WEBVTT - Harris, Trump Election Effects on Financials 0:00:15.640 --> 0:00:19.080 Bloomberg Intelligence has five hundred analysts and strategists working across 0:00:19.079 --> 0:00:21.840 the globe and focused on all major markets. Our coverage 0:00:21.840 --> 0:00:24.479 includes over two thousand equities and credits, and we have 0:00:24.520 --> 0:00:27.440 outlooks on more than ninety industries, one hundred market indices, 0:00:27.480 --> 0:00:32.400 currencies and commodities. This podcast series examines the intersection of 0:00:32.440 --> 0:00:34.960 business policy and law. My name is Nathan Dean, and 0:00:35.000 --> 0:00:38.559 I'm an analyst with Bloomberg Intelligence. Coming Financials Policy. The 0:00:38.600 --> 0:00:41.879 fourth Covering Conversation was the first of several webinars that 0:00:41.880 --> 0:00:44.920 the Bloomberg Intelligence team has had on the US elections 0:00:45.320 --> 0:00:50.320 and October first, Nathan Dean, Elliott Stein, Alison Williams, Hermann Chan, 0:00:50.640 --> 0:00:53.600 and Arnold Kakuda met to discuss the implications of the 0:00:53.680 --> 0:00:57.280 US elections on financials, banks and asset managers. If you 0:00:57.280 --> 0:00:59.560 have any questions, please feel free to reach out at 0:00:59.680 --> 0:01:04.120 NDS at Bloomberg dot net. Thank you, Okay, Well, I 0:01:04.200 --> 0:01:06.360 have it at two minutes after the hour, so why 0:01:06.360 --> 0:01:09.080 don't we go ahead and get started. Hello and welcome. 0:01:09.640 --> 0:01:11.760 My name is Nathan Dean. I am a senior policy 0:01:11.760 --> 0:01:15.000 anost with Bloomberg Intelligence, and joining me on the discussion 0:01:15.080 --> 0:01:19.280 today is our senior investment banks analyst Alison Williams, our 0:01:19.319 --> 0:01:23.039 senior regional banks analyst Hermann Chan, our senior credit analyst 0:01:23.160 --> 0:01:27.200 Arnold Kakuda, and our senior litigation analyst Elliott Stein. All 0:01:27.240 --> 0:01:29.440 of this is focused on financials, and we'd like to 0:01:29.480 --> 0:01:32.280 welcome you to the first of many of our elections 0:01:32.360 --> 0:01:35.560 series on the US elections, and again we're going to 0:01:35.560 --> 0:01:38.560 talk about financials. We're also going to record this as 0:01:38.600 --> 0:01:41.680 an episode for our Votes and Verdicts podcasts. So if 0:01:41.720 --> 0:01:44.240 you're listening to this after the fact, you can reach 0:01:44.319 --> 0:01:47.120 this via the Apple Spotify, our Heart Radio, and also 0:01:47.200 --> 0:01:49.520 the Bloomberg terminal. And for those of you who don't 0:01:49.520 --> 0:01:52.919 know who Bloomberg Intelligence is, we are the investment research 0:01:52.960 --> 0:01:56.160 platform of Bloomberg LP. We have about five hundred analysts 0:01:56.160 --> 0:01:58.920 and strategists working across the globe and focused on all 0:01:58.960 --> 0:02:02.280 the major markets. Our coverage includes over two thousand equities 0:02:02.280 --> 0:02:04.200 and credits, and we have outlooks on more than ninety 0:02:04.200 --> 0:02:08.520 industries and market indices, currencies, commodities, and so if you 0:02:08.520 --> 0:02:10.320 want need to access any of those, you can always 0:02:10.360 --> 0:02:14.600 reach that via the BEC function BICO. So let's go 0:02:14.600 --> 0:02:17.440 ahead and get started. So thank you again everybody for attending. 0:02:18.160 --> 0:02:19.639 What I want to do is just take a few 0:02:19.680 --> 0:02:22.720 minutes to talk about the election and the implications from 0:02:22.720 --> 0:02:26.120 the financial sector, and then I'll ask questions to Herman, Alison, 0:02:26.240 --> 0:02:29.480 Arnold and Elliott to give us their views on certain 0:02:29.520 --> 0:02:32.240 aspects of how it can assist your portfolio and how 0:02:32.280 --> 0:02:35.200 you should be thinking about the impact on the financial sector. 