WEBVTT - The Weak Are Getting Found Out in Banking 0:00:00.600 --> 0:00:05.160 Hi Francine, Hi Dave. For a week you have had, 0:00:05.280 --> 0:00:07.440 I think, haven't you? Well, we've all had I feel like, 0:00:07.440 --> 0:00:10.360 what a month we just keep on talking about banks. 0:00:10.760 --> 0:00:13.800 Zoey Shnevis, who used to be our bureau chief in Switzerland, 0:00:13.880 --> 0:00:16.000 said it best, The Swiss are boring until they're not, 0:00:16.079 --> 0:00:19.160 until they're really not. Right now, front page news everywhere, 0:00:19.360 --> 0:00:22.200 and you have been zooming around and covering this story. 0:00:22.239 --> 0:00:24.480 And we could have tried to get someone from Switzer 0:00:24.560 --> 0:00:26.200 on this, but actually, who do we get in the 0:00:26.280 --> 0:00:27.960 end is someone we've been trying to get on this 0:00:28.000 --> 0:00:31.080 podcast since we started last year, I think. And it's 0:00:31.120 --> 0:00:33.120 like the perfect moment to have. I think Jim O'Neill, 0:00:33.159 --> 0:00:35.519 didn't you. Yeah, So when we started talking about the 0:00:35.520 --> 0:00:38.680 podcast about eight months ago, you and I Dave, we're 0:00:38.720 --> 0:00:42.360 talking about, Okay, who's the ideal economist who usually doesn't 0:00:42.360 --> 0:00:45.240 pull any punches, talks freely. And of course it was 0:00:45.280 --> 0:00:48.800 Jim O'Neil, former Gorman Sax economist who coined the acronym 0:00:48.800 --> 0:00:51.920 brick exactly. And you know he was right at the 0:00:51.920 --> 0:00:54.640 centry things in the last in the big financial crisis 0:00:54.680 --> 0:00:57.520 of two thousand and eight. He has been a policy advisor, 0:00:57.560 --> 0:00:59.880 has been in the government. Of course he's a Manchester 0:01:00.080 --> 0:01:05.200 Uniceed deal expert. All these things are sort of converging 0:01:05.240 --> 0:01:09.200 at the moment. So finally he said yes, that he 0:01:09.200 --> 0:01:19.839 had come in and talk to us. I'm Francie Laquas 0:01:20.160 --> 0:01:23.320 and I'm David Merritt. This is In the City, Bloomberg's podcast, 0:01:23.400 --> 0:01:25.720 connecting you to the conversations at the heart of the 0:01:25.760 --> 0:01:28.240 City of London, and this week we speak with former 0:01:28.280 --> 0:01:33.959 Conservative minister and Goldman Sachs chief economist Jim O'Neill. Jim O'Neill, 0:01:34.000 --> 0:01:37.240 the world famous economist who coined bricks Now the House 0:01:37.240 --> 0:01:41.600 of Lords? Is that me who ex Treasury minister was 0:01:42.040 --> 0:01:44.560 what else do you have on your TV? I'm the 0:01:44.680 --> 0:01:48.240 chair of Northern Guitztone, which is a actually probably the 0:01:48.280 --> 0:01:51.480 most fun thing I currently do, which is relatively new, 0:01:51.520 --> 0:01:53.640 and to do that invests in startups coming out of 0:01:53.680 --> 0:01:57.800 Northern universities. Do you miss being in banking? No, not 0:01:57.880 --> 0:02:01.280 in the slightest, particularly now right, I mean the sort 0:02:01.280 --> 0:02:04.760 of analytical bit about how the hell do we get 0:02:04.800 --> 0:02:09.080 out of this situation? I'd enjoy, in fact one of 0:02:09.120 --> 0:02:12.600 the great things about my time and it is because 0:02:12.639 --> 0:02:15.440 there were so many of those events. I often say 0:02:15.480 --> 0:02:17.400 one of the sort of few things I think I 0:02:17.560 --> 0:02:23.440 learned is how individuals. I think it's probably true bilder 0:02:23.480 --> 0:02:28.359 in life, but certainly in that world, how individuals responded 0:02:28.520 --> 0:02:33.000 during a crisis, and how the leadership of an institution 0:02:33.120 --> 0:02:36.840 responded would be the mark of how they did in 0:02:36.880 --> 0:02:39.919 the next era. In my view, I think it's true 0:02:39.919 --> 0:02:43.560 as certainly the best investors, but it's probably true of 0:02:43.600 --> 0:02:46.160 an organization as well. What do you mean, Jim, So 0:02:46.200 --> 0:02:48.760 if they accessed public money then they're in a better 0:02:48.760 --> 