WEBVTT - Consumer Banking, Global Business Schools 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:07.120 --> 0:00:10.720 You're listening to Bloomberg BusinessWeek with Karrol Messer and Tim 0:00:10.760 --> 0:00:14.160 Steneveek on Bloomberg Radio. Don't know if you caught this 0:00:14.240 --> 0:00:17.400 story earlier today, Katie Claire Ballentine or Bloomberg News colleague 0:00:17.440 --> 0:00:20.680 reporting that women are controlling ever greater sums of money 0:00:20.680 --> 0:00:22.840 around the world, setting the stage for major ships in 0:00:22.880 --> 0:00:24.360 wealth management and philanthropy. 0:00:24.480 --> 0:00:27.280 You know, I didn't catch that article specifically, but I 0:00:27.320 --> 0:00:29.600 have heard that. I mean, that's a conversation we've had 0:00:29.600 --> 0:00:34.199 with Sally Crawlcheck for example. All of that's right, and yeah, exactly, 0:00:34.280 --> 0:00:38.960 and it's a really interesting stat by itself, but also 0:00:38.960 --> 0:00:40.640 the implications are important as well. 0:00:40.840 --> 0:00:43.920 Yeah, in the US alone, McKenzie expects women to control 0:00:43.960 --> 0:00:46.559 thirty four trillion dollars, or roughly thirty eight percent of 0:00:46.600 --> 0:00:49.920 investable assets by twenty thirty. It's close to double last 0:00:49.960 --> 0:00:53.239 year's total for one private wealth back with us as 0:00:53.360 --> 0:00:56.520 Brendan Kaughlin, vice chairman and head of Consumer Banking at 0:00:56.560 --> 0:01:00.440 Citizens Financial Groups. Citizens hired many of the private bankers 0:01:00.760 --> 0:01:04.720 from the old First Republic platform, though they didn't buy 0:01:05.160 --> 0:01:08.600 First Republic outright. JP Morgan ended up doing that during 0:01:08.600 --> 0:01:11.560 the regional banking crisis of twenty twenty three. Brandon, good 0:01:11.560 --> 0:01:14.200 to see you. How are you see Katie? Good to 0:01:14.200 --> 0:01:15.880 see you, so give us an update. It's been a 0:01:15.920 --> 0:01:18.640 few months since we spoke to you. How are things 0:01:18.680 --> 0:01:21.080 going as you sort of absorb at least some of 0:01:21.120 --> 0:01:23.759 the personnel from the old First Republic. 0:01:24.080 --> 0:01:27.840 It's going fantastically well so far. The market is still 0:01:27.880 --> 0:01:32.199 incredibly disrupted in looking for a platform to provide world 0:01:32.200 --> 0:01:35.360 class white glove service for high net worth and ultra 0:01:35.400 --> 0:01:37.800 high net worth individuals, which is really the play that 0:01:37.840 --> 0:01:40.600 we've made is to lean in there and fill the 0:01:40.640 --> 0:01:43.880 white space that was left behind. And many banks will 0:01:44.200 --> 0:01:47.880 suggest that their customer focus, but in this particular space, 0:01:47.920 --> 0:01:49.920 it's very very important that you are. And what we 0:01:50.040 --> 0:01:52.440 find is that the biggest banks in the country have 0:01:52.520 --> 0:01:55.680 all the sophisticated capabilities to serve those clients, but they're 0:01:55.720 --> 0:01:58.640 also very big and very siloed and very bureaucratic to 0:01:58.680 --> 0:02:01.920 bring the full bank together for these clients. Whereas a 0:02:01.960 --> 0:02:04.840 bank are size like citizens. We're big enough to have 0:02:04.880 --> 0:02:07.680 the sophisticated capabilities, but we're also small enough to actually 0:02:07.800 --> 0:02:10.440 value the client overall. In the sum of their parts, 0:02:10.440 --> 0:02:14.679 whether it's wealth, personal banking, commercial lending. And so we've 0:02:14.680 --> 0:02:17.440 really made a tremendous pushing here and the growth has 0:02:17.440 --> 0:02:18.399 been substantial. 0:02:18.880 --> 0:02:22.320 And so you're head of consumer banking, and I'm curious. 0:02:22.400 --> 0:02:25.280 I mean, you have obviously a unique view into the consumer. 0:02:25.320 --> 0:02:27.840 We talk about the health of the consumer all the time, 0:02:27.880 --> 0:02:29.480 but what are you seeing from your perch? 