1 00:00:02,759 --> 00:00:10,600 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,640 --> 00:00:14,600 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,640 --> 00:00:17,880 Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg 4 00:00:17,960 --> 00:00:21,080 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,400 --> 00:00:23,560 Speaker 1: or watch us live on YouTube. 6 00:00:24,000 --> 00:00:26,400 Speaker 2: We had some earnings, We had American Express and some 7 00:00:26,480 --> 00:00:28,640 Speaker 2: numbers out there and bringing together the bringing to the 8 00:00:28,640 --> 00:00:31,400 Speaker 2: forefront just this whole credit card business, which is such 9 00:00:31,480 --> 00:00:35,240 Speaker 2: a competitive business in terms of fees and what service 10 00:00:35,280 --> 00:00:38,240 Speaker 2: cards premium card space exactly and kind of what services 11 00:00:38,280 --> 00:00:38,760 Speaker 2: they provide. 12 00:00:38,800 --> 00:00:38,879 Speaker 3: You. 13 00:00:39,120 --> 00:00:42,680 Speaker 2: I know, people are really aggressive in kind of managing 14 00:00:42,720 --> 00:00:44,960 Speaker 2: the points and really trying to take advantage of that. 15 00:00:44,960 --> 00:00:48,960 Speaker 2: Ben Elliott, Bloomberg Intelligence consumer finance analysts. Ben talk to 16 00:00:49,000 --> 00:00:52,560 Speaker 2: us about American Express, the numbers that they reported today. 17 00:00:52,560 --> 00:00:55,280 Speaker 2: What did you see and what are some of the takeaways? 18 00:00:55,760 --> 00:00:57,400 Speaker 4: So I think what really jumped out to me today 19 00:00:57,480 --> 00:01:02,080 Speaker 4: is their their new plot Them card product, which you know, 20 00:01:02,080 --> 00:01:03,960 Speaker 4: made a bunch of headlines for raising the fee. It's 21 00:01:03,960 --> 00:01:07,440 Speaker 4: like nine hundred bucks a year now it is getting 22 00:01:07,840 --> 00:01:13,800 Speaker 4: great traction amongst millennials and gen z MX says that 23 00:01:13,840 --> 00:01:16,600 Speaker 4: they're getting two times as many applications and new card 24 00:01:16,600 --> 00:01:20,600 Speaker 4: accounts after the refresh. So how that translates to AMX's earnings. 25 00:01:21,800 --> 00:01:23,360 Speaker 4: You know, you see their expenses go up right away 26 00:01:23,400 --> 00:01:26,000 Speaker 4: because people get all these new benefits, all these new 27 00:01:26,040 --> 00:01:28,040 Speaker 4: credits that they have access to with the new card. 28 00:01:28,680 --> 00:01:31,040 Speaker 4: But the fee sort of advertises in over a year 29 00:01:31,120 --> 00:01:35,160 Speaker 4: or two, but the growth engine is still there. People 30 00:01:35,520 --> 00:01:38,520 Speaker 4: are still clamoring for this card and the business is 31 00:01:38,600 --> 00:01:41,640 Speaker 4: really sustaining an incredible level of growth. 32 00:01:42,080 --> 00:01:43,800 Speaker 5: Okay, so they raise a feed to eight hundred and 33 00:01:43,840 --> 00:01:46,520 Speaker 5: ninety five dollars and even more people applied for this 34 00:01:46,600 --> 00:01:49,360 Speaker 5: card because there's a bunch of these new perks. Do 35 00:01:49,400 --> 00:01:52,160 Speaker 5: these perks actually cost American Express a lot of money? 