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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jai Ley.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Right

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Speaker 1: now on the September eleventh, as we spoke to Tomas

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Speaker 1: showed of KBW earlier, we now speak with b MP

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Speaker 1: Parry by USA, Jean Eve Phileng He joins us right now.

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Speaker 1: We're thrilled that he could be with us today. Johnny.

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Speaker 1: The commitment of b MP Parry bout in New York

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Speaker 1: City has been steadfast. Give us your thoughts on this

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Speaker 1: nineteenth anniversary of this tragedy. Thank you, Thank you hard

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Speaker 1: for having me by the way today. I would like

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Speaker 1: to stop this morning and really acknowledging the significance of

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Speaker 1: today's date, remembering those were lost on September eleven, two

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Speaker 1: thousand and one. UM, this is going to be forever

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Speaker 1: in our memory and UH and obviously particularly in UH

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Speaker 1: in New York City. Look, Johnny, if at the uniqueness

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Speaker 1: of this in the pandemic, and that speaks to what

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Speaker 1: every business is doing which is ear to the ground,

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Speaker 1: trying to feel what business is doing. JP Morgan bringing

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Speaker 1: sales and trading back headlining today, what would be the

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Speaker 1: action of BMP Perry but in North America in the

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Speaker 1: coming weeks. Well, you know, in my position, obviously safety

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Speaker 1: of employees is my absolute priority. However, we've started, you know,

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Speaker 1: returned to the office plan, but it's gradually it's faced in.

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Speaker 1: We're using rotation and uh to give you a sense,

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Speaker 1: at the peak of the pandemic, we were probably of

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Speaker 1: the staff working from home. Today we're eight to five

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Speaker 1: percent of the staff still working from home. I'm expecting

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Speaker 1: this to stay probably the way it is Untilia end

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Speaker 1: and with a reasss where the pandemic is early in Johnny,

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Speaker 1: if let's talk about something that I guess it's hard

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Speaker 1: to do, but let's pretend, just for the sake of

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Speaker 1: this argument, this conversation, that the pandemic goes away. Perhaps

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Speaker 1: we have a vaccine in the next twelve months and

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Speaker 1: it's widely distributed. What do you think will change permanently

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Speaker 1: for you operating in New York City. Well, I would

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Speaker 1: say the remote working I believe, uh, it's going to

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Speaker 1: be part of the new normal even under the scenario

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Speaker 1: you just described, John, As you know, we've we've discovered

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Speaker 1: we can be so effective serving clients communicating uh during

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Speaker 1: the pandemic. By the way, make no mistakes, I miss

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Speaker 1: the face to face interaction. I wish, by the way,

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Speaker 1: like we always do, I would be with you in

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Speaker 1: the studio in person, but it's here to stay. I

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Speaker 1: see another trend in terms of smaller real estate footprints

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Speaker 1: in the dance urban areas consequence of more digitalization and

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Speaker 1: working from home. Are you see business traveling will be

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Speaker 1: dramatically different as there already reassess you know, the need

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Speaker 1: to really uh you know, travel around the world, even

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Speaker 1: though I would love to host you are in Paris

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Speaker 1: one of these days. And from my clients, UM, I

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Speaker 1: see an interesting trend and it's been back on force,

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Speaker 1: but particularly for the US clients that are more international,

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Speaker 1: A really a real willingness to for realdomistication of supply chains.

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Speaker 1: For economics, I would say, um, independence as well as

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Speaker 1: you know, job creation reasons A lot to unpack their

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Speaker 1: John Age. Let's just talk about things operationally very briefly.

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Speaker 1: We've seen with debt issuance, for instance, that supplies just

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Speaker 1: kept coming through even in the summer, and I guess

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Speaker 1: that's an example that we can work from home and

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Speaker 1: we can get that death supply way in an efficient way,

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Speaker 1: even in August, and perhaps even in places like Europe

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Speaker 1: as well. I just wonder from an operational standpoint, what

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Speaker 1: you did find difficult working from home? What a bank

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Speaker 1: found hard to do well? I would say what at

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Speaker 1: BNP pied by. We were probably fortunate to be already

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Speaker 1: very you know, very digital, but still you know too

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Speaker 1: nobody was ready to have this amount of staff working

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Speaker 1: from home, and it was a one investing in bandwidth,

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Speaker 1: small lap tops and um and and making sure rationally uh,

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Speaker 1: you know, activities like you know, trading and payments and

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Speaker 1: and clearing would continue to be uh to to to

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Speaker 1: to be fine. Another dimension of working from home is, uh,

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Speaker 1: it's actually it's harder, you know, somewhere somewhat because it's

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Speaker 1: chop chop shop. You don't have much time between meetings,

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Speaker 1: and you know, some some of our staff you know,

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Speaker 1: at times, you know, might have felt isolated, and we're

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Speaker 1: here to provide the support and hopefully the psychological support. However,

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Speaker 1: I think a significant part of my staff like the

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Speaker 1: getting closer to the communities. Know, the main fear of staff,

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Speaker 1: by the way, is public transportation coming to the office

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Speaker 1: and making sure the office is safe here. And John

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Speaker 1: to your point, another real investment we had to make,

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Speaker 1: we all had to make, is to make the workplace safer,

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Speaker 1: much more adapted to this new fare of working. Johnny,

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Speaker 1: that's that's a really good description of the day to

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Speaker 1: day challenges is people try to get back to work

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Speaker 1: in this current environment. On a broader sense, you talk

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Speaker 1: about the red domestication of supply chains, there's also this

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Speaker 1: d globalization wave that's been enhanced and the tensions that

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Speaker 1: have been exacerbated by the pandemic. Do you feel it

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Speaker 1: being a French bank operating in the US. Obviously we

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Speaker 1: do feel it most importantly for me or clients feel it.