0:02:35.480 --> 0:02:38.440 So I want to start with the US House of Representatives, because, 0:02:38.440 --> 0:02:41.440 as many of you may know, we have other elections 0:02:41.480 --> 0:02:44.000 this November other than the presidential race. We have the 0:02:44.080 --> 0:02:46.400 US House of Representatives, we have the Senate, we have 0:02:46.440 --> 0:02:50.080 the presidency. Now the House of Representatives, they're four hundred 0:02:50.120 --> 0:02:53.079 and thirty five members. Each member serves a two year term. 0:02:53.400 --> 0:02:57.040 About forty four individuals. According to our friends over at Bloomberg, 0:02:57.080 --> 0:03:00.919 government are either in toss up or leaning races, meaning 0:03:00.960 --> 0:03:03.359 that it can go either way. Now, this is about 0:03:03.360 --> 0:03:05.600 twelve percent of that four hundred and thirty five. So 0:03:05.680 --> 0:03:08.079 the majority of House members when they go to bed 0:03:08.120 --> 0:03:10.320 on election night, their work is already done. They're going 0:03:10.360 --> 0:03:12.840 to go to bed knowing that they have already secured 0:03:12.880 --> 0:03:16.440 their vote. But with the House right now in control 0:03:16.480 --> 0:03:18.840 of the GOP two hundred and twenty to two hundred 0:03:18.840 --> 0:03:23.560 and eleven. It only takes a few individuals either way 0:03:23.639 --> 0:03:27.880 to secure the next, you know, the next control of 0:03:27.880 --> 0:03:30.519 the House of Representatives. The reason why that the control 0:03:30.520 --> 0:03:32.840 of the House of Representatives is important to the financial 0:03:32.840 --> 0:03:35.600 sector is because twenty twenty five is going to be 0:03:35.640 --> 0:03:38.680 a year of tax reform tax debate. The Trump era 0:03:38.840 --> 0:03:41.760 tax cuts expire at the tail end of twenty twenty five, 0:03:41.840 --> 0:03:44.520 and this was from two and twenty seventeen, and so 0:03:44.640 --> 0:03:46.840 things like the corporate tax rate, the state and local 0:03:46.880 --> 0:03:50.600 tax deduction, uncapitalized games, and so forth like that, all 0:03:50.680 --> 0:03:53.960 this is going to be in the discussion because neither 0:03:54.000 --> 0:03:57.160 party at this point wants to see those individual tax 0:03:57.240 --> 0:04:00.800 rates for most Americans to increase, and so there is 0:04:00.840 --> 0:04:04.600 going to be a discussion. And if the Democrats control 0:04:04.680 --> 0:04:07.080 the House of Representatives, they will control the House in 0:04:07.160 --> 0:04:10.480 waves means committee or vice versa. And whoever controls the 0:04:10.480 --> 0:04:13.800 House and ways and means committee controls the opening salvo, 0:04:13.880 --> 0:04:16.920 the first step of negotiations, the base case, if you will, 0:04:17.200 --> 0:04:19.440 of tax reform. And that is why the House is 0:04:19.480 --> 0:04:21.800 so important. Now I can't get into polling of the 0:04:21.800 --> 0:04:25.120 House races, But our general view is is that whoever 0:04:25.160 --> 0:04:27.479 wins the presidency takes the House, and it's going to 0:04:27.480 --> 0:04:30.200 be very close. So let's talk about the Senate. One 0:04:30.279 --> 0:04:32.440 hundred senators, thirty four of them are up for re 0:04:32.520 --> 0:04:35.440 election this year. It's actually usually one third, one third, 0:04:35.480 --> 0:04:39.720 one third thirty four this year because Nebraska has two 0:04:39.920 --> 0:04:44.599 Senate seats up due to Senator Ben Sass retiring. Now, 0:04:44.600 --> 0:04:47.279 this is a very difficult race for the Democrats. The 0:04:47.320 --> 0:04:50.240 reason being is of those thirty four seats, twenty three 0:04:50.279 --> 0:04:52.680 of them are held by Democrats, and right now the 0:04:52.720 --> 0:04:55.080 Democrats have a fifty one to forty nine majority. There 0:04:55.080 --> 0:04:59.920 are four independents that caucus with the Democrats. But Stor 0:05:00.120 --> 0:05:02.640 Joe Mansion of West Virginia is retiring, and you don't 0:05:02.680 --> 0:05:04.800 need to be me or political strategist to know that 0:05:04.839 --> 0:05:07.560 it's more likely than not the Republicans are going to 0:05:07.640 --> 0:05:10.200 take West Virginia. So now you're at a fifty to 0:05:10.200 --> 0:05:12.560 fifty and fifty to fifty control goes to the Vice 0:05:12.600 --> 0:05:16.040 president or whoever wins the presidency. But for the Democrats 0:05:16.040 --> 0:05:18.120 to keep the Senate, they essentially have to run the 0:05:18.160 --> 0:05:23.080 table and have an extremely good, extremely well run election night, 0:05:23.520 --> 0:05:26.840 because there are several seats that are up for risk. 0:05:26.920 --> 0:05:29.720 For example, Senator Cheron Brown, who's the chairman of the 0:05:29.720 --> 0:05:32.880 Senate Banking Committee in Ohio, he's running a very tough race. 0:05:32.880 --> 0:05:34.880 He's a couple of points behind right now according to 0:05:35.000 --> 0:05:38.039 the latest statistics that I'm just reading off the terminal. 