36 00:01:52,200 --> 00:01:54,040 Speaker 5: I mean, we're talking about four hundred dollars a year 37 00:01:54,080 --> 00:01:57,800 Speaker 5: of dining credits. There's also like free credits at Lululemon 38 00:01:57,840 --> 00:01:59,600 Speaker 5: and sacks and these are all things that people get 39 00:01:59,600 --> 00:02:02,800 Speaker 5: really up sessed over on Reddit threads, reddit boards. 40 00:02:03,640 --> 00:02:06,160 Speaker 4: Yeah they could. I mean, so the costs are real, right, 41 00:02:07,320 --> 00:02:11,040 Speaker 4: they call them variable customer expenses. Typically they're brought about 42 00:02:11,040 --> 00:02:14,000 Speaker 4: like forty percent of the revenue of the company, but 43 00:02:14,760 --> 00:02:18,320 Speaker 4: that's the number is pretty flat actually, despite the introduction 44 00:02:18,400 --> 00:02:20,640 Speaker 4: of some of the new benefits. But so you know, 45 00:02:20,760 --> 00:02:23,359 Speaker 4: so their expenses are up about ten percent, which is 46 00:02:23,400 --> 00:02:25,440 Speaker 4: sort of there in line with their long term revenue 47 00:02:25,440 --> 00:02:29,440 Speaker 4: growth target. But over time you'll see that fee increase 48 00:02:29,440 --> 00:02:31,720 Speaker 4: start to advertise into earnings and that should more than 49 00:02:31,760 --> 00:02:33,440 Speaker 4: offset the increase in costs. 50 00:02:34,080 --> 00:02:37,640 Speaker 5: And how does the pick up in new customers compare 51 00:02:37,680 --> 00:02:41,119 Speaker 5: to its biggest competitor, which is a State Chase Sapphire 52 00:02:41,200 --> 00:02:43,920 Speaker 5: card and as well City Group coming out with a 53 00:02:43,960 --> 00:02:46,840 Speaker 5: new Strata card. It's its own elite card offering. How 54 00:02:46,880 --> 00:02:48,799 Speaker 5: would you stack them up against one another? 55 00:02:49,600 --> 00:02:50,480 Speaker 3: You know, it's interesting. 56 00:02:50,600 --> 00:02:52,000 Speaker 4: MX is always going to have a little bit of 57 00:02:52,040 --> 00:02:54,680 Speaker 4: an advantage here because they capture all of the economics 58 00:02:55,240 --> 00:02:58,160 Speaker 4: of a premium credit card because they're also the network, right, 59 00:02:58,200 --> 00:03:01,760 Speaker 4: so they're in addition to to earning the fee, they're 60 00:03:01,800 --> 00:03:05,680 Speaker 4: also earning a swipe fee every time customers use that card. 61 00:03:06,160 --> 00:03:09,960 Speaker 4: So the value proposition to AMEX is always inherently higher 62 00:03:10,520 --> 00:03:12,840 Speaker 4: than it would be to Chase or to City to 63 00:03:12,960 --> 00:03:15,560 Speaker 4: increase sort of the benefits they provide to the card 64 00:03:15,600 --> 00:03:19,119 Speaker 4: and to drive more customers there. I think what's really 65 00:03:19,120 --> 00:03:22,240 Speaker 4: interesting is that millennials and Gen z or are driving this. 66 00:03:22,360 --> 00:03:25,040 Speaker 4: I think it's like sixty five sixty four to six 67 00:03:25,160 --> 00:03:28,160 Speaker 4: five percent of the new customers or millennials and Gen zs. 68 00:03:29,520 --> 00:03:33,120 Speaker 4: And it's interesting the CEO is saying to they learners 69 00:03:33,160 --> 00:03:36,119 Speaker 4: call it. They're looking into how many of these people 70 00:03:36,160 --> 00:03:37,880 Speaker 4: are coming from other premium cards or how many people 71 00:03:37,880 --> 00:03:39,960 Speaker 4: are just coming to a premium card for the first time, 72 00:03:40,760 --> 00:03:43,240 Speaker 4: because they're so attracted to this new offering that that 73 00:03:43,280 --> 