WEBVTT - Bloomberg Surveillance TV: July 16, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.920 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.360 Terminal and the Bloomberg Business app. David Malpas, the former 0:00:37.400 --> 0:00:39.760 World Bank President, joins us now from the R and 0:00:39.840 --> 0:00:42.960 C in Milwaukee, Wisconsin. David, it's always the wonderful to 0:00:43.000 --> 0:00:44.800 catch up with you, sir. Thanks for making time for 0:00:44.840 --> 0:00:46.960 us this morning. This is a man that you know 0:00:47.080 --> 0:00:49.239 quite well. Walk us through what we need to know 0:00:49.560 --> 0:00:52.680 and how you think this administration might change might be 0:00:52.720 --> 0:00:54.920 different to what we saw the first time around with 0:00:54.960 --> 0:00:55.600 Donald Trump. 0:00:58.240 --> 0:01:00.280 Hi, John, good to see you. World one day is 0:01:00.400 --> 0:01:03.040 high energy, so that's going to I think help. We 0:01:03.120 --> 0:01:06.840 need a lot of US leadership within the world. Another 0:01:06.920 --> 0:01:10.000 theme from last night that was very clear is the 0:01:10.040 --> 0:01:13.720 working person in America you know, I'm a nerd, So 0:01:13.840 --> 0:01:17.759 we talk about median income. Raising the median income. That's 0:01:17.800 --> 0:01:20.880 what I've worked for for forty years, and that means 0:01:21.120 --> 0:01:23.480 what's the wage of the people in the middle of 0:01:23.520 --> 0:01:25.759 the economy. How do you get it up? And there 0:01:25.800 --> 0:01:28.720 was a lot of talk, of course last night about manufacturing. 0:01:29.080 --> 0:01:32.360 Jd Vance is a great choice as you think about 0:01:32.600 --> 0:01:35.560 how do you get people in jobs in rural areas, 0:01:35.600 --> 0:01:39.679 in suburban areas that are manufacturing jobs that are making things. Again, 0:01:40.080 --> 0:01:46.679 that speaks directly to Michigan, to Ohio, to Wisconsin, to 0:01:46.760 --> 0:01:50.400 Minnesota and so on around. I'm from Michigan and manufacturing 0:01:50.480 --> 0:01:51.920 is a key part of the state. 0:01:51.920 --> 0:01:53.680 David, if I can match that with a conversation on 0:01:53.720 --> 0:01:55.680 Wall Street, just to get across the here, there are 0:01:55.720 --> 0:01:58.920 some conversations taking place about foreign exchange. You know Larry 0:01:58.960 --> 0:02:01.800 Kudlow than I do. We both know him well. Larry 0:02:01.840 --> 0:02:04.760 Kudlow would often talk about the strong dollar policy. You 0:02:04.760 --> 0:02:07.160 don't hear that so much from Senate events. Some might say, 0:02:07.280 --> 0:02:09.160 you hear the opposite. What do you think is going 0:02:09.200 --> 0:02:10.120 to change on that front? 0:02:13.040 --> 0:02:15.959 We saw in the platform that the US is going 0:02:16.000 --> 0:02:19.920 to protect the reserve currency status of the dollar. That 0:02:19.960 --> 0:02:22.760 means defend the dollar. You know, I use the phrase 0:02:22.800 --> 0:02:25.919 strong and stable dollar. That means fifty years from now, 0:02:25.960 --> 0:02:30.399 you will know that the US dollar is the stable 0:02:30.600 --> 0:02:33.520 store of value for the world. That's the best thing 0:02:33.560 --> 0:02:36.920 for manufacturing because you can make the new investments. I 0:02:36.960 --> 0:02:40.359 think the key is to create an environment where people 0:02:40.480 --> 0:02:45.400 want to invest in the US. There was the Teamsters 0:02:45.480 --> 0:02:49.200 Union had last night gave a really strong endorsement to 0:02:49.280 --> 0:02:54.560 President Trump talking about breaking the political caste system and 0:02:54.639 --> 0:02:58.200 creating an environment where people who are corporations wanted to 0:02:58.240 --> 0:03:01.800 be in America because they could here. That's going to 0:03:01.800 --> 0:03:05.000 be especially true of energy. You can create energy and 0:03:05.080 --> 0:03:10.000 mining huge value in the US, and that enables all 0:03:10.040 --> 0:03:13.240 of the manufacturing and the technology sectors of the country. 