Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jai Ley.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Right
Speaker 1: now on the September eleventh, as we spoke to Tomas
Speaker 1: showed of KBW earlier, we now speak with b MP
Speaker 1: Parry by USA, Jean Eve Phileng He joins us right now.
Speaker 1: We're thrilled that he could be with us today. Johnny.
Speaker 1: The commitment of b MP Parry bout in New York
Speaker 1: City has been steadfast. Give us your thoughts on this
Speaker 1: nineteenth anniversary of this tragedy. Thank you, Thank you hard
Speaker 1: for having me by the way today. I would like
Speaker 1: to stop this morning and really acknowledging the significance of
Speaker 1: today's date, remembering those were lost on September eleven, two
Speaker 1: thousand and one. UM, this is going to be forever
Speaker 1: in our memory and UH and obviously particularly in UH
Speaker 1: in New York City. Look, Johnny, if at the uniqueness
Speaker 1: of this in the pandemic, and that speaks to what
Speaker 1: every business is doing which is ear to the ground,
Speaker 1: trying to feel what business is doing. JP Morgan bringing
Speaker 1: sales and trading back headlining today, what would be the
Speaker 1: action of BMP Perry but in North America in the
Speaker 1: coming weeks. Well, you know, in my position, obviously safety
Speaker 1: of employees is my absolute priority. However, we've started, you know,
Speaker 1: returned to the office plan, but it's gradually it's faced in.
Speaker 1: We're using rotation and uh to give you a sense,
Speaker 1: at the peak of the pandemic, we were probably of
Speaker 1: the staff working from home. Today we're eight to five
Speaker 1: percent of the staff still working from home. I'm expecting
Speaker 1: this to stay probably the way it is Untilia end
Speaker 1: and with a reasss where the pandemic is early in Johnny,
Speaker 1: if let's talk about something that I guess it's hard
Speaker 1: to do, but let's pretend, just for the sake of
Speaker 1: this argument, this conversation, that the pandemic goes away. Perhaps
Speaker 1: we have a vaccine in the next twelve months and
Speaker 1: it's widely distributed. What do you think will change permanently
Speaker 1: for you operating in New York City. Well, I would
Speaker 1: say the remote working I believe, uh, it's going to
Speaker 1: be part of the new normal even under the scenario
Speaker 1: you just described, John, As you know, we've we've discovered
Speaker 1: we can be so effective serving clients communicating uh during
Speaker 1: the pandemic. By the way, make no mistakes, I miss
Speaker 1: the face to face interaction. I wish, by the way,
Speaker 1: like we always do, I would be with you in
Speaker 1: the studio in person, but it's here to stay. I
Speaker 1: see another trend in terms of smaller real estate footprints
Speaker 1: in the dance urban areas consequence of more digitalization and
Speaker 1: working from home. Are you see business traveling will be
Speaker 1: dramatically different as there already reassess you know, the need
Speaker 1: to really uh you know, travel around the world, even
Speaker 1: though I would love to host you are in Paris
Speaker 1: one of these days. And from my clients, UM, I
Speaker 1: see an interesting trend and it's been back on force,
Speaker 1: but particularly for the US clients that are more international,
Speaker 1: A really a real willingness to for realdomistication of supply chains.
Speaker 1: For economics, I would say, um, independence as well as
Speaker 1: you know, job creation reasons A lot to unpack their
Speaker 1: John Age. Let's just talk about things operationally very briefly.
Speaker 1: We've seen with debt issuance, for instance, that supplies just
Speaker 1: kept coming through even in the summer, and I guess
Speaker 1: that's an example that we can work from home and
Speaker 1: we can get that death supply way in an efficient way,
Speaker 1: even in August, and perhaps even in places like Europe
Speaker 1: as well. I just wonder from an operational standpoint, what
Speaker 1: you did find difficult working from home? What a bank
Speaker 1: found hard to do well? I would say what at
Speaker 1: BNP pied by. We were probably fortunate to be already
Speaker 1: very you know, very digital, but still you know too
Speaker 1: nobody was ready to have this amount of staff working
Speaker 1: from home, and it was a one investing in bandwidth,
Speaker 1: small lap tops and um and and making sure rationally uh,
Speaker 1: you know, activities like you know, trading and payments and
Speaker 1: and clearing would continue to be uh to to to
Speaker 1: to be fine. Another dimension of working from home is, uh,
Speaker 1: it's actually it's harder, you know, somewhere somewhat because it's
Speaker 1: chop chop shop. You don't have much time between meetings,
Speaker 1: and you know, some some of our staff you know,
Speaker 1: at times, you know, might have felt isolated, and we're
Speaker 1: here to provide the support and hopefully the psychological support. However,
Speaker 1: I think a significant part of my staff like the
Speaker 1: getting closer to the communities. Know, the main fear of staff,
Speaker 1: by the way, is public transportation coming to the office
Speaker 1: and making sure the office is safe here. And John
Speaker 1: to your point, another real investment we had to make,
Speaker 1: we all had to make, is to make the workplace safer,
Speaker 1: much more adapted to this new fare of working. Johnny,
Speaker 1: that's that's a really good description of the day to
Speaker 1: day challenges is people try to get back to work
Speaker 1: in this current environment. On a broader sense, you talk
Speaker 1: about the red domestication of supply chains, there's also this
Speaker 1: d globalization wave that's been enhanced and the tensions that
Speaker 1: have been exacerbated by the pandemic. Do you feel it
Speaker 1: being a French bank operating in the US. Obviously we
Speaker 1: do feel it most importantly for me or clients feel it.