00:03:45,800 Speaker 4: Amex has out on the market. So it looks like 74 00:03:45,840 --> 00:03:49,920 Speaker 4: there's appetite for this. It's probably driven by social media 75 00:03:49,960 --> 00:03:51,760 Speaker 4: and sort of new new forces in our in our 76 00:03:51,800 --> 00:03:54,440 Speaker 4: society that are driving interest in premium credit cards. And 77 00:03:54,840 --> 00:03:55,920 Speaker 4: it looks like it has legs. 78 00:03:56,200 --> 00:03:58,000 Speaker 3: It looks like it has legs. And people don't just. 79 00:03:58,000 --> 00:04:00,920 Speaker 5: Get one Amex Platinum card the other thing, right, Ben, 80 00:04:00,960 --> 00:04:03,720 Speaker 5: I mean, they often get the Amex Gold card and 81 00:04:03,760 --> 00:04:04,760 Speaker 5: the Amex Screen card. 82 00:04:05,240 --> 00:04:06,400 Speaker 3: I'm on these Reddit threads. 83 00:04:06,480 --> 00:04:08,000 Speaker 5: I've been spending a lot of time on them because 84 00:04:08,000 --> 00:04:10,640 Speaker 5: I'm trying to decide which card I should keep or use. 85 00:04:10,720 --> 00:04:13,520 Speaker 5: And what struck me is how some people have like 86 00:04:13,600 --> 00:04:15,040 Speaker 5: ten credit cards in their wallet. 87 00:04:16,040 --> 00:04:18,560 Speaker 4: Yeah, they're very proud of how how the platinum and 88 00:04:18,600 --> 00:04:20,440 Speaker 4: the and the goal and some of their other cards 89 00:04:21,440 --> 00:04:24,120 Speaker 4: work together, and people love to be in the AMEX ecosystem. 90 00:04:24,880 --> 00:04:26,080 Speaker 4: And they actually had a lot of strength in their 91 00:04:26,120 --> 00:04:29,039 Speaker 4: high yield savings account growth this quarter as well, which 92 00:04:29,080 --> 00:04:31,600 Speaker 4: kind of goes along with people sort of. The MX 93 00:04:31,680 --> 00:04:33,400 Speaker 4: is able to meet all of their needs, right from 94 00:04:33,480 --> 00:04:35,640 Speaker 4: travel down through dining down through sort of every day 95 00:04:35,680 --> 00:04:38,159 Speaker 4: spend on groceries. And that's kind of the ultimate goal 96 00:04:38,240 --> 00:04:40,760 Speaker 4: is to pull people fully into the ecosystem, capture one 97 00:04:40,839 --> 00:04:44,039 Speaker 4: hundred percent of the economics of these super super prime, 98 00:04:44,120 --> 00:04:45,480 Speaker 4: super high income customers. 99 00:04:46,120 --> 00:04:49,200 Speaker 2: Ben, I'm holding in my hand my money clip cash. 100 00:04:49,440 --> 00:04:52,080 Speaker 3: I mean, he pulls it out right pretty regularly. 101 00:04:52,279 --> 00:04:54,440 Speaker 2: Yeah, I got the green card on old school. 102 00:04:55,040 --> 00:04:57,520 Speaker 4: What's the fee on that cash exactly? 103 00:04:58,040 --> 00:05:00,559 Speaker 2: Hey, Ben, talk to us about just the credit quality. 104 00:05:00,600 --> 00:05:03,200 Speaker 2: What are the card companies you follow? What are they 105 00:05:03,240 --> 00:05:05,840 Speaker 2: saying these days about their consumer and credit quality? 106 00:05:06,560 --> 00:05:11,360 Speaker 4: So MX is incredible, right, they have almost no signs 107 00:05:11,400 --> 00:05:14,160 Speaker 4: whatsoever of stress. There's a little bit of stress. Last quarter. 