0:03:13.720 --> 0:03:15.880 What do you make of the mister Vance talking about 0:03:15.880 --> 0:03:19.160 and he's questioned j Powell about this as well, the 0:03:19.160 --> 0:03:22.120 fact that the reserve currency status of the US dollar 0:03:22.280 --> 0:03:24.800 worries him and the lack of control we have our 0:03:24.840 --> 0:03:27.560 own currency. Does that bode with some of the members, 0:03:27.560 --> 0:03:30.919 as Jonathan was saying, in the former Trump administration, like Carrot, 0:03:31.040 --> 0:03:32.120 Larry Kudlow. 0:03:35.160 --> 0:03:37.880 I think the FED made big mistakes. You know I've 0:03:37.920 --> 0:03:40.400 been reading about I've been writing about that in the 0:03:40.400 --> 0:03:43.720 Wall Street Journal for well over a decade. The idea 0:03:43.720 --> 0:03:47.200 of having zero percent interest rates didn't defend the dollar, 0:03:47.280 --> 0:03:50.000 and it didn't work for getting investment into the US. 0:03:50.280 --> 0:03:53.800 So you can have a much stronger policy from the 0:03:53.800 --> 0:03:56.800 Federal Reserve. I think that's some of what people are 0:03:56.840 --> 0:03:59.200 getting at that the Fed needs to be talking about 0:03:59.240 --> 0:04:03.360 production in the US as a way to bring down inflation, 0:04:03.720 --> 0:04:06.760 and that will bring down interest rates. So I think 0:04:06.800 --> 0:04:10.120 there is a huge complaint right now that interest rates 0:04:10.120 --> 0:04:12.480 are the only tool being used to try to bring 0:04:12.520 --> 0:04:15.280 down inflation. That's not the right way to go at it, 0:04:15.520 --> 0:04:18.679 and it means that the little guys, small businesses across 0:04:18.720 --> 0:04:22.080 the country are feeling the pain. The interest rates are 0:04:22.120 --> 0:04:25.719 too high for small businesses, and it's feeding into the 0:04:25.800 --> 0:04:27.600 concentration of wealth at the top. 0:04:28.000 --> 0:04:29.640 David, I just want to understand that. Just give me 0:04:29.680 --> 0:04:31.839 some more color. How are you thinking about the Federal Reserve? 0:04:31.920 --> 0:04:35.000 Are you saying they need newer tools, more tools, or are 0:04:35.000 --> 0:04:38.440 you saying the emphasis should be elsewhere in Congress? 0:04:41.279 --> 0:04:45.359 They have lots of tools. They have regulatory, regulatory tools 0:04:45.600 --> 0:04:48.760 that really affect how lending is done within the country, 0:04:48.960 --> 0:04:51.919 they're not doing it in order to in order to 0:04:51.960 --> 0:04:55.480 help small businesses. They need to be thinking about that. Also, 0:04:55.680 --> 0:05:00.000 the tradeoff between the balance sheet and the interest rates, 0:05:00.360 --> 0:05:02.880 I think can be done in a more effective way. 0:05:03.200 --> 0:05:05.359 They don't need to be owning all the bonds of 0:05:05.400 --> 0:05:09.000 the US government. They're helping. How is it that we're 0:05:09.000 --> 0:05:12.000 in this environment where central banks buy the bonds of 0:05:12.040 --> 0:05:16.000 their governments and that enables big government spending. So you 0:05:16.040 --> 0:05:18.839 can change that in a way that's very pro growth, 0:05:19.160 --> 0:05:22.400 and I think that also plays into making the dollar 0:05:22.520 --> 0:05:25.720 the reserve currency of the world. China is looking at 0:05:25.760 --> 0:05:28.240 it saying it sure looks to us like the United 0:05:28.240 --> 0:05:31.520 States has lost its way. It's cha chasing its tail, 0:05:32.160 --> 0:05:35.680 and that can be fixed, I think pretty quickly by 0:05:35.720 --> 0:05:39.760 communicating clearly that you want a strong, independent FED that 0:05:40.040 --> 0:05:44.039 is talking about the actual needs of the country as 0:05:44.040 --> 0:05:46.960 a way to bring down inflation and bring down interest rates. 