Speaker 1: And um, you know b antipipis headquartered in France, but
Speaker 1: it's rereally European bank today. Then we we we obviously
Speaker 1: have to make sure we can support clients, help clients
Speaker 1: managing this uncertainty you just you just described, you know,
Speaker 1: an area of increased activity because of this uncertainty and unstability.
Speaker 1: At times, lactility has been a real high demand in
Speaker 1: terms of hedging, you know, protection strategies across rates, currencies, commodities,
Speaker 1: and equities. Going forward. There's also a question of the
Speaker 1: consumer strength versus the investment bank. John I was talking
Speaker 1: about the robust issuance of corporate debt record August for that.
Speaker 1: Do you expect the consumer to take on more of
Speaker 1: that as we do see this ongoing strength and consumer
Speaker 1: spending or do you think that those who are putting
Speaker 1: faith in that perhaps the JP Morgan's and the Golden
Speaker 1: Saccess of the world have gotten ahead of themselves. Well,
Speaker 1: I think that's that's a very important point and important
Speaker 1: question here. Well on on on the capital markets, by
Speaker 1: the way, you're right, it's it's been, uh, it's been.
Speaker 1: It's it's been amazing in terms of how active they've
Speaker 1: been across your mention earlier, you know, high yield, high
Speaker 1: grade across all asset classies CEO Seattle's infrastructure project finance. Um.
Speaker 1: The what I see still I see a contrast between
Speaker 1: the very active capital markets and what I would call
Speaker 1: the real economy and how consumer confidence and consumers spending
Speaker 1: is going to be evolving of the next few months.
Speaker 1: Is really going to be depending on what John was
Speaker 1: mentioning before, how the pandemic is being managed and how
Speaker 1: fast do we managed to get a vaccine? And I
Speaker 1: would say, and only making it work, but distributing it widely.
Speaker 1: And I think that the whole constumer dynamic dynamic will
Speaker 1: be there as BNP Pariba. And again my life keeps
Speaker 1: me very modest but or integrated diversified business model, you know,
Speaker 1: retail wholesale help us manage you know, the various factors
Speaker 1: and trends, you know, consumer investment, banking, corporate institutional uh
Speaker 1: that you know obviously have been fluctuating depending on day
Speaker 1: to day conditions. Johnny, if I think the Mackenzie have
Speaker 1: called this the great acceleration, and I just wanted from
Speaker 1: your standpoint where E. S G fits into that great acceleration?
Speaker 1: How much emphasis has been put on that in the
Speaker 1: last couple of months Moving forward, it's been you know,
Speaker 1: s G has been in the map already for many
Speaker 1: many years. We actually this year have exceeded the one
Speaker 1: trillion of you know, green bond systemability financing issuance around
Speaker 1: the world. Uh. The pandemic has been an accelerator, as
Speaker 1: you know, we've all probably better understand figured out the
Speaker 1: impact on our communities, health economies. And by the way,
Speaker 1: I've seen this trend both on the investor and issue side.