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Speaker 1: And um, you know b antipipis headquartered in France, but

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Speaker 1: it's rereally European bank today. Then we we we obviously

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Speaker 1: have to make sure we can support clients, help clients

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Speaker 1: managing this uncertainty you just you just described, you know,

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Speaker 1: an area of increased activity because of this uncertainty and unstability.

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Speaker 1: At times, lactility has been a real high demand in

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Speaker 1: terms of hedging, you know, protection strategies across rates, currencies, commodities,

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Speaker 1: and equities. Going forward. There's also a question of the

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Speaker 1: consumer strength versus the investment bank. John I was talking

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Speaker 1: about the robust issuance of corporate debt record August for that.

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Speaker 1: Do you expect the consumer to take on more of

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Speaker 1: that as we do see this ongoing strength and consumer

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Speaker 1: spending or do you think that those who are putting

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Speaker 1: faith in that perhaps the JP Morgan's and the Golden

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Speaker 1: Saccess of the world have gotten ahead of themselves. Well,

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Speaker 1: I think that's that's a very important point and important

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Speaker 1: question here. Well on on on the capital markets, by

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Speaker 1: the way, you're right, it's it's been, uh, it's been.

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Speaker 1: It's it's been amazing in terms of how active they've

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Speaker 1: been across your mention earlier, you know, high yield, high

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Speaker 1: grade across all asset classies CEO Seattle's infrastructure project finance. Um.

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Speaker 1: The what I see still I see a contrast between

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Speaker 1: the very active capital markets and what I would call

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Speaker 1: the real economy and how consumer confidence and consumers spending

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Speaker 1: is going to be evolving of the next few months.

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Speaker 1: Is really going to be depending on what John was

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Speaker 1: mentioning before, how the pandemic is being managed and how

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Speaker 1: fast do we managed to get a vaccine? And I

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Speaker 1: would say, and only making it work, but distributing it widely.

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Speaker 1: And I think that the whole constumer dynamic dynamic will

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Speaker 1: be there as BNP Pariba. And again my life keeps

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Speaker 1: me very modest but or integrated diversified business model, you know,

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Speaker 1: retail wholesale help us manage you know, the various factors

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Speaker 1: and trends, you know, consumer investment, banking, corporate institutional uh

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Speaker 1: that you know obviously have been fluctuating depending on day

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Speaker 1: to day conditions. Johnny, if I think the Mackenzie have

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Speaker 1: called this the great acceleration, and I just wanted from

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Speaker 1: your standpoint where E. S G fits into that great acceleration?

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Speaker 1: How much emphasis has been put on that in the

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Speaker 1: last couple of months Moving forward, it's been you know,

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Speaker 1: s G has been in the map already for many

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Speaker 1: many years. We actually this year have exceeded the one

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Speaker 1: trillion of you know, green bond systemability financing issuance around

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Speaker 1: the world. Uh. The pandemic has been an accelerator, as

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Speaker 1: you know, we've all probably better understand figured out the

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Speaker 1: impact on our communities, health economies. And by the way,

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Speaker 1: I've seen this trend both on the investor and issue side.

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Speaker 1: B ANDP BNP piable one of the only ones, but

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Speaker 1: we've been a pioneer in insistainable finance. Today we lead

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Speaker 1: in the table rankings in terms of floans uh in

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Speaker 1: terms of bonds, and we raised recently actually were one

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Speaker 1: of the first banks to structure systemability link derivative. Then

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Speaker 1: it's really been part of the product offering. And I

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Speaker 1: think it's a trend that is going to be reinforcing

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Speaker 1: itself over the of the weeks, in the month major

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Speaker 1: I want to expressial here and as E s G

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Speaker 1: on the s of E s G is actually taking

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Speaker 1: more and more visibility. You know, on the social side,

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Speaker 1: you've seen you know, COVID nineteen Waiste cubones becoming much

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Speaker 1: more of a factor. Here. We at BNP actually underworld

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Speaker 1: large transactions in Europe and in Latin America for you know,

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Speaker 1: very committed supernationals, institutionals and even banks are getting into

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Speaker 1: this this tream. We're lucky to have you on the

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Speaker 1: program with us this morning. Johnny, Thank you Johnny's filly

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Speaker 1: on US CEO. Thank you, sir, oh we care about

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Speaker 1: on this September eleventh, and we are thrilled to have

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Speaker 1: with this Michael Show market Field Asset Management. He's one

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Speaker 1: of our most astute conversations on the view forward. Michael,

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Speaker 1: give us your sense of enthusiasm to own equities right now?

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Speaker 1: You know, it is kind of slip send some of

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Speaker 1: the measures um that I think track older, older, more

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Speaker 1: established investors that show plenty of skepticism, the AII being

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Speaker 1: the clearest. You know, outflows some mutual funds and e

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Speaker 1: T f UM you know, have been significant for the

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Speaker 1: last few weeks, and yet at the same time very obviously,

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Speaker 1: you know, the end of the summer saw of this

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Speaker 1: mad rush into a limited pocket of the US equity market.

