08:17.320 --> 0:08:19.120 receipts of the US will stay a little stronger on 0:08:19.160 --> 0:08:19.960 a relative basis. 0:08:19.960 --> 0:08:21.960 How much is it supported simply by the strength of 0:08:21.960 --> 0:08:23.680 the US dollar. That is to say, people tend to 0:08:23.680 --> 0:08:25.640 turn to dollars when in doubt. 0:08:25.960 --> 0:08:28.040 They should because it's you know, it's a safe haven. 0:08:28.080 --> 0:08:30.240 It's what commerce is conducted in because in the day, 0:08:30.280 --> 0:08:33.160 the consumption power of the United States drives economies around 0:08:33.160 --> 0:08:36.080 the world. Therefore there's you know, US consumers spend dollars. 0:08:36.080 --> 0:08:38.480 So if you're selling stuff in dollars, you got to 0:08:38.520 --> 0:08:41.959 be exposed a dollar. And so I think the idea 0:08:41.960 --> 0:08:44.079 of some of this debate about reserve currency status. It's 0:08:44.080 --> 0:08:46.160 been tightening in the flight to quality, and the US 0:08:46.440 --> 0:08:48.679 tends to come. Now ten year bonds moved up and 0:08:48.720 --> 0:08:51.080 everybody gets built up. We're talking about the difference between 0:08:51.280 --> 0:08:53.560 you know, three eighty three ninety and four ten, four twenty. 0:08:54.080 --> 0:08:56.440 These are not very big moves in a grand scheme 0:08:56.480 --> 0:08:59.120 of things. It is tapping quickly, and people get excited 0:08:59.160 --> 0:09:01.839 about who trade bond is living from the grander impact 0:09:01.880 --> 0:09:05.000 in economy. Those moves are needed to get the Ultimately, 0:09:05.000 --> 0:09:06.720 they old curve has to get back and sink or 0:09:06.720 --> 0:09:09.280 else we aren't taming the inflation or we're going to 0:09:09.320 --> 0:09:10.120 drive into a recession. 0:09:10.440 --> 0:09:12.200 When you talk about the strengthening the US dollar, is 0:09:12.200 --> 0:09:14.960 it stronger today as a reserve currency globally than it 0:09:15.040 --> 0:09:16.120 was ten twenty years ago? 0:09:16.240 --> 0:09:18.160 And if so, why because I think the opportunities in 0:09:18.160 --> 0:09:19.880 the US are the strongest. And that's why, you know, 0:09:19.920 --> 0:09:21.800 with a great financial system we have, with a great 0:09:21.800 --> 0:09:25.559 set of companies and innovation, we have the research universities, 0:09:25.600 --> 0:09:27.760 we have the things like if we keep investing in 0:09:27.800 --> 0:09:31.440 all that and let capitalism and you know, United States 0:09:31.440 --> 0:09:34.400 style capitalism drive the US will always be a favorite 0:09:34.400 --> 0:09:37.240 place because other places are struggling with different systems that 0:09:37.360 --> 0:09:41.040 proved not to be as beneficial, with less innovation, less 0:09:41.040 --> 0:09:43.920 ability tackle problems, and so yes, it's interesting from time 0:09:43.960 --> 0:09:46.199 to time all what goes on. But if you think about, 0:09:46.280 --> 0:09:48.320 you know, think about the late sixties to now, we've 0:09:48.320 --> 0:09:50.440 doubled them around. People work United States. We were supposed 0:09:50.440 --> 0:09:53.160 to be taken over by japan ankeeers. The computers are 0:09:53.160 --> 0:09:54.760 going to get rid of all the people. The people 0:09:54.760 --> 0:09:56.920 are still working. You know, we had to more in Vietnam. 0:09:56.960 --> 0:10:01.120 We had the political constitutional crist This and Nixon presidency. 0:10:01.160 --> 0:10:03.720 You had an oil and bar. All that stuff happened 0:10:03.720 --> 0:10:06.080 in the early seventies and still a dec you know, 0:10:06.480 --> 0:10:08.360 fifty years later, we have twice as many people work 0:10:08.400 --> 0:10:09.000 in this country. 0:10:09.160 --> 0:10:10.880 Since we talked last, Brian, and we now have the 0:10:10.880 --> 0:10:14.400 proposed regulations on capital requirements from the federal bank regulators. 