Speaker 1: B ANDP BNP piable one of the only ones, but
Speaker 1: we've been a pioneer in insistainable finance. Today we lead
Speaker 1: in the table rankings in terms of floans uh in
Speaker 1: terms of bonds, and we raised recently actually were one
Speaker 1: of the first banks to structure systemability link derivative. Then
Speaker 1: it's really been part of the product offering. And I
Speaker 1: think it's a trend that is going to be reinforcing
Speaker 1: itself over the of the weeks, in the month major
Speaker 1: I want to expressial here and as E s G
Speaker 1: on the s of E s G is actually taking
Speaker 1: more and more visibility. You know, on the social side,
Speaker 1: you've seen you know, COVID nineteen Waiste cubones becoming much
Speaker 1: more of a factor. Here. We at BNP actually underworld
Speaker 1: large transactions in Europe and in Latin America for you know,
Speaker 1: very committed supernationals, institutionals and even banks are getting into
Speaker 1: this this tream. We're lucky to have you on the
Speaker 1: program with us this morning. Johnny, Thank you Johnny's filly
Speaker 1: on US CEO. Thank you, sir, oh we care about
Speaker 1: on this September eleventh, and we are thrilled to have
Speaker 1: with this Michael Show market Field Asset Management. He's one
Speaker 1: of our most astute conversations on the view forward. Michael,
Speaker 1: give us your sense of enthusiasm to own equities right now?
Speaker 1: You know, it is kind of slip send some of
Speaker 1: the measures um that I think track older, older, more
Speaker 1: established investors that show plenty of skepticism, the AII being
Speaker 1: the clearest. You know, outflows some mutual funds and e
Speaker 1: T f UM you know, have been significant for the
Speaker 1: last few weeks, and yet at the same time very obviously,
Speaker 1: you know, the end of the summer saw of this
Speaker 1: mad rush into a limited pocket of the US equity market.
Speaker 1: I mean, just a crazy rush. I mean it's just interesting,
Speaker 1: to say the least, what will be the what will
Speaker 1: be the next catalyst? Do we go to the FED
Speaker 1: meeting here mid September. No, I think the FED has
Speaker 1: sort of taken itself out of the equation, you know,
Speaker 1: I think Al was very clear that Jackson Hole that
Speaker 1: that the FED is going to be following the current
Speaker 1: policy for the you know, for the foreseeable for the
Speaker 1: foreseeable future. Now, I think it's going to be more
Speaker 1: about the resilience, the internal resilience of the equity market itself,
Speaker 1: whether support at the fifty day, particularly for an ASDA
Speaker 1: one holds, you know, and if it does, and I
Speaker 1: think this is just a consolidation that goes on, you know,
Speaker 1: goes on and breaks to the upside at some point
Speaker 1: in Q four or you know, if that's fifty day
Speaker 1: gives way, then then you potentially have more internal selling
Speaker 1: fressure in the most popular parts of the US equity market,
Speaker 1: or we can get a broader rebound in this equity
Speaker 1: market and the leadership rotates to our swear. Michael, do
Speaker 1: you think we can establish that in the coming weeks
Speaker 1: and months? You know, I do because I I you look,
Speaker 1: it's only a five days sell off now, um, you know,
Speaker 1: so it's not really a very long one. But you
Speaker 1: know what is notable is is some things have not
Speaker 1: gone down. Most of the cyclical sectors in the US
Speaker 1: of sidestep this transportation, um, most of the industrials, a
Speaker 1: market like Japan, you know, which again is very sort
Speaker 1: of cyclical, has shown absolutely no interest in, you know,
Speaker 1: in this sort of mini in this mini correction. And
Speaker 1: I always think that not going down UM is the
Speaker 1: first sign that something is moving towards is moving towards leadership.
Speaker 1: So I think we do have some hints of that.
Speaker 1: I think, as they say, you know, for that stuff
Speaker 1: to break out, I think you need the nastack to
Speaker 1: be ranged found. I think if the nastac actually broke down,
Speaker 1: it does enough damage to people that that there's probably
Speaker 1: a you know, a temptation to generally liquidate UM. And
Speaker 1: then you be talking about relative performance by not going
Speaker 1: down as much as the overall market, which isn't quite
Speaker 1: as good as breaking out. Michael, what do you think
Speaker 1: the big distinction is between you and a long tech crowd? Um?
Speaker 1: You know, I think I think partly I've been wrong
Speaker 1: for a lot of years about estimated texts text opportunity,
Speaker 1: But I do think that that people have missed the
Speaker 1: degree to which be what I call the jewable goods
Speaker 1: economy globally has really been a beneficiary of this COVID
Speaker 1: crisis that the the the personal sector of the corporate
Speaker 1: sector has been forced or encouraged to spend significant amounts
Speaker 1: on on on on retooling itself. Um, that that is
Speaker 1: a I believe a sustainable, a sustainable change in behavior. Michael,
Speaker 1: how much do you change positioning ahead of the US election? Um?