0:02:51.840 shape now or I mean it more in sort of 0:02:51.880 --> 0:02:57.919 culture and leadership and sort of thoughtfulness about how you respond, 0:02:58.240 --> 0:03:00.040 and I guess below it what are we in? I 0:03:00.080 --> 0:03:05.840 mean is you know crises will always happen despite the 0:03:05.880 --> 0:03:10.080 best intentions of policymakers, because at the end of the day, 0:03:10.160 --> 0:03:14.480 I think there were consequence of the at one end 0:03:14.680 --> 0:03:17.600 greed and at the other end fear and whatever. You know, 0:03:17.639 --> 0:03:20.400 And it's just human nature. But we all have these 0:03:20.520 --> 0:03:24.080 strange minds where we forget things, so nobody ever really 0:03:24.120 --> 0:03:27.520 thinks about that, although it's the reality. Then a crisis 0:03:27.560 --> 0:03:31.920 happens and most people kind of panic a bit. Typically 0:03:32.000 --> 0:03:37.120 people aren't being through them before and frequently don't make 0:03:37.680 --> 0:03:40.880 rational decisions about, you know, what's the right thing to 0:03:40.880 --> 0:03:43.040 do and what's going to happen. So ubs have had 0:03:43.080 --> 0:03:46.920 to bring back therefore Joe Motty, right, I saw that 0:03:46.920 --> 0:03:49.800 when I was walking in So if the all phone 0:03:49.880 --> 0:03:55.320 rang somebody saying we need would you would you? Would 0:03:55.320 --> 0:03:58.600 you take up the mental again? No, I have too 0:03:58.680 --> 0:04:03.280 much fun doing things I do. It's actually ten years 0:04:03.280 --> 0:04:06.680 ago in a pullet when I left Gorman, I promised 0:04:06.720 --> 0:04:10.640 myself that that I was leaving because it was a 0:04:10.720 --> 0:04:14.320 nice time to leave for me, and nobody really expects 0:04:14.400 --> 0:04:16.599 me to leave. And I sort of dreamt up this mantra, 0:04:16.720 --> 0:04:18.320 if it can't be better, it's got to be different 0:04:18.360 --> 0:04:21.080 about what I'd do, and I've kind of stuck to it. Really, 0:04:21.560 --> 0:04:24.400 But how would you fix banks right now? What's going 0:04:24.400 --> 0:04:27.160 on in the banking system right now? I mean to me, 0:04:28.040 --> 0:04:30.320 and I'm obviously I'm not in at twenty four seven 0:04:30.400 --> 0:04:33.479 like I used to be. But for my forty thousand 0:04:33.560 --> 0:04:38.960 feet I think it's revealed. One thing again that we 0:04:39.040 --> 0:04:43.240 always know is that whenever interest rates our eyes sharply, 0:04:43.920 --> 0:04:47.320 the week get found out. It is quite simple and 0:04:47.400 --> 0:04:51.560 quite remarkable how that theme just does repeat what's the 0:04:51.560 --> 0:04:54.240 great phrase history and never repeats itself, but it rhymes. 0:04:54.240 --> 0:04:57.719 I mean, in that instance it is I'm really reminded 0:04:57.720 --> 0:05:02.159 of my days at SBC before I went to government. 0:05:02.160 --> 0:05:05.280 We're in ninety four, the gang I was with him, 0:05:05.520 --> 0:05:08.440 just the research guys, but also some of the traders there. 0:05:08.800 --> 0:05:10.760 We were very confident that FED was going to start 0:05:10.880 --> 0:05:13.680 raising rights, and we thought we were such geniuses and 0:05:13.680 --> 0:05:16.760 blah blah blah, blah blah, and we got completely hosed 0:05:17.279 --> 0:05:20.159 because of the broader things with the bank's exposure to 0:05:21.120 --> 0:05:23.800 your bonds it was at the time. And it's just 0:05:23.880 --> 0:05:27.479 so difficult when that's happening, and that's at the core 0:05:27.560 --> 0:05:32.760 of this. And then but secondly, it's just so difficult 0:05:32.839 --> 0:05:38.159 for the regulators to treat every financial entity with the 0:05:38.279 --> 0:05:42.279 right approach. I think what seems to famous last words 0:05:42.560 --> 0:05:46.920 seems to be robust, which as a consequence of last time, 0:05:47.560 --> 0:05:50.240 is what the broadly put in place for big banks 0:05:51.440 --> 0:05:55.080 seems to be robust enough. But what they made a 0:05:55.160 --> 0:05:58.680 huge error on and for what I vaguely read, I 0:05:58.760 --> 0:06:01.279 think the Silicon Valley Bank guys played a bit of 0:06:01.279 --> 0:06:05.320 a naughty game. Is they deliberately kept their equity size 0:06:05.520 --> 0:06:09.839 below the number of where they become subjects a full 0:06:10.920 --> 0:06:15.400 serious regulatory focus. And that's obviously an hour of the regulators. 