0:05:47.120 --> 0:05:49.640 David, you just sounded like you were saying that you 0:05:49.680 --> 0:05:52.159 think they should accelerate the balance sheet roll off and 0:05:52.160 --> 0:05:54.120 get out of the treasury business. And I'm trying to 0:05:54.160 --> 0:05:56.800 sort of match that up with the prospect of extending 0:05:56.839 --> 0:05:59.680 the tax counts of twenty seventeen. How do you do 0:05:59.720 --> 0:06:02.000 both those things at the same time. You know financial 0:06:02.000 --> 0:06:04.080 markets better than most What was that going to look like? 0:06:06.920 --> 0:06:09.640 They all go together and they actually work toward growth. 0:06:09.720 --> 0:06:12.400 I think if the if they would shrink the balance sheet. 0:06:12.640 --> 0:06:15.960 Remember the balance sheet has two sides, assets and liabilities. 0:06:16.160 --> 0:06:19.000 The liabilities that the FED is using to hold all 0:06:19.040 --> 0:06:22.920 those bonds is short term liabilities. They have this giant 0:06:23.400 --> 0:06:27.000 leverage to trade on that's lost a huge amount of money, 0:06:27.000 --> 0:06:30.479 maybe a trillion dollars of losses from that trade. They 0:06:30.520 --> 0:06:32.840 should they can let it run off in a way 0:06:32.839 --> 0:06:36.320 that puts money through the financial through the private sector, 0:06:36.560 --> 0:06:39.719 so it actually gets to small businesses. Think how better 0:06:39.800 --> 0:06:42.839 the environment would be if we had lower short term 0:06:42.880 --> 0:06:46.160 interest rates? And that that I think can be achieved 0:06:46.360 --> 0:06:49.880 by talking about growth, about the dollar, defending the dollar, 0:06:50.000 --> 0:06:53.560 and about about having more investment in the US, you'd 0:06:53.560 --> 0:06:56.640 have more confidence in the in the country and in 0:06:56.680 --> 0:06:59.400 the future. And that really was the theme at the 0:06:59.440 --> 0:07:00.600 convention yesterday. 0:07:00.800 --> 0:07:03.839 You clearly have a very clear policy preference, David. I 0:07:03.920 --> 0:07:05.520 just wondered you have a clear preference on who you 0:07:05.560 --> 0:07:07.599 would like to run the federal Reserve. 0:07:10.760 --> 0:07:15.800 Oh no, that's not so much the issue as the policies. 0:07:15.840 --> 0:07:20.000 We need good people in strong positions in order to 0:07:20.040 --> 0:07:22.600 turn the country around. I've written a lot about the 0:07:22.640 --> 0:07:26.760 need for a full upheaval of policy thinking, and especially 0:07:26.800 --> 0:07:29.840 the models at the FED. You know, they're still basically 0:07:29.920 --> 0:07:32.920 operating under the Phillips curve model that in some way 0:07:32.960 --> 0:07:36.400 you have to have unemployment in order to bring inflation down. 0:07:36.680 --> 0:07:39.400 And I think that can be switched around to say, look, 0:07:39.560 --> 0:07:42.040 if we have more people working, you're going to get 0:07:42.080 --> 0:07:44.240 lower prices and lower interest rates. 0:07:44.560 --> 0:07:46.440 One of the bad things about TV, David is you 0:07:46.520 --> 0:07:47.960 run out of time, and this is one of those 0:07:48.000 --> 0:07:50.160 conversations where I needed an extra thirty minutes to get 0:07:50.160 --> 0:07:52.040 more clarity from you. David. Let's do it again soon. 0:07:52.200 --> 0:07:54.560 Thanks for making sign for David Malpasta, a former World 0:07:54.600 --> 0:08:07.320 Bank president. This is two New York Congressman Mike Lauda 0:08:07.360 --> 0:08:11.240 and Richie Taurus are introducing bipartisan legislation that would increase 0:08:11.280 --> 0:08:15.640 protection for presidential candidates Trump, Biden and Robert Kennedy. Junior 0:08:15.840 --> 0:08:18.480 Police have said that joining us now is Republican Congressman 0:08:18.640 --> 0:08:21.120 Mike Lawla Congressman. Thanks for sharing some of your time 0:08:21.160 --> 0:08:23.480 this morning, particularly how busy things