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Speaker 1: I mean, just a crazy rush. I mean it's just interesting,

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Speaker 1: to say the least, what will be the what will

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Speaker 1: be the next catalyst? Do we go to the FED

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Speaker 1: meeting here mid September. No, I think the FED has

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Speaker 1: sort of taken itself out of the equation, you know,

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Speaker 1: I think Al was very clear that Jackson Hole that

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Speaker 1: that the FED is going to be following the current

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Speaker 1: policy for the you know, for the foreseeable for the

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Speaker 1: foreseeable future. Now, I think it's going to be more

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Speaker 1: about the resilience, the internal resilience of the equity market itself,

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Speaker 1: whether support at the fifty day, particularly for an ASDA

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Speaker 1: one holds, you know, and if it does, and I

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Speaker 1: think this is just a consolidation that goes on, you know,

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Speaker 1: goes on and breaks to the upside at some point

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Speaker 1: in Q four or you know, if that's fifty day

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Speaker 1: gives way, then then you potentially have more internal selling

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Speaker 1: fressure in the most popular parts of the US equity market,

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Speaker 1: or we can get a broader rebound in this equity

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Speaker 1: market and the leadership rotates to our swear. Michael, do

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Speaker 1: you think we can establish that in the coming weeks

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Speaker 1: and months? You know, I do because I I you look,

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Speaker 1: it's only a five days sell off now, um, you know,

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Speaker 1: so it's not really a very long one. But you

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Speaker 1: know what is notable is is some things have not

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Speaker 1: gone down. Most of the cyclical sectors in the US

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Speaker 1: of sidestep this transportation, um, most of the industrials, a

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Speaker 1: market like Japan, you know, which again is very sort

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Speaker 1: of cyclical, has shown absolutely no interest in, you know,

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Speaker 1: in this sort of mini in this mini correction. And

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Speaker 1: I always think that not going down UM is the

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Speaker 1: first sign that something is moving towards is moving towards leadership.

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Speaker 1: So I think we do have some hints of that.

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Speaker 1: I think, as they say, you know, for that stuff

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Speaker 1: to break out, I think you need the nastack to

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Speaker 1: be ranged found. I think if the nastac actually broke down,

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Speaker 1: it does enough damage to people that that there's probably

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Speaker 1: a you know, a temptation to generally liquidate UM. And

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Speaker 1: then you be talking about relative performance by not going

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Speaker 1: down as much as the overall market, which isn't quite

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Speaker 1: as good as breaking out. Michael, what do you think

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Speaker 1: the big distinction is between you and a long tech crowd? Um?

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Speaker 1: You know, I think I think partly I've been wrong

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Speaker 1: for a lot of years about estimated texts text opportunity,

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Speaker 1: But I do think that that people have missed the

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Speaker 1: degree to which be what I call the jewable goods

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Speaker 1: economy globally has really been a beneficiary of this COVID

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Speaker 1: crisis that the the the personal sector of the corporate

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Speaker 1: sector has been forced or encouraged to spend significant amounts

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Speaker 1: on on on on retooling itself. Um, that that is

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Speaker 1: a I believe a sustainable, a sustainable change in behavior. Michael,

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Speaker 1: how much do you change positioning ahead of the US election? Um?

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Speaker 1: Not a great deal for for myself. I think whichever

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Speaker 1: party gets control, Um, you know, isn't you know? I

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Speaker 1: think there degrees of fiscal support, but I think both

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Speaker 1: are going to be generally fiscal supportive. It's not that

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Speaker 1: we have austerity versus spending between you know, between the

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Speaker 1: two parties. And I don't think monetary policy changes a

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Speaker 1: great deal. You know, we haven't yet seen the market

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Speaker 1: show a clear preference if you went back to two

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Speaker 1: thousand and sixteen. By now we knew of the market

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Speaker 1: wanted Hillary Clinton to win and Trump to lose. Ironically,

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Speaker 1: it changed its mind three hours after the election result.

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Speaker 1: But but sen with a with a with an example

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Speaker 1: of a very sort of politically driven equity market. You know,

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Speaker 1: I think right now the non political factors are bigger

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Speaker 1: than the political factors, which is kind of interesting considering

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Speaker 1: the fact that a lot of people are indicating an

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Speaker 1: increase in volatility bets around that November three election. When

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Speaker 1: you talk about fiscal preference. Meanwhile, we're getting no fiscal

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Speaker 1: deal whatsoever in Washington without really a sign that there's

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Speaker 1: going to be one. How much of a sell off

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Speaker 1: do you expect if we really get a breakdown and

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Speaker 1: talks and does look very unlikely that we get anything

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Speaker 1: out of the election. Well, you know, we still have

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Speaker 1: a lot of monetary support. Um. And I think that

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Speaker 1: part of the economy that is that is most affected

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Speaker 1: by the failure to get a deal done is not

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Speaker 1: that widely represented within you know, within the equity market.

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Speaker 1: So so far the market has been patient. Um. I

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Speaker 1: think there is a belief that something, you know, something

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Speaker 1: will get done, and even without a stimulus still being done.

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Speaker 1: You know. I think the extension to the debt ceiling

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Speaker 1: means that, you know, we're not dealing with the kind

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Speaker 1: of fiscal cliff risk that we had, you know, that

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Speaker 1: we had several years ago. So I don't yet seaber

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Speaker 1: market showing a great deal of you a great deal

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Speaker 1: of concern about that. Yeah, I wonder. I wonder Michael,

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Speaker 1: whether that's actually because of the data so far, that

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Speaker 1: the data hasn't broken down and the recovery has continued.

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Speaker 1: What would your read beyond that? Look, I think that's true. Um,

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Speaker 1: I think that that, um, you know, I mean my

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Speaker 1: view of the US economy is you have a labor

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Speaker 1: market which is you know, back to the early teens

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Speaker 1: and somewhere between two thousand and twelve and two thousand

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Speaker 1: and fourteen, depending on which metric you look at, you know,

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Speaker 1: with much much more fiscal support even without a new

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Speaker 1: stimulus bill, and much much looser monetary policy than we have. So,

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Speaker 1: you know, I really think that that the U. S

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Speaker 1: economy has enough support without a new um, without a

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Speaker 1: new without a new stimulus spill um. You know, as

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Speaker 1: far as the equity market is concerned. Now, you may

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Speaker 1: have social concerns that don't get addressed and need to

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Speaker 1: you know, you know, need that money. But maybe you know,

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Speaker 1: issues of genuine poverty and hardship, but that's not what

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Speaker 1: drives the S and P five hundred. The S and

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Speaker 1: P five hundred is not controlled by sociologists. It's controlled

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Speaker 1: by investors, and they really have a different outlook on

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Speaker 1: on what needs to get done. Michael Craig to catch up,

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Speaker 1: stay well one your Michael Shower there of market Field

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Speaker 1: Asset Management. Thank you, sir, thank you very much. Right

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Speaker 1: now to give us an update on the economy, and

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Speaker 1: maybe it is the resilience you give the American economic

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Speaker 1: experience is Michael Faroli of JP Morgan his service to

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Speaker 1: economics over the recent years has been absolutely extraordinary, particularly

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Speaker 1: in the measurement of what our potential is. Michael Faroli,

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Speaker 1: what is the potential GDP calculation of America given a pandemic?

