1 00:00:00,080 --> 00:00:02,520 Speaker 1: Bankers can make some money out of government picking winners. 2 00:00:02,640 --> 00:00:05,400 Speaker 1: The question is whether long term that's for good or bad. 3 00:00:09,119 --> 00:00:16,680 Speaker 1: From Bloomberg News and iHeartRadio, It's the Big Take. I'm Westkasova. 4 00:00:17,079 --> 00:00:21,840 Speaker 1: Today Bloomberg's editor in chief John Micklethwaite talks about the 5 00:00:21,960 --> 00:00:32,240 Speaker 1: post bank crash world. John, how are you enjoying springtime 6 00:00:32,240 --> 00:00:36,479 Speaker 1: in London? I am. It's back to the traditional British 7 00:00:36,479 --> 00:00:40,200 Speaker 1: weather of raining, although there's a brief burst of sunshine 8 00:00:40,320 --> 00:00:43,280 Speaker 1: right now. Well, I came looking for you to see 9 00:00:43,320 --> 00:00:46,000 Speaker 1: if you had come on the show and take a 10 00:00:46,040 --> 00:00:49,480 Speaker 1: step back from the news to put a larger perspective 11 00:00:49,520 --> 00:00:52,720 Speaker 1: on the collapse of Silicon Valley Bank and Signature Bank 12 00:00:52,760 --> 00:00:56,200 Speaker 1: and then the sort of very long, slow motion failure 13 00:00:56,240 --> 00:01:00,360 Speaker 1: of Credit Sweez. But it turns out you were quite 14 00:01:00,360 --> 00:01:05,319 Speaker 1: coincidentally in Edinburgh, Scotland. Yes, I went. I went up 15 00:01:05,360 --> 00:01:08,160 Speaker 1: to Edinburgh to do a little bit to promote Bloomberg UK. 16 00:01:09,200 --> 00:01:11,640 Speaker 1: But we had a dinner at a place called the 17 00:01:11,720 --> 00:01:15,280 Speaker 1: Library of Mistakes, which I would argue is probably about 18 00:01:15,319 --> 00:01:18,399 Speaker 1: the best single room in the world to consider what 19 00:01:18,480 --> 00:01:22,039 Speaker 1: has been happening in banking of the past period. And 20 00:01:22,080 --> 00:01:25,800 Speaker 1: the Library Mistakes is on the edge of Edinburgh's financial district, 21 00:01:26,720 --> 00:01:30,920 Speaker 1: and it is dedicated to all the disasters that financiers 22 00:01:30,920 --> 00:01:34,559 Speaker 1: can do. So on one side you've got a sign 23 00:01:34,680 --> 00:01:38,800 Speaker 1: shirt from Nick Leeson, the man who brought down Bearings Bank. 24 00:01:39,600 --> 00:01:41,400 Speaker 1: On the other side you've got a picture of Charles 25 00:01:41,400 --> 00:01:46,759 Speaker 1: Ponzi of Ponzi Scheme fame. The books scattered around the library, 26 00:01:47,160 --> 00:01:51,240 Speaker 1: and possibly one of mine in there. They all depict 27 00:01:51,480 --> 00:01:55,760 Speaker 1: terrible things that finance has done, and disasters and terrible schemes. 28 00:01:56,440 --> 00:02:00,320 Speaker 1: And the whole thing boils down to this aphorism from 29 00:02:00,440 --> 00:02:06,040 Speaker 1: James Grant of Grant's Interest Rate Observer that in technology 30 00:02:06,040 --> 00:02:13,200 Speaker 1: and engineering progress is cumulative, but in finance progress is cyclical. 31 00:02:14,440 --> 00:02:16,720 Speaker 1: And for those of us who don't hang out on 32 00:02:16,880 --> 00:02:20,000 Speaker 1: Wall Street, James Grant is an investor who writes a 33 00:02:20,080 --> 00:02:24,560 Speaker 1: pricey and influential newsletter about finance. He has another phrase, John, 34 00:02:24,639 --> 00:02:26,280 Speaker 1: which I think is also apped as a little less 35 00:02:26,280 --> 00:02:28,560 Speaker 1: lofty than the one in the Library of Mistakes, and 36 00:02:28,600 --> 00:02:33,040 Speaker 1: that's we keep stepping on the same rakes. That's sort 37 00:02:33,040 --> 00:02:35,120 Speaker 1: of the same thing, isn't it, but rather pithier in 38 00:02:35,160 --> 00:02:37,720 Speaker 1: some ways. Why do we keep stepping on the same rakes, 39 00:02:38,160 --> 00:02:40,639 Speaker 1: well one problems. It tends to be a slightly different 40 00:02:40,720 --> 00:02:45,800 Speaker 1: rake each time. And the previous rake you go back 41 00:02:45,840 --> 00:02:49,120 Speaker 1: to the great financial crisis of two thousand and eight 42 00:02:49,120 --> 00:02:52,000 Speaker 1: two thousand and nine. There you can see the real 43 00:02:52,040 --> 00:02:55,440 Speaker 1: problem with banks was on the asset side. They had 44 00:02:55,800 --> 00:03:00,400 Speaker 1: an enormous amount of really dodgy loans, the subprime things 45 00:03:00,440 --> 00:03:05,639 Speaker 1: we all heard about, all those piles of vertiginous derivatives, 46 00:03:05,639 --> 00:03:08,080 Speaker 1: and that was all on top of a tiny slither 47 00:03:08,240 --> 00:03:12,080 Speaker 1: of capital. And so when those loans started getting bad, 48 00:03:12,280 --> 00:03:15,280 Speaker 1: they got into real trouble. And what's happened since then 49 00:03:15,639 --> 00:03:18,720 Speaker 1: is that regulators have done a great deal to push that. 50 00:03:19,360 --> 00:03:22,480 Speaker 1: We're proposing a set of reforms to require regulators to 51 00:03:22,639 --> 00:03:26,440 Speaker 1: look not only at the safety and soundness of individual institutions, 52 00:03:27,040 --> 00:03:29,960 Speaker 1: but also for the first time, at the stability of 53 00:03:30,360 --> 00:03:33,920 Speaker 1: the financial system as a whole. One of the reasons 54 00:03:33,919 --> 00:03:36,560 Speaker 1: this crisis could take place is that while many agencies 55 00:03:36,560 --> 00:03:40,800 Speaker 1: and regulators were responsible for overseeing individual financial firms and 56 00:03:40,840 --> 00:03:44,640 Speaker 1: their subsidiaries, no one was responsible for protecting the whole 57 00:03:44,680 --> 00:03:47,560 Speaker 1: system from the kinds of risks that tied these firms 58 00:03:47,560 --> 00:03:51,640 Speaker 1: to one another. Regulators were charged with seeing the trees, 59 00:03:52,000 --> 00:03:55,200 Speaker 1: but not the forest. One interesting thing about Credit Suites 60 00:03:55,720 --> 00:03:58,720 Speaker 1: and Silica Valley Bank is actually they had, by most measures, 61 00:03:58,800 --> 00:04:00,880 Speaker 1: quite a lot of capital. They in order to have it, 62 00:04:01,200 --> 00:04:04,080 Speaker 1: and they had quite a lot. The problem with them 63 00:04:04,320 --> 00:04:08,560 Speaker 1: was liquidity. Suddenly