have been for you 0:08:23.520 --> 0:08:25.680 over the last couple of days following the events of 0:08:25.760 --> 0:08:28.960 Saturday evening. Can you walk us through just the content 0:08:29.040 --> 0:08:31.360 of your bill and the kind of changes that you'd 0:08:31.400 --> 0:08:32.840 like to see. 0:08:34.760 --> 0:08:37.920 Well, we're working through the logistics right now and plan 0:08:38.000 --> 0:08:42.080 to introduce this week. But the intention here is to 0:08:42.240 --> 0:08:47.720 ensure that President Trump, President Biden, and RFK Junior, whose 0:08:47.760 --> 0:08:55.200 family has twice been victim of political assassination, have enhanced security. Obviously, 0:08:55.320 --> 0:08:59.960 as more information is uncovered about the events on Saturday 0:09:00.000 --> 0:09:05.840 to day, it raises serious questions about, you know, what 0:09:06.040 --> 0:09:10.360 level of security the former president had. The fact that 0:09:10.679 --> 0:09:15.079 a armed shooter was able to get on a roof 0:09:15.200 --> 0:09:18.720 with a clear line of sight at the former president 0:09:18.840 --> 0:09:23.839 and get a shot off that went through Donald Trump's ear. 0:09:24.520 --> 0:09:27.520 But not for the grace of God, we'd be having 0:09:27.559 --> 0:09:31.440 a very different conversation right now. So, you know, the 0:09:31.520 --> 0:09:34.640 fact that this was able to happen, There's been lots 0:09:34.679 --> 0:09:37.960 of questions about, you know, the lack of resources, the 0:09:38.040 --> 0:09:41.120 lack of air support, if you will, as well as 0:09:41.240 --> 0:09:45.400 the use of drone technology. You know, lots of questions 0:09:45.440 --> 0:09:51.400 being raised that require immediate and serious answers, and this 0:09:51.480 --> 0:09:54.520 cannot be a you know, cover your own ass situation. 0:09:54.720 --> 0:09:59.480 This has to be a full and transparent investigation into 0:09:59.520 --> 0:10:03.400 what happened and why it happened, and how to ensure 0:10:03.400 --> 0:10:07.440 that this never happens again. Our elections must be determined 0:10:07.520 --> 0:10:09.520 by votes at a ballot box, not. 0:10:09.520 --> 0:10:11.040 By violence at a rally. 0:10:11.400 --> 0:10:15.240 And obviously, the Secret Service has a responsibility to ensure 0:10:15.280 --> 0:10:18.000 the safety and well being and this cannot be a 0:10:18.080 --> 0:10:23.680 question of expense or resources. The federal government has a 0:10:23.760 --> 0:10:27.440 responsibility to ensure the safety and well being of these 0:10:27.480 --> 0:10:32.800 candidates and to ensure that every resource necessary is available 0:10:32.800 --> 0:10:33.120 to them. 0:10:33.240 --> 0:10:36.079 Congressman, I think many of your colleagues on the other 0:10:36.280 --> 0:10:38.360 side of the aisle also agree with you. But just 0:10:38.400 --> 0:10:40.719 from a logistical point of view, how quickly can this 0:10:40.760 --> 0:10:44.080 bill get passed and then we actually see those resources 0:10:44.160 --> 0:10:44.720 hit the ground. 0:10:48.000 --> 0:10:51.439 Look, obviously this is a question for leadership on getting 0:10:51.480 --> 0:10:55.560 this bill to the floor as quickly as possible. I'm 0:10:55.920 --> 0:10:59.760 heartened to see that the binding Administration did move yesterday 0:10:59.760 --> 0:11:05.040 to get give RFK Secret Service protection after many months 0:11:05.040 --> 0:11:10.680 of him requesting it, and obviously the head of the 0:11:10.679 --> 0:11:13.760 Secret Service saying that there's going to be immediate changes 0:11:14.600 --> 0:11:19.760 with respect to President Trump's detailed butt. We need to 0:11:19.800 --> 0:11:23.320 make sure as a Congress that we are ensuring that 0:11:23.360 --> 0:11:26.600 the resources are there both financially and that there is 0:11:26.760 --> 0:11:32.800 more stringent requirement on providing this security. I mean, it 0:11:32.840 --> 0:11:36.600 shouldn't have taken a shooting on Saturday for them to 0:11:36.679 --> 0:11:40.960 realize that President Trump needed enhanced security and that RFK 0:11:41.240 --> 0:11:42.840 Junior should have security. 