Speaker 1: Not a great deal for for myself. I think whichever
Speaker 1: party gets control, Um, you know, isn't you know? I
Speaker 1: think there degrees of fiscal support, but I think both
Speaker 1: are going to be generally fiscal supportive. It's not that
Speaker 1: we have austerity versus spending between you know, between the
Speaker 1: two parties. And I don't think monetary policy changes a
Speaker 1: great deal. You know, we haven't yet seen the market
Speaker 1: show a clear preference if you went back to two
Speaker 1: thousand and sixteen. By now we knew of the market
Speaker 1: wanted Hillary Clinton to win and Trump to lose. Ironically,
Speaker 1: it changed its mind three hours after the election result.
Speaker 1: But but sen with a with a with an example
Speaker 1: of a very sort of politically driven equity market. You know,
Speaker 1: I think right now the non political factors are bigger
Speaker 1: than the political factors, which is kind of interesting considering
Speaker 1: the fact that a lot of people are indicating an
Speaker 1: increase in volatility bets around that November three election. When
Speaker 1: you talk about fiscal preference. Meanwhile, we're getting no fiscal
Speaker 1: deal whatsoever in Washington without really a sign that there's
Speaker 1: going to be one. How much of a sell off
Speaker 1: do you expect if we really get a breakdown and
Speaker 1: talks and does look very unlikely that we get anything
Speaker 1: out of the election. Well, you know, we still have
Speaker 1: a lot of monetary support. Um. And I think that
Speaker 1: part of the economy that is that is most affected
Speaker 1: by the failure to get a deal done is not
Speaker 1: that widely represented within you know, within the equity market.
Speaker 1: So so far the market has been patient. Um. I
Speaker 1: think there is a belief that something, you know, something
Speaker 1: will get done, and even without a stimulus still being done.
Speaker 1: You know. I think the extension to the debt ceiling
Speaker 1: means that, you know, we're not dealing with the kind
Speaker 1: of fiscal cliff risk that we had, you know, that
Speaker 1: we had several years ago. So I don't yet seaber
Speaker 1: market showing a great deal of you a great deal
Speaker 1: of concern about that. Yeah, I wonder. I wonder Michael,
Speaker 1: whether that's actually because of the data so far, that
Speaker 1: the data hasn't broken down and the recovery has continued.
Speaker 1: What would your read beyond that? Look, I think that's true. Um,
Speaker 1: I think that that, um, you know, I mean my
Speaker 1: view of the US economy is you have a labor
Speaker 1: market which is you know, back to the early teens
Speaker 1: and somewhere between two thousand and twelve and two thousand
Speaker 1: and fourteen, depending on which metric you look at, you know,
Speaker 1: with much much more fiscal support even without a new
Speaker 1: stimulus bill, and much much looser monetary policy than we have. So,
Speaker 1: you know, I really think that that the U. S
Speaker 1: economy has enough support without a new um, without a
Speaker 1: new without a new stimulus spill um. You know, as
Speaker 1: far as the equity market is concerned. Now, you may
Speaker 1: have social concerns that don't get addressed and need to
Speaker 1: you know, you know, need that money. But maybe you know,
Speaker 1: issues of genuine poverty and hardship, but that's not what
Speaker 1: drives the S and P five hundred. The S and
Speaker 1: P five hundred is not controlled by sociologists. It's controlled
Speaker 1: by investors, and they really have a different outlook on
Speaker 1: on what needs to get done. Michael Craig to catch up,
Speaker 1: stay well one your Michael Shower there of market Field
Speaker 1: Asset Management. Thank you, sir, thank you very much. Right
Speaker 1: now to give us an update on the economy, and
Speaker 1: maybe it is the resilience you give the American economic
Speaker 1: experience is Michael Faroli of JP Morgan his service to
Speaker 1: economics over the recent years has been absolutely extraordinary, particularly
Speaker 1: in the measurement of what our potential is. Michael Faroli,
Speaker 1: what is the potential GDP calculation of America given a pandemic?