investors wanted their money back, and again 64 00:04:08,640 --> 00:04:10,640 Speaker 1: that's very much what you can see all the way 65 00:04:10,640 --> 00:04:14,200 Speaker 1: around the library mistakes. It's like an old fashioned bank run. 66 00:04:14,240 --> 00:04:18,520 Speaker 1: If suddenly all your people want their money bag, then 67 00:04:18,760 --> 00:04:20,880 Speaker 1: banks don't tend to have it that much on hand, 68 00:04:21,000 --> 00:04:24,000 Speaker 1: especially if they've got it stuck in other things. And 69 00:04:24,120 --> 00:04:27,600 Speaker 1: it's that collapse of confidence which really hit both of them, 70 00:04:27,640 --> 00:04:30,680 Speaker 1: and we saw it sort of two weekends in a row. Well, 71 00:04:30,720 --> 00:04:34,200 Speaker 1: first weekend Silicon Valley Bank in trouble, next weekend Credit 72 00:04:34,279 --> 00:04:38,719 Speaker 1: suis Now. The storm swirling around Kreditswis dates back years. 73 00:04:38,720 --> 00:04:40,760 Speaker 1: In March twenty twenty one, the lender was hit by 74 00:04:40,760 --> 00:04:43,320 Speaker 1: a double dose of bad news following the collapse of 75 00:04:43,400 --> 00:04:45,960 Speaker 1: Green Sail Capital and then our Kagos, which left to 76 00:04:46,000 --> 00:04:49,760 Speaker 1: Kretitswie holding the bag on billions of dollars of losses. Now, 77 00:04:49,800 --> 00:04:52,719 Speaker 1: the Zerich based bank has also been rocked by legal 78 00:04:52,720 --> 00:04:55,880 Speaker 1: trouble and instability in the executive suite with three chief 79 00:04:55,920 --> 00:05:01,000 Speaker 1: executive and multiple chairman since twenty and that's the sort 80 00:05:01,000 --> 00:05:03,680 Speaker 1: of way that this particular financial crisis went. So it 81 00:05:03,800 --> 00:05:06,279 Speaker 1: was about liquidity. But and I think this is a 82 00:05:06,320 --> 00:05:09,720 Speaker 1: really important thing that doesn't really get the bankers off 83 00:05:09,720 --> 00:05:13,120 Speaker 1: the hook, because at Silicon Valley Bank, you know, they 84 00:05:13,240 --> 00:05:16,880 Speaker 1: simply were not looking at one part, the boring part 85 00:05:16,920 --> 00:05:18,480 Speaker 1: of what they were supposed to be doing, which is 86 00:05:18,480 --> 00:05:21,599 Speaker 1: when they took deposits in they invested them in fixed 87 00:05:21,640 --> 00:05:25,520 Speaker 1: rate government bonds, which sounds great and safe except when 88 00:05:25,560 --> 00:05:29,200 Speaker 1: interest rates suddenly change. All their kind of exciting stuff 89 00:05:29,200 --> 00:05:32,240 Speaker 1: at Silicon Valley Bank was off lending to tech and 90 00:05:32,400 --> 00:05:35,239 Speaker 1: doing all that quite difficult things. It was a really 91 00:05:35,320 --> 00:05:38,760 Speaker 1: boring bit, the kind of mismatch between having a lot 92 00:05:38,760 --> 00:05:41,839 Speaker 1: of short term people who suddenly wanted their money back 93 00:05:42,000 --> 00:05:44,360 Speaker 1: and then putting all that on a floating rate basis 94 00:05:44,520 --> 00:05:47,520 Speaker 1: and putting your money into fixed rate on the other side. Meanwhile, 95 00:05:47,560 --> 00:05:49,400 Speaker 1: at Credit Sue, you know, I think we could have 96 00:05:49,520 --> 00:05:51,920 Speaker 1: taken entire big take to go through all the different 97 00:05:53,160 --> 00:05:56,320 Speaker 1: sort of scandals which we somehow has managed to get 98 00:05:56,320 --> 00:05:59,000 Speaker 1: involved in, which is deeply ironic because when you and 99 00:05:59,040 --> 00:06:01,320 Speaker 1: I started in this kind of credit swee was a 100 00:06:01,360 --> 00:06:05,159 Speaker 1: byword for being rather boring and stodgy. It's part of 101 00:06:05,160 --> 00:06:08,800 Speaker 1: the problem that when times are good, no one really 102 00:06:08,839 --> 00:06:12,200 Speaker 1: wants to look too closely, and then when it goes 103 00:06:12,240 --> 00:06:15,880 Speaker 1: wrong and all comes crashing down, we're shocked to find 104 00:06:15,920 --> 00:06:18,000 Speaker 1: their capitalists we're doing what they always do, which is 105 00:06:18,040 --> 00:06:22,039 Speaker 1: to try to find any way they can to be profitable. Yes, 106 00:06:22,240 --> 00:06:25,200 Speaker 1: I think there is that in each case. I think 107 00:06:25,480 --> 00:06:29,520 Speaker 1: people were straining at the edges, especially at credit suees. Basically, 108 00:06:29,560 --> 00:06:32,640 Speaker 1: you've had a long period of low interest rates. It 109 00:06:32,680 --> 00:06:35,599 Speaker 1: was hard to make money on sort of normal loans, 110 00:06:35,600 --> 00:06:38,599 Speaker 1: so they started messing around looking for other stuff. And 111 00:06:38,760 --> 00:06:41,120 Speaker 1: one of the tragedies of credit sweeas it seems to 112 00:06:41,640 --> 00:06:45,360 Speaker 1: get stuck in every available sort of shebang from Mozambique 113 00:06:45,400 --> 00:06:48,440 Speaker 1: to Russia. And the answer is a credit sweet further 114 00:06:48,520 --> 00:06:52,560 Speaker 1: and further away from the stodgy stuff. And that was 115 00:06:52,640 --> 00:06:54,880 Speaker 1: the reason why people began to panic. And once you 116 00:06:54,960 --> 00:06:58,120 Speaker 1: have question marks about your numbers, there was a problem 117 00:06:58,160 --> 00:07:00,400 Speaker 1: about how big the outflows were. There was a few 118 00:07:00,440 --> 00:07:05,120 Speaker 1: accounting things. Eventually people get spooked, and that is what happened. 