0:11:43.600 --> 0:11:44.360 That should have been. 0:11:44.280 --> 0:11:48.840 A no brainer in this heightened political environment in which look, 0:11:48.880 --> 0:11:53.360 we're a deeply divided country and obviously we've seen incidents 0:11:53.400 --> 0:11:58.360 in recent years, attacks on members of Congress, threats against 0:11:58.400 --> 0:12:03.320 sitting governors, violence against the former speaker's husband. 0:12:04.320 --> 0:12:05.160 So this is. 0:12:05.160 --> 0:12:09.480 Critical in this moment that we recognize the seriousness of 0:12:09.520 --> 0:12:13.120 this the threat, and that Congress acts both in terms 0:12:13.200 --> 0:12:17.840 of ensuring the support financially and otherwise for the Secret Service, 0:12:17.880 --> 0:12:23.040 as well as these congressional investigations that are going to 0:12:23.080 --> 0:12:26.840 get underway next week when we get back to Washington. 0:12:27.040 --> 0:12:29.960 Congressman, given we are deeply divided country at the moment. 0:12:30.120 --> 0:12:34.560 Following that assassination attempt, the now VP pick of President 0:12:34.559 --> 0:12:38.400 Trump said that this had ties back to Biden. Do 0:12:38.440 --> 0:12:41.680 you think that kind of rhetoric is appropriate coming from 0:12:41.840 --> 0:12:42.960 the VP candidate. 0:12:45.760 --> 0:12:49.360 Well, first of all, the investigation obviously is underway. We 0:12:49.440 --> 0:12:53.719 don't yet know the motivation of the shooter, and that 0:12:53.760 --> 0:12:55.920 will come out in due time, and we should allow 0:12:55.960 --> 0:13:00.120 that process to play itself out. I think what you 0:13:00.120 --> 0:13:04.080 know the vice presidential nominee was alluding to in his 0:13:04.160 --> 0:13:08.880 comments is the continued assertion that Donald Trump is a 0:13:08.960 --> 0:13:11.559 threat to democracy or a fascist, or that if he 0:13:11.840 --> 0:13:16.160 somehow wins in November, that therefore American democracy is going 0:13:16.200 --> 0:13:16.680 to end. 0:13:17.040 --> 0:13:17.840 Is destructive. 0:13:18.200 --> 0:13:21.720 It's destructive to our country. It undermines our democracy, it 0:13:21.800 --> 0:13:24.400 undermines our electoral process. 0:13:24.200 --> 0:13:24.920 And should stop. 0:13:25.600 --> 0:13:28.600 And I think all of us can recognize the need 0:13:29.040 --> 0:13:33.839 to bring down the temperature several notches to look at 0:13:33.880 --> 0:13:38.120 the rhetoric that is being used. Both Republicans and Democrats 0:13:38.160 --> 0:13:44.400 have a responsibility here in this moment of heightened political disagreement, 0:13:44.960 --> 0:13:49.640 that we really recognize the importance of the moment. 0:13:50.840 --> 0:13:51.559 As I said. 0:13:51.400 --> 0:13:54.800 Before, our election should always be determined by votes at 0:13:54.800 --> 0:13:58.240 a ballot box, not by violence at a rally, and 0:13:58.600 --> 0:14:03.040 all of us have a responsibilit to understand that words matter, 0:14:03.400 --> 0:14:09.600 Our rhetoric can at times cause harm, and we need 0:14:09.640 --> 0:14:12.520 to be clear that we're not going to tolerate it. 0:14:12.679 --> 0:14:18.160 And I think what the vice presidential nominee was alluding 0:14:18.160 --> 0:14:21.600 to in that is that, you know, the continued effort 0:14:21.680 --> 0:14:25.000 to somehow say that Donald Trump getting elected is going 0:14:25.040 --> 0:14:28.520 to destroy our democracy needs to stop and representative. 0:14:28.560 --> 0:14:31.400 I mean to be clear, this was of course shocking 0:14:31.440 --> 0:14:34.680 events over the weekend and deeply disturbing to anyone, but 0:14:34.760 --> 0:14:37.200 it is not the only case of political violence. 