0:10:14.559 --> 0:10:16.680 We talked before and you said one hundred basis points, 0:10:16.679 --> 0:10:19.120 as I recall, a difference in the capital requirements would 0:10:19.120 --> 0:10:21.439 amount one hundred fifty billion dollars lest year loan. Now 0:10:21.440 --> 0:10:23.120 we have the proposals. What would it mean for Bank 0:10:23.120 --> 0:10:24.520 of America and for our banking system. 0:10:24.720 --> 0:10:26.960 Well, what it does is it's not to get too 0:10:27.000 --> 0:10:30.160 technical in the grand skiving things, but it changes the 0:10:30.160 --> 0:10:33.600 calculation of risk WEDED asets RWA. And so the idea 0:10:33.640 --> 0:10:35.800 is that the estimates by the FED is it's fifteen 0:10:35.800 --> 0:10:38.120 to twenty percent of our WA increase. When you do that, 0:10:38.160 --> 0:10:41.199 then ten percent of our WA at X and ten 0:10:41.240 --> 0:10:43.400 percent of our WA at one point one times X 0:10:43.480 --> 0:10:45.840 means you have to have more capital, and so the 0:10:45.880 --> 0:10:48.160 amount of capital goes up. That then constraints leny because 0:10:48.160 --> 0:10:49.560 you can't do anything with that capital. If you did, 0:10:49.600 --> 0:10:51.120 then you'd have more rw and you have to have 0:10:51.160 --> 0:10:53.840 more capital. So so but I think if you step back, 0:10:54.800 --> 0:10:57.200 this industry is well capitalized. It just proved it again 0:10:57.240 --> 0:11:00.480 in another crisis. It's well managed, it's well rked related. 0:11:00.679 --> 0:11:04.720 You've had successive FED regime chairs and people working in 0:11:04.760 --> 0:11:07.360 a chair supervision vice chair over the years say the 0:11:07.360 --> 0:11:10.439 capital's adequate. Industry, it's well it's well managed as well. 0:11:10.480 --> 0:11:13.760 Capities they'll be. Banks will fail, they fail, they failed 0:11:13.760 --> 0:11:14.439 throughout history. 0:11:14.480 --> 0:11:15.080 That happens. 0:11:15.880 --> 0:11:18.120 But since the financial crisis, more people under the tent 0:11:18.360 --> 0:11:20.199 because the issue of the financial crisis a lot of 0:11:20.200 --> 0:11:21.840 stuff wasn't a tent. The problem is if you get 0:11:21.840 --> 0:11:24.520 the capital regulations of banking system too tight, you push 0:11:24.520 --> 0:11:27.400 stuff back outsides of tent. And that's a concern. So 0:11:27.559 --> 0:11:29.320 as I look at it, one, give a set of. 0:11:29.360 --> 0:11:30.400 Rules, we'll live with it. 0:11:30.440 --> 0:11:33.640 Two, it won't you know, bank Americal adjustice business model 0:11:33.679 --> 0:11:35.800 to make it work. But what's been interesting about this 0:11:36.120 --> 0:11:39.120 is it's competitive position United States versus Europe and others. 0:11:39.480 --> 0:11:43.360 This is making the bank industry, all banks less competitive 0:11:43.360 --> 0:11:45.760 to mid sized US companies than foreign banks are to 0:11:45.760 --> 0:11:48.319 mid sized US companies participating in a sing globe of 0:11:48.320 --> 0:11:51.200 supply chains in those countries. That's that's more of a 0:11:51.240 --> 0:11:53.640 trade question and a balance of power question. 0:11:53.760 --> 0:11:54.160 That's one. 0:11:54.200 --> 0:11:56.160 And then second, I'm surprised by the amount of descent 0:11:56.160 --> 0:11:58.200 that the governors of Federal Reserve. I've been working on 0:11:58.240 --> 0:12:01.040 Federal Reserve stuff for my whole or forty years now, 0:12:01.360 --> 0:12:03.200 and I was just surprised the amount of debate, which 0:12:03.200 --> 0:12:05.520 shows you that you know, whether it's mortgage loans one side, 0:12:05.520 --> 0:12:10.800 whether it's a tax benefits for and treatment for energy 0:12:10.800 --> 0:12:13.840 clean energy investments, or whether it's the basic trading and 0:12:13.920 --> 0:12:16.199 things like that there's