119 00:07:05,640 --> 00:07:09,960 Speaker 1: John You and Adrian Wooldridge, who's the global business columnist 120 00:07:10,040 --> 00:07:14,840 Speaker 1: for Bloomberg Opinion, describe that and really where things go 121 00:07:15,040 --> 00:07:18,320 Speaker 1: from here in a column that you've written together, and 122 00:07:18,400 --> 00:07:21,320 Speaker 1: in that piece you take a step back from the 123 00:07:21,360 --> 00:07:27,400 Speaker 1: news and show how the relationship between financial institutions and 124 00:07:27,560 --> 00:07:32,600 Speaker 1: governments is now being reshaped. You and Adrian write. One 125 00:07:32,640 --> 00:07:36,760 Speaker 1: thing that happens when people get spooked is that suddenly 126 00:07:37,040 --> 00:07:41,000 Speaker 1: what you call the fearless free market financiers discover the 127 00:07:41,200 --> 00:07:45,400 Speaker 1: virtues of state intervention. Yes, and that has happened so 128 00:07:45,480 --> 00:07:48,120 Speaker 1: many times before. If you remember in the financial crisis, 129 00:07:48,680 --> 00:07:51,920 Speaker 1: you had a whole variety of people who effectively became 130 00:07:52,040 --> 00:07:55,960 Speaker 1: government sponsored entities. I always remember having a colleague back 131 00:07:55,960 --> 00:07:58,160 Speaker 1: at the economist guy called Tom Easton, who used to 132 00:07:58,240 --> 00:08:00,440 Speaker 1: relentlessly whenever we went to see the Hut if Gildan 133 00:08:00,480 --> 00:08:04,320 Speaker 1: Sachs remind them that they were basically a socialist enterprise 134 00:08:04,360 --> 00:08:07,600 Speaker 1: because they were backed by the government and distress. Mervin King, 135 00:08:07,760 --> 00:08:09,360 Speaker 1: the governor of the Bank of England, had a very 136 00:08:09,440 --> 00:08:13,040 Speaker 1: nice statement that capitalists tend to be global in life 137 00:08:13,080 --> 00:08:16,040 Speaker 1: but local in death. Whenever things get tough, they go 138 00:08:16,200 --> 00:08:19,760 Speaker 1: rushing to their local governments to bail them out. And 139 00:08:20,360 --> 00:08:23,480 Speaker 1: that sort of is what has happened again. Lots of 140 00:08:23,560 --> 00:08:27,880 Speaker 1: people suddenly who used to usually talk about caveat emptor 141 00:08:27,920 --> 00:08:31,560 Speaker 1: and the difficulty of moral hazard and all these sort 142 00:08:31,560 --> 00:08:36,040 Speaker 1: of things. When America's main technology bank, when that got 143 00:08:36,080 --> 00:08:39,199 Speaker 1: into trouble, suddenly everyone said well, we must protect depositors, 144 00:08:39,679 --> 00:08:41,880 Speaker 1: and the same from a Swiss point of view, when 145 00:08:41,880 --> 00:08:44,840 Speaker 1: they suddenly looked at credit sweets. And this is really 146 00:08:44,880 --> 00:08:47,960 Speaker 1: the problem with finances because it's in the middle of everything. 147 00:08:48,480 --> 00:08:52,280 Speaker 1: It's very difficult sometimes for governments to say no. I 148 00:08:52,320 --> 00:08:54,600 Speaker 1: would be one of those people who when Lehman Brothers 149 00:08:55,160 --> 00:08:57,680 Speaker 1: was let go, I was on those people who thought, well, 150 00:08:57,720 --> 00:09:00,240 Speaker 1: that probably makes sense, and I think in retrospect I 151 00:09:00,280 --> 00:09:02,920 Speaker 1: was probably wrong. There are sometimes where you do need 152 00:09:02,960 --> 00:09:06,400 Speaker 1: to keep financial systems afloat for the good of the 153 00:09:06,880 --> 00:09:12,079 Speaker 1: whole economy. It reminds me of that saying that profits 154 00:09:12,120 --> 00:09:17,240 Speaker 1: are privatized, but losses are socialized. Yes, entirely, and that 155 00:09:17,360 --> 00:09:20,439 Speaker 1: having lived through several crises, the first thing I ever 156 00:09:20,480 --> 00:09:24,160 Speaker 1: covered was, or nearly the first thing was Black Monday 157 00:09:24,200 --> 00:09:27,600 Speaker 1: back in nineteen eighty seven. The problem in financial crisis 158 00:09:28,040 --> 00:09:32,640 Speaker 1: is debt. That's the Gelic Night. There's a reason why, 159 00:09:32,840 --> 00:09:34,960 Speaker 1: if you go back to the dot com crash, it 160 00:09:35,000 --> 00:09:37,360 Speaker 1: didn't really have much of an economic effect because there 161 00:09:37,400 --> 00:09:40,880 Speaker 1: wasn't that much debt involved. It was just simply people 162 00:09:41,000 --> 00:09:45,720 Speaker 1: massively overvaluing technology companies back then, and people who invested 163 00:09:45,720 --> 00:09:48,240 Speaker 1: them lost their money and life went on. But it's 164 00:09:48,280 --> 00:09:51,199 Speaker 1: different when you have debt because that becomes much more systemic. 165 00:09:51,720 --> 00:09:54,880 Speaker 1: And so as a result of these failures like it 166 00:09:54,960 --> 00:09:58,080 Speaker 1: has happened before, we now see the government coming in 167 00:09:58,559 --> 00:10:01,880 Speaker 1: looking at what happened, are trying to find regulations and 168 00:10:01,960 --> 00:10:05,160 Speaker 1: fixes to keep it from happening again. But one thing 169 00:10:05,160 --> 00:10:08,200 Speaker 1: you write is that their government isn't always very clever 170 00:10:08,280 --> 00:10:11,680 Speaker 1: about doing this, and they're always trying to fix the 171 00:10:11,760 --> 00:10:15,679 Speaker 1: last problem, fight the last battle. Yes, this is where 172 00:10:15,880 --> 00:10:19,280 Speaker 1: I think the story starts heading in a different direction. 173 00:10:19,880 --> 00:10:24,160 Speaker 1: During the last global financial crisis, there were several really 174 00:10:24,200 --> 00:10:28,080 Speaker 1: important differences. The first is that the main economies, the 175 00:10:28,120 --> 00:10:31,520 Speaker 1: European Union, the United States, and China all acted together. 176 00:10:32,040 --> 00:10:34,880 Speaker 1: You know, they were all there trying to shore up things. 177 00:10:34,880 --> 00:10:38,280 Speaker 1: The second thing was the whole rhetoric of it, which was, look, 178 00:10:38,360 --> 00:10:42,120 Speaker 1: this is just a temporary intervention in the markets, you know, 179 00:10:42,200 --> 00:10:44,679 Speaker 1: we are coming in with some cases they're nationalizing things. 180 00:10:44,720 --> 00:10:48,120 Speaker 1: In some cases there doing extreme measures, but we're not. 181 00:10:48,160 --> 00:10:51,600 Speaker 1: We're just doing this on a temporary basis. What has 182 00:10:51,640 --> 00:10:54,040 Speaker 1: happened now, and I think that this is what will 183 00:10:54,080 --> 00:10:58,880 Speaker 1: steer this crisis, is that the whole intellectual environment has 184 00:10:59,000 --> 00:11:02,760 Speaker 1: changed and the pitical environment, the political environment has changed, 185 00:11:02,840 --> 00:11:07,040 Speaker 1: because now we have a world of competing trade blocks. 