0:14:37.280 --> 0:14:38.600 You only need to look back. 0:14:38.360 --> 0:14:41.360 Over the past few years, whether it be the insurrection 0:14:41.520 --> 0:14:45.600 on January sixth, whether it be Nancy Pelosi's husband being attacked. 0:14:45.720 --> 0:14:47.920 I want to understand from you the temperature read that 0:14:47.920 --> 0:14:49.880 you're getting at this moment in this country, what you're 0:14:49.880 --> 0:14:53.960 hearing from constituents. Are we starting to dial down the temperature? 0:14:54.000 --> 0:14:56.240 Does this weekend represent a peak to you? Or how 0:14:56.280 --> 0:14:59.880 concerned are you still of this deeply divided rhetoric that 0:15:00.160 --> 0:15:00.880 continue to hear. 0:15:04.000 --> 0:15:08.000 Well, if this doesn't shock our nation's conscience to its core, 0:15:08.200 --> 0:15:08.800 I don't. 0:15:08.560 --> 0:15:10.480 Know what would look. 0:15:10.520 --> 0:15:13.320 I've been very clear over the years. I was the 0:15:13.360 --> 0:15:16.800 first Republican member of the state legislature in New York 0:15:17.080 --> 0:15:21.280 to denounce the events of January sixth. On January sixth, 0:15:22.440 --> 0:15:25.960 I spoke out when Nancy Pelosi's husband was attacked in 0:15:26.000 --> 0:15:29.760 the same way I'm speaking out about the assassination attempt 0:15:29.760 --> 0:15:33.280 against President Trump. All of us should be universally clear 0:15:33.320 --> 0:15:38.080 in this political violence has no place in our democracy. 0:15:38.400 --> 0:15:41.360 There should be no tolerance for it wherever it occurs. 0:15:42.040 --> 0:15:46.080 Whether it's those that seized control of a federal courthouse 0:15:46.200 --> 0:15:49.840 in Portland, burned down a police station in Minneapolis, or 0:15:49.880 --> 0:15:53.280 storm to capital on January sixth, it should never be 0:15:53.480 --> 0:15:55.440 tolerated or condoned, period. 0:15:55.800 --> 0:15:58.840 Congressman, appreciate perspective. Thanks for making time for us this morning. 0:15:58.880 --> 0:16:11.880 Thank you, Sir Michael that joining us now to talk 0:16:11.880 --> 0:16:14.840 about bank earnings is Chris marronach of Jenny Montgomery Sco. 0:16:15.120 --> 0:16:16.560 Chris Water for to catch up with you. So we've 0:16:16.560 --> 0:16:18.840 got a lot to talk about, particularly the rally in 0:16:18.880 --> 0:16:20.600 small caps in a regionals, but I want to start 0:16:20.600 --> 0:16:22.840 with the earnings from the big players on Wall Street. First, 0:16:23.000 --> 0:16:25.240 we've had JP Morgan, We've had City, We've had Bank 0:16:25.320 --> 0:16:27.880 for America. What stands out for you, not just this morning, 0:16:28.040 --> 0:16:29.400 but over the last week. 0:16:29.960 --> 0:16:30.720 Well, nenadist. 0:16:30.720 --> 0:16:33.360 Margins aren't really increasing yet, John Amie, I think we 0:16:33.400 --> 0:16:35.560 have this final quarter where margins bottom. 0:16:35.840 --> 0:16:38.560 You know, we're happy that the cost of funds at BNA. 0:16:38.400 --> 0:16:42.160 Was only up marginally, so they're still the leader in 0:16:42.240 --> 0:16:44.760 terms of low cost deposits. I think that yield you're 0:16:44.800 --> 0:16:47.840 going to get better as things roll over on the upside, 0:16:47.960 --> 0:16:49.800 but the cost of funds has to come down. That's 0:16:49.800 --> 0:16:52.600 where the Fed policy, the possible shift and interest rates 0:16:52.960 --> 0:16:53.840 third fourth. 0:16:53.600 --> 0:16:54.920 Quarter could be very useful. 0:16:55.520 --> 0:16:58.520 I was very thankful that the criticized loans were flat 0:16:58.560 --> 0:17:01.160 in the quarter from Q one, charge offs only up 0:17:01.200 --> 0:17:02.080 one basis point. 0:17:02.400 --> 0:17:03.480 The provision was higher. 