been a lot of water that's 0:12:16.200 --> 0:12:17.480 got to go over the dam here to get these 0:12:17.559 --> 0:12:19.440 rules right, because there's a debate even among the governors 0:12:19.440 --> 0:12:20.680 themselves about what the right answer is. 0:12:20.679 --> 0:12:23.000 Over the years. Brian, you said there's a role for regulation, 0:12:23.040 --> 0:12:24.439 and you'll live with the regulation as you say you 0:12:24.520 --> 0:12:26.600 will with capital parts. But what is the problem it's 0:12:26.640 --> 0:12:28.800 being addressed. That's what I don't quite understand. You talked 0:12:28.800 --> 0:12:31.120 about the crisis we had back in March with the banks. 0:12:31.120 --> 0:12:33.000 I'm not sure this addresses that well. 0:12:33.040 --> 0:12:35.360 And that's been the debate, and that's go read the 0:12:35.360 --> 0:12:38.480 descents and the debate in the things. So strong regulation 0:12:38.559 --> 0:12:42.520 is important. Rapid growth in banks tends to come from 0:12:42.559 --> 0:12:44.480 things that turn out to be not so interesting after 0:12:44.520 --> 0:12:47.600 the fact, and so I think, you know that's the 0:12:47.679 --> 0:12:49.280 thing they need to sort of come to a common 0:12:49.320 --> 0:12:52.080 agreement on Basil three. Across the world. We're just applying 0:12:52.080 --> 0:12:56.120 it with much more rigidity and requirements. And so if 0:12:56.120 --> 0:12:58.679 you look at the largest bank in France, UK and Germany, 0:12:58.720 --> 0:13:01.079 they have about half the capital requirements in the largest 0:13:01.120 --> 0:13:03.720 banks in US do. So that could send a competitive 0:13:03.760 --> 0:13:05.640 question and so I think people just have to look 0:13:05.679 --> 0:13:08.440 at it seriously look at it relative to what we're 0:13:08.440 --> 0:13:10.960 trying to do here. We want the strongest banking industry. 0:13:11.000 --> 0:13:13.920 Our banking stry has better returns, has better things. But 0:13:14.040 --> 0:13:16.040 on the other hand, our multiples are half or less 0:13:16.080 --> 0:13:18.080 than the SMP multiples. There's a reason for that, which 0:13:18.040 --> 0:13:20.280 as investors or say, wait a second, if the capital 0:13:20.320 --> 0:13:22.520 demands don't stop, we aren't sure that we can continue 0:13:22.520 --> 0:13:24.360 to invest. So there's a little bit of a counter 0:13:24.440 --> 0:13:25.880 veil here that people have to pay attention to it. 0:13:25.880 --> 0:13:27.800 And then back to your point, every hundred base of 0:13:27.800 --> 0:13:30.880 points of capitals, one hundred fifteen hundred billion less loans 0:13:30.880 --> 0:13:33.400 we at Bank America could do, and this applies across 0:13:33.400 --> 0:13:35.520 what they can't be done other places. Those companies aren't 0:13:35.559 --> 0:13:35.880 that size. 0:13:35.960 --> 0:13:38.240 Man, Brian, thank you so much for spending times. Really 0:13:38.240 --> 0:13:38.679 appreciate it. 0:13:38.760 --> 0:13:39.560 That's Brian moynan. 0:13:39.679 --> 0:13:42.480 He is the share in CEO of Bank of America. 0:13:42.679 --> 0:13:46.079 You're listening to the team Ken's our live program Bloomberg 0:13:46.120 --> 0:13:49.520 Markets weekdays at ten am Eastern on Bloomberg dot Com, 0:13:49.559 --> 0:13:52.760 the iHeartRadio app and the Bloomberg Business app, or listening 0:13:52.800 --> 0:13:54.920 on demand wherever you get your podcasts. 