0:02:29.720 --> 0:02:33.200 Broadly, I would say the consumer has normalized post COVID, 0:02:33.240 --> 0:02:36.400 and the things I look at spending, deposits and the 0:02:36.400 --> 0:02:39.840 health of credit. Spending has been flatish year of the year, 0:02:39.840 --> 0:02:42.360 but that's after a couple of years of booming spending 0:02:42.360 --> 0:02:45.280 coming off the heels of COVID. We did see Black 0:02:45.320 --> 0:02:48.240 Friday and Cyber Monday sales up three to four percent 0:02:48.280 --> 0:02:50.239 year of vieer, So that's a healthy sign. That's spending, 0:02:50.480 --> 0:02:52.880 which is an indication of consumer confidence. So that's good. 0:02:53.240 --> 0:02:56.600 On the deposit front, customers still have a decent amount 0:02:56.639 --> 0:02:58.920 of access liquidity. But the economy is not felt the 0:02:58.960 --> 0:03:00.880 same across all walks of life. So if you look 0:03:00.880 --> 0:03:03.960 at mass market or your paycheck, if paycheck folks, they 0:03:04.000 --> 0:03:06.960 basically are back to pre COVID levels of deposits, whereas 0:03:07.000 --> 0:03:09.880 mass affluent and affluent are still carrying twenty to twenty 0:03:09.960 --> 0:03:13.320 five percent more in cash than they were before COVID, 0:03:13.400 --> 0:03:15.400 So a lot of excess liquidity. 0:03:15.440 --> 0:03:17.560 Why do you think that is? Have they just not 0:03:17.600 --> 0:03:18.360 reinvested it? 0:03:19.160 --> 0:03:21.839 You know, a variety of reasons. We hear. First of all, 0:03:21.840 --> 0:03:24.440 deposit rates are pretty good right now, and so particularly 0:03:24.480 --> 0:03:27.160 we're in the bigger banks where they've got confidence that 0:03:27.200 --> 0:03:30.120 the bank failures of twenty twenty three were really idiosyncratic 0:03:30.200 --> 0:03:32.320 and it wasn't really going to hit the vast majority 0:03:32.360 --> 0:03:35.560 of US banks. Deposit rates are pretty good, and so 0:03:36.120 --> 0:03:39.920 they're finding balance of having some liquid and deposits, some 0:03:40.040 --> 0:03:44.000 tied up in treasuries and in equities, but there's very 0:03:44.080 --> 0:03:46.680 much the fair share in the banking system. And then 0:03:46.680 --> 0:03:49.160 when you look at the credit side of things, certainly 0:03:49.160 --> 0:03:51.680 when you look at linked year and linked quarter stats, 0:03:51.720 --> 0:03:55.040 it looks like credit delinquencies and charge ups are going up. 0:03:55.280 --> 0:03:57.960 I would broadly say they are, but it's only getting 0:03:58.000 --> 0:04:01.080 back to normal pre COVID, coming off of really artificially 0:04:01.160 --> 0:04:04.720 suppressed levels getting through COVID, where people taking payment holidays 0:04:04.760 --> 0:04:06.720 and not making student loan payments and so on and 0:04:06.720 --> 0:04:09.320 so forth. So there's nothing at the macro level I 0:04:09.320 --> 0:04:11.600 would call out and concern. In fact, even credit cards, 0:04:11.640 --> 0:04:13.360 which has been a topic of a lot of conversation 0:04:13.440 --> 0:04:16.520 of consumers relevering. They are up year every year, but 0:04:16.560 --> 0:04:19.279 there's still ten percent below where they were pre COVID 0:04:19.279 --> 0:04:22.320 in terms of debt leverage ratios. So overall, the health 0:04:22.360 --> 0:04:25.560 of the US consumer is still pretty strong, and I 0:04:25.560 --> 0:04:28.560 don't see any real signs of a breakout of anything deteriorating, 0:04:28.560 --> 0:04:29.600 at least as of right now. 0:04:29.960 --> 0:04:32.680 I want to talk about the consumer in the context 0:04:32.839 --> 0:04:35.000 of falling interest rates. So we were just having this 0:04:35.080 --> 0:04:39.480 conversation with lending Tree's chief credit analysts, and he made 0:04:39.560 --> 0:04:42.120 the point that a twenty five bases raycut isn't going 0:04:42.200 --> 0:04:45.640 to make a huge difference when you think about consumer behavior. 0:04:45.880 --> 0:04:49.600 Give us some context, though, I mean, how much what 0:04:49.760 --> 0:04:52.320 magnitude of ray cutting do you need to see from 0:04:52.360 --> 0:04:55.240 the FED before it affects the behavior that you see 0:04:55.240 --> 0:04:55.800 in you touch. 