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Speaker 1: Is it possible to calculate that? So, like a lot

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Speaker 1: of things, including inflation, right now, there's a lot of

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Speaker 1: noise that it is going to take some time to

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Speaker 1: let filter through before we get a better sense of

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Speaker 1: how things are involving. Now. Has the pandemic affected trend

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Speaker 1: growth in the US? UH? Perhaps? I think there's still

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Speaker 1: quite a bit of debate about that. I think one

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Speaker 1: of the easy things to say is that we've had

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Speaker 1: a period of slower capital spending in the middle part

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Speaker 1: of this year, which will hold back productivity growth. That said,

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Speaker 1: capital spending, like many other aspects of alluate demand, is

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Speaker 1: recovering pretty nicely in the third quarters. So that's why

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Speaker 1: I think it's probably wise the whole judgment here, or

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Speaker 1: at least a few more months to see where things

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Speaker 1: settle before radically rechanging one's view of potential GDP growth. Mike,

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Speaker 1: are you surprised by how balanced the inflation debate is

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Speaker 1: right now? I would have expected overwhelmingly a consensus around disinflation,

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Speaker 1: and that's not what we experience in any given day

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Speaker 1: on this program. What are you experiencing in the conversations

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Speaker 1: you're having? So, I do think most people that I

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Speaker 1: speak with are on the distant are in the disinflationary

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Speaker 1: or low inflation camp. But I think it's reasonable that

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Speaker 1: there are going to be two sides this debate, because

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Speaker 1: conceptually the pandemic is both a supply shock and a

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Speaker 1: demand shock at the same time, and so at least

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Speaker 1: from first principles, there's no necessary reason to think that

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Speaker 1: one side or the other is going to hold this

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Speaker 1: way here. I believe in part the reason I'm more

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Speaker 1: in the disinflationary or low inflationary camp is that while

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Speaker 1: the supply constraints were temporary, particularly concentrated in the second quarter,

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Speaker 1: the slowness and the weakness and aggregate demand looks like

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Speaker 1: it's going to be enduring for longer than that. In

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Speaker 1: other words, the unemployment rate, while it's come down quote

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Speaker 1: nicely in recent months probably will be elevated, we think

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Speaker 1: for several quarters, and so that's why I think on

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Speaker 1: net the evidence is going to lead us towards a

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Speaker 1: low inflation outcomes for the next few years. The Federal

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Speaker 1: Reserve Michael have said repeatedly that they've shifted the framework,

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Speaker 1: the reaction function has changed. Have made the argument over

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Speaker 1: the last twelve months tolerating car inflation is not the

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Speaker 1: same as engineering car inflation. Are there any policy moves left, Mike, Uh,

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Speaker 1: that's a great question. So you know, there are a

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Speaker 1: few things they could do to bolster their recent move

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Speaker 1: and their recent change in their framework. None of them

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Speaker 1: are going to be home runs here. So they can

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Speaker 1: obviously tell the market that they're not going to high

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Speaker 1: rates until inflation gets above two, which is fine, will

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Speaker 1: probably eventually do that. The market is not even pricing

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Speaker 1: in hikes until to begin with, so it's not like

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Speaker 1: this isn't like two thousand nine can where the market

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Speaker 1: was really chopping at the bit to price rad hikes

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Speaker 1: nine months in the future. Right now, I think the

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Speaker 1: market has learned that lesson, so that well, that's that's

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Speaker 1: good that the markets learning that lesson. It also reduces

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Speaker 1: how much. Uh, these types of moves, by the fact,

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Speaker 1: can really provide further fur the stingless Michael Faroli of

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Speaker 1: JP Morgan And of course they're huge investment on Park

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Speaker 1: Avenue and new facilities, their belief in New York City.

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Speaker 1: Right now, many images here from a very different nineteen

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Speaker 1: remembrance of September eleventh. Right now, Vice President Pence and

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Speaker 1: Karen Pence walking into the ceremonies again very much pandemic affected.

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Speaker 1: We just saw images of Vice President Biden and Dr

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Speaker 1: Biden along with a former mayor of New York, Michael Bloomberg.

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Speaker 1: I believe I saw a Governor Cuomo there as well.

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Speaker 1: I must say, Lisa Brow, it's a little there's Vice

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Speaker 1: President Biden. For those of you on radio, Uh, the

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Speaker 1: images here are uh quite poignant, Lisa Bromo, it's for

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Speaker 1: those on radio and t t V. It's just a

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Speaker 1: whole lot harder to do this this year because of

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Speaker 1: all those masks, especially when you look at the concept

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Speaker 1: of mourning. When you look at the concept of resilience,

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Speaker 1: usually it has to do with coming together, being face

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Speaker 1: to face, being close, and that has been shattered by

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Speaker 1: the pandemic. These images also raise a question about the recovery,

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Speaker 1: and Michael Faroli, I do wonder what we're seeing with

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Speaker 1: respect the recovery of the labor market. I don't think

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Speaker 1: we made enough of yesterday's employment figures, the jobless filings

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Speaker 1: that came in higher than expected, with the number of

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Speaker 1: individuals receiving unemployment benefits actually increasing week over week. Michael,

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Speaker 1: is this a significant data point that marks a turning,

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Speaker 1: a sort of souring of the labor market that has

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Speaker 1: been recovering at a pretty fast speed. So I think

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Speaker 1: that's fair to UH. I think it's a fair response.