108 00:05:14,520 --> 00:05:17,440 Speaker 4: Airline spending was down, that's sort of like the top top, 109 00:05:17,520 --> 00:05:20,240 Speaker 4: top of the wallet, kind of front of cabin spend 110 00:05:20,320 --> 00:05:24,000 Speaker 4: was down. But by and large, the companies I follow, 111 00:05:24,040 --> 00:05:27,720 Speaker 4: even sort of the less prime companies, the Synchronies and 112 00:05:27,800 --> 00:05:30,840 Speaker 4: Breads of the world that are doing things like point 113 00:05:30,880 --> 00:05:33,920 Speaker 4: of sale retail credit cards, even they are continuing to 114 00:05:33,960 --> 00:05:37,159 Speaker 4: see an improvement in credit And the interesting thing about 115 00:05:37,480 --> 00:05:40,839 Speaker 4: credit card charge offs is you see people go delinquent first, 116 00:05:40,880 --> 00:05:42,400 Speaker 4: and then you can kind of look six months into 117 00:05:42,400 --> 00:05:45,000 Speaker 4: the future and when they'll charge off, and delinquencies are 118 00:05:45,000 --> 00:05:47,240 Speaker 4: still improving. So as far as we can tell, six 119 00:05:47,240 --> 00:05:50,880 Speaker 4: months in the future, credit card charge offs still look good. 120 00:05:51,440 --> 00:05:53,960 Speaker 5: So what does this say for what Capital One is 121 00:05:54,040 --> 00:05:56,200 Speaker 5: likely to report, which I believe is on the twenty 122 00:05:56,240 --> 00:05:56,960 Speaker 5: first October. 123 00:05:58,839 --> 00:06:01,480 Speaker 4: I would expect the REA cross to be positive for 124 00:06:01,560 --> 00:06:04,520 Speaker 4: Capital One as well. You know, they're interested in this 125 00:06:04,560 --> 00:06:08,520 Speaker 4: top of wallet competition with Chase and an Amex, but 126 00:06:08,520 --> 00:06:11,599 Speaker 4: they're sort of the perennial third player, so it'll be 127 00:06:11,600 --> 00:06:14,479 Speaker 4: interesting to see if they lean more into that, you know, 128 00:06:14,520 --> 00:06:16,640 Speaker 4: through their marketing spend and some of the other expenses, 129 00:06:17,560 --> 00:06:20,120 Speaker 4: but ultimately chases bread and butter. 130 00:06:20,400 --> 00:06:20,679 Speaker 6: Sorry. 131 00:06:20,720 --> 00:06:22,880 Speaker 4: Capital One's bread and butter is kind of the less 132 00:06:22,920 --> 00:06:26,839 Speaker 4: prime borrower and that flows through in a much higher 133 00:06:26,920 --> 00:06:30,040 Speaker 4: net interest margin versus Chase and Amex, which are more 134 00:06:30,080 --> 00:06:32,760 Speaker 4: focused on fees and swipe revenue. 135 00:06:34,080 --> 00:06:34,760 Speaker 3: Stay with us. 136 00:06:34,880 --> 00:06:37,159 Speaker 2: More from Bloomberg Intelligence coming up after this. 137 00:06:40,839 --> 00:06:44,520 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live 138 00:06:44,600 --> 00:06:47,719 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 139 00:06:47,720 --> 00:06:51,039 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 140 00:06:51,080 --> 00:06:54,640 Speaker 1: you get your podcasts, or watch us live on YouTube. 141 00:06:55,440 --> 00:06:58,560 Speaker 5: The fundamentals underpinning this economy and the point financial mark 142 00:06:58,680 --> 00:07:01,640 Speaker 5: is is this idea that the consumer is resilient. But 143 00:07:01,800 --> 00:07:04,160 Speaker 5: a new study shows that all is not well in 144 00:07:04,240 --> 00:07:07,239 Speaker 5: car loans. Keith Notton is Bloomberg News is auto reporter 145 00:07:07,400 --> 00:07:10,520 Speaker 5: in Detroit. Anti joins us now and Keith auto loans 146 00:07:10,600 --> 00:07:13,400 Speaker 5: is really a good leading indicator of the economy because 