0:04:55.960 --> 0:04:58.640 Well, there's some direct and indirect elements that's on the 0:04:58.680 --> 0:05:01.479 direct side for the consumer. Twenty five basis points, fifty 0:05:01.520 --> 0:05:04.480 basis points, one hundred basis points, especially on the short 0:05:04.560 --> 0:05:06.440 end which is what really people usually talk about with 0:05:06.480 --> 0:05:09.119 Fed funds rates coming down, You'll feel that in two ways. 0:05:09.120 --> 0:05:11.720 One is lower deposits that you're getting paid, and two 0:05:11.880 --> 0:05:14.800 is lower debt load on your credit card, a bit 0:05:14.839 --> 0:05:17.880 more affordability on your credit card. That's not typically tied 0:05:17.960 --> 0:05:21.480 into mortgage rates, which are more the ten year treasury 0:05:21.520 --> 0:05:24.520 and longer term rates. Is now you're seeing short term 0:05:24.600 --> 0:05:27.119 rates come down, but mortgage rates are still hovering pretty 0:05:27.120 --> 0:05:30.000 close to seven percent, and those are not projected to 0:05:30.000 --> 0:05:34.760 come down significantly over the next even twelve months. And 0:05:34.839 --> 0:05:38.720 when you look at seventy four percent of US consumers 0:05:38.720 --> 0:05:41.480 that have a home loan have rates under five percent. 0:05:41.800 --> 0:05:43.640 So what would you need to believe for rates to 0:05:43.640 --> 0:05:45.719 come down to really kick up a refive boom to 0:05:45.720 --> 0:05:48.440 get a lot of payment savings on your home. You've 0:05:48.440 --> 0:05:51.040 got to believe that rates come down significantly more than 0:05:51.040 --> 0:05:53.200 they're projected. So right now we're in this range of 0:05:53.560 --> 0:05:55.400 rates come down. It's going to be a little painful 0:05:55.400 --> 0:05:59.000 on deposits, a little beneficial on credit card, probably not transformational. 0:05:59.279 --> 0:06:01.800 On the indirect side, though, what you'll tend to see 0:06:01.880 --> 0:06:05.120 is businesses reacting a little faster if they have confidence 0:06:05.120 --> 0:06:07.080 we're going to hit a soft landing in the economy, 0:06:07.279 --> 0:06:09.440 they'll borrow a little bit more invest in their business. 0:06:09.440 --> 0:06:12.280 That will drive up employment, drive up confidence, which will 0:06:12.279 --> 0:06:13.320 trickle into the consumer. 0:06:13.640 --> 0:06:16.200 How much I know your vice chair and head of 0:06:16.279 --> 0:06:18.520 consumer banking, but I want to talk about the business 0:06:18.520 --> 0:06:21.600 side of things, corporate side. What are you seeing from 0:06:21.640 --> 0:06:23.360 companies from your corporate clients right now? 0:06:23.960 --> 0:06:27.360 They were in a period of time where they were delevering, 0:06:27.839 --> 0:06:31.440 draw downs on their credit was really at all time lows, 0:06:32.200 --> 0:06:35.400 trying to in an uncertain Valladle economy, which we were in, 0:06:35.440 --> 0:06:37.560 where there's a lot of question and variability around know 0:06:37.600 --> 0:06:38.920 we're going to hit a soft landing or we're going 0:06:38.960 --> 0:06:41.320 to hit a recession. What's going to happen with inflation. 0:06:41.440 --> 0:06:44.920 That's generally conditions that make businesses a little bit more cautious, 0:06:44.920 --> 0:06:47.680 and we saw that through into twenty two into most 0:06:47.680 --> 0:06:51.000 of twenty three, particularly with the bank failures and vallatle rates, 0:06:51.200 --> 0:06:53.480 we're seeing that stabilize a little bit more so. The 0:06:53.640 --> 0:06:57.000 likelihood of missing a recession of a soft landing is increasing. 0:06:57.440 --> 0:07:00.760 Rates easing is a good sign. Inflation, while it's completely 0:07:00.760 --> 0:07:02.800 done now seems to be generally under control. So we're 0:07:02.839 --> 0:07:05.520 seeing the early signs of businesses starting to have confidence 0:07:05.560 --> 0:07:08.320 to maybe take out some debt, make some capital investments, 0:07:08.360 --> 0:07:11.160 stimulate some economic demand. Those are all good signs and 0:07:11.200 --> 0:07:14.400 hopefully that continues, and if it does, we should be 0:07:14.440 --> 0:07:17.360 in a decent spot for soft landing, as we have hoped. 