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Speaker 1: One problem, though, is that these jobless benefit numbers, the

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Speaker 1: weekly claims numbers, have been a bit skewed in recent

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Speaker 1: months by issue use with processing of filings. UH, and

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Speaker 1: a lot of those continuing claims that you mentioned is

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Speaker 1: for this pandemic unemployment assistance program, which the reporting by

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Speaker 1: the jobless claims numbers are reported by the fifty states

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Speaker 1: and aggregated together, and how those states are reporting that

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Speaker 1: has been not a very clean process. And so while

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Speaker 1: on the face of it, I agree with you that

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Speaker 1: it's not a it's not healthful indicator that we stalled

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Speaker 1: in the progress we're seeing in those claims numbers. That

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Speaker 1: hasn't been a perfect indicator in recent months. If we

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Speaker 1: don't get another round of fiscal support, where will we

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Speaker 1: end the year with respect to the unemployment rate? So

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Speaker 1: we have something in the high sevens, I think without

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Speaker 1: further fiscal support, that could be in the remain in

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Speaker 1: the low aids. UH. That said, you know, look, I

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Speaker 1: think the response that we're seeing in in Capitol Hill.

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Speaker 1: You know, I wouldn't want to say fiscal policy is

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Speaker 1: perfectly endogenous with respect to economic developments. But I think

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Speaker 1: the fact that the economy has been performing well or

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Speaker 1: better than expected, let's say over the summer months, may

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Speaker 1: have reduced some of that urgency UH in Washington to

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Speaker 1: deliver more stimulus. So I think we have to take

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Speaker 1: the lack of stiulus or lack of progress in stingulas

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Speaker 1: alongside with the better numbers together when we look at

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Speaker 1: how the economy is evolving here as we go into

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Speaker 1: the fall. Michael Ferrati writes a cash up Jpmugan Securities

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Speaker 1: Chief US Economists. It is September eleven, and Thomas showed

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Speaker 1: visits with us each year. Of course, his tour of

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Speaker 1: duty at Keith Bury in Woods after their horrific moment

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Speaker 1: of nineteen years ago. We're thrilled to Thomas showed could

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Speaker 1: join us today and particularly please that he will stay

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Speaker 1: with us and speak of the changes in banking here

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Speaker 1: into this half hour as well. Thomas showed what a

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Speaker 1: different September eleven this year. And to me, the pandemic

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Speaker 1: also makes us almost remember the wonderful ceremony only we've

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Speaker 1: seen for the previous eighteen years. Yes, it's uh, it's uh.

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Speaker 1: There are a lot of similarities with h with I

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Speaker 1: think really other crises that are going on with this pandemic.

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Speaker 1: I mean, I think nine eleven, if it was anything,

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Speaker 1: it was a story of resiliency, I think, both for

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Speaker 1: my firm as well as for New York and the industry. Um,

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Speaker 1: and here we are again right now with more challenges

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Speaker 1: both you know, global recession as well as the pandemic.

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Speaker 1: And and I'll tell you I over the years, over

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Speaker 1: the nineteen years, there have been many times where there's

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Speaker 1: been more challenges as we all know. And I'll never

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Speaker 1: forget a story, uh that that happened. Uh during the

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Speaker 1: global financial crisis. We had just had a senior meeting

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Speaker 1: at the firm. I think it was after Fannie and

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Speaker 1: Freddie had been put into conservatorship, and one of my

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Speaker 1: colleagues came up to me and he said, Tom, I

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Speaker 1: know this is a challenging time, and we just discussed

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Speaker 1: how we're going to address it. But remember, we've seen

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Speaker 1: what the end of the world looks like, and we

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Speaker 1: know this isn't it. And frankly, when you feel about

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Speaker 1: what happened on nine on eleven, how devastating that was,

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Speaker 1: I think it's really built in some of the resiliency

430
00:24:07,680 --> 00:24:10,159
Speaker 1: that's going to help New York and other other cities

431
00:24:10,200 --> 00:24:13,040
Speaker 1: as we get through the current situation. With the current

432
00:24:13,200 --> 00:24:16,680
Speaker 1: situation and with the strength of New York City, what

433
00:24:16,880 --> 00:24:19,280
Speaker 1: is the Machowed plan? How do we get through this?

434
00:24:19,520 --> 00:24:22,800
Speaker 1: Verry icon Green at Berkeley made very clear he thinks

435
00:24:22,880 --> 00:24:26,760
Speaker 1: this moment we're going into of economic contraction and frankly,

436
00:24:26,920 --> 00:24:30,560
Speaker 1: challenges for banking is gonna be tougher than February March

437
00:24:31,080 --> 00:24:35,600
Speaker 1: in April. What's the Machowed plan to drive KBW forward? Well,

438
00:24:35,960 --> 00:24:39,080
Speaker 1: first of all, I don't necessarily share that belief that

439
00:24:39,400 --> 00:24:41,480
Speaker 1: that we're going to go back and retest where we

440
00:24:41,560 --> 00:24:44,600
Speaker 1: were in March. Um so I don't. And I think

441
00:24:44,760 --> 00:24:46,879
Speaker 1: remember too, I think you and I had talked to

442
00:24:46,960 --> 00:24:49,320
Speaker 1: because there are a lot of concerns that were were

443
00:24:49,320 --> 00:24:51,880
Speaker 1: going to do the global financial crisis all over again

444
00:24:51,960 --> 00:24:54,560
Speaker 1: with the banking industry. And I think, if anything, uh,

445
00:24:54,840 --> 00:24:57,800
Speaker 1: the American banks have demonstrated that a lot of the

446
00:24:57,880 --> 00:25:00,440
Speaker 1: reforms from Dodd Frank, while some of them more maybe

447
00:25:00,440 --> 00:25:03,240
Speaker 1: a little bit too onerous, they still worked, and that

448
00:25:03,359 --> 00:25:07,199
Speaker 1: the industry is plenty of capital and lots of liquidity. Uh.