0:06:16.200 --> 0:06:18.240 So I think I'm assuming all of that will get changed. 0:06:18.360 --> 0:06:21.919 I think the Credit Swiss thing is slightly unique because 0:06:21.960 --> 0:06:24.360 obviously that is one of the thirty banks that was 0:06:24.400 --> 0:06:27.760 supposedly too big to fail, and it had the regulatory 0:06:27.839 --> 0:06:30.440 net and that, But I don't know. I mean, another 0:06:30.480 --> 0:06:33.760 oddity about this, which is a contrast to eight eight, 0:06:34.640 --> 0:06:37.479 is that because short rates are so high on government 0:06:37.560 --> 0:06:41.880 debt in the US and the UK, you know, for 0:06:41.920 --> 0:06:47.120 any rational person that has a bit of cash exposed 0:06:47.160 --> 0:06:49.920 in the bank that they don't need, you can basically 0:06:49.960 --> 0:06:52.240 get the same rate of return in two years or 0:06:52.360 --> 0:06:56.080 less government money. So what is the incentive right now 0:06:56.120 --> 0:06:58.120 to do anything other than put it in a government 0:06:58.200 --> 0:07:03.320 And that means that particularly for banks that aren't so 0:07:03.720 --> 0:07:05.920 strong in terms of deposit base, it's quite a lot 0:07:05.960 --> 0:07:08.360 of them are probably under the cosh as we speak. 0:07:08.760 --> 0:07:11.240 So we're going to see more in trouble or is 0:07:11.280 --> 0:07:13.480 this now contained? I mean, we have seen this mega 0:07:13.480 --> 0:07:16.800 deal in Switzerland try to contain the bleeding of the 0:07:16.840 --> 0:07:20.120 system there but an SEB obviously has been resolved. But then, 0:07:20.200 --> 0:07:22.400 I mean, the interest rate situation is what it is, right, 0:07:22.480 --> 0:07:25.400 So is there more to come? You know? I think 0:07:25.400 --> 0:07:27.880 if you if you go back over the whole of 0:07:27.920 --> 0:07:30.040 my career, you know, I don't. I don't think there's 0:07:30.040 --> 0:07:33.680 a magic solution. Monetary policy can't solve everything. It's a 0:07:33.680 --> 0:07:38.080 blunt instrument in that sense. And what is the prime 0:07:38.200 --> 0:07:41.360 job of the central banks? We've lived at for much 0:07:41.360 --> 0:07:45.480 of our generation, thinking it's to fight inflation, but every 0:07:45.520 --> 0:07:48.880 time there's a huge financial crisis, actually what their prime 0:07:48.960 --> 0:07:53.080 job is to ensure financial stability. And I think of 0:07:53.360 --> 0:07:56.320 what we've seen from them in the past three weeks, 0:07:56.560 --> 0:07:58.560 I think is actually pretty impressive in terms of the 0:07:58.720 --> 0:08:02.480 speed which they be outside, which of course is driven 0:08:02.480 --> 0:08:06.000 by what happened in OA, and it's very impressive. And 0:08:06.040 --> 0:08:08.720 I think that tells you that in the event of 0:08:09.080 --> 0:08:13.160 some further big problems that especially starts to threaten some 0:08:13.160 --> 0:08:17.080 of the big guys, you know, there'll be more hints 0:08:17.120 --> 0:08:22.280 of border deposit support that Janet Yellen clearly flirted with 0:08:22.480 --> 0:08:26.320 and then she backed off. But the interesting thing is 0:08:27.240 --> 0:08:31.960 because of the tricky to measure but probably important mechanism 0:08:32.080 --> 0:08:35.920 from those weekend banks that then curtail the lending. This 0:08:36.040 --> 0:08:38.240 might start doing some of the Fed's job and the 0:08:38.280 --> 0:08:41.560 Bank of England's job, another central banks job for them, right, 0:08:41.760 --> 0:08:44.400 so it stops the need for other eight acts. Yes, ortainly, 0:08:44.400 --> 0:08:47.199 if there's a credit crisis. When you look at our 0:08:47.280 --> 0:08:52.400 mobile apps, does it encourage