0:07:17.680 --> 0:07:20.360 And I want to talk about your business specifically, because 0:07:20.400 --> 0:07:22.880 one of the expectations heading into twenty twenty five is 0:07:22.920 --> 0:07:28.400 that you're going to see a much more friendly regulatory environment, 0:07:28.440 --> 0:07:29.800 that you're going to see a lot of M and 0:07:29.880 --> 0:07:31.880 A come back. It feels like we're already seeing a 0:07:31.880 --> 0:07:33.840 ton of M and A. But that being said, I 0:07:33.840 --> 0:07:37.400 know that Citizens has made quite a few purchases over 0:07:37.400 --> 0:07:40.040 the past couple of years. You think about the five 0:07:40.240 --> 0:07:43.040 M and A and equity firms, the mortgage company you bought. 0:07:43.080 --> 0:07:46.040 You also bought a high end wealth management firm. When 0:07:46.040 --> 0:07:48.800 you take a look at the portfolio of Citizens right now, 0:07:48.840 --> 0:07:51.920 are there any spots where it could make sense to 0:07:52.400 --> 0:07:55.160 look to those inorganic channels to grow well. 0:07:55.560 --> 0:07:59.960 I'd also add that we've bought HSBC's US franchise for 0:08:00.080 --> 0:08:03.200 retail banking, and we also bought investors Bank in Northern 0:08:03.240 --> 0:08:06.840 New Jersey and Metro New York. To round out our 0:08:06.960 --> 0:08:10.360 footprint strategy. We're marking a big play in Metro New York, 0:08:10.360 --> 0:08:13.640 in Northern New Jersey. And while the liftouts of private 0:08:13.680 --> 0:08:15.440 banking and private wealth is not an M and A 0:08:15.560 --> 0:08:18.040 transaction per se, we're treating it as such. And so 0:08:18.680 --> 0:08:20.680 we're coming on the heels of our ten year anniversary 0:08:20.680 --> 0:08:23.400 of our IPO right now, where the number two stock 0:08:23.440 --> 0:08:25.440 and the regional bank stocks this year, which is good, 0:08:25.440 --> 0:08:28.080 and I think that's based on the foundation that we've 0:08:28.080 --> 0:08:30.040 built over the last ten years that it's a solid 0:08:30.080 --> 0:08:33.199 bank outperformance on deposits. When you have that confidence, you 0:08:33.240 --> 0:08:36.760 can selectively play offense. And so we're looking at making 0:08:36.840 --> 0:08:39.640 a big play in wealth management, in private banking, building 0:08:39.640 --> 0:08:42.720 our geography in Metro New York, New Jersey, maturing the 0:08:42.760 --> 0:08:44.959 acquisitions we did on the corporate banking side, and M 0:08:45.000 --> 0:08:47.640 and A. You know, never say never on M and A. 0:08:47.840 --> 0:08:50.200 You're right to say the conditions are improving, rates are 0:08:50.200 --> 0:08:52.360 coming back down. That was one impediment of making the 0:08:52.400 --> 0:08:54.840 deal math work on M and A. And then regulatory 0:08:54.840 --> 0:08:57.200 and political pressures to the ease too. So we're on 0:08:57.200 --> 0:08:59.480 the lookout, But we have a very full agenda and 0:08:59.480 --> 0:09:01.880 we don't feel like we have to do a deal 0:09:01.920 --> 0:09:04.280 of any kind. We think the organic growth that we're 0:09:04.280 --> 0:09:06.520 on the path to deliver will be distinctive for this 0:09:06.559 --> 0:09:09.440 franchise versus other banks, and we're excited about it. 0:09:09.440 --> 0:09:13.880 What about geographic footprint, just twenty seconds, geographic footprint extending it. 0:09:14.440 --> 0:09:15.679 We're open minded to it. 0:09:15.679 --> 0:09:19.439 It's been challenging for banks to grow their geography organically 0:09:19.480 --> 0:09:22.320 through retail banking. Now the addition of the private bank 0:09:22.360 --> 0:09:24.360 makes it more affordable. Instead of needing one hundred and 0:09:24.400 --> 0:09:26.520 fifty branches to compete, we can have two or three 0:09:26.600 --> 0:09:29.480 private banking offices. In fact, we just planted a flag 0:09:29.520 --> 0:09:32.040 in the Bay Area. We opened three private banking offices 0:09:32.040 --> 0:09:34.720 and the deposit growth has been tremendous. So we are 0:09:34.840 --> 0:09:38.600 thinking about geographic expansion X M and A. But through that. 0:09:38.679 --> 0:09:41.839 Lens Brandon Kaflan, Vice chair and head of Consumer Banking 0:09:41.840 --> 0:09:45.280 at Citizens Financial Group. Here at Bloomberg Headquarters, well here 0:09:45.280 --> 0:09:47.320 at Bloomberg Business Week, we spend quite a bit of 0:09:47.360 --> 0:09:49.720 time talking about the best business schools in the world. 