449
00:25:07,359 --> 00:25:10,000
Speaker 1: So I think the banking industry is in good shape,

450
00:25:10,320 --> 00:25:13,560
Speaker 1: but by no means uh. And and clearly what I'm

451
00:25:13,600 --> 00:25:16,880
Speaker 1: hearing from the banking industry is that things are getting better.

452
00:25:17,080 --> 00:25:21,440
Speaker 1: Loan deferral requests have declined. Uh, They're feeling better about

453
00:25:21,560 --> 00:25:24,080
Speaker 1: credit quality generally, even though there's still a lot of

454
00:25:24,119 --> 00:25:27,639
Speaker 1: concern about hotels and other areas. But a lot of

455
00:25:27,680 --> 00:25:31,200
Speaker 1: the stimulus programs have been working. So it's not gonna

456
00:25:31,240 --> 00:25:34,560
Speaker 1: be easy. It's gonna be bumpy, But we're not in

457
00:25:34,680 --> 00:25:36,399
Speaker 1: the camp that we think that this is going to

458
00:25:36,520 --> 00:25:39,359
Speaker 1: roll over and get get really hard again. And and

459
00:25:40,440 --> 00:25:43,480
Speaker 1: and our plan is is UH to continue just to

460
00:25:43,840 --> 00:25:47,119
Speaker 1: stay focused to good research, make sure we've got communications

461
00:25:47,520 --> 00:25:50,080
Speaker 1: with our clients and that uh, you know, and that

462
00:25:50,240 --> 00:25:53,920
Speaker 1: we continue to be their form um as we Tom

463
00:25:53,960 --> 00:25:56,520
Speaker 1: one are the symbolisms of the lights to the sky.

464
00:25:58,000 --> 00:26:01,040
Speaker 1: I think it's Uh. First of all, I think it's

465
00:26:01,160 --> 00:26:04,879
Speaker 1: remarkable how much support there was for those lights. And

466
00:26:05,000 --> 00:26:08,840
Speaker 1: I think it's just another reminder. And what's beautiful about

467
00:26:08,880 --> 00:26:10,919
Speaker 1: it is that you can see it from so far away.

468
00:26:11,600 --> 00:26:14,679
Speaker 1: And I think it's a moment to think about thing

469
00:26:14,760 --> 00:26:17,760
Speaker 1: about those who lost their lives in that attack, and

470
00:26:17,920 --> 00:26:21,000
Speaker 1: an attack is exactly what it was, um, And I

471
00:26:21,080 --> 00:26:23,600
Speaker 1: think it's somewhat of a beacon to the heavens about

472
00:26:23,760 --> 00:26:26,199
Speaker 1: what New York is capable of doing and what our

473
00:26:26,240 --> 00:26:30,920
Speaker 1: country is capable of doing when really put to the test, Tom,

474
00:26:31,240 --> 00:26:34,040
Speaker 1: You know, from far from London, it feels like this

475
00:26:34,200 --> 00:26:37,240
Speaker 1: is a very different America. The way that the US

476
00:26:37,320 --> 00:26:40,399
Speaker 1: came together for eleven is not the same way that

477
00:26:40,560 --> 00:26:43,560
Speaker 1: the US is coming together for coronavirus. Why is the

478
00:26:43,680 --> 00:26:47,680
Speaker 1: USO splinter down? Well? Uh, First of all, I know

479
00:26:47,800 --> 00:26:50,480
Speaker 1: what I can speak to, which is the remarkable unity

480
00:26:50,600 --> 00:26:56,880
Speaker 1: following nine eleven, Uh and uh, and that was really remarkable.

481
00:26:57,720 --> 00:27:00,600
Speaker 1: I also can speak to some of the energy that

482
00:27:00,760 --> 00:27:04,720
Speaker 1: nine eleven created in the volunteer community for the follow up,

483
00:27:04,760 --> 00:27:07,320
Speaker 1: and I can speak to is what we're doing specifically.

484
00:27:07,440 --> 00:27:09,960
Speaker 1: For example, I'm a board member of something called nine

485
00:27:10,000 --> 00:27:13,960
Speaker 1: eleven Day, which is an organization that worked with Congress

486
00:27:14,040 --> 00:27:17,240
Speaker 1: to make nine eleven a national days service. We think

487
00:27:17,320 --> 00:27:21,359
Speaker 1: it's now today the biggest day of volunteer engagement during

488
00:27:21,400 --> 00:27:25,000
Speaker 1: the year in the country. Uh. And so this year

489
00:27:25,080 --> 00:27:29,240
Speaker 1: our focus is we're gonna be delivering forty thou meals

490
00:27:29,320 --> 00:27:33,600
Speaker 1: today in thirty cities to medical first responders and frontline

491
00:27:33,720 --> 00:27:37,640
Speaker 1: care workers UM and and it's an idea where where

492
00:27:37,720 --> 00:27:40,720
Speaker 1: we're going to not let not let the bad guys

493
00:27:40,800 --> 00:27:44,200
Speaker 1: frankly define what nine eleven is. And so the answer

494
00:27:44,240 --> 00:27:46,840
Speaker 1: to that question is we're working hard to make sure

495
00:27:46,880 --> 00:27:50,000
Speaker 1: that we haven't forgotten that spirit after nine eleven. And

496
00:27:50,040 --> 00:27:52,040
Speaker 1: while there will be ebbs and flows, and I wouldn't

497
00:27:52,200 --> 00:27:55,280
Speaker 1: I wouldn't underestimate America and our ability to pull together

498
00:27:55,359 --> 00:27:57,639
Speaker 1: when we really need to. So I wouldn't undermate it.