0:05:38.640 --> 0:05:41.120 The next thing is Senator John Tester, also a member 0:05:41.120 --> 0:05:44.000 of the Senate Banking Committee. He's in Montana. He's fighting 0:05:44.000 --> 0:05:46.840 for his political life right now because the last two 0:05:46.920 --> 0:05:49.919 election cycles in Montana he's barely been able to squeak 0:05:49.960 --> 0:05:52.960 out a win. And right according to the polling again, 0:05:53.200 --> 0:05:56.600 he's about six points behind Senator Jackie Rosen and Nevada 0:05:56.640 --> 0:06:00.719 a swing state, Senator Debbie Stabanaw who's retiring come from Michigan. 0:06:00.960 --> 0:06:03.320 She's the chairman of the Senate and Committee. So my 0:06:03.440 --> 0:06:05.479 point here is is that for the Democrats, who essentially 0:06:05.520 --> 0:06:07.360 have control of the Senate, they have to run the table. 0:06:07.800 --> 0:06:10.680 And the reason why that's important for financial services is 0:06:10.720 --> 0:06:15.080 because the Senate does not have a fillibuster for nominations 0:06:15.680 --> 0:06:19.480 or appointments. And so if you think the SEC Chairman 0:06:20.120 --> 0:06:24.840 Gary Ginsler may leave under a Kamala Harris presidency. The Republicans, 0:06:24.880 --> 0:06:27.120 if they take the Senate, will effectively be able to 0:06:27.200 --> 0:06:30.760 jam up a lot of time against her nominees and 0:06:30.839 --> 0:06:34.720 prevent her from putting into place individuals that she may seek. Now, 0:06:34.800 --> 0:06:37.120 the FED, for what it's worth, their tim appointments go 0:06:37.200 --> 0:06:39.280 through the end of twenty twenty five and beginning twenty 0:06:39.279 --> 0:06:42.400 twenty six. And I'm talking about FED Chairman Jerome Powell, 0:06:42.560 --> 0:06:45.720 FED Vice Chairman Michael Barr. But if you're looking at 0:06:45.720 --> 0:06:48.200 the SEC, the FDIC, or the c of DC, if 0:06:48.200 --> 0:06:52.239 any of those individuals leave, the Republicans can effectively jam 0:06:52.320 --> 0:06:54.599 up the Vice president if she were to win. And 0:06:54.640 --> 0:06:57.320 if President Trump wins the Republican state the House, there's 0:06:57.400 --> 0:06:59.920 very little that Democrats could do to stall, slow, or 0:07:00.120 --> 0:07:04.120 or change those appointments. Now, the last thing I want 0:07:04.160 --> 0:07:06.679 to talk about is the presidential cycle. Now, I often 0:07:06.720 --> 0:07:09.240 say that this is a race between three individuals. It's 0:07:09.320 --> 0:07:12.840 Vice President Kamala Harris, former President Donald Trump, and the couch. 0:07:13.360 --> 0:07:15.200 And what I mean by that is is that this 0:07:15.280 --> 0:07:18.120 is an election about turnout. The last two elections have 0:07:18.200 --> 0:07:22.080 had the most votes ever in US election history, and 0:07:22.160 --> 0:07:25.160 if that remains the same here, turnout is good, more 0:07:25.240 --> 0:07:28.040 likely than not, Vice President Kamala Harris will win. You know, 0:07:28.080 --> 0:07:31.080 if turnout is poor, more likely than not, Former President 0:07:31.120 --> 0:07:32.920 Donald Trump will win. And now I can show you 0:07:33.000 --> 0:07:35.000 polling on both sides that says that both sides are 0:07:35.040 --> 0:07:37.080 going to win. It is going to be that close. 