Speaker 1: Is it possible to calculate that? So, like a lot
Speaker 1: of things, including inflation, right now, there's a lot of
Speaker 1: noise that it is going to take some time to
Speaker 1: let filter through before we get a better sense of
Speaker 1: how things are involving. Now. Has the pandemic affected trend
Speaker 1: growth in the US? UH? Perhaps? I think there's still
Speaker 1: quite a bit of debate about that. I think one
Speaker 1: of the easy things to say is that we've had
Speaker 1: a period of slower capital spending in the middle part
Speaker 1: of this year, which will hold back productivity growth. That said,
Speaker 1: capital spending, like many other aspects of alluate demand, is
Speaker 1: recovering pretty nicely in the third quarters. So that's why
Speaker 1: I think it's probably wise the whole judgment here, or
Speaker 1: at least a few more months to see where things
Speaker 1: settle before radically rechanging one's view of potential GDP growth. Mike,
Speaker 1: are you surprised by how balanced the inflation debate is
Speaker 1: right now? I would have expected overwhelmingly a consensus around disinflation,
Speaker 1: and that's not what we experience in any given day
Speaker 1: on this program. What are you experiencing in the conversations
Speaker 1: you're having? So, I do think most people that I
Speaker 1: speak with are on the distant are in the disinflationary
Speaker 1: or low inflation camp. But I think it's reasonable that
Speaker 1: there are going to be two sides this debate, because
Speaker 1: conceptually the pandemic is both a supply shock and a
Speaker 1: demand shock at the same time, and so at least
Speaker 1: from first principles, there's no necessary reason to think that
Speaker 1: one side or the other is going to hold this
Speaker 1: way here. I believe in part the reason I'm more
Speaker 1: in the disinflationary or low inflationary camp is that while
Speaker 1: the supply constraints were temporary, particularly concentrated in the second quarter,
Speaker 1: the slowness and the weakness and aggregate demand looks like
Speaker 1: it's going to be enduring for longer than that. In
Speaker 1: other words, the unemployment rate, while it's come down quote
Speaker 1: nicely in recent months probably will be elevated, we think
Speaker 1: for several quarters, and so that's why I think on
Speaker 1: net the evidence is going to lead us towards a
Speaker 1: low inflation outcomes for the next few years. The Federal
Speaker 1: Reserve Michael have said repeatedly that they've shifted the framework,
Speaker 1: the reaction function has changed. Have made the argument over
Speaker 1: the last twelve months tolerating car inflation is not the
Speaker 1: same as engineering car inflation. Are there any policy moves left, Mike, Uh,
Speaker 1: that's a great question. So you know, there are a
Speaker 1: few things they could do to bolster their recent move
Speaker 1: and their recent change in their framework. None of them
Speaker 1: are going to be home runs here. So they can
Speaker 1: obviously tell the market that they're not going to high
Speaker 1: rates until inflation gets above two, which is fine, will
Speaker 1: probably eventually do that. The market is not even pricing
Speaker 1: in hikes until to begin with, so it's not like
Speaker 1: this isn't like two thousand nine can where the market
Speaker 1: was really chopping at the bit to price rad hikes
Speaker 1: nine months in the future. Right now, I think the
Speaker 1: market has learned that lesson, so that well, that's that's
Speaker 1: good that the markets learning that lesson. It also reduces
Speaker 1: how much. Uh, these types of moves, by the fact,
Speaker 1: can really provide further fur the stingless Michael Faroli of
Speaker 1: JP Morgan And of course they're huge investment on Park
Speaker 1: Avenue and new facilities, their belief in New York City.
Speaker 1: Right now, many images here from a very different nineteen
Speaker 1: remembrance of September eleventh. Right now, Vice President Pence and
Speaker 1: Karen Pence walking into the ceremonies again very much pandemic affected.
Speaker 1: We just saw images of Vice President Biden and Dr
Speaker 1: Biden along with a former mayor of New York, Michael Bloomberg.
Speaker 1: I believe I saw a Governor Cuomo there as well.
Speaker 1: I must say, Lisa Brow, it's a little there's Vice
Speaker 1: President Biden. For those of you on radio, Uh, the
Speaker 1: images here are uh quite poignant, Lisa Bromo, it's for
Speaker 1: those on radio and t t V. It's just a
Speaker 1: whole lot harder to do this this year because of
Speaker 1: all those masks, especially when you look at the concept
Speaker 1: of mourning. When you look at the concept of resilience,
Speaker 1: usually it has to do with coming together, being face
Speaker 1: to face, being close, and that has been shattered by
Speaker 1: the pandemic. These images also raise a question about the recovery,
Speaker 1: and Michael Faroli, I do wonder what we're seeing with
Speaker 1: respect the recovery of the labor market. I don't think
Speaker 1: we made enough of yesterday's employment figures, the jobless filings
Speaker 1: that came in higher than expected, with the number of
Speaker 1: individuals receiving unemployment benefits actually increasing week over week. Michael,
Speaker 1: is this a significant data point that marks a turning,
Speaker 1: a sort of souring of the labor market that has
Speaker 1: been recovering at a pretty fast speed. So I think
Speaker 1: that's fair to UH. I think it's a fair response.