499
00:27:57,800 --> 00:28:00,680
Speaker 1: But but I think we'll work to You think that

500
00:28:00,800 --> 00:28:03,920
Speaker 1: you're coming together is the US? I mean, has it

501
00:28:04,080 --> 00:28:06,840
Speaker 1: changed or do you think that actually fundamentally this is

502
00:28:07,040 --> 00:28:09,960
Speaker 1: the same country now that it was nineteen years ago.

503
00:28:10,720 --> 00:28:13,400
Speaker 1: I I think that we've had a long too. That's

504
00:28:13,440 --> 00:28:16,199
Speaker 1: a very big and bold question. I think we've had

505
00:28:16,240 --> 00:28:18,560
Speaker 1: a two hundred year history of ebbs and flows. But

506
00:28:18,640 --> 00:28:21,640
Speaker 1: I think the fabric of the company country still remains

507
00:28:22,600 --> 00:28:25,680
Speaker 1: that there are don't don't underestimate the people who you

508
00:28:25,760 --> 00:28:28,439
Speaker 1: don't hear speaking up one way or other on the extreme,

509
00:28:28,480 --> 00:28:31,120
Speaker 1: because my things are as the majority of the country

510
00:28:31,600 --> 00:28:33,359
Speaker 1: wants to do the right thing and wants to be

511
00:28:33,480 --> 00:28:36,679
Speaker 1: unified and wants to see a great outcome for all

512
00:28:36,720 --> 00:28:39,120
Speaker 1: Americans and frankly for the world community to be a

513
00:28:39,160 --> 00:28:43,040
Speaker 1: little more peaceful like that. Thomas showed with us this

514
00:28:43,200 --> 00:28:46,320
Speaker 1: morning with KBW of course Keith pet and was an

515
00:28:46,360 --> 00:28:49,200
Speaker 1: of course, Tom. You know, this was a move that

516
00:28:49,280 --> 00:28:52,800
Speaker 1: was largely cheered by many people yesterday. It's the first

517
00:28:52,880 --> 00:28:55,920
Speaker 1: female in a top Wall Street job. Does it show

518
00:28:56,120 --> 00:28:59,320
Speaker 1: how much progress we've made or does it actually show

519
00:28:59,800 --> 00:29:02,840
Speaker 1: that there's a real lack of diversity because everyone cheered

520
00:29:02,880 --> 00:29:04,600
Speaker 1: it and she's one of the very few women at

521
00:29:04,640 --> 00:29:07,160
Speaker 1: the time. Well, first of all, uh, I think that

522
00:29:07,280 --> 00:29:09,640
Speaker 1: she's highly qualified for the job, and I think that's

523
00:29:09,680 --> 00:29:13,000
Speaker 1: the most important thing. Uh. She has played a senior

524
00:29:13,120 --> 00:29:16,680
Speaker 1: role in UH in the consumer businesses at City Group,

525
00:29:16,720 --> 00:29:19,800
Speaker 1: which is probably the most important business at City Group.

526
00:29:20,160 --> 00:29:24,080
Speaker 1: She's had international experience, she looks like she's highly qualified

527
00:29:24,360 --> 00:29:26,480
Speaker 1: and is the right person for the job. And also

528
00:29:26,560 --> 00:29:31,440
Speaker 1: I believe it was telegraphed. So I'm delighted that there's

529
00:29:31,480 --> 00:29:34,320
Speaker 1: a woman leading the leading a top bank in the country.

530
00:29:34,400 --> 00:29:37,080
Speaker 1: But I think the most important comment about Jane is

531
00:29:37,160 --> 00:29:39,920
Speaker 1: that she's got the skills, the background, and the talent

532
00:29:40,040 --> 00:29:42,040
Speaker 1: to have a good go at it as a CEO

533
00:29:42,120 --> 00:29:44,920
Speaker 1: of a really important banking company. Thomas shown on this

534
00:29:45,120 --> 00:29:49,080
Speaker 1: nine eleven, we have remembrances back nineteen years for Mr

535
00:29:49,200 --> 00:29:53,320
Speaker 1: Corbett and others. It is simply remembrances back what twelve

536
00:29:53,680 --> 00:29:56,920
Speaker 1: thirteen years. I want to review this now because there's

537
00:29:56,960 --> 00:30:00,680
Speaker 1: great criticism about the profitability of the bank. Thomas showed,

538
00:30:00,760 --> 00:30:03,520
Speaker 1: is it's safe to say was City Group that they're

539
00:30:03,600 --> 00:30:06,720
Speaker 1: lucky they're here right now because of the leadership and

540
00:30:06,840 --> 00:30:13,120
Speaker 1: management of Michael Corbett. I think that Michael Corbett paid

541
00:30:13,280 --> 00:30:16,800
Speaker 1: played an enormously important role at City Group, and I

542
00:30:16,960 --> 00:30:18,600
Speaker 1: agree with you, Tom, I think you got to turn

543
00:30:18,680 --> 00:30:21,440
Speaker 1: back the clock and look at where the thing where

544
00:30:21,520 --> 00:30:24,640
Speaker 1: he took over and and and I've been thinking about

545
00:30:24,680 --> 00:30:28,160
Speaker 1: why now because my firm and our analyst who follows

546
00:30:28,240 --> 00:30:30,920
Speaker 1: the company, and I think many were surprised that happened now,

547
00:30:31,600 --> 00:30:33,760
Speaker 1: But I think when they write the book on Michael

548
00:30:33,760 --> 00:30:35,920
Speaker 1: Corbett's period at City Group, they're going to see that