0:07:37.480 --> 0:07:40.040 Out of a one hundred and fifty or so million Americans 0:07:40.040 --> 0:07:42.760 that are going to vote in this election cycle, it's 0:07:42.880 --> 0:07:45.440 ultimately going to be around one hundred thousand Americans across 0:07:45.480 --> 0:07:47.960 seven swing states that are going to decide who the 0:07:48.000 --> 0:07:50.480 next president is. It's not going to be me. I 0:07:50.560 --> 0:07:52.880 live in Virginia, and more likely than not won't be 0:07:52.920 --> 0:07:55.040 anybody else in my call who lives in New Jersey 0:07:55.160 --> 0:07:57.560 or New York. It's going to be individuals that live 0:07:57.560 --> 0:08:02.240 in Pennsylvania, Arizona, North Carolina, Nevada, Michigan. They are going 0:08:02.320 --> 0:08:05.000 to be the ones that decide who the next president 0:08:05.040 --> 0:08:07.480 will be. And it could be as close as if 0:08:07.520 --> 0:08:10.840 there's a potential snowstorm in Philadelphia that could swing in 0:08:10.880 --> 0:08:13.360 Pennsylvania a certain way, if there is a bad storm 0:08:13.400 --> 0:08:16.320 in Phoenix that could swing states another way. It's going 0:08:16.360 --> 0:08:19.200 to be that close. So what it's important to keep 0:08:19.200 --> 0:08:22.280 in mind is what if scenarios Under a Kamala Harris presidency. 0:08:22.280 --> 0:08:24.360 You're going to see a couple of key themes. One, 0:08:24.640 --> 0:08:26.560 the Bosso three end game, which we're about to talk 0:08:26.600 --> 0:08:28.920 about in a minute, is going to likely move forward. 0:08:29.120 --> 0:08:32.560 You will see increased capital requirements for the banks ranging 0:08:32.600 --> 0:08:34.720 from two hundred and fifty billion in assets and up. 0:08:35.280 --> 0:08:38.240 There will be another proposal coming out on executive compensation, 0:08:38.440 --> 0:08:42.760 probably additional proposals out there on curbing certain aspects and 0:08:42.840 --> 0:08:46.079 bonuses and deferrals and so forth. You may see another 0:08:46.480 --> 0:08:48.880 bite of the apple in terms of a new proposal 0:08:48.920 --> 0:08:52.840 on the enhanced supplementally leverage ratio. But in a Kamala 0:08:52.920 --> 0:08:56.680 Harris presidency, the one thing to keep in mind is 0:08:56.679 --> 0:09:00.240 is that in her history as Attorney General California, she 0:09:00.400 --> 0:09:03.560 has a history of going after the enforcement side of 0:09:03.600 --> 0:09:06.920 the financial services sector. And we often have seen in 0:09:07.000 --> 0:09:13.000 her history that she will use investigations enforcement examinations, and 0:09:13.160 --> 0:09:15.839 we don't see that we see that trend continuing if 0:09:15.840 --> 0:09:19.000 she were to win. Now, I don't think you're going 0:09:19.000 --> 0:09:21.440 to see much in the way of legislation. Remember, Congress 0:09:21.480 --> 0:09:25.000 is very difficult to get legislation through so again that 0:09:25.160 --> 0:09:27.640 examination and that enforcement side, and you will see a 0:09:27.720 --> 0:09:32.360 much more focus on consumer aspect of financial regulation, namely 0:09:32.559 --> 0:09:36.120 coming from the Consumer Financial Protection Bureau, the Federal Trade Commission, 0:09:36.400 --> 0:09:39.560 and so forth. Now in a President Trump presidency, well 0:09:39.600 --> 0:09:41.719 it could be a little it's a different story. You know, 0:09:41.800 --> 0:09:44.480 there's a deregulatory effort. But for as long as it 0:09:44.520 --> 0:09:48.160 takes regulations to come into force, it also takes probably 0:09:48.200 --> 0:09:51.400 the same amount of time for deregulation efforts to take place. 0:09:51.800 --> 0:09:53.360 Now you have to go through a proposal, you have 0:09:53.400 --> 0:09:54.920 to go through a comment period, you have to go 0:09:55.000 --> 0:09:58.360 through a finalization. So if you ever hear Republicans talking 0:09:58.360 --> 0:10:01.840 about deregulation, they can do that and they can bypass 0:10:01.880 --> 0:10:05.560 the opposition, but it takes time. It takes years. And 0:10:05.640 --> 0:10:07.880 so keep that in mind that if President Trump were 0:10:07.920 --> 0:10:10.280 to come into office and he says that I'll want 0:10:10.280 --> 0:10:12.960 to do something, more often than not, it will take 0:10:13.000 --> 0:10:14.960 time or it will take an active Congress. And for 0:10:15.000 --> 0:10:17.480 what it's worth, the only immediate thing that