0:09:50.080 --> 0:09:53.680 On that list, Ie University, it's one of those schools. 0:09:53.760 --> 0:09:56.920 On this year's Bloomberg Business Week Best Business School rankings, 0:09:56.920 --> 0:10:01.040 it comes in at number eleventh in Europe and they're growing. 0:10:01.320 --> 0:10:05.679 Menuel Muni is excuse me. Manuel Muneath is provost at 0:10:05.720 --> 0:10:09.280 I University and also chair of Ie New York College. 0:10:09.320 --> 0:10:11.560 How are you wonderful? It's wonderful to be here. 0:10:11.600 --> 0:10:15.240 Thank you, very welcome. Welcome, I say welcome. But part 0:10:15.280 --> 0:10:17.840 of the big news is that you're growing here in 0:10:17.880 --> 0:10:21.000 New York. So talk a little bit about you know, 0:10:21.200 --> 0:10:23.240 we spend a lot of time talking about international business 0:10:23.240 --> 0:10:26.720 schools and the way that there are campuses in multiple 0:10:26.760 --> 0:10:30.200 parts of the world. What we don't often see is 0:10:30.440 --> 0:10:33.800 European schools expanding here in the US. Yeah, talk a 0:10:33.840 --> 0:10:35.080 little bit about the thinking behind that. 0:10:35.360 --> 0:10:39.040 Well, so for us, this is a major move because 0:10:39.080 --> 0:10:42.320 it's not just a campus. So we we've become the 0:10:42.360 --> 0:10:44.720 sole members, which is basically where the custodi. We've taken 0:10:44.720 --> 0:10:48.120 over a college, a pre existing college here in Lower 0:10:48.120 --> 0:10:51.720 Manhattan and soho. So we're a fully licensed higher education 0:10:51.760 --> 0:10:54.880 institution in the US. We will issue US degrees. We're 0:10:54.920 --> 0:10:56.880 accredited by the Middle States Commission, one of the big 0:10:56.920 --> 0:11:00.280 act creditors in the US. So this is a long term, 0:11:00.440 --> 0:11:04.800 serious commitment of ours to have a Transatlantic footprint and 0:11:04.880 --> 0:11:08.959 to run programs, fundamentally graduate programs in the business space 0:11:09.240 --> 0:11:10.560 on both sides of the Atlantic. 0:11:10.640 --> 0:11:13.960 But is it for European students who want exposure to 0:11:14.080 --> 0:11:17.920 New York? Is it for American students who you want 0:11:17.920 --> 0:11:20.800 to funnel then into a European program? 0:11:20.840 --> 0:11:21.040 Also? 0:11:21.160 --> 0:11:22.160 Who is it a geared towards? 0:11:22.200 --> 0:11:25.040 So this is a this is a key question. Our 0:11:25.080 --> 0:11:28.400 student body. Our current student body in Spain is super international, 0:11:28.480 --> 0:11:31.240 so about ninety nine zero percent of our students are 0:11:31.280 --> 0:11:33.640 non Spanish. Many of them come from the US, but 0:11:33.679 --> 0:11:36.640 many other European countries. So our project here is not 0:11:36.679 --> 0:11:40.079 so much to come into New York to recruit exclusively 0:11:40.120 --> 0:11:43.000 American students and maybe compete in a more head on 0:11:43.080 --> 0:11:45.800 way with some excellent business schools that you have in 0:11:45.840 --> 0:11:48.480 New York and in the US. It's about opening New 0:11:48.559 --> 0:11:51.440 York too our already very international student body, so our 0:11:51.480 --> 0:11:53.760 students will be able to begin in Spain in Europe 0:11:53.760 --> 0:11:57.040 and finish here and vice versa. So it's about making 0:11:57.120 --> 0:12:00.320 the higher education landscape in New York maybe a little 0:12:00.360 --> 0:12:02.679 bit more diverse than it already is and bringing a 0:12:02.720 --> 0:12:04.240 different kind of student to New York. 0:12:04.480 --> 0:12:06.400 Well in addition to the student body, talk to us 0:12:06.400 --> 0:12:08.800 a little bit about some of the offerings here when 0:12:08.800 --> 0:12:11.600 it comes to the programs that we'll be taught. 