549
00:30:36,040 --> 00:30:39,600
Speaker 1: he he stabilized the bank, he built capital, he built

550
00:30:39,760 --> 00:30:43,480
Speaker 1: the built uh built liquidity in the bank. And while

551
00:30:43,720 --> 00:30:46,200
Speaker 1: City Group does lag many of its peers in terms

552
00:30:46,240 --> 00:30:50,440
Speaker 1: of valuation and profitability, but now I think I think

553
00:30:50,480 --> 00:30:53,760
Speaker 1: the question is what's next, And if somebody's at the

554
00:30:53,800 --> 00:30:57,400
Speaker 1: tail end of their career as CEO, it's hard to

555
00:30:57,480 --> 00:31:00,120
Speaker 1: set up what's next for the five next five. At

556
00:31:00,160 --> 00:31:02,720
Speaker 1: ten years, I believe Jane is fifty three boarding the

557
00:31:02,760 --> 00:31:05,160
Speaker 1: public sources, So you need a new CEO to do that.

558
00:31:05,200 --> 00:31:06,920
Speaker 1: And I think in that regard, the time is good.

559
00:31:07,080 --> 00:31:09,880
Speaker 1: And Tom, this is so important, folks that the heritage

560
00:31:09,880 --> 00:31:12,320
Speaker 1: of Keith Burutton Woods from Tucker Anthony you are all

561
00:31:12,400 --> 00:31:15,840
Speaker 1: Day and KBW and the roll ups of the nineteen

562
00:31:15,880 --> 00:31:18,120
Speaker 1: eighties and all that. Tom, I mean, do you just

563
00:31:18,280 --> 00:31:22,360
Speaker 1: anticipate that the way that City Group gets retail mass

564
00:31:22,640 --> 00:31:25,200
Speaker 1: is a reductive roll up of what we saw from

565
00:31:25,240 --> 00:31:29,640
Speaker 1: the nine eighties. I I don't. I think uh. I

566
00:31:29,720 --> 00:31:32,720
Speaker 1: think City Group is an internal improvement story. And I

567
00:31:32,840 --> 00:31:36,440
Speaker 1: think that if I were having a conversation with Jane now,

568
00:31:36,840 --> 00:31:40,440
Speaker 1: my my advice would be to really, City Group's got

569
00:31:40,520 --> 00:31:45,040
Speaker 1: a great footprint. They're a significantly important company, but but

570
00:31:45,160 --> 00:31:47,960
Speaker 1: they do lag in terms of profitability there Peers, and

571
00:31:48,080 --> 00:31:50,920
Speaker 1: I think continuing to focus on steps they can take

572
00:31:51,360 --> 00:31:55,360
Speaker 1: to improve it, to improve their performance. And look, the

573
00:31:55,560 --> 00:31:59,200
Speaker 1: digital era and banking is accelerating. The pandemic has been

574
00:31:59,320 --> 00:32:02,560
Speaker 1: driving that City Group has all the skills they can

575
00:32:02,640 --> 00:32:05,200
Speaker 1: to do that. In some ways, they don't have to

576
00:32:05,240 --> 00:32:08,920
Speaker 1: build branches across America. They can use digital engagement, which

577
00:32:08,960 --> 00:32:12,040
Speaker 1: they're very good at. And as they continue to hone

578
00:32:12,360 --> 00:32:15,080
Speaker 1: the profitability of the bank, I think there's an opportunity

579
00:32:15,120 --> 00:32:20,800
Speaker 1: to catch up with Peers. But but so you know, Tom, concretely,

580
00:32:20,920 --> 00:32:23,120
Speaker 1: what is it that Jane Fraser needs to do? Is

581
00:32:23,160 --> 00:32:26,480
Speaker 1: it is it just that it's the group is to unruly.

582
00:32:27,400 --> 00:32:30,920
Speaker 1: I think it's it's frankly, operating leverage. They need to

583
00:32:31,360 --> 00:32:33,760
Speaker 1: generate more earnings off the revenues that they have, and

584
00:32:33,800 --> 00:32:36,280
Speaker 1: I think that's pretty much it. So I think it's

585
00:32:36,320 --> 00:32:39,640
Speaker 1: gonna be. I really think that while there will be

586
00:32:39,880 --> 00:32:43,720
Speaker 1: offensive revenue, certainly opportunities for them, I think you're going

587
00:32:43,760 --> 00:32:46,920
Speaker 1: to see the real focus on the expense side of

588
00:32:47,000 --> 00:32:49,720
Speaker 1: the equation. And um, you know they One of the

589
00:32:49,840 --> 00:32:53,080
Speaker 1: things I think too about Michael Corbett is they finished

590
00:32:53,200 --> 00:32:55,320
Speaker 1: some time ago. I'm gonna get off the top of

591
00:32:55,360 --> 00:32:58,760
Speaker 1: my head, I think eighteen months months ago finished running

592
00:32:58,800 --> 00:33:02,720
Speaker 1: off city holdings, because you know, is a runoff business. Uh.

593
00:33:03,480 --> 00:33:07,880
Speaker 1: And I think there's gonna be a continued, relentless approach

594
00:33:07,960 --> 00:33:11,520
Speaker 1: on the expense side. Uh. And I think that's going

595
00:33:11,560 --> 00:33:14,080
Speaker 1: to be an important part of the equate Tomas showed

596
00:33:14,120 --> 00:33:16,480
Speaker 1: thank you for these important comments on this day of

597
00:33:16,720 --> 00:33:21,160
Speaker 1: remember it. Mr Machadas with km W a stifle Company.

598
00:33:21,520 --> 00:33:25,600
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

599
00:33:25,800 --> 00:33:31,080
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

600
00:33:31,160 --> 00:33:35,400
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before

601
00:33:35,440 --> 00:33:39,280
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg

602
00:33:39,360 --> 00:33:39,640
Speaker 1: Radio