Speaker 1: One problem, though, is that these jobless benefit numbers, the
Speaker 1: weekly claims numbers, have been a bit skewed in recent
Speaker 1: months by issue use with processing of filings. UH, and
Speaker 1: a lot of those continuing claims that you mentioned is
Speaker 1: for this pandemic unemployment assistance program, which the reporting by
Speaker 1: the jobless claims numbers are reported by the fifty states
Speaker 1: and aggregated together, and how those states are reporting that
Speaker 1: has been not a very clean process. And so while
Speaker 1: on the face of it, I agree with you that
Speaker 1: it's not a it's not healthful indicator that we stalled
Speaker 1: in the progress we're seeing in those claims numbers. That
Speaker 1: hasn't been a perfect indicator in recent months. If we
Speaker 1: don't get another round of fiscal support, where will we
Speaker 1: end the year with respect to the unemployment rate? So
Speaker 1: we have something in the high sevens, I think without
Speaker 1: further fiscal support, that could be in the remain in
Speaker 1: the low aids. UH. That said, you know, look, I
Speaker 1: think the response that we're seeing in in Capitol Hill.
Speaker 1: You know, I wouldn't want to say fiscal policy is
Speaker 1: perfectly endogenous with respect to economic developments. But I think
Speaker 1: the fact that the economy has been performing well or
Speaker 1: better than expected, let's say over the summer months, may
Speaker 1: have reduced some of that urgency UH in Washington to
Speaker 1: deliver more stimulus. So I think we have to take
Speaker 1: the lack of stiulus or lack of progress in stingulas
Speaker 1: alongside with the better numbers together when we look at
Speaker 1: how the economy is evolving here as we go into
Speaker 1: the fall. Michael Ferrati writes a cash up Jpmugan Securities
Speaker 1: Chief US Economists. It is September eleven, and Thomas showed
Speaker 1: visits with us each year. Of course, his tour of
Speaker 1: duty at Keith Bury in Woods after their horrific moment
Speaker 1: of nineteen years ago. We're thrilled to Thomas showed could
Speaker 1: join us today and particularly please that he will stay
Speaker 1: with us and speak of the changes in banking here
Speaker 1: into this half hour as well. Thomas showed what a
Speaker 1: different September eleven this year. And to me, the pandemic
Speaker 1: also makes us almost remember the wonderful ceremony only we've
Speaker 1: seen for the previous eighteen years. Yes, it's uh, it's uh.
Speaker 1: There are a lot of similarities with h with I
Speaker 1: think really other crises that are going on with this pandemic.
Speaker 1: I mean, I think nine eleven, if it was anything,
Speaker 1: it was a story of resiliency, I think, both for
Speaker 1: my firm as well as for New York and the industry. Um,
Speaker 1: and here we are again right now with more challenges
Speaker 1: both you know, global recession as well as the pandemic.
Speaker 1: And and I'll tell you I over the years, over
Speaker 1: the nineteen years, there have been many times where there's
Speaker 1: been more challenges as we all know. And I'll never
Speaker 1: forget a story, uh that that happened. Uh during the
Speaker 1: global financial crisis. We had just had a senior meeting
Speaker 1: at the firm. I think it was after Fannie and
Speaker 1: Freddie had been put into conservatorship, and one of my
Speaker 1: colleagues came up to me and he said, Tom, I
Speaker 1: know this is a challenging time, and we just discussed
Speaker 1: how we're going to address it. But remember, we've seen
Speaker 1: what the end of the world looks like, and we
Speaker 1: know this isn't it. And frankly, when you feel about
Speaker 1: what happened on nine on eleven, how devastating that was,
Speaker 1: I think it's really built in some of the resiliency
Speaker 1: that's going to help New York and other other cities
Speaker 1: as we get through the current situation. With the current
Speaker 1: situation and with the strength of New York City, what
Speaker 1: is the Machowed plan? How do we get through this?
Speaker 1: Verry icon Green at Berkeley made very clear he thinks
Speaker 1: this moment we're going into of economic contraction and frankly,
Speaker 1: challenges for banking is gonna be tougher than February March
Speaker 1: in April. What's the Machowed plan to drive KBW forward? Well,
Speaker 1: first of all, I don't necessarily share that belief that
Speaker 1: that we're going to go back and retest where we
Speaker 1: were in March. Um so I don't. And I think
Speaker 1: remember too, I think you and I had talked to
Speaker 1: because there are a lot of concerns that were were
Speaker 1: going to do the global financial crisis all over again
Speaker 1: with the banking industry. And I think, if anything, uh,
Speaker 1: the American banks have demonstrated that a lot of the
Speaker 1: reforms from Dodd Frank, while some of them more maybe
Speaker 1: a little bit too onerous, they still worked, and that
Speaker 1: the industry is plenty of capital and lots of liquidity. Uh.