0:12:11.800 --> 0:12:14.240 So, the big two areas of focus of the college 0:12:14.280 --> 0:12:17.680 are business and sustainability, so we're very focused in these 0:12:17.720 --> 0:12:22.560 two spaces. We have a mess's in Business for Social 0:12:22.600 --> 0:12:26.600 Impact on sustainability, We're going to be launching new programs 0:12:26.600 --> 0:12:28.880 in finance and in management. We also have a program 0:12:28.880 --> 0:12:31.480 in sustainable Fashion, which was already offered by the college 0:12:31.520 --> 0:12:34.840 before we arrived. So those are the two areas of footprint, 0:12:34.880 --> 0:12:38.160 and we think that New York is very strong in 0:12:38.200 --> 0:12:41.520 these two areas. The business community significant, the type of 0:12:41.559 --> 0:12:43.520 experience that we can build for the student in these 0:12:43.559 --> 0:12:46.720 areas is very significant. So we see real synergies between 0:12:46.720 --> 0:12:48.160 what we do in Europe and what we're going to 0:12:48.160 --> 0:12:49.800 be able to do here with that offering. 0:12:50.120 --> 0:12:52.760 And wanted to talk a little bit about your other experience, 0:12:52.840 --> 0:12:56.920 your State secretary at the Spanish Foreign Ministry. You are 0:12:56.920 --> 0:13:01.120 an expert when it comes to geopolitics and international affairs. 0:13:01.720 --> 0:13:03.520 Kind of a perfect day to be speaking with you, 0:13:03.559 --> 0:13:05.679 given what we saw happen over the weekend in Syria, 0:13:05.720 --> 0:13:09.680 Ekstra Horner, what we saw last week with South Korea. Yes, 0:13:10.080 --> 0:13:14.040 given what we're seeing in Eastern Europe with Ukraine, all 0:13:14.080 --> 0:13:16.760 against the backdrop of a changing administration here in the US, 0:13:16.800 --> 0:13:20.640 and this idea globally that we're seeing a decline in 0:13:20.679 --> 0:13:24.920 the belief of institutions, the decline of quote unquote liberalism. Yes, 0:13:25.040 --> 0:13:26.680 around the world. How are you thinking about this? 0:13:27.160 --> 0:13:29.680 So that's another very significant question, because if you think 0:13:29.720 --> 0:13:32.800 about it, the world seems to be moving in a 0:13:32.920 --> 0:13:37.240 direction of fracture. This is true politically, diplomatically, there's a 0:13:37.280 --> 0:13:40.680 more weaken multilateral architecture internationally, but also in the economic 0:13:41.080 --> 0:13:45.439 side of things, a real fracturing of international trade. An investment, 0:13:46.280 --> 0:13:48.959 So then the question is what is a European university 0:13:49.360 --> 0:13:52.760 making such a significant investment in the US and abroad. 0:13:52.920 --> 0:13:55.520 And the answer to this is that we're really doubling 0:13:55.559 --> 0:13:58.840 down on our vision of what international university should be about. 0:13:59.280 --> 0:14:03.400 We should be about building global environments, very diverse environments 0:14:03.440 --> 0:14:06.319 in our classrooms, our students, the parents of our students, 0:14:06.320 --> 0:14:09.720 particularly in the undergrad they want their children and they 0:14:09.720 --> 0:14:13.160 want themselves to have these very international experiences. They want 0:14:13.160 --> 0:14:16.400 to work in different geographies. So we're moving a little 0:14:16.440 --> 0:14:19.080 bit in the opposite direction of where our geopolitics are headed. 0:14:19.080 --> 0:14:23.040 Our geopolitics are headed towards fracture, and we're betting on interdependence. 0:14:23.240 --> 0:14:26.240 And I think this is the mission of academia. I 0:14:26.240 --> 0:14:28.960 mean it is in our name. I mean, universities are 0:14:29.000 --> 0:14:31.480 supposed to be universal. They're supposed to be about bringing 0:14:31.520 --> 0:14:35.480 diverse points of view, building the diverse kinds of learning 0:14:35.560 --> 0:14:39.120 environments and experiences for the students. So that's how our 0:14:39.240 --> 0:14:42.600 New York and US investment fits into a broader vision 0:14:42.640 --> 0:14:44.360 of what university should be doing. But this is not 0:14:44.480 --> 0:14:48.160 risk free because we're rowing a little bit against the 0:14:48.200 --> 0:14:51.040 current of where our geopolitics are headed. 