0:17:03.480 --> 0:17:06.000 They could build slightly, but I think overall that was 0:17:06.000 --> 0:17:08.040 a win as well. But you're not really seeing the 0:17:08.040 --> 0:17:11.320 big revenue growth on the spread side. Investment banking, as 0:17:11.320 --> 0:17:14.159 you mentioned, was definitely higher, so no issues there. That 0:17:14.359 --> 0:17:17.159 was a beat. I think expenses acted well, but no 0:17:17.280 --> 0:17:18.960 major surprise on the expense front. 0:17:19.040 --> 0:17:21.000 Chris, I went through the today gains for the Stokes 0:17:21.000 --> 0:17:23.080 to some of these major players. If you go over 0:17:23.080 --> 0:17:25.960 the last twelve months, you can double it. They've been tremendous. Chris, 0:17:25.960 --> 0:17:28.040 there was something about this environment in the last year 0:17:28.320 --> 0:17:30.720 that has been particularly good for the bigger players in 0:17:30.760 --> 0:17:34.120 the financial world. Is something changing, Chris? Why you think 0:17:34.160 --> 0:17:37.080 things get better for the smaller, the mid sized banks, 0:17:37.119 --> 0:17:39.639 the more regional players. Sure. 0:17:39.680 --> 0:17:41.720 I think on the regional and the smaller players, I 0:17:41.720 --> 0:17:43.520 think what you have is the cost of funds is 0:17:43.520 --> 0:17:46.679 beginning to crust. That was the major challenge even before 0:17:46.720 --> 0:17:49.440 you had the Silicon Valley and First Republic failures last year. 0:17:49.760 --> 0:17:52.960 I also think that generally speaking, the expense leverage in 0:17:53.000 --> 0:17:56.000 this business is very good. We've seen banks much more 0:17:56.000 --> 0:17:58.480 efficient today than they were fifteen years ago, John, and 0:17:58.520 --> 0:18:01.320 that's a tremendous difference. You know, the cost of technology 0:18:01.400 --> 0:18:03.920 is helping banks do more with less. I think they're 0:18:03.920 --> 0:18:06.639 getting much more efficient with their staffing. They still have 0:18:06.720 --> 0:18:09.040 to spend money, but I think they're much more efficient 0:18:09.040 --> 0:18:10.679 at doing so. So I think as we get to 0:18:10.720 --> 0:18:13.879 a period where the cost of funds comes down or 0:18:13.960 --> 0:18:16.080 the at least flattens out, that's going to lead to 0:18:16.160 --> 0:18:18.600 better spread in common I think overall, the expense leverage 0:18:18.680 --> 0:18:19.800 is still there for the industry. 0:18:19.840 --> 0:18:21.760 The moving regional banks over the last few days has 0:18:21.760 --> 0:18:24.240 been absolutely phenomenal. Chris. I think We're up by something 0:18:24.280 --> 0:18:26.480 like eleven percent in just five days. There was a 0:18:26.520 --> 0:18:29.000 note from City just yesterday from Scott cron Now I'm 0:18:29.000 --> 0:18:30.080 going to share it with our audience. 0:18:30.119 --> 0:18:30.879 Maybe you've seen it. 0:18:31.200 --> 0:18:36.560 Overweight US banks, our preferred Trump trade. Easy evaluation sets up, 0:18:37.000 --> 0:18:42.880 stable fundamentals, lesser tariff risk combined with incremental deregulatory inertia 0:18:43.440 --> 0:18:46.120 give this sector a good risk reward sets up. It's 0:18:46.119 --> 0:18:48.879 the conversation at the moment, Chris, how would does Trump's 0:18:48.880 --> 0:18:52.600 second term influence shape the performance of these stocks? 0:18:53.920 --> 0:18:56.639 Well, John, for sure, the regulatory environment's going to shift. 0:18:56.680 --> 0:18:59.920 I think regulation can very much have peaked in terms 0:18:59.920 --> 0:19:02.960 of the banks in the industry. Under a new administration, 0:19:03.040 --> 0:19:05.080 you would see regulations change dramatically. 