Speaker 1: So I think the banking industry is in good shape,
Speaker 1: but by no means uh. And and clearly what I'm
Speaker 1: hearing from the banking industry is that things are getting better.
Speaker 1: Loan deferral requests have declined. Uh, They're feeling better about
Speaker 1: credit quality generally, even though there's still a lot of
Speaker 1: concern about hotels and other areas. But a lot of
Speaker 1: the stimulus programs have been working. So it's not gonna
Speaker 1: be easy. It's gonna be bumpy, But we're not in
Speaker 1: the camp that we think that this is going to
Speaker 1: roll over and get get really hard again. And and
Speaker 1: and our plan is is UH to continue just to
Speaker 1: stay focused to good research, make sure we've got communications
Speaker 1: with our clients and that uh, you know, and that
Speaker 1: we continue to be their form um as we Tom
Speaker 1: one are the symbolisms of the lights to the sky.
Speaker 1: I think it's Uh. First of all, I think it's
Speaker 1: remarkable how much support there was for those lights. And
Speaker 1: I think it's just another reminder. And what's beautiful about
Speaker 1: it is that you can see it from so far away.
Speaker 1: And I think it's a moment to think about thing
Speaker 1: about those who lost their lives in that attack, and
Speaker 1: an attack is exactly what it was, um, And I
Speaker 1: think it's somewhat of a beacon to the heavens about
Speaker 1: what New York is capable of doing and what our
Speaker 1: country is capable of doing when really put to the test, Tom,
Speaker 1: You know, from far from London, it feels like this
Speaker 1: is a very different America. The way that the US
Speaker 1: came together for eleven is not the same way that
Speaker 1: the US is coming together for coronavirus. Why is the
Speaker 1: USO splinter down? Well? Uh, First of all, I know
Speaker 1: what I can speak to, which is the remarkable unity
Speaker 1: following nine eleven, Uh and uh, and that was really remarkable.
Speaker 1: I also can speak to some of the energy that
Speaker 1: nine eleven created in the volunteer community for the follow up,
Speaker 1: and I can speak to is what we're doing specifically.
Speaker 1: For example, I'm a board member of something called nine
Speaker 1: eleven Day, which is an organization that worked with Congress
Speaker 1: to make nine eleven a national days service. We think
Speaker 1: it's now today the biggest day of volunteer engagement during
Speaker 1: the year in the country. Uh. And so this year
Speaker 1: our focus is we're gonna be delivering forty thou meals
Speaker 1: today in thirty cities to medical first responders and frontline
Speaker 1: care workers UM and and it's an idea where where
Speaker 1: we're going to not let not let the bad guys
Speaker 1: frankly define what nine eleven is. And so the answer
Speaker 1: to that question is we're working hard to make sure
Speaker 1: that we haven't forgotten that spirit after nine eleven. And
Speaker 1: while there will be ebbs and flows, and I wouldn't
Speaker 1: I wouldn't underestimate America and our ability to pull together
Speaker 1: when we really need to. So I wouldn't undermate it.
Speaker 1: But but I think we'll work to You think that
Speaker 1: you're coming together is the US? I mean, has it
Speaker 1: changed or do you think that actually fundamentally this is
Speaker 1: the same country now that it was nineteen years ago.
Speaker 1: I I think that we've had a long too. That's
Speaker 1: a very big and bold question. I think we've had
Speaker 1: a two hundred year history of ebbs and flows. But
Speaker 1: I think the fabric of the company country still remains
Speaker 1: that there are don't don't underestimate the people who you
Speaker 1: don't hear speaking up one way or other on the extreme,
Speaker 1: because my things are as the majority of the country
Speaker 1: wants to do the right thing and wants to be
Speaker 1: unified and wants to see a great outcome for all
Speaker 1: Americans and frankly for the world community to be a
Speaker 1: little more peaceful like that. Thomas showed with us this
Speaker 1: morning with KBW of course Keith pet and was an
Speaker 1: of course, Tom. You know, this was a move that
Speaker 1: was largely cheered by many people yesterday. It's the first
Speaker 1: female in a top Wall Street job. Does it show
Speaker 1: how much progress we've made or does it actually show
Speaker 1: that there's a real lack of diversity because everyone cheered
Speaker 1: it and she's one of the very few women at
Speaker 1: the time. Well, first of all, uh, I think that
Speaker 1: she's highly qualified for the job, and I think that's
Speaker 1: the most important thing. Uh. She has played a senior
Speaker 1: role in UH in the consumer businesses at City Group,
Speaker 1: which is probably the most important business at City Group.