147 00:07:13,400 --> 00:07:15,720 Speaker 5: people will continue to pay their car loans because they 148 00:07:15,760 --> 00:07:17,760 Speaker 5: need their car to get to work. So when they're 149 00:07:17,760 --> 00:07:20,000 Speaker 5: not paying their car loans, that's a sign that something's 150 00:07:20,040 --> 00:07:22,679 Speaker 5: not going well. What are we learning about car loans 151 00:07:22,760 --> 00:07:23,160 Speaker 5: right now? 152 00:07:24,360 --> 00:07:26,920 Speaker 7: Yeah, you know, the authors of this study say that 153 00:07:26,960 --> 00:07:30,560 Speaker 7: consumers are actually in their most precarious position since the 154 00:07:30,640 --> 00:07:34,000 Speaker 7: last recession. You're absolutely right, Scarlett. Normally, the car loan 155 00:07:34,200 --> 00:07:37,560 Speaker 7: and the mortgage payment are the priorities, particularly the car 156 00:07:37,640 --> 00:07:39,440 Speaker 7: loan because you need to get your kids to school, 157 00:07:39,560 --> 00:07:41,400 Speaker 7: get to work, all the things you need from a car. 158 00:07:41,840 --> 00:07:44,280 Speaker 7: But what we're seeing is over the last fifteen years, 159 00:07:44,680 --> 00:07:48,520 Speaker 7: delinquency so sixty days past due and more, have gone 160 00:07:48,600 --> 00:07:51,760 Speaker 7: up by more than fifty percent. So that has made 161 00:07:51,880 --> 00:07:57,760 Speaker 7: car loans actually the riskiest consumer credit product out there, 162 00:07:58,320 --> 00:08:02,840 Speaker 7: more so than mortgages of cards and personal loans, so Keith. 163 00:08:03,160 --> 00:08:05,000 Speaker 2: Another data point that jumped out of me is the 164 00:08:05,080 --> 00:08:08,960 Speaker 2: average auto loan balance has grown fifty seven percent since 165 00:08:09,000 --> 00:08:12,880 Speaker 2: twenty ten, outpacing all other credit products. I mean, it's 166 00:08:12,880 --> 00:08:15,560 Speaker 2: getting crazy out there. The average cost for average new 167 00:08:15,600 --> 00:08:18,560 Speaker 2: cars I think north of fifty thousand dollars now, I mean, 168 00:08:18,920 --> 00:08:20,040 Speaker 2: what's the industry saying? 169 00:08:21,360 --> 00:08:24,960 Speaker 7: Yeah? So that's also news of this week is that 170 00:08:25,080 --> 00:08:26,880 Speaker 7: the average price of a car, of a new car 171 00:08:27,000 --> 00:08:30,080 Speaker 7: is topping fifty thousand dollars for the first time. This 172 00:08:30,120 --> 00:08:32,480 Speaker 7: is all part of a shift that the industry has 173 00:08:32,520 --> 00:08:37,520 Speaker 7: made to selling more high price, high profit vehicles, especially 174 00:08:38,200 --> 00:08:42,160 Speaker 7: sport utility vehicles and pickup trucks. You know, the industry, 175 00:08:42,240 --> 00:08:45,360 Speaker 7: particularly the Detroit automakers, have sort of moved away from 176 00:08:45,440 --> 00:08:48,880 Speaker 7: the bare bones economy models you might remember coming straight 177 00:08:48,920 --> 00:08:51,640 Speaker 7: out of college, and now it's all about these very 178 00:08:51,679 --> 00:08:55,079 Speaker 7: well equipped, very well appointed cars. You can spend over 179 00:08:55,080 --> 00:08:57,960 Speaker 7: one hundred thousand dollars for a Ford F series pickup truck. 