we're talking 0:10:17.559 --> 0:10:19.959 about that if President Trump were to come into fruition, 0:10:20.400 --> 0:10:22.760 the only true immediate impact that we see out there 0:10:22.840 --> 0:10:25.319 right now is tariffs. Because the power of the presidency 0:10:25.360 --> 0:10:27.320 is a lot more powerful when it comes to executive 0:10:27.400 --> 0:10:30.679 orders in tariffs, but everything else either requires an Act 0:10:30.720 --> 0:10:33.280 of Congress which is difficult to come by, or ask 0:10:33.320 --> 0:10:35.480 to go to the regulatory route. The last thing I 0:10:35.480 --> 0:10:37.920 want to say about President Trump is his stance on crypto. 0:10:38.280 --> 0:10:40.480 He's made several remarks about how he wants to make 0:10:40.520 --> 0:10:43.080 the United States the crypto capital of the world. But 0:10:43.120 --> 0:10:45.359 here's where I'm going to get a little out of consensus. 0:10:45.800 --> 0:10:48.880 My view is is that the crypto framework, of the 0:10:48.960 --> 0:10:53.080 regulatory crypto framework that firms like coinbase and other crypto 0:10:53.120 --> 0:10:57.480 players are seeking, I think can come back, whether or 0:10:57.720 --> 0:11:00.280 I think it can come and move into law, whether 0:11:00.320 --> 0:11:04.160 President Trump wins or where whether Vice President Harris wins. 0:11:04.559 --> 0:11:06.800 And the reason being here, and this is what Elliott 0:11:06.800 --> 0:11:09.400 will hint at in his remarks is the courts are 0:11:09.440 --> 0:11:12.480 becoming more and more and more willing to get into 0:11:12.640 --> 0:11:17.600 the regulatory status of enforcement actions and regulations and so forth. 0:11:17.920 --> 0:11:21.160 And we currently have a murky regulatory environment because the 0:11:21.160 --> 0:11:23.560 courts will say one thing in one case but another 0:11:23.559 --> 0:11:26.960 thing in another case. In Congress itself does not like 0:11:27.000 --> 0:11:28.880 it when courts come in and try and tell them 0:11:28.920 --> 0:11:31.640 what their job is. And so I do think a 0:11:31.840 --> 0:11:34.400 version of the Financial Innovation and Technology Act, and I 0:11:34.400 --> 0:11:37.080 don't want to get into specifics, but essentially tells the 0:11:37.160 --> 0:11:40.199 SEC you have authority over these types of tokens versus 0:11:40.280 --> 0:11:43.440 the CFTC having authority over these types of tokens will 0:11:43.480 --> 0:11:46.439 pass either if Vice President Harris or President Trump were 0:11:46.480 --> 0:11:49.880 to win. So I'm going to stop talking at this point. 0:11:49.960 --> 0:11:52.560 I'm going to open up four questions, and so I 0:11:52.600 --> 0:11:54.880 want to start with Herman and Herman, you know, you 0:11:55.000 --> 0:11:58.560 cover the regional banks. Last year, you had one of 0:11:58.559 --> 0:12:00.679 the busiest first quarters in the history I think of 0:12:00.679 --> 0:12:04.480 Bloomberg Intelligence. So just at a high level question, are 0:12:04.480 --> 0:12:07.120 there any high level thoughts that you would like to 0:12:07.160 --> 0:12:10.600 have about how people should think about their portfolios as 0:12:10.600 --> 0:12:12.720 we approach the US election. Yeah? 0:12:12.800 --> 0:12:16.040 Sure, So you touched on a couple of things. I 0:12:16.040 --> 0:12:19.400 guess I can highlight on Basle three end game. First, 0:12:20.440 --> 0:12:24.559 the regional banks that I cover, the banks between two 0:12:24.640 --> 0:12:27.800 hundred and fifty billion one hundred million in assets. There's 0:12:28.000 --> 0:12:30.840 a lot of relaxation in the reproposal of those rules, 0:12:30.880 --> 0:12:35.600 so they actually are in a very solid position of 0:12:35.840 --> 0:12:39.400 already meeting or exceeding the bast three end game guidelines 0:12:39.440 --> 0:12:47.199 for capital. Just as a refresher, the reproposal eliminates the 0:12:47.280 --> 0:12:50.800 risk rayed asset inflation for the regional banks for those 0:12:50.880 --> 0:12:54.000 under two hundred and fifty billion and assets. So that's 0:12:54.360 --> 0:12:58.040 a modest win. And you've already seen a lot of 0:12:58.080 --> 0:13:02.959 these regionals re answer the buybacks game, with a number 0:13:02.960 --> 0:13:08.440 of banks announcing share repurchases, including US Bank recently at 0:13:08.480 --> 0:13:12.560 their investor day a few weeks back. So that's all positive. 