Speaker 1: She's had international experience, she looks like she's highly qualified
Speaker 1: and is the right person for the job. And also
Speaker 1: I believe it was telegraphed. So I'm delighted that there's
Speaker 1: a woman leading the leading a top bank in the country.
Speaker 1: But I think the most important comment about Jane is
Speaker 1: that she's got the skills, the background, and the talent
Speaker 1: to have a good go at it as a CEO
Speaker 1: of a really important banking company. Thomas shown on this
Speaker 1: nine eleven, we have remembrances back nineteen years for Mr
Speaker 1: Corbett and others. It is simply remembrances back what twelve
Speaker 1: thirteen years. I want to review this now because there's
Speaker 1: great criticism about the profitability of the bank. Thomas showed,
Speaker 1: is it's safe to say was City Group that they're
Speaker 1: lucky they're here right now because of the leadership and
Speaker 1: management of Michael Corbett. I think that Michael Corbett paid
Speaker 1: played an enormously important role at City Group, and I
Speaker 1: agree with you, Tom, I think you got to turn
Speaker 1: back the clock and look at where the thing where
Speaker 1: he took over and and and I've been thinking about
Speaker 1: why now because my firm and our analyst who follows
Speaker 1: the company, and I think many were surprised that happened now,
Speaker 1: But I think when they write the book on Michael
Speaker 1: Corbett's period at City Group, they're going to see that
Speaker 1: he he stabilized the bank, he built capital, he built
Speaker 1: the built uh built liquidity in the bank. And while
Speaker 1: City Group does lag many of its peers in terms
Speaker 1: of valuation and profitability, but now I think I think
Speaker 1: the question is what's next, And if somebody's at the
Speaker 1: tail end of their career as CEO, it's hard to
Speaker 1: set up what's next for the five next five. At
Speaker 1: ten years, I believe Jane is fifty three boarding the
Speaker 1: public sources, So you need a new CEO to do that.
Speaker 1: And I think in that regard, the time is good.
Speaker 1: And Tom, this is so important, folks that the heritage
Speaker 1: of Keith Burutton Woods from Tucker Anthony you are all
Speaker 1: Day and KBW and the roll ups of the nineteen
Speaker 1: eighties and all that. Tom, I mean, do you just
Speaker 1: anticipate that the way that City Group gets retail mass
Speaker 1: is a reductive roll up of what we saw from
Speaker 1: the nine eighties. I I don't. I think uh. I
Speaker 1: think City Group is an internal improvement story. And I
Speaker 1: think that if I were having a conversation with Jane now,
Speaker 1: my my advice would be to really, City Group's got
Speaker 1: a great footprint. They're a significantly important company, but but
Speaker 1: they do lag in terms of profitability there Peers, and
Speaker 1: I think continuing to focus on steps they can take
Speaker 1: to improve it, to improve their performance. And look, the
Speaker 1: digital era and banking is accelerating. The pandemic has been
Speaker 1: driving that City Group has all the skills they can
Speaker 1: to do that. In some ways, they don't have to
Speaker 1: build branches across America. They can use digital engagement, which
Speaker 1: they're very good at. And as they continue to hone
Speaker 1: the profitability of the bank, I think there's an opportunity
Speaker 1: to catch up with Peers. But but so you know, Tom, concretely,
Speaker 1: what is it that Jane Fraser needs to do? Is
Speaker 1: it is it just that it's the group is to unruly.
Speaker 1: I think it's it's frankly, operating leverage. They need to
Speaker 1: generate more earnings off the revenues that they have, and
Speaker 1: I think that's pretty much it. So I think it's
Speaker 1: gonna be. I really think that while there will be
Speaker 1: offensive revenue, certainly opportunities for them, I think you're going
Speaker 1: to see the real focus on the expense side of
Speaker 1: the equation. And um, you know they One of the
Speaker 1: things I think too about Michael Corbett is they finished
Speaker 1: some time ago. I'm gonna get off the top of
Speaker 1: my head, I think eighteen months months ago finished running
Speaker 1: off city holdings, because you know, is a runoff business. Uh.
Speaker 1: And I think there's gonna be a continued, relentless approach
Speaker 1: on the expense side. Uh. And I think that's going
Speaker 1: to be an important part of the equate Tomas showed
Speaker 1: thank you for these important comments on this day of
Speaker 1: remember it. Mr Machadas with km W a stifle Company.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg
Speaker 1: Radio