180 00:08:59,240 --> 00:09:02,400 Speaker 5: Keith, You've spent about forty years tracking the auto industry, 181 00:09:02,440 --> 00:09:05,520 Speaker 5: covering it in great detail. When you get a report 182 00:09:05,559 --> 00:09:08,600 Speaker 5: like this, how do the automakers respond, how do they 183 00:09:08,720 --> 00:09:12,800 Speaker 5: capitalize on this or how do they modify their offerings 184 00:09:12,880 --> 00:09:13,760 Speaker 5: in response to this? 185 00:09:15,160 --> 00:09:17,640 Speaker 7: Yeah, you know, there is a lot of talk and 186 00:09:17,679 --> 00:09:21,960 Speaker 7: some movement lately toward coming out with affordable models. Again, 187 00:09:22,040 --> 00:09:25,360 Speaker 7: they really had kind of disappeared from the market cars 188 00:09:25,559 --> 00:09:29,920 Speaker 7: under thirty thousand dollars. In fact, one of the Kelly 189 00:09:29,920 --> 00:09:33,480 Speaker 7: Bluebook people recently said the twenty thousand dollars car has 190 00:09:33,520 --> 00:09:36,880 Speaker 7: basically become extinct. So there is some focus on that, 191 00:09:37,520 --> 00:09:40,800 Speaker 7: including in the electric vehicle space, but we've yet to 192 00:09:40,840 --> 00:09:43,040 Speaker 7: see that materialize in a big way. Scarlett. 193 00:09:43,480 --> 00:09:46,360 Speaker 2: Well, what Matt Miller tells me, Keith, is that they're 194 00:09:46,400 --> 00:09:49,640 Speaker 2: going to continue to make these cars because people are 195 00:09:49,679 --> 00:09:53,000 Speaker 2: these high price cars which are very high margin because 196 00:09:53,000 --> 00:09:55,000 Speaker 2: people are buying them. 197 00:09:55,640 --> 00:09:57,920 Speaker 7: Yes, they are. What it does, though, is it shrinks 198 00:09:57,960 --> 00:10:01,559 Speaker 7: the new car market to just kind of the wealthiest households. 199 00:10:01,600 --> 00:10:06,560 Speaker 7: It really excludes mainstream consumers if everything is priced above 200 00:10:06,600 --> 00:10:10,200 Speaker 7: fifty thousand dollars, and you know, that can cause trouble 201 00:10:10,240 --> 00:10:12,280 Speaker 7: down the road if your market keeps shrinking. 202 00:10:13,120 --> 00:10:14,480 Speaker 5: So how do you think this plays out in the 203 00:10:14,559 --> 00:10:17,480 Speaker 5: second secondary car market, the used car market. 204 00:10:17,520 --> 00:10:21,600 Speaker 7: Then, used car prices are also high. You know, they're 205 00:10:21,640 --> 00:10:25,120 Speaker 7: close to thirty thousand dollars on average. So a lot 206 00:10:25,160 --> 00:10:28,520 Speaker 7: of those first time car buyers or budget minded car 207 00:10:28,600 --> 00:10:31,920 Speaker 7: buyers are going to the used car market and they're finding, 208 00:10:32,360 --> 00:10:35,040 Speaker 7: you know, the sort of three year old used car, 209 00:10:35,160 --> 00:10:38,800 Speaker 7: the classic Goodbye, is more expensive than it used to be. 210 00:10:39,840 --> 00:10:41,920 Speaker 2: And what's the and this is the stat that gets me, 211 00:10:42,240 --> 00:10:45,160 Speaker 2: what's the average age of a car these days out 212 00:10:45,160 --> 00:10:47,760 Speaker 2: there on the roads. 