bank runs? We had the 0:08:52.679 --> 0:08:55.600 City Group chief executives saying like, look, maybe regulation needs 0:08:55.600 --> 0:08:56.920 to look at this. So you have a lot of 0:08:56.920 --> 0:08:59.559 online fakes. We had the you know, I don't know 0:08:59.600 --> 0:09:02.520 if you the pope with a big puffer jacket that 0:09:02.640 --> 0:09:05.160 was a fake, you head. There's so much fakes and 0:09:05.160 --> 0:09:07.720 there's so much mobile app I think this is a 0:09:07.800 --> 0:09:10.760 perfect concoction. I think mobile phones have got a lot 0:09:10.800 --> 0:09:17.240 to answer for right for banks more broadly, so I'm 0:09:17.240 --> 0:09:19.640 still waiting for somebody to tell me why Facebook and 0:09:19.679 --> 0:09:24.280 Twitter or serve any useful purpose to society and more, 0:09:24.360 --> 0:09:26.040 you know more, if you look at it from a 0:09:26.120 --> 0:09:31.600 true macroeconomics perspective, We've we've had this staggering and I'm 0:09:31.600 --> 0:09:33.360 on the damn thing all day long as well. By 0:09:33.400 --> 0:09:35.760 the way, and we've had this stagging rise of this 0:09:36.559 --> 0:09:41.040 during a collapse of productivity in the Western world. And 0:09:41.559 --> 0:09:44.160 I think it's a quite relevant issue to focus on 0:09:44.200 --> 0:09:48.120 about the rise of AI, because what is the point 0:09:48.160 --> 0:09:50.960 of all these things? If they don't boost productiviously, why 0:09:51.000 --> 0:09:54.920 are they useful things for society? Please allowed banks to 0:09:55.480 --> 0:10:01.720 have runs in false circumstances, then clearly it's not. It 0:10:01.800 --> 0:10:05.880 also runs a record. See people to queue around the block, 0:10:06.120 --> 0:10:07.920 you have to get your place in the queue. Right 0:10:08.480 --> 0:10:11.720 in England it was a day, yeah, exactly, which we're 0:10:11.760 --> 0:10:14.440 very peace today, but so so. And you mentioned the 0:10:14.480 --> 0:10:16.960 speed of the regulators. But if everyone can pull their 0:10:16.960 --> 0:10:19.800 cash out in hours, you know, what can the regulators 0:10:19.800 --> 0:10:22.720 do to sort of catch That adds to the problems 0:10:22.720 --> 0:10:25.400 facing them. I mean, it's of course always so easy 0:10:25.400 --> 0:10:28.800 for people to criticize regulators, but that's one of the 0:10:28.840 --> 0:10:30.920 core things as to why it's so hard for them, 0:10:30.960 --> 0:10:34.800 because you know, quite rightly they've always got them all 0:10:34.880 --> 0:10:37.400 has an issue at the back of the minds. And 0:10:37.480 --> 0:10:41.040 if they certainly wouldn't have supported Silicon Bank as quickly 0:10:41.080 --> 0:10:43.840 as they did, that could have been a catastrophe for 0:10:44.960 --> 0:10:47.960 you know, normal human beings. Never mind all of us 0:10:48.400 --> 0:10:50.480 closeted people who have been in the world of finance. 0:10:50.920 --> 0:10:53.640 And in Britain there was some praise for the government 0:10:53.640 --> 0:10:56.200 about how they responded on the on the SVB situation. 0:10:56.240 --> 0:10:59.520 Over the weekend. They they brokered the deal with HSBC, 0:10:59.679 --> 0:11:03.520 and every one on Monday morning thought, look, Britain's regulators 0:11:03.559 --> 0:11:08.559 are working quite well. It's all quite neat. Is that 0:11:08.640 --> 0:11:11.440 something you listen? I managed people I know in the 0:11:11.520 --> 0:11:15.679 policy world myself saying exactly that I thought, And you 0:11:15.720 --> 0:11:18.280 know this has not been I'm a cross bencher by 0:11:18.320 --> 0:11:22.439 the way, so I'm at liberty to critical neutrals, so 0:11:22.480 --> 0:11:26.880 I can criticize or compliment anybody on the political side, 0:11:27.160 --> 0:11:30.600 and this government or this colum of government has not 0:11:30.720 --> 0:11:33.280 been that difficult to criticize in the past few years. 0:11:34.160 --> 0:11:37.520 But on this I thought that it was very impressive policy. 