0:13:56.760 --> 0:14:00.719 We did have another Central Bank decision today. Earlier the 0:14:00.880 --> 0:14:03.959 Bank of England did raise interest rates to a fresh 0:14:04.000 --> 0:14:08.000 fifteen year high and raising its key rate to five 0:14:08.080 --> 0:14:10.679 and a quarter percent. Here and really, as far as 0:14:10.720 --> 0:14:14.120 the central bankers, they're signaling how the UK still faces 0:14:14.400 --> 0:14:16.439 a longer period of higher rates. So we want to 0:14:16.440 --> 0:14:19.920 get straight to our next guest, A Vanias stav Rukiva, 0:14:20.280 --> 0:14:23.480 who's an economics professor at London Business School, joining us 0:14:23.480 --> 0:14:27.080 on zoom to break down this latest decision from the BOE. 0:14:27.080 --> 0:14:28.760 What's your takeaway from this. 0:14:30.240 --> 0:14:32.400 Hi, it's a pleasure to be here. I think we 0:14:32.520 --> 0:14:36.160 expected them to hike, given that the core APN numbers 0:14:36.240 --> 0:14:38.280 is still very high at six point nine percent. 0:14:38.840 --> 0:14:39.680 Also, it's a bit. 0:14:39.560 --> 0:14:43.840 Embarrassing for Bank of England to be essentially the central 0:14:43.840 --> 0:14:46.800 bank of an advanced economy with the highest CPI numbers 0:14:47.120 --> 0:14:49.600 at this point. I don't think they had a choice 0:14:49.960 --> 0:14:50.560 but to hike. 0:14:51.360 --> 0:14:55.680 Professor, here in US, we're seeing inflation come down pretty significantly, 0:14:55.760 --> 0:14:58.600 although some people call there some areas of stickiness. If 0:14:58.600 --> 0:15:01.480 you will give us a sense of what's driving the 0:15:01.520 --> 0:15:05.120 inflation in the UK and why is it perhaps a 0:15:05.120 --> 0:15:07.120 little bit more stubborn to bring down than in other 0:15:07.120 --> 0:15:07.840 parts of the world. 0:15:09.160 --> 0:15:11.280 I think the difference between the UK and the US 0:15:11.520 --> 0:15:15.240 is around the wage inflation. So the UK is particularly 0:15:15.240 --> 0:15:17.960 problematic because it got hit by Brexit at the same time, 0:15:18.000 --> 0:15:21.120 which of course limited the inflow of workers from the Urozone. 0:15:22.040 --> 0:15:24.640 But also they have other structural problems. So we know 0:15:24.800 --> 0:15:28.040 that the number of people that long term ill and 0:15:28.080 --> 0:15:31.200 they cannot return to the labor force is significantly higher 0:15:31.240 --> 0:15:33.760 in the UK than in other countries. Actually some of 0:15:33.760 --> 0:15:36.760 the numbers are as high as half a million. Moreover, 0:15:37.280 --> 0:15:39.880 we are seeing a lot most strikes, of course in 0:15:39.880 --> 0:15:41.760 the UK. We don't really see that in the US, 0:15:41.840 --> 0:15:45.040 and they're justified because there were decades of austerity and 0:15:45.080 --> 0:15:47.880 public sector wages are very y low. I don't think 0:15:47.880 --> 0:15:50.520 these trends are going to go away. So for example, 0:15:50.520 --> 0:15:53.280 the fact that they approved public sector wage increase of 0:15:53.560 --> 0:15:56.720 six percent, given the even you know, course CPR inflation 0:15:56.800 --> 0:15:59.400 is seven percent, I don't think public sector workers are 0:15:59.400 --> 0:16:02.080 going to be side with these wages. So I do 0:16:02.120 --> 0:16:04.920 think that actually strikes are going to continue and this 0:16:05.040 --> 0:16:07.880 is going to feed into higher wage inflation. Also, wage 0:16:07.920 --> 0:16:10.960 inflation in the private sector is above seven percent, so 0:16:11.400 --> 0:16:13.600 wage inflation is the biggest problem in the UK in 0:16:13.640 --> 0:16:14.120 my opinion. 0:16:14.520 --> 0:16:18.560 How has also the inflation picture impacted other economies in Europe. 0:16:20.480 --> 0:16:24.600 So the Eurozone is quite interesting because there is massive 0:16:24.600 --> 0:16:27.440 hetroogeneta across different countries in the Eurozone. So this is 0:16:27.480 --> 0:16:31.560 the usual problem when you have a single central bank 0:16:31.600 --> 0:16:35.080 and many different business cycles. So we know the southern 0:16:35.120 --> 0:16:38.160 European countries, for example, the inflation rates is significantly lower 0:16:38.440 --> 0:16:40.880 than Germany, and then you have Eastern EU operator inflation 0:16:40.920 --> 0:16:44.880