186 00:11:07,640 --> 00:11:10,160 Speaker 1: And if you want an example of two people who 187 00:11:10,240 --> 00:11:13,719 Speaker 1: epitomize these two different worlds, you have Adam Smith, the 188 00:11:13,760 --> 00:11:17,160 Speaker 1: great economist who worked very close to the Library mistakes. 189 00:11:17,559 --> 00:11:20,280 Speaker 1: You know, he believed in free markets. On the other hand, 190 00:11:20,679 --> 00:11:25,160 Speaker 1: you have Jean Baptiste Colbert, the finance minister of Louis 191 00:11:25,200 --> 00:11:29,000 Speaker 1: the fourteenth, the man who people think of about it deregist, 192 00:11:29,000 --> 00:11:32,600 Speaker 1: where the state doesn't leave finance to get on with it. 193 00:11:32,600 --> 00:11:36,040 Speaker 1: It directs the economy. And what is happening at the 194 00:11:36,040 --> 00:11:39,000 Speaker 1: moment now is the desire to direct the economy is 195 00:11:39,040 --> 00:11:42,959 Speaker 1: pretty extreme, not least really in America, which was always 196 00:11:43,000 --> 00:11:45,920 Speaker 1: supposed to be the haven of free market thinking. You 197 00:11:45,960 --> 00:11:48,600 Speaker 1: look at everything that Joe Biden has done, and there 198 00:11:48,679 --> 00:11:52,199 Speaker 1: is a very strong deregist flavor to it. You look 199 00:11:52,240 --> 00:11:56,000 Speaker 1: at the Inflatian reduction acting in buy American provisions everywhere, 200 00:11:56,400 --> 00:11:59,520 Speaker 1: Hang on to good, great American jobs. The Tech bill, 201 00:12:00,080 --> 00:12:03,600 Speaker 1: the chips bill, that is all about cajoling chip companies 202 00:12:03,600 --> 00:12:06,120 Speaker 1: to come and set up in America. These chips were 203 00:12:06,200 --> 00:12:11,040 Speaker 1: invented in America. Let's get down straight. They're invented in America. 204 00:12:11,559 --> 00:12:15,600 Speaker 1: Could we used to make of the world's chips. There 205 00:12:15,679 --> 00:12:21,280 Speaker 1: is a very nationalistic feel to American industrial policy at 206 00:12:21,280 --> 00:12:23,760 Speaker 1: the moment, and you jump across to Europe and there 207 00:12:23,800 --> 00:12:27,080 Speaker 1: are people who are horrified by that, saying how terrible 208 00:12:27,080 --> 00:12:29,280 Speaker 1: it is. But there are also people who are quietly 209 00:12:29,840 --> 00:12:32,920 Speaker 1: extremely glad about that because it gives them all an 210 00:12:32,920 --> 00:12:35,880 Speaker 1: excuse to have an industrial policy too. And so far 211 00:12:36,040 --> 00:12:39,120 Speaker 1: finance hasn't sort of been an obvious part of that. 212 00:12:39,480 --> 00:12:41,720 Speaker 1: But what has happened in this crisis, I think, is 213 00:12:41,720 --> 00:12:45,520 Speaker 1: that finance has become part of that more. With Jan 214 00:12:45,640 --> 00:12:58,960 Speaker 1: Michelethwaite after the break, you and Adrian actually coin a 215 00:12:59,040 --> 00:13:02,320 Speaker 1: phrase of your own in this piece that I found 216 00:13:02,360 --> 00:13:06,760 Speaker 1: really interesting. You call it national financial capitalism, and you 217 00:13:06,840 --> 00:13:10,080 Speaker 1: say that we're seeing the birth of a new form 218 00:13:10,160 --> 00:13:13,840 Speaker 1: of financial capitalism. The idea that finance is an arm 219 00:13:13,960 --> 00:13:17,600 Speaker 1: of the state is back, and global banking is likely 220 00:13:17,679 --> 00:13:19,840 Speaker 1: to be reshaped by it. Talk a little bit more 221 00:13:19,880 --> 00:13:22,120 Speaker 1: about what you mean by that. Let's look at the 222 00:13:22,160 --> 00:13:26,640 Speaker 1: two takeovers. Silicon Valley Bank. I think if that had 223 00:13:26,679 --> 00:13:30,240 Speaker 1: been based in Oklahoma, I think governments might have taken 224 00:13:30,280 --> 00:13:33,160 Speaker 1: a very different view. The point about Silicon Valley Bank 225 00:13:33,440 --> 00:13:35,440 Speaker 1: is that all the people who stood to lose money 226 00:13:35,440 --> 00:13:39,480 Speaker 1: in it were effectively it was American technology. That is 227 00:13:39,600 --> 00:13:43,080 Speaker 1: the industry that America prides itself on more than the other. 228 00:13:43,200 --> 00:13:46,720 Speaker 1: It's the one that whenever people talk about American competing 229 00:13:46,720 --> 00:13:51,080 Speaker 1: with China, they talk about technology. So it is not 230 00:13:51,200 --> 00:13:54,480 Speaker 1: a long jump for Joe Biden to go saying that 231 00:13:54,520 --> 00:13:57,560 Speaker 1: he wants to protect American technology. So he wants to 232 00:13:57,559 --> 00:14:01,240 Speaker 1: protect the bank that was closest to those technologists, and 233 00:14:01,360 --> 00:14:03,640 Speaker 1: it would have caused a lot of disruption in the 234 00:14:03,720 --> 00:14:07,200 Speaker 1: venture capital industry, which is the absolute core of technology. 235 00:14:08,200 --> 00:14:10,400 Speaker 1: Was it systemic in the same way as something like 236 00:14:10,520 --> 00:14:13,440 Speaker 1: Lehman's No, I don't think it was really at all. 237 00:14:13,559 --> 00:14:17,520 Speaker 1: But if you take a very industrial policy angled view 238 00:14:17,520 --> 00:14:20,280 Speaker 1: of the world, yes, it becomes much more important. Now 239 00:14:20,280 --> 00:14:23,280 Speaker 1: look at the second one, Credit Swiss. There is no 240 00:14:24,000 --> 00:14:26,800 Speaker 1: kind of free market world in which it would make 241 00:14:26,880 --> 00:14:31,720 Speaker 1: sense to allow UBS, the biggest Swiss bank, to take 242 00:14:31,760 --> 00:14:35,280 Speaker 1: over the second biggest Swiss bank. Consumers would suffer, so 243 00:14:35,360 --> 00:14:38,200 Speaker 1: on and so on. Bringing UBS and credit Swits together, 244 00:14:38,560 --> 00:14:41,800 Speaker 1: we'll build on the best skills available in the Swiss 245 00:14:41,800 --> 00:14:46,800 Speaker 1: financial center and enhance the combined organization's ability to serve 246 00:14:46,840 --> 00:14:51,000 Speaker 1: our clients and deepen our best in class capabilities. But 247 00:14:51,400 --> 00:14:55,840 Speaker 1: if your main priority is to keep Swiss finance Swiss, yeah, 248 00:14:55,840 --> 00:14:58,640 Speaker 1: it makes absolute sense. And so in both cases, I 249 00:14:58,640 --> 00:15:01,960 Speaker 1: think you can see an