0:11:37.640 --> 0:11:41.240 The speed in which they reacted was very impressive, and 0:11:41.280 --> 0:11:44.760 I think they kind of you know, HSBC, it's probably 0:11:44.760 --> 0:11:47.760 a very very difficult thing to not do given the 0:11:47.800 --> 0:11:49.960 price to god it form. But is this the government 0:11:50.040 --> 0:11:52.160 or resist some woods at the Bank of England with 0:11:52.240 --> 0:11:56.800 Andrew Bailey the regulator. I think I think it's almost 0:11:56.800 --> 0:11:59.160 definitely all of them, and I think it's a flat 0:11:59.240 --> 0:12:02.840 it's a to doncal reflection of the character of this 0:12:03.000 --> 0:12:06.680 Prime Minister and that in that sense, I think we 0:12:06.800 --> 0:12:09.000 have a couple of adults in the room for the 0:12:09.040 --> 0:12:13.000 first time in a few years. You know, they might 0:12:13.040 --> 0:12:16.760 not be the most exciting personalities to lead a country 0:12:16.800 --> 0:12:19.360 in our chancellor as well, but I think it's a 0:12:19.360 --> 0:12:23.600 reflection of how they are as thinkers, because they wouldn't 0:12:23.679 --> 0:12:26.520 particularly wish because you know it was in finance, so 0:12:26.559 --> 0:12:29.559 it knows straight away. But I do something pretty sharp, 0:12:29.559 --> 0:12:33.079 but I think the Bank of England guys played a 0:12:33.120 --> 0:12:35.839 big welty And as you said, Jim, it's been years, 0:12:35.840 --> 0:12:39.320 hasn't it, since it's been possible or since I've heard 0:12:39.320 --> 0:12:42.560 people you know in your position experience for lavishing praise 0:12:42.640 --> 0:12:46.880 on the British government doesn't become so easy these days, 0:12:46.880 --> 0:12:49.680 sort of through clenched teeth. So so are you a 0:12:49.679 --> 0:12:52.480 bit more optimistic then for the reputation of Britain or 0:12:52.559 --> 0:12:55.400 at the City of London in general with this administration. 0:12:56.160 --> 0:13:02.720 I mean, it's such a subjective topic to talk about 0:13:02.720 --> 0:13:06.120 and so easy for the kind of crazy decisions this 0:13:06.240 --> 0:13:09.440 country has made in recent years to think that you know, 0:13:09.480 --> 0:13:13.720 the city's in trouble, but I'm sure from you and 0:13:13.760 --> 0:13:16.920 I over the years talks about this, we have some 0:13:17.080 --> 0:13:20.960 really basic, forty thousand feet unique advantages that are hard 0:13:21.000 --> 0:13:23.480 to get rid of. And because of the sheer history 0:13:24.840 --> 0:13:28.760 of financial markets and therefore the depth of what might 0:13:28.880 --> 0:13:32.720 loosely be called the talent pool, and our regulatory system 0:13:32.800 --> 0:13:37.880 and our legal system, it's pretty hard for anybody else 0:13:37.880 --> 0:13:40.680 in this time zone to get even close to the 0:13:40.800 --> 0:13:44.960 role that London can play in global finance. But you 0:13:44.960 --> 0:13:47.800 know we're we're chipping away at the edges, that's for sure. 0:13:47.880 --> 0:13:49.880 So what should the government do? And what if you 0:13:49.920 --> 0:13:52.959 had to give a report card to this government and regulators, 0:13:52.960 --> 0:13:57.079 what would it be Well on a tangential close tangent 0:13:57.200 --> 0:13:59.800 part of it. I am partly involved in aspects of 0:13:59.800 --> 0:14:02.560 this now because I was asked by Rachel Reeves to 0:14:02.679 --> 0:14:06.400 lead this so called Startup Review into the future of 0:14:07.320 --> 0:14:11.559 small businesses and new startups becoming successful, because it's a 0:14:11.640 --> 0:14:14.800 huge seeming dilemma in this country that we have all 0:14:14.840 --> 0:14:18.360 these brilliant universities and lots of great ideas, but we 0:14:19.000 --> 0:14:23.880 fail to develop seemingly too many lasting successful businesses out 0:14:23.920 --> 0:14:27.440 of them in the UK and so that was quite 0:14:27.560 --> 0:14:32.280 fun doing that. And I'm a big fan of those 0:14:32.320 --> 0:14:35.000 aspects of the so called Edinburgh reforms and they need 0:14:35.040 --> 0:14:39.440 to go further. It is bizarre how many assets are 0:14:39.640 --> 0:14:44.200 