0:14:51.560 --> 0:14:54.720 Well, it's interesting. I mean it feels like higher education 0:14:55.080 --> 0:14:57.920 has become politicized. I mean, you think about what happened 0:14:57.960 --> 0:15:02.400 on campuses across New York City, including throughout the spring, 0:15:02.600 --> 0:15:04.960 I mean, how are you thinking about that? 0:15:05.560 --> 0:15:07.760 Well, so, I mean it's not just what happened here. 0:15:07.800 --> 0:15:11.040 If you actually look at there's a general trend of 0:15:11.280 --> 0:15:15.680 restriction to internationalization of university. So there've been caps on 0:15:15.720 --> 0:15:19.280 international students in Australia, restrictions to teaching in English in 0:15:19.320 --> 0:15:24.640 the Netherlands, restrictions to visa visas for students in the UK. So, 0:15:24.720 --> 0:15:27.320 if you take it as a whole, this symphony sort 0:15:27.360 --> 0:15:30.920 of this concert or fracture of growing to some extent 0:15:30.960 --> 0:15:34.600 nationalism and nationalistic policies is really trickling. I don't know 0:15:34.640 --> 0:15:36.840 if it's trickling up or down, but it's beginning to 0:15:36.880 --> 0:15:39.880 affect the higher education landscape. So we see this with 0:15:40.040 --> 0:15:45.040 concern and we are willing to go against this trend 0:15:45.120 --> 0:15:48.320 because I tell you, I mean the value add of 0:15:48.360 --> 0:15:52.240 an education is significantly higher if you can build these 0:15:52.320 --> 0:15:54.400 different avenues, these different experiences. I'll give you a very 0:15:54.440 --> 0:15:58.280 specific example, because we have the college in New York 0:15:58.320 --> 0:16:00.520 and it's going to be issuing American degree. One of 0:16:00.560 --> 0:16:03.000 the huge benefits to our students is that they're going 0:16:03.040 --> 0:16:05.560 to be able to come study here, be embedded in 0:16:05.560 --> 0:16:08.160 New York, and ones they graduate, they have a much 0:16:08.160 --> 0:16:10.720 easier access to the US labor market if US employers 0:16:10.720 --> 0:16:13.080 are willing to employ them through opt schemes and others. 0:16:13.600 --> 0:16:15.800 This is the sort of thing that people in German, 0:16:15.920 --> 0:16:18.800 students in Germany, young people in Italy. Young people in 0:16:18.800 --> 0:16:21.080 Canada really want they want to be able to access 0:16:21.160 --> 0:16:25.040 universities and have these very different paths that open environments 0:16:25.040 --> 0:16:29.400 for them professional entrepreneurial environments. So you know, we're going 0:16:29.440 --> 0:16:31.720 to fight this, you know through through how we behave 0:16:31.760 --> 0:16:32.520 as a university. 0:16:32.560 --> 0:16:35.200 Do you think you say you're going to fight it? 0:16:35.320 --> 0:16:38.680 You say that fractionalization, that's what's happening right now, but 0:16:38.920 --> 0:16:41.720 not necessarily the way that you see things going, at 0:16:41.800 --> 0:16:45.840 least at an academic level. Is this move toward populism 0:16:45.920 --> 0:16:48.480 around the world, especially in Europe and the United States. 0:16:49.840 --> 0:16:51.520 Is this something that you see as a blip and 0:16:51.560 --> 0:16:54.360 short lived or is this something that is sort of 0:16:54.400 --> 0:16:56.400 the next era of our lives? 0:16:56.520 --> 0:16:59.520 Well, so this requires a deep brands or no, because 0:17:00.520 --> 0:17:02.520 the question, I think the core question is why are 0:17:02.560 --> 0:17:05.480 we seeing in a lot of the Western world, in 0:17:05.520 --> 0:17:09.199 advanced economies and liberal democracies, why are we seeing the 0:17:09.280 --> 0:17:11.560 rise of the extremes in the right and in the 0:17:11.600 --> 0:17:13.520 left and the rise of populism. 