element of de regis behind it, 250 00:15:02,560 --> 00:15:05,560 Speaker 1: and I think the next stage is that continues, especially 251 00:15:05,600 --> 00:15:09,120 Speaker 1: in Europe, because that Europe has got this very weird 252 00:15:09,160 --> 00:15:14,520 Speaker 1: system of a Firstly, it is deeply annoying that the 253 00:15:14,600 --> 00:15:19,720 Speaker 1: main Western banks, the top five are all American. Europeans 254 00:15:19,760 --> 00:15:23,120 Speaker 1: aren't even close. But secondly they've now discovered that this 255 00:15:23,320 --> 00:15:27,480 Speaker 1: particular industry can cause problems everywhere. So you look at 256 00:15:27,560 --> 00:15:30,080 Speaker 1: somewhere like Germany and I think you're going to see 257 00:15:30,120 --> 00:15:34,640 Speaker 1: really sort of profound questions happening. So far, the Germans 258 00:15:34,960 --> 00:15:37,640 Speaker 1: Anglo Merkel thought about it, but they've never thought of 259 00:15:37,720 --> 00:15:41,400 Speaker 1: pushing together Deutsche Bank, which has had a somewhat credit 260 00:15:41,400 --> 00:15:44,360 Speaker 1: sweet like history of involvement in quite a few scandals 261 00:15:44,360 --> 00:15:47,200 Speaker 1: over the times, with Comets Bank, which has a lot 262 00:15:47,240 --> 00:15:49,760 Speaker 1: of retail depositors. If you put them together, you kind 263 00:15:49,760 --> 00:15:54,440 Speaker 1: of have a German national champion in banking. That's one solution. Alternatively, 264 00:15:54,800 --> 00:15:59,120 Speaker 1: you could begin to look at a pan EU system, 265 00:15:59,360 --> 00:16:01,720 Speaker 1: and that is quite an interesting one. At the moment, 266 00:16:01,800 --> 00:16:04,920 Speaker 1: you have all these banks around Europe which are sort 267 00:16:04,920 --> 00:16:07,520 Speaker 1: of banned from merging with each other, and even American 268 00:16:07,560 --> 00:16:11,760 Speaker 1: bankers forever saying honestly, they should get together. But once 269 00:16:11,800 --> 00:16:14,240 Speaker 1: you begin to think about this as a necessity of 270 00:16:14,320 --> 00:16:18,320 Speaker 1: having European champions in a really important industry, then yeah, 271 00:16:18,320 --> 00:16:21,840 Speaker 1: I think you begin to move in that direction. John, 272 00:16:21,880 --> 00:16:24,760 Speaker 1: which you're really describing is something that you wrote, which 273 00:16:24,800 --> 00:16:27,400 Speaker 1: is that governments now around the world they're starting to 274 00:16:27,440 --> 00:16:32,160 Speaker 1: pick winners in losers among industries. Yes, you know, America 275 00:16:32,200 --> 00:16:35,560 Speaker 1: has picked the idea that it wanted to kind of 276 00:16:35,600 --> 00:16:39,320 Speaker 1: hang on to that technology bid, and the Swiss government 277 00:16:39,320 --> 00:16:42,120 Speaker 1: has decided that it wanted to push its two ones together. 278 00:16:42,200 --> 00:16:46,440 Speaker 1: I think the next phase it's this idea that governments 279 00:16:46,480 --> 00:16:52,720 Speaker 1: should pick winners that finance and government an get more intertwined. 280 00:16:53,240 --> 00:16:55,640 Speaker 1: Once you think through that, that becomes a much more 281 00:16:55,720 --> 00:17:00,000 Speaker 1: revolutionary idea. There has always been a link between finance 282 00:17:00,160 --> 00:17:03,280 Speaker 1: in government, and there always will be, but this could 283 00:17:03,320 --> 00:17:05,960 Speaker 1: take it to a different level, and especially when you 284 00:17:06,000 --> 00:17:09,920 Speaker 1: see it against that repetitive kind of regional economic warfare. 285 00:17:10,640 --> 00:17:13,560 Speaker 1: From that perspective, it's not something I support, but it 286 00:17:13,600 --> 00:17:16,280 Speaker 1: does make some degree of sense. Or you can look 287 00:17:16,280 --> 00:17:20,199 Speaker 1: at America there the American banking system is somewhat bizarre. 288 00:17:20,200 --> 00:17:23,120 Speaker 1: You have these big banks at the top, and regulators 289 00:17:23,119 --> 00:17:26,520 Speaker 1: made a very obvious mistake of only looking at or 290 00:17:26,600 --> 00:17:30,080 Speaker 1: indoing stress tests really on the too big to fail level, 291 00:17:30,119 --> 00:17:32,879 Speaker 1: which was around above two hundred and fifty billion dollars 292 00:17:32,920 --> 00:17:35,920 Speaker 1: in assets. Silicon Valley Bank was around two hundred billion. 293 00:17:36,320 --> 00:17:39,440 Speaker 1: But America's sort of biggest problem is that there are 294 00:17:39,520 --> 00:17:42,240 Speaker 1: loads of small banks. And this goes all the way 295 00:17:42,240 --> 00:17:44,880 Speaker 1: back to the Great Depression, where I think back then 296 00:17:44,880 --> 00:17:48,960 Speaker 1: there were nearly twenty five, maybe thirty thousand banks. A 297 00:17:49,040 --> 00:17:52,359 Speaker 1: whole host of them went bust. Roosevelt forced quite allot 298 00:17:52,359 --> 00:17:55,120 Speaker 1: of them to merge again in the national interest back then, 299 00:17:55,320 --> 00:17:58,040 Speaker 1: because that was another time where people were turning to 300 00:17:58,119 --> 00:18:00,920 Speaker 1: the state, and now I think you might well see 301 00:18:01,000 --> 00:18:04,399 Speaker 1: exactly the same thing happening, perhaps cloaked in the same 302 00:18:04,480 --> 00:18:08,200 Speaker 1: sort of nationalistic, somewhat FDR like language, and it will 303 00:18:08,240 --> 00:18:11,040 Speaker 1: make some degree of sense that actually getting all these 304 00:18:11,080 --> 00:18:14,360 Speaker 1: smatal banks would take a long time to regulate. If 305 00:18:14,400 --> 00:18:18,080 Speaker 1: the Americans look at the European systems, they come off it, 306 00:18:18,440 --> 00:18:20,679 Speaker 1: you know you should start merging and doing it. The 307 00:18:20,760 --> 00:18:23,480 Speaker 1: same thing is slightly true of the American system as well. 308 00:18:24,760 --> 00:18:28,960 Speaker 1: John After the two thousand and eight financial crisis, Washington 309 00:18:29,040 --> 00:18:31,920 Speaker 1: put in strict new regulations on banks to make sure 310 00:18:31,960 --> 00:18:34,760 Speaker 1: that they had enough capital on hand, and they