big pension fund and insurance companies hold and how little 0:14:44.200 --> 0:14:49.240 they invest in domestic risk assets. And we made a 0:14:49.320 --> 0:14:53.160 number of proposals which I think under a different government 0:14:53.160 --> 0:14:57.520 would be adopted. But as is the nature of parts 0:14:57.560 --> 0:15:01.240 of the Odd Way how politics seems to be conducted here, 0:15:02.200 --> 0:15:05.640 the incumbent government is also on the case about many 0:15:05.640 --> 0:15:08.040 of those same ideas. Now, whether it's because they thought 0:15:08.040 --> 0:15:10.000 of them themselves or they're like, as they've done with 0:15:10.040 --> 0:15:13.520 other things, just pinch what the opposition is saying. But 0:15:13.600 --> 0:15:16.640 so I think there's quite a lot of momentum to 0:15:16.760 --> 0:15:19.880 use the freedoms away from being in the EU, and 0:15:20.000 --> 0:15:25.000 to play around with solvency too, to allow, if not force, 0:15:25.480 --> 0:15:28.560 some more long term domestic investment, whether it be an 0:15:28.560 --> 0:15:33.760 infrastructure or scale ups, or to empower the British business. 0:15:33.760 --> 0:15:37.040 But that would be protectionism. Is that protectionism? If you 0:15:37.120 --> 0:15:40.440 force investment domestically, call it what you want. I mean, 0:15:40.600 --> 0:15:42.840 it's kind of what goes on in many parts of 0:15:42.880 --> 0:15:46.080 the world, and the US has always, from my experience, 0:15:46.160 --> 0:15:49.320 being so brilliant at this as being the leader of 0:15:49.440 --> 0:15:53.840 free markets, but being pretty clever subsidizing a lot of 0:15:53.840 --> 0:15:59.000 its technology businesses through homeland security for example, or through 0:15:59.040 --> 0:16:02.920 the defense spending. I mean, would Google and others have 0:16:03.000 --> 0:16:05.640 actually ever been what they are if it wouldn't have 0:16:05.680 --> 0:16:08.160 been for support from the US early government, early on. 0:16:08.400 --> 0:16:10.840 And to be honest, and I think it is necessary 0:16:10.880 --> 0:16:14.840 because if you look, you know, and again I spend 0:16:14.880 --> 0:16:16.440 lots of time on this because of all the stuff 0:16:16.440 --> 0:16:19.520 I'm doing around the North. But more broadly, if you 0:16:19.560 --> 0:16:24.560 look at Britain's biggest problem, which is low productivity and 0:16:24.640 --> 0:16:29.960 with it extremely persistently weak investment spending, we've got to 0:16:30.000 --> 0:16:33.480 do something about boosting investment spending, both from the governments 0:16:33.480 --> 0:16:37.120 itself but also on the incensives for the private sector. 0:16:37.560 --> 0:16:39.800 It does entail if you do that, and I'm sure 0:16:39.840 --> 0:16:42.760 some regulators now because of the banking issue, will try 0:16:42.760 --> 0:16:48.000 to It may raise fresh risk about the mark to 0:16:48.120 --> 0:16:51.920 market issues of how you know, because it's long term 0:16:51.960 --> 0:16:56.000 investing in risk assets is risky, but no risk, no return. 0:16:56.680 --> 0:17:00.800 How can you persuade the big pots money to invest 0:17:00.880 --> 0:17:02.560 or will take on more risk that sit in the 0:17:02.560 --> 0:17:05.399 city of London. I mean, you know, there's solvency two 0:17:05.560 --> 0:17:07.640 is one angle of this, of course, but how can 0:17:07.680 --> 0:17:11.960 we create more of an investment in risk culture in 0:17:12.000 --> 0:17:15.280 the city. I spend endless time on this, and it 0:17:15.359 --> 0:17:18.320 was it's the core feature of the Startup Review. But 0:17:18.520 --> 0:17:22.400 because of proposed and because the psychology of businesses will 0:17:22.520 --> 0:17:25.720 labor might win. So a lot of big business people, 0:17:25.880 --> 0:17:29.879 especially risk takers in the space, have been in touch 0:17:29.920 --> 0:17:31.960 with me, and so I'm thinking I'm spending a lot 0:17:31.960 --> 0:17:34.080 of time on this every week, and I think the 0:17:34.119 --> 0:17:38.000 real answer is because of the culture we have and 0:17:38.040 --> 0:17:40.040 how long some of these things have been going wrong. 