0:17:13.119 --> 0:17:15.200 Or the right and the left coming together to ask 0:17:15.240 --> 0:17:17.560 to Prime Minister in France like last week. 0:17:18.200 --> 0:17:20.520 I mean, this is part of this noise, of this 0:17:20.640 --> 0:17:23.399 symphony of disorder that we're living in our politics and 0:17:23.560 --> 0:17:26.439 that it's affecting highered. If I had to summarize in 0:17:26.480 --> 0:17:29.440 one phrase why I think this is occurring is if 0:17:29.480 --> 0:17:32.680 you look at the economic performance of advanced economies around 0:17:32.880 --> 0:17:34.680 the world over the last thirty years, you will see 0:17:34.680 --> 0:17:37.720 that there is one trend that repeats itself in many 0:17:37.800 --> 0:17:40.159 of these countries, and that is the hollowing of the 0:17:40.200 --> 0:17:43.840 middle of our income distribution through stagnation or income decline. 0:17:43.880 --> 0:17:47.199 In real terms, that disappearance or that weakening of the 0:17:47.240 --> 0:17:50.879 middle is highly correlated with the disappearance of the middle 0:17:50.920 --> 0:17:54.560 of the political spectrum. So these trends are highly correlated. 0:17:55.160 --> 0:17:59.720 We simply do not know how to sustain an effective liberal, 0:18:00.640 --> 0:18:04.360 deliberative democracy if the middle is under immense pressure and 0:18:04.520 --> 0:18:09.240 the middle classes in most advanced economies are growingly precarious. 0:18:09.280 --> 0:18:14.000 They have difficulty accessing fundamental things. In fact, education is 0:18:14.000 --> 0:18:15.960 one of them because it's been getting more and more expensive, 0:18:15.960 --> 0:18:20.040 but housing, healthcare, and many others. They view the future 0:18:20.200 --> 0:18:22.720 with greater concern, and one of the trend one of 0:18:22.720 --> 0:18:25.760 the factors that is most highly correlated with support for 0:18:25.840 --> 0:18:29.200 populist forces is concerns about the future. So we live 0:18:29.200 --> 0:18:32.359 in a pessimistic environment about the future. One's on future, 0:18:32.680 --> 0:18:34.800 the future of the next generation, and that is driving 0:18:34.840 --> 0:18:39.199 our politics. So unless we address the underlying drivers of 0:18:39.200 --> 0:18:42.159 this fracture our politics, that the river sort of the 0:18:42.480 --> 0:18:45.960 ripples of this in our politics and in our international politics, 0:18:45.960 --> 0:18:49.399 because this is shaping foreign policy, will become more and 0:18:49.440 --> 0:18:52.560 more severe. So I think it's a social contract, social 0:18:52.760 --> 0:18:57.919 justice equity question that really lies beneath the issue that 0:18:57.960 --> 0:18:58.440 you raised. 0:19:00.119 --> 0:19:03.240 So I mean you talk about this hollowing of the 0:19:03.520 --> 0:19:07.080 middle class and the correlation there that you've seen. I mean, 0:19:07.280 --> 0:19:10.360 do we have any good examples I mean in your 0:19:10.440 --> 0:19:14.760 academic work of where that callowing has happened but successfully 0:19:14.840 --> 0:19:18.200 has been made robust again, I mean, are there any 0:19:18.200 --> 0:19:19.639 good examples that we can look to. 0:19:19.840 --> 0:19:22.600 Well, it's very tough because I would say for the 0:19:22.640 --> 0:19:24.800 first time and when I was in when I served 0:19:24.800 --> 0:19:27.840 in this Spanish government, was right around the time where 0:19:27.840 --> 0:19:31.720 we made this diagnosis, where this diagnosis was properly configured, 0:19:31.760 --> 0:19:34.719 because twenty sixteen seventeen we had a number of shocks, 0:19:34.760 --> 0:19:37.240 we had the Brexit, we had the first Trump president. 0:19:37.280 --> 0:19:41.600 It was very unexpected in many ways, but nobody, I 0:19:41.600 --> 0:19:44.239 mean there was really no consensus around the world as 0:19:44.280 --> 0:19:46.720 the way this was occurring. So the consensus is recent 0:19:47.400 --> 0:19:49.520 this diagnosis that I just laid out, But I think 0:19:49.560 --> 0:19:51.360 if you went to the World Bank or the IMF 0:19:51.359 --> 0:19:53.840 for the Commission now, they'll tell you we have an 0:19:53.880 --> 0:19:58.640 equity and sustainability sort of social sustainability issue in our society. 0:19:58.640 --> 0:20:02.399 So everybody's trying doing implement policies that tackle this, like, 0:20:02.440 --> 0:20:08.120 for example, measures that change taxation, measures that implement better 0:20:08.160 --> 0:20:12.160