0:13:12.640 --> 0:13:14.760 Capital is in a really good place for them, and 0:13:15.720 --> 0:13:20.120 they'll have plenty of time to meet these rules given 0:13:20.240 --> 0:13:24.880 the delayed implementation process. Corporate tax rates is something that 0:13:25.280 --> 0:13:28.920 you mentioned earlier. That's something I don't think has been 0:13:28.960 --> 0:13:31.200 really contemplated in the bank stalks now. But I would 0:13:31.200 --> 0:13:34.480 say that regional banks, in particular, with all of their 0:13:35.440 --> 0:13:38.800 earnings and activities here in the US, any changes in 0:13:38.840 --> 0:13:44.080 the corporate tax rates would affect them more versus other 0:13:44.800 --> 0:13:49.120 types of corporations here in the US. 0:13:49.679 --> 0:13:52.040 So, you know, you mentioned the fossil three endgame, and 0:13:52.120 --> 0:13:54.760 one thing that we should tell our viewers and listeners 0:13:54.880 --> 0:13:57.720 is that when this proposal initially came out, it was 0:13:57.800 --> 0:14:00.920 calling for a nineteen percent increase on Allison's banks, the 0:14:01.000 --> 0:14:04.520 investment banks, the mid sized banks were around five to 0:14:04.559 --> 0:14:07.439 six percent, And then Vice Chairman Michael Barr came out 0:14:07.440 --> 0:14:09.079 and gave a speech where he said there is going 0:14:09.120 --> 0:14:11.800 to be a reproposal and the overall impact for the 0:14:11.800 --> 0:14:14.439 investment banks would be nine percent and for the regional 0:14:14.520 --> 0:14:17.280 banks would be three to four percent. But there's a 0:14:17.280 --> 0:14:19.360 little bit of a problem happening at the moment with 0:14:19.440 --> 0:14:22.760 the Basil three endgame, because the FETIS said, this is 0:14:22.800 --> 0:14:24.720 a plan, this is what we want to go forward with, 0:14:25.120 --> 0:14:26.840 but there seems to be a hiccup over at the 0:14:26.920 --> 0:14:30.480 FDIC because the FDIC is made up of five individuals 0:14:31.080 --> 0:14:33.640 and three of them currently are a no on this plan. 0:14:33.720 --> 0:14:36.600 It's the two Republicans, and then it's the Consumer Financial 0:14:36.680 --> 0:14:40.200 Protection Bureau Director Rowhee Chopra, who doesn't seem to be 0:14:40.280 --> 0:14:44.360 on board with this weakening or this loosening of the 0:14:44.360 --> 0:14:47.240 Basil three endgame. Now, I do think that eventually this 0:14:47.280 --> 0:14:51.360 proposal will come forward, especially if Vice President Harris wins, 0:14:51.960 --> 0:14:54.480 but again they could be delayed until after the election. 0:14:54.560 --> 0:14:56.560 You have the c FPB Director Chopra does not want 0:14:56.600 --> 0:14:59.280 to move on board with this. But Herman one quick 0:14:59.320 --> 0:15:01.720 follow up in this something that I always ask Herman, 0:15:02.400 --> 0:15:05.520 and I've been asking in this for about eighteen months now. Yeah, 0:15:05.680 --> 0:15:08.800 last year we saw a regional bank turmoil. How are 0:15:08.800 --> 0:15:11.920 the regional banks doing today? Is there any concern whatsoever 0:15:11.960 --> 0:15:12.320 with them? 0:15:13.720 --> 0:15:15.880 I think we've already crossed that bridge at this point, 0:15:16.440 --> 0:15:20.760 given the banks have had plenty of quarters to increase capital. 0:15:21.040 --> 0:15:25.680 As I articulated earlier, they really shored up their deposits 0:15:27.040 --> 0:15:31.360 and their balance sheet in particular paid up for deposits. 