0:17:40.600 --> 0:17:43.680 It's probably not that easy, you know. For the big, 0:17:43.800 --> 0:17:49.240 big institutional investment managers, particularly ones of a somewhat younger 0:17:49.280 --> 0:17:52.240 generation than me, they've been brought in a culture where dividend, 0:17:52.520 --> 0:17:56.160 dividend yields and guilts is all that they need to do. 0:17:56.920 --> 0:18:00.320 We've got to change the risk reward culture on that, 0:18:00.640 --> 0:18:03.919 and it will involve some possible cost, because who the 0:18:03.960 --> 0:18:05.760 hell is going to buy all these guilts if they're 0:18:05.800 --> 0:18:09.359 not buying as many, but we need to change the 0:18:09.440 --> 0:18:15.360 way their incentives work. So one way links to solvency too, 0:18:15.359 --> 0:18:17.719 which I think is going to happen, is you change 0:18:17.840 --> 0:18:21.160 the rule in which they account for long term liabilities 0:18:21.200 --> 0:18:24.960 to have it more sensitive to anything other than guilt yields, 0:18:25.359 --> 0:18:27.320 because when you're real it's more of the US model. 0:18:27.960 --> 0:18:30.040 I think it's more like the US model because when 0:18:30.119 --> 0:18:33.680 you certainly think back to it, and following the mad 0:18:33.800 --> 0:18:37.480 few weeks of Liz Trusts, you know, from my advantage 0:18:37.520 --> 0:18:40.679 point that disaster ended up being as bad as it 0:18:40.880 --> 0:18:45.320 was because we discovered that a large section of that 0:18:45.480 --> 0:18:49.040 crowd basically for the best part of a decade being 0:18:49.080 --> 0:18:52.960 taking hugely leveraged bets on guilts. And is that the 0:18:53.080 --> 0:18:57.080 right thing for our long term institutions to do? And 0:18:57.119 --> 0:19:01.040 I think the answer is no. We need people to 0:19:01.160 --> 0:19:04.280 be investing in things that will boost the country's long 0:19:04.400 --> 0:19:07.960 term growth performance and whether that including, by the way, 0:19:08.160 --> 0:19:12.880 more of them holding publicly quoted equities listed in the UK, 0:19:13.640 --> 0:19:16.680 because that's partly why nobody ever listed in the UK anymore, 0:19:16.720 --> 0:19:19.920 because there's no domestic investors and it becomes a bit 0:19:19.920 --> 0:19:23.520 of a vicious circle. In the days of when Maggie 0:19:23.640 --> 0:19:27.399 was first around, and we began to privatize some the 0:19:27.680 --> 0:19:31.240 endless state entities of the time before your time, I 0:19:31.359 --> 0:19:37.119 might suggest many many decades only the beginning of mine. 0:19:37.440 --> 0:19:41.639 It became known as cool sid where you would basically 0:19:41.800 --> 0:19:45.480 have a huge campaign aimed at, you know, anybody in 0:19:45.480 --> 0:19:48.640 the country about how good it was for the country 0:19:49.040 --> 0:19:52.120 for them to buy shares in BP or BP so 0:19:52.359 --> 0:19:54.080 one thing you could do in that you could have 0:19:54.160 --> 0:19:56.320 you know, on the I don't know what the pension 0:19:56.320 --> 0:19:58.680 schemes are here, but on many of these days you 0:19:59.200 --> 0:20:01.600 asked to you want to invest in? Do you want 0:20:01.600 --> 0:20:04.840 your pension to go into equity or dividend or you 0:20:04.840 --> 0:20:07.720 can add two more. You say, these are all ideas. 0:20:07.920 --> 0:20:09.560 Will they push it through? I mean, Dave and I 0:20:09.600 --> 0:20:11.360 spent a lot of time in saying, look, there's also 0:20:11.400 --> 0:20:13.520 the cost of living crisis. The government wants to be 0:20:13.560 --> 0:20:16.880 reelected like this could be low hanging fruit, but will 0:20:16.920 --> 0:20:19.040 they actually get it done if they have so much 0:20:19.040 --> 0:20:21.480 else to worry about. It seems to me that both 0:20:21.560 --> 0:20:26.879 mainstream political parties are working quite seriously on this stuff. 