0:19:05.119 --> 0:19:07.800 I think it would take about eighteen months to really 0:19:07.840 --> 0:19:09.320 affect the rank and file. 0:19:09.400 --> 0:19:11.399 Do not change that quickly just because the head of 0:19:11.440 --> 0:19:13.440 the White House changes, But it is going to be 0:19:13.520 --> 0:19:15.879 a perception shift which is going to be anticipated and 0:19:15.920 --> 0:19:18.679 already is by the stocks. You know, the banks were 0:19:18.720 --> 0:19:21.720 training at forty eight percent relative multiples last week. Today 0:19:21.760 --> 0:19:25.399 they're fifty three or fifty four relative pe to SMP. 0:19:25.840 --> 0:19:27.760 That has a long way to go, because we used 0:19:27.800 --> 0:19:30.280 to be at sixty six to seventy percent. You know, 0:19:30.359 --> 0:19:32.639 median reigns for the last ten years, so there's a 0:19:32.680 --> 0:19:37.199 lot more valuation to recapture. The regulatory perception change is 0:19:37.240 --> 0:19:39.680 a massive one. We have to see the follow through 0:19:39.720 --> 0:19:42.240 in the fall, but that certainly is a very good start. 0:19:42.320 --> 0:19:43.440 They last several days. 0:19:43.600 --> 0:19:47.119 We heard jd Vance, the Foreign President's VP pick in 0:19:47.160 --> 0:19:50.480 the past, talk about big banks, but also talk about regional, 0:19:50.520 --> 0:19:53.680 smaller banks. He says community lenders. He thinks they operate 0:19:53.920 --> 0:19:56.760 at a financial disadvantage to the biggest banks. Would that 0:19:56.880 --> 0:19:59.520 be another reason why potentially put on trades for some 0:19:59.560 --> 0:20:01.320 of these all are regional players. 0:20:02.359 --> 0:20:04.119 Well, sure, I mean I think you have to have 0:20:04.200 --> 0:20:07.200 a regulatory framework that's going to fit the community banks 0:20:07.200 --> 0:20:08.680 and it makes it elite. 0:20:08.240 --> 0:20:10.040 Easier and less onerous on them. 0:20:10.400 --> 0:20:12.880 I think having the trickle down to the same regulation 0:20:12.920 --> 0:20:15.040 applied to one hundred or two hundred million dollar bank 0:20:15.400 --> 0:20:18.359 on one that's a billion or two billion dollars is 0:20:18.720 --> 0:20:20.879 just very difficult to execute. It gets back to the 0:20:20.880 --> 0:20:23.760 opposite of the expense leverage I was mentioning. So if 0:20:23.760 --> 0:20:26.399 we can have relief there, that is a tremendous shift 0:20:26.440 --> 0:20:28.840 I think that is a possibility. I do think it 0:20:28.880 --> 0:20:31.840 takes time, but that absolutely happens. The small banks are 0:20:31.880 --> 0:20:34.440 the major lenders in the country. Small businesses are still 0:20:34.440 --> 0:20:38.160 to generate. They generate the new jobs, the new activity 0:20:38.200 --> 0:20:38.800 in the country. 0:20:39.040 --> 0:20:41.600 That's where community banks really do their best work. 0:20:41.680 --> 0:20:53.560 Hik Chris Wonderful, I hear from you, sir, great echo 0:20:53.640 --> 0:20:56.960 of ey alongside Andrew Husby of BNP Parwaback, Greg, I 0:20:57.040 --> 0:20:59.040 want to come across the US first. Your reaction to 0:20:59.080 --> 0:21:02.520 this data is the shaky period for the consumer over 0:21:02.720 --> 0:21:04.000 or is the jury still out? 0:21:05.920 --> 0:21:07.920 What we're doing is just generally more prudence. 0:21:07.960 --> 0:21:09.879 I don't think we're seeing any form of retrenchment in 0:21:09.920 --> 0:21:12.400 consumer spending activity. And this type of June report, which 0:21:12.440 --> 0:21:16.480 was quite strong across the word, as Mike was just highlighting, 0:21:16.800 --> 0:21:19.720 is indication that consumers are not pulling back, but they 0:21:19.760 --> 0:21:22.560 are being more judicious with how they spend, how much 0:21:22.600 --> 0:21:24.800 they spent, and where they spend. And that's still the 0:21:24.840 --> 0:21:27.320 reality today despite this fairly favorable report. 0:21:27.520 --> 0:21:28.800 Let's not forget we still. 0:21:28.560 --> 0:21:31.160 Have a job market that's still adding the decent number 0:21:31.160 --> 0:21:32.960 of jobs one hundred and eighty thousand on a three 0:21:32.960 --> 0:21:36.520 month moving average, and wage growth is still around four percent, 0:21:36.600 --> 0:21:39.240 so combined it too, you still have that income support. 0:21:39.640 --> 0:21:42.359 It's not any sign of a retrenchment, but it is 0:21:42.480 --> 0:21:43.640