0:15:33.040 --> 0:15:36.240 The issue was with what we saw last March with 0:15:36.480 --> 0:15:42.640 SBB and signature First Republic was really a crisis of confidence, 0:15:42.840 --> 0:15:47.880 and the banks collectively have delivered on increasing confidence within 0:15:48.640 --> 0:15:52.040 their customers and their balance sheets. They've done a lot 0:15:52.120 --> 0:15:57.520 to reduce their riskuated assets. A lot of them went 0:15:57.600 --> 0:16:00.760 on a so called ORWA diets online year and we've 0:16:00.800 --> 0:16:03.840 already moved past that with banks actually looking to grow 0:16:03.880 --> 0:16:07.280 their balance sheets, but the loan demand just really isn't 0:16:07.320 --> 0:16:10.680 there for them to do so, and lower interest rates 0:16:10.680 --> 0:16:14.520 going forward will help funding costs. You'll recall last year, 0:16:14.520 --> 0:16:20.080 in particular, after SVB banks had really had to re 0:16:20.160 --> 0:16:24.120 up their deposit game by paying up for deposits to 0:16:24.840 --> 0:16:27.920 really satisfy the customers that could go to other places 0:16:28.000 --> 0:16:31.440 like money market funds and the like. So they've done 0:16:31.480 --> 0:16:34.840 that and they will reap the benefits of lower funding 0:16:34.880 --> 0:16:39.640 costs going forward with the feed a reserve looking to 0:16:39.720 --> 0:16:42.960 cut rates even more potentially later in the year. 0:16:43.800 --> 0:16:44.080 Right. 0:16:44.480 --> 0:16:46.840 So, just as a reminder to our viewers at the moment, 0:16:46.960 --> 0:16:49.120 you can't put in a question into the Q and 0:16:49.160 --> 0:16:51.600 a chat at the bottom and we'll get to that. 0:16:51.960 --> 0:16:54.000 But now I want to turn it to Alison Williams, 0:16:54.040 --> 0:16:56.040 who covers our investment banks. So Alison, I want to 0:16:56.040 --> 0:16:58.760 talk about the busle three end game. You know, Arnold, 0:16:58.760 --> 0:17:01.240 I'm sorry Herman gave us the view from the regional side, 0:17:01.520 --> 0:17:04.000 you know, is there the similar story playing after the 0:17:04.040 --> 0:17:07.359 investment banks and then just thinking about it in a 0:17:07.520 --> 0:17:10.680 global sense, you know, we've seen the UK delayed their 0:17:10.720 --> 0:17:14.440 capital requirements as a result of the US in action, 0:17:14.560 --> 0:17:17.359 if you will. How did the American bank stand in 0:17:17.440 --> 0:17:19.840 terms of global capital requirements? Is there something to be 0:17:19.880 --> 0:17:20.520 concerned about? 0:17:21.800 --> 0:17:26.919 So I think that, you know, the rollback of the 0:17:27.000 --> 0:17:29.359 rules or the softening of the rules is definitely something 0:17:29.359 --> 0:17:32.040 that the banks fought for for a couple of reasons. 0:17:33.200 --> 0:17:36.720 You know, there are a lot of the you know, 0:17:37.040 --> 0:17:40.679 the gold plating of standards relating to some of the 0:17:40.720 --> 0:17:43.560 businesses like residential and retail ending. 0:17:43.359 --> 0:17:43.879 Et cetera. 0:17:44.800 --> 0:17:48.600 But especially for some of the rules that impact things 0:17:48.680 --> 0:17:53.040 like you know, the prime brokerage business, where the US 0:17:53.080 --> 0:17:57.119 banks are truly the global leaders. That's an area that 0:17:57.160 --> 0:17:59.920 the that the banks were very vocal in terms of 0:18:00.280 --> 0:18:07.000 making the US rivals less competitive with these rules, and 0:18:07.080 --> 0:18:11.919 so it really will be I think in the details 0:18:11.960 --> 0:18:16.080 in terms of what the changes are, and so I think, 0:18:16.680 --> 0:18:19.640 you know, JP Morgan had sort of set the expectation 0:18:19.880 --> 0:18:23.760 for a potential having of the impact of the rules 0:18:23.800 --> 0:18:26.159 when they went through a bunch of different scenarios that 0:18:26.280 --> 0:18:28.880 investor day. But I would keep in mind that there 0:18:28.920 --> 0:18:32.600 are several different aspects and at the end of the day, 0:18:32.600 --> 0:18:36.480 it will depend on, you know, which parts of the 0:18:36.560 --> 0:18:38.679 rules are eased. And that that also does make me 0:18:38.760 --> 0:18:42.199 curious and perhaps you can talk about this, Nathan, But 0:18:42.680 --> 0:18:46.680 in terms of the FDIC's objection, are they objecting to 0:18:46.880 --> 0:18:51.800 things that might make these banks more globally competitive, because 0:18:51.880 --> 0:18:56.439 that is generally not something that the FDIC supports. But 0:18:57.040 --> 0:18:59.480 just backing up for a second, and I'll just echo 