0:20:27.040 --> 0:20:32.480 And you know, the real answer to the cyclical, intense 0:20:32.560 --> 0:20:35.240 challenges with guys, we need to be able to grow 0:20:35.760 --> 0:20:38.320 boost the growth rate in a non inflationary way. But 0:20:38.359 --> 0:20:41.640 if you just put sticking plaster on solving the cost 0:20:41.680 --> 0:20:45.040 of living crisis in the way that generally is trying 0:20:45.040 --> 0:20:47.720 to be done, all that means is when you try 0:20:47.720 --> 0:20:49.520 and boost the growth rate again, you're going to go 0:20:49.640 --> 0:20:51.960 straight back into it. So you've got to be able 0:20:52.000 --> 0:20:55.040 to boost the capacity of the country to grow without 0:20:55.080 --> 0:20:58.680 generating inflation. And again it goes back to adults being 0:20:58.680 --> 0:21:01.280 in the room. If I look at some of the 0:21:01.359 --> 0:21:04.119 things they said in the budget, it's probably the most 0:21:04.200 --> 0:21:09.879 serious supply side boosting budget I've seen, certainly since the 0:21:09.920 --> 0:21:13.240 days of Osborne, and maybe a bit sorry George, maybe 0:21:13.240 --> 0:21:15.359 even a bit before, you know, on things to do 0:21:15.480 --> 0:21:18.560 again that I'm heavily involved in, on devolution and giving 0:21:18.600 --> 0:21:22.400 more powers to English regions, certainly the most serious stuff 0:21:22.400 --> 0:21:24.600 we've since since Osborne. You know, we might be just 0:21:24.680 --> 0:21:27.560 a year away from an election, and it sounds like 0:21:28.040 --> 0:21:30.919 you feel that the other side of the aisle and 0:21:31.080 --> 0:21:33.520 Rachel Reeves they're not going to be radically different in 0:21:33.600 --> 0:21:35.600 their approach to this. I mean, I think that's part 0:21:35.680 --> 0:21:38.520 of the intriguing thing here. If you you did one 0:21:38.520 --> 0:21:42.119 of those games where you sort of dubbed Rachel's voice 0:21:42.840 --> 0:21:45.840 with somebody else's in the Tory side and otherwise with 0:21:45.880 --> 0:21:48.159 the current chancellor, would you know the difference on a 0:21:48.280 --> 0:21:53.120 number of issues. Well, of course you would, because you're 0:21:53.200 --> 0:21:58.720 so savvy. But I think that I think in that sense, 0:21:58.800 --> 0:22:01.760 maybe we're coming a little bit about like towards the 0:22:01.800 --> 0:22:05.119 early nineces, and maybe there's a hint of board of things. 0:22:05.200 --> 0:22:07.000 You can see it a bit in other countries that 0:22:07.640 --> 0:22:10.320 some of the sort of lunatic fringe people of the 0:22:10.400 --> 0:22:14.200 past decade don't seem to be quite in the middle 0:22:14.200 --> 0:22:16.800 of the game anymore. But and so in that sense, 0:22:16.880 --> 0:22:19.320 I kind of quite welcome it. But you know, I don't. 0:22:19.720 --> 0:22:25.080 I've got to know the opposition leaders pretty well and 0:22:25.200 --> 0:22:30.280 I think they're quite credible. People have united yet, oh god, 0:22:30.320 --> 0:22:33.560 I knew? And for how married? What we want to ask? 0:22:33.640 --> 0:22:35.879 What do you mean? I don't know what you're talking about? 0:22:36.000 --> 0:22:44.919 Who's united? Yeah? What? What? I don't get about the 0:22:45.040 --> 0:22:48.119 core issue of that. So many people don't seem to 0:22:48.359 --> 0:22:52.919 understand that one billion pounds it's like an enormous amount 0:22:52.960 --> 0:22:56.960 of money. There's you know, never mind four or five. 0:22:57.280 --> 0:23:01.040 You know, so there is literally very as as this 0:23:01.240 --> 0:23:06.000 rather public That's a fascinating part of it. I've never 0:23:06.040 --> 0:23:10.840 come across a publicly quoted company having such such this 0:23:11.040 --> 0:23:14.879 game going on via in this get sports media to 0:23:15.040 --> 0:23:19.520 effectively try and boost the value of the asset. There 0:23:19.560 --> 0:23:23.480 must be some pretty fine issues about the whether the 0:23:23.520 --> 0:23:25.679 New York Stock Exchange should be having a look at that, 0:23:25.720 --> 0:23:29.000 because it's it's literally three months of this madness. But 0:23:29.200 --> 0:23:32.720