had 311 00:18:34,800 --> 00:18:37,879 Speaker 1: new reporting requirements and stress tests to make sure they 312 00:18:37,880 --> 00:18:40,960 Speaker 1: weren't taking on more risk they can handle. And even 313 00:18:41,000 --> 00:18:44,040 Speaker 1: with all of that, Bloomberg recently reported that the five 314 00:18:44,119 --> 00:18:47,680 Speaker 1: biggest US banks made a trillion dollars in the last 315 00:18:47,720 --> 00:18:50,679 Speaker 1: ten years, so they've made out pretty well. Even with 316 00:18:50,720 --> 00:18:54,520 Speaker 1: those restrictions, they have done pretty well. The truth is 317 00:18:54,560 --> 00:18:57,600 Speaker 1: the American banking from a consumer's point of view, it's 318 00:18:57,600 --> 00:19:00,640 Speaker 1: a rotten deal. You look at everything from credit charges 319 00:19:00,800 --> 00:19:03,600 Speaker 1: to credit card charges through to kind of checking and 320 00:19:03,640 --> 00:19:06,359 Speaker 1: all that stuff, and you know, somebody goes backwards and forwards. 321 00:19:06,400 --> 00:19:09,520 Speaker 1: It is fairly neanderthal. And one reason why is because 322 00:19:09,560 --> 00:19:12,160 Speaker 1: you have these five big ones and then this variety 323 00:19:12,160 --> 00:19:14,240 Speaker 1: of small ones. You could argue that if you had, 324 00:19:14,760 --> 00:19:16,960 Speaker 1: I don't know, fifty banks, you might have much more 325 00:19:16,960 --> 00:19:21,480 Speaker 1: active competition rather these few minnows trying to get alongside. 326 00:19:21,520 --> 00:19:24,240 Speaker 1: And there's something of an idea that it's fine to 327 00:19:24,280 --> 00:19:26,600 Speaker 1: be able to charge these sort of numbers. But the 328 00:19:26,760 --> 00:19:31,240 Speaker 1: underlying point beneath all this is that the regulators, yes, 329 00:19:31,280 --> 00:19:33,480 Speaker 1: they took this decision too big to fail, they would 330 00:19:33,520 --> 00:19:36,600 Speaker 1: go through stress tests, and it's sort of worked. You know, 331 00:19:36,640 --> 00:19:39,199 Speaker 1: they've made sure these banks have way more capital than 332 00:19:39,240 --> 00:19:42,760 Speaker 1: they have before. I saw a fairly prominent financier and 333 00:19:42,760 --> 00:19:44,280 Speaker 1: he said, well, it's obvious, you know, you just put 334 00:19:44,359 --> 00:19:46,320 Speaker 1: your money. In his case, it was with JP Morgan, 335 00:19:46,400 --> 00:19:48,520 Speaker 1: I think because he said they're always going to be protected, 336 00:19:48,560 --> 00:19:50,560 Speaker 1: they're too big to fail. That is the lesson of 337 00:19:50,600 --> 00:19:55,879 Speaker 1: this from a sort of rational financier. One of the 338 00:19:55,960 --> 00:19:59,119 Speaker 1: things we're finding now about Silicon Valley Bank, of course, 339 00:19:59,280 --> 00:20:02,879 Speaker 1: is that twenty eighteen the CEO of that bank and 340 00:20:02,960 --> 00:20:07,399 Speaker 1: other regional banks said well, we shouldn't be regulated in 341 00:20:07,440 --> 00:20:09,080 Speaker 1: the same way as the big banks. You should pull 342 00:20:09,119 --> 00:20:13,560 Speaker 1: back these very long and arduous, expensive yearly tests looking 343 00:20:13,600 --> 00:20:15,360 Speaker 1: into our books because we don't do the same sort 344 00:20:15,359 --> 00:20:17,719 Speaker 1: of things that crashed the economy by the big banks. 345 00:20:17,960 --> 00:20:20,439 Speaker 1: And so they pulled it back in twenty eighteen. The 346 00:20:20,560 --> 00:20:24,440 Speaker 1: legislation I'm signing today rolls back the crippling Dodd Frank 347 00:20:24,560 --> 00:20:30,640 Speaker 1: regulations that are crushing community banks and credit unions nationwide. 348 00:20:30,640 --> 00:20:35,240 Speaker 1: They were in such trouble one size fits all those 349 00:20:35,320 --> 00:20:39,040 Speaker 1: rules just don't work, and community banks and credit unions 350 00:20:39,040 --> 00:20:43,200 Speaker 1: should be regulated the same way. And now, of course 351 00:20:43,280 --> 00:20:46,000 Speaker 1: it turns out that is you right. They were doing 352 00:20:46,040 --> 00:20:49,240 Speaker 1: things that you just wouldn't do, and if anyone were looking, 353 00:20:49,280 --> 00:20:52,720 Speaker 1: perhaps they would have spotted it and avoided this calamity 354 00:20:52,760 --> 00:20:54,679 Speaker 1: by saying, I don't know, maybe you shouldn't put all 355 00:20:54,680 --> 00:20:58,359 Speaker 1: of your money into bonds. It's just rather bizarre because 356 00:20:58,400 --> 00:21:00,800 Speaker 1: it would have been such a simple liquidity tests just 357 00:21:00,880 --> 00:21:04,680 Speaker 1: to look and see. Somebody would have said, look, why 358 00:21:04,680 --> 00:21:06,760 Speaker 1: are you putting all your money in this? They were 359 00:21:06,840 --> 00:21:11,200 Speaker 1: chasing possibly slightly greater yields, because if you bought long 360 00:21:11,320 --> 00:21:14,680 Speaker 1: term fixed rate government bonds when interest rates are really low, 361 00:21:14,760 --> 00:21:17,199 Speaker 1: you might get a few points more, but it was 362 00:21:17,240 --> 00:21:19,840 Speaker 1: still a really bizarre thing to do. And there is 363 00:21:19,880 --> 00:21:22,480 Speaker 1: something rather odd about a place where I think all 364 00:21:22,480 --> 00:21:24,640 Speaker 1: the action was at the other end of Silicon Valley 365 00:21:24,640 --> 00:21:27,240 Speaker 1: Bank and then suddenly they get swamped by deposits from 366 00:21:27,280 --> 00:21:29,719 Speaker 1: all these people who raise venture capital, and then they 367 00:21:29,800 --> 00:21:32,320 Speaker 1: just stuffed them on the money markets without actually thinking 368 00:21:32,359 --> 00:21:35,879 Speaker 1: through it. And liquidity interest rate mismatches, those are one 369 00:21:35,920 --> 00:21:38,000 Speaker 1: of the things you get taught about very early, is 370 00:21:38,040 --> 00:21:40,520 Speaker 1: about it. You know, if you have floating rate short 371 00:21:40,640 --> 00:21:43,879 Speaker 1: term liabilities, don't stuff at all in fixed rate on 372 00:21:43,920 --> 00:21:45,960 Speaker 1: the other side, because of the fixed rate one suddenly 373 00:21:46,000 --> 00:21:48,359 Speaker 