0:18:59.560 --> 0:19:03.280 something that Herman said in terms of the banks having 0:19:03.320 --> 0:19:06.440 time to implement the rules. So I think that there 0:19:06.600 --> 0:19:10.480 was obviously some negative reactions when the rules came out. 0:19:11.000 --> 0:19:12.639 One thing I would point to is the fact that 0:19:12.680 --> 0:19:15.600 the banks have shown themselves to be very nimble over time. 0:19:16.080 --> 0:19:20.320 The stress capital buffer requirements, which change every year based 0:19:20.359 --> 0:19:24.840 on the US stress tests, have helped them to show 0:19:24.880 --> 0:19:27.679 their flexibility. If we go back to twenty twenty two, 0:19:27.800 --> 0:19:32.200 for example, the JP Morgan, Bank of America and City 0:19:32.200 --> 0:19:36.920 Group had to very quickly shore up their standardized ratios 0:19:36.920 --> 0:19:39.600 by sixty to eighty basis point in a very in 0:19:39.680 --> 0:19:42.239 just a couple of quarters, and so I think that 0:19:42.320 --> 0:19:45.000 illustrates their nimbleness. Part of it is buybacks, of course, 0:19:45.040 --> 0:19:49.840 and part of it is things like non operational deposits. 0:19:50.320 --> 0:19:54.760 At the end of the day, it's not about compliance, 0:19:54.800 --> 0:19:57.080 so it's not about downside risk. But I think it 0:19:57.119 --> 0:20:01.159 is for investors about upside in terms of the fact 0:20:01.160 --> 0:20:05.720 that just by mathematically, if you have a larger denominator 0:20:05.800 --> 0:20:10.160 that's required, returns are going to go down. That's generally 0:20:10.160 --> 0:20:16.639 how bank stock investors value the stock, So that is 0:20:17.560 --> 0:20:21.600 mathematically and negative aside from the fact that there's just 0:20:21.760 --> 0:20:25.040 you know, lesser less capital to be returned to shareholders 0:20:25.320 --> 0:20:25.760 over time. 0:20:25.800 --> 0:20:29.600 So that's how it sort of sort of plays out. 0:20:29.720 --> 0:20:34.240 And so I think it is manageable. Again, I think 0:20:34.280 --> 0:20:38.160 it's it's at this point in time, investors, I think, 0:20:38.320 --> 0:20:42.480 are you know, have sort of digested the revised comments. 0:20:42.480 --> 0:20:45.399 They were in line with what people had expected, and 0:20:45.680 --> 0:20:50.399 the next step is really the election. As to your point, 0:20:50.600 --> 0:20:56.600 if if Trump wins the election, that could mean that 0:20:56.640 --> 0:21:01.040 things are derailed for a longer period of time, where 0:21:01.080 --> 0:21:05.119 as you know, a demo democratic when you know, could 0:21:05.280 --> 0:21:09.280 mean that the rules come sooner and generally more negative. 0:21:10.119 --> 0:21:12.080 So one quick fallow up I had is that, you know, 0:21:12.440 --> 0:21:17.040 I often hear people say that banks do well under 0:21:17.119 --> 0:21:21.760 Republican administrations and banks don't do well under democratic administrations. 0:21:22.440 --> 0:21:24.560 And I was looking at the terminal the other day 0:21:24.600 --> 0:21:27.040 and I saw that under the Obama administration bank stocks 0:21:27.040 --> 0:21:30.720 did quite well in the post global financial crisis era. 0:21:30.840 --> 0:21:32.639 Is there any truth to this or is it really 0:21:33.160 --> 0:21:36.680 there's so much more macro matters, you know, in macro matters, 0:21:36.760 --> 0:21:39.960 is the podcast are fixed? Thinkham folks, I highly recommend 0:21:40.000 --> 0:21:41.800 you to take a listen to that. Are there macro 0:21:42.040 --> 0:21:45.440 issues at play here that are just beyond the US election. 0:21:46.160 --> 0:21:48.919 Well, it is all about rules of thumb, right, So 0:21:49.080 --> 0:21:53.600 I think in general, you know, from the regulatory standpoint, 0:21:54.240 --> 0:21:55.800 you know, as you've written about, and as. 0:21:55.680 --> 0:21:58.520 We've discussed, from a regulatory. 0:21:57.960 --> 0:22:03.720 Standpoint, it generally Republicans tend to be more favorable. Also 0:22:03.920 --> 0:22:08.199 from you know, if we look back to you know, 0:22:08.280 --> 0:22:12.040 the Trump presidency, it really was about a lot of 0:22:12.080 --> 0:22:17.879