1: drop in value, you've got a problem. And that was 374 00:21:48,440 --> 00:21:51,320 Speaker 1: sort of the way the whole thing unraveled. I do 375 00:21:51,400 --> 00:21:54,280 Speaker 1: think there will be a change though, in terms of 376 00:21:54,320 --> 00:21:57,720 Speaker 1: the way that anchors look at the state. I'll give 377 00:21:57,760 --> 00:22:01,159 Speaker 1: you two examples. One is you look at ubs. I 378 00:22:01,200 --> 00:22:04,320 Speaker 1: could of course be proved completely wrong about this, but 379 00:22:04,359 --> 00:22:07,919 Speaker 1: at least in principle, it looks as if by sitting 380 00:22:07,960 --> 00:22:10,560 Speaker 1: there and saying no, no, no, we don't remotely want 381 00:22:10,560 --> 00:22:12,920 Speaker 1: to take over a credit squeee, what a disaster, they 382 00:22:12,960 --> 00:22:15,399 Speaker 1: could well have played a blinder. You know, they have 383 00:22:15,880 --> 00:22:19,879 Speaker 1: bought their main rival, which we should remind ourselves, was 384 00:22:19,920 --> 00:22:22,720 Speaker 1: I think worth a hundred billion dollars ten years ago. 385 00:22:23,359 --> 00:22:26,440 Speaker 1: They have bought that for three They've got one hundred 386 00:22:26,480 --> 00:22:29,640 Speaker 1: billion dollar line to help support them, and they've got 387 00:22:29,680 --> 00:22:32,919 Speaker 1: I think another ten billion of sort of guarantees on 388 00:22:32,920 --> 00:22:36,040 Speaker 1: top of it. Now it could be that Credit Sweete 389 00:22:36,080 --> 00:22:39,520 Speaker 1: has some nasty things in its balance sheet and would 390 00:22:39,560 --> 00:22:42,119 Speaker 1: discover that, but at least in principle, that looks like 391 00:22:42,240 --> 00:22:44,600 Speaker 1: quite a good deal. You've also got Warren Buffett on 392 00:22:44,640 --> 00:22:48,200 Speaker 1: the other side of the Atlantic, offering very generously as 393 00:22:48,200 --> 00:22:51,639 Speaker 1: ever to take on some of the debts of Silicon 394 00:22:51,720 --> 00:22:53,600 Speaker 1: Valley and things like that, or at least talking about 395 00:22:53,640 --> 00:22:58,200 Speaker 1: it again. Buffett is a famously good man, but he's 396 00:22:58,240 --> 00:23:01,080 Speaker 1: not famed for his altruism. When it comes to making money. 397 00:23:01,480 --> 00:23:03,680 Speaker 1: You have to imagine that he again has seen that 398 00:23:03,720 --> 00:23:06,119 Speaker 1: there is a path to make money, and that this 399 00:23:06,160 --> 00:23:09,919 Speaker 1: will be the same as banks throughout that entire library 400 00:23:09,960 --> 00:23:12,480 Speaker 1: of mistakes. At different times banks have had to deal 401 00:23:12,520 --> 00:23:15,760 Speaker 1: with much more nationalistic governments and they found ways to 402 00:23:15,840 --> 00:23:18,880 Speaker 1: make money there. If you've got a government saying help 403 00:23:18,920 --> 00:23:21,439 Speaker 1: us build up a tech industry, there are bankers certainly 404 00:23:21,480 --> 00:23:23,760 Speaker 1: who will sit there saying we can help you. If 405 00:23:23,840 --> 00:23:26,440 Speaker 1: you want government saying we want you to lend money 406 00:23:26,440 --> 00:23:28,080 Speaker 1: to these people, there would be people saying, yes, we 407 00:23:28,080 --> 00:23:29,879 Speaker 1: can help you do that, and so on and so 408 00:23:30,040 --> 00:23:32,360 Speaker 1: on and so on. It will just be a different climate. 409 00:23:33,040 --> 00:23:35,399 Speaker 1: And one way I say that, you know, bankers can 410 00:23:35,440 --> 00:23:37,919 Speaker 1: make some money out of government picking winners. The question 411 00:23:38,040 --> 00:23:41,440 Speaker 1: is whether long term that's for good or bad. We'll 412 00:23:41,480 --> 00:23:53,679 Speaker 1: be right back. When things do go wrong, especially when 413 00:23:53,720 --> 00:23:56,280 Speaker 1: they go wrong in a big way. It's not often 414 00:23:56,320 --> 00:23:58,720 Speaker 1: the people who cause the problem who suffer the most 415 00:23:58,720 --> 00:24:00,800 Speaker 1: because they're going to do it. Okay, maybe they lost 416 00:24:00,880 --> 00:24:02,960 Speaker 1: a lot of money, but they've got a lot still. 417 00:24:03,320 --> 00:24:05,879 Speaker 1: It's often the people who are at the bottom in 418 00:24:05,880 --> 00:24:09,400 Speaker 1: the middle who get hurt in that equation. Is this 419 00:24:09,480 --> 00:24:13,359 Speaker 1: kind of up and down cycle archived in the library 420 00:24:13,400 --> 00:24:17,359 Speaker 1: of mistakes ultimately worth it? I will say yes. I 421 00:24:17,400 --> 00:24:22,000 Speaker 1: will point out that always in these crises, which are, 422 00:24:22,040 --> 00:24:25,040 Speaker 1: as we pointed out, cyclical, each time there's some sort 423 00:24:25,040 --> 00:24:27,880 Speaker 1: of degree of weirdness that goes on. So there will 424 00:24:27,920 --> 00:24:29,760 Speaker 1: always be a bit of that, and there will be 425 00:24:29,800 --> 00:24:33,920 Speaker 1: other arbitrary decisions, and there will always be financiers making 426 00:24:33,960 --> 00:24:36,879 Speaker 1: mistakes in a strange world. I'd go back to Adam Smith. 427 00:24:37,080 --> 00:24:41,679 Speaker 1: He had no doubt at all about the vinality of 428 00:24:41,840 --> 00:24:46,480 Speaker 1: financiers and capitalists. His creed, although it's often cited as 429 00:24:46,520 --> 00:24:49,680 Speaker 1: being a sort of very pro capitalism one, was one 430 00:24:49,720 --> 00:24:52,720 Speaker 1: which came with a sort of hefty pinch of salt 431 00:24:52,760 --> 00:24:54,760 Speaker 1: when it came to the actual people who were doing this. 432 00:24:55,440 --> 00:24:58,200 Speaker 1: But his argument was that as long as there is 433 00:24:58,320 --> 00:25:00,680 Speaker 1: enough kind of greed and fear, you will get the 434 00:25:00,840 --> 00:25:03,199 Speaker 1: kind of growth that you should want. And again, I 435 00:25:03,200 --> 00:25:05,960 Speaker 1: think if you look at the Library Mistakes, Yes, you 436 00:25:06,000 --> 00:25:09,119 Speaker 1: look at those walls, and they are papered with terrible 437 00:25:09,200 --> 00:25:11,800 Speaker 1: things that have happened all the way around those walls. Ponzi, 438 00:25:12,200 --> 00:25:15,320 Speaker 1: god knows what. On the other hand, you think what 439 00:25:15,480 --> 00:25:18,600 Speaker 1: Scottish finance has done around the world. You think of 440 00:25:18,640 --> 00:25:21,960 Speaker 1: the fact these rather dour scotsman, you know, they have 441 00:25:22,080 --> 00:25:26,800 Speaker 1: financed everything from Latin America to American railroads to Hong Kong, 442 00:25:27,200 --> 00:25:31,160 Speaker 1: all these different places. They have caused an enormous amount 443 00:25:31,480 --> 00:25:34,520 Speaker 1: of kind of good to have happened around the world 444 00:25:34,560 --> 00:25:37,040 Speaker 1: because they were prepared to risk, they were prepared to 445 00:25:37,080 --> 00:25:39,880 Speaker 1: do things. Some of them got quite rich in the process, 446 00:25:39,960 --> 00:25:42,040 Speaker 1: so you know, some people would be upset about that, 447 00:25:42,440 --> 00:25:44,560 Speaker 1: and of course that's to Scotland. You know. You look 448 00:25:44,600 --> 00:25:46,800 Speaker 1: at Wall Street and look at all the things that 449 00:25:46,880 --> 00:25:49,800 Speaker 1: it is, the finance around the world, the city of London. 450 00:25:50,200 --> 00:25:53,280 Speaker 1: You know, there is so much good For all the 451 00:25:53,960 --> 00:25:57,440 Speaker 1: bad things we say about Silicon Valley Bank through things 452 00:25:57,520 --> 00:26:00,439 Speaker 1: like ventured debt and so on, it was part of 453 00:26:00,600 --> 00:26:06,240 Speaker 1: enormous wealth creation. Without the money behind it, no, you 454 00:26:06,280 --> 00:26:09,480 Speaker 1: wouldn't have the kind of technology that we have now. 455 00:26:09,760 --> 00:26:12,840 Speaker 1: So that is, in a sense all part of the puzzle. 456 00:26:13,119 --> 00:26:16,920 Speaker 1: We just haven't found a way of doing it without 457 00:26:17,000 --> 00:26:22,040 Speaker 1: the occasional catastrophe along the way. Even allowing for those 458 00:26:22,080 --> 00:26:24,960 Speaker 1: sort of things happening, I would think most people would say, look, 459 00:26:25,000 --> 00:26:27,600 Speaker 1: a lot of economic good has come from that, and 460 00:26:27,680 --> 00:26:31,280 Speaker 1: I think there is still an advantage in giving capitalism 461 00:26:31,359 --> 00:26:34,119 Speaker 1: a bit of its head. And what worries me about 462 00:26:34,160 --> 00:26:37,600 Speaker 1: this shift to a more state directed version of capitalism 463 00:26:37,840 --> 00:26:39,840 Speaker 1: is you end up with a different set of problems 464 00:26:40,080 --> 00:26:42,360 Speaker 1: which in some ways are harder to fix. And if 465 00:26:42,359 --> 00:26:44,439 Speaker 1: you want an example that, look at what has happened 466 00:26:44,440 --> 00:26:47,359 Speaker 1: in China. There you have very state directed capitalism and 467 00:26:47,400 --> 00:26:51,520 Speaker 1: you have all these problems of state banks stuffed with 468 00:26:51,600 --> 00:26:54,240 Speaker 1: things which they prosaibly shouldn't be, all the links into 469 00:26:54,320 --> 00:26:56,920 Speaker 1: local government and all those things. And I think, out 470 00:26:56,920 --> 00:26:59,000 Speaker 1: of the various bits of China that work very well, 471 00:26:59,040 --> 00:27:01,399 Speaker 1: I don't think people partically sort of stare at the 472 00:27:01,440 --> 00:27:04,400 Speaker 1: banking system and think that that's a great bit januine 473 00:27:04,440 --> 00:27:10,600 Speaker 1: Adrian end europiece and a vaguely optimistic note saying that 474 00:27:10,880 --> 00:27:15,640 Speaker 1: progress may be cyclical, but it's usually been progress. Yes, 475 00:27:15,840 --> 00:27:19,119 Speaker 1: I think that's true. I'm not quite sure we're optimistic 476 00:27:19,119 --> 00:27:22,480 Speaker 1: about the next stage, but yes, I think you look 477 00:27:22,520 --> 00:27:26,199 Speaker 1: over the long tail and you see all the different 478 00:27:26,240 --> 00:27:29,720 Speaker 1: ways in which economic growth has pushed things forward. Yes, 479 00:27:29,720 --> 00:27:32,040 Speaker 1: it has been fairly incredible. I'm not going to sit 480 00:27:32,119 --> 00:27:35,760 Speaker 1: here and defend why there were I can't rewards three 481 00:27:35,800 --> 00:27:39,720 Speaker 1: trillion dollars worth of credit derivatives back in two thousand 482 00:27:39,760 --> 00:27:42,040 Speaker 1: and eight. I'm not remotely going to try and defend 483 00:27:42,200 --> 00:27:45,800 Speaker 1: why Silicon Valley bankers were to chuck so much money 484 00:27:45,800 --> 00:27:48,959 Speaker 1: into long term bonds. And I'm certainly going to defend 485 00:27:49,200 --> 00:27:54,760 Speaker 1: credit saces many weird escapades, but the system underneath it 486 00:27:54,840 --> 00:27:57,120 Speaker 1: still has quite a lot of strengths and awful rays 487 00:27:57,160 --> 00:27:58,960 Speaker 1: about throwing the baby out at the bath water you 488 00:27:58,960 --> 00:28:02,040 Speaker 1: don't terribly want to do up. John, thanks so much 489 00:28:02,080 --> 00:28:05,359 Speaker 1: for coming on the show. Thank you, Wiz. Thanks for 490 00:28:05,440 --> 00:28:07,359 Speaker 1: listening to us here at the Big Take. It's a 491 00:28:07,440 --> 00:28:11,240 Speaker 1: daily podcast from Bloomberg and iHeartRadio. For more shows from 492 00:28:11,240 --> 00:28:15,159 Speaker 1: my Heart Radio, visit the iHeartRadio app, Apple Podcasts, or 493 00:28:15,200 --> 00:28:17,919 Speaker 1: wherever you listen, and we'd love to hear from you. 494 00:28:18,280 --> 00:28:22,159 Speaker 1: Email us questions or comments to Big Take at Bloomberg 495 00:28:22,200 --> 00:28:25,960 Speaker 1: dot net. The supervising producer of The Big Take is 496 00:28:26,040 --> 00:28:29,600 Speaker 1: Vicky Bergolina. Our senior producer and the producer of this 497 00:28:29,640 --> 00:28:34,600 Speaker 1: episode is Catherine Fink, with additional production support from Federica 498 00:28:34,680 --> 00:28:39,280 Speaker 1: Romanello and zenib Sadiki. Raphael M. Seeley is our engineer. 499 00:28:39,720 --> 00:28:43,840 Speaker 1: Our original music is composed by Leo Sidrin. I'm wes Kasova. 500 00:28:44,120 --> 00:28:46,520 Speaker 1: We'll be back tomorrow with another Big Take.