213 00:10:47,400 --> 00:10:51,840 Speaker 7: It's over twelve years wow, which is such a change 214 00:10:51,960 --> 00:10:54,480 Speaker 7: from the days of our youth when a car would 215 00:10:54,520 --> 00:10:57,560 Speaker 7: never last past one hundred thousand miles. Now cars are 216 00:10:57,559 --> 00:11:01,440 Speaker 7: built to really go the distance. And so that's another 217 00:11:01,720 --> 00:11:05,760 Speaker 7: factor in this affordability crisis. A lot of people aren't 218 00:11:05,760 --> 00:11:09,079 Speaker 7: even going after the used cars. They're just you know, 219 00:11:09,360 --> 00:11:12,040 Speaker 7: sticking with the clunker that they have for as long 220 00:11:12,080 --> 00:11:12,920 Speaker 7: as they can ride it. 221 00:11:13,880 --> 00:11:14,480 Speaker 3: Stay with us. 222 00:11:14,679 --> 00:11:17,040 Speaker 2: More from Bloomberg Intelligence coming up after this. 223 00:11:20,920 --> 00:11:24,560 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 224 00:11:24,720 --> 00:11:27,800 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 225 00:11:27,800 --> 00:11:31,120 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 226 00:11:31,160 --> 00:11:34,280 Speaker 1: you get your podcasts, or watch us live on YouTube. 227 00:11:34,960 --> 00:11:36,840 Speaker 3: Let's talk a little bit about higher education. 228 00:11:36,920 --> 00:11:39,760 Speaker 5: It has been in the spotlight, and not always in 229 00:11:39,800 --> 00:11:43,000 Speaker 5: a good way, but for four historically black colleges this week, 230 00:11:43,040 --> 00:11:45,360 Speaker 5: it's been a very good week because the family foundation 231 00:11:45,760 --> 00:11:48,439 Speaker 5: of Arthur Blank, who owns the Atlanta Falcons and was 232 00:11:48,480 --> 00:11:50,920 Speaker 5: the co founder of home Depot, gave a very generous 233 00:11:50,960 --> 00:11:52,800 Speaker 5: gift to four of those schools. I want to bring 234 00:11:52,800 --> 00:11:56,920 Speaker 5: in now, Rosbrewer. She is the interim president of Spelman 235 00:11:57,040 --> 00:12:01,200 Speaker 5: College in Atlanta. And Janet Wore Bloomberg News is higher 236 00:12:01,320 --> 00:12:04,640 Speaker 5: education finance reporter. Janet, why don't you just set the 237 00:12:04,640 --> 00:12:05,319 Speaker 5: scene for us here? 238 00:12:06,559 --> 00:12:10,400 Speaker 6: Thanks for having me so. Arthur Plank, as you mentioned, 239 00:12:10,559 --> 00:12:13,880 Speaker 6: is the owner of the Atlanta Falcons, his adopted hometown, 240 00:12:14,400 --> 00:12:16,920 Speaker 6: and he decided to give a fifty million dollar gift 241 00:12:16,960 --> 00:12:20,480 Speaker 6: to four historically black colleges. And what I found pretty 242 00:12:20,520 --> 00:12:24,520 Speaker 6: remarkable is that when all four colleges said what our 243 00:12:24,600 --> 00:12:27,400 Speaker 6: needs are. It was exactly the same thing. It was 244 00:12:27,520 --> 00:12:31,400 Speaker 6: grants to students to help them finish college, get over 245 00:12:31,640 --> 00:12:34,680 Speaker 6: the line. And in some cases it's just a couple 246 00:12:34,720 --> 00:12:36,280 Speaker 6: of one hundred dollars, it could be a couple of 247 00:12:36,360 --> 00:12:40,120 Speaker 6: thousand dollars. But one of the most intractable problems in 248 00:12:40,200 --> 00:12:44,040 Speaker 6: higher education is students completing college, and these types of 249 00:12:44,080 --> 00:12:47,440 Speaker 6: grants literally help them get to the next semester and 250 00:12:47,480 --> 00:12:50,800 Speaker 6: to finish and to realize the economic benefit of college 251 00:12:50,920 --> 00:12:54,240 Speaker 6: rather than leaving and having loans, which is the worst outcome. 252 00:12:54,400 --> 00:12:56,480 Speaker 5: All right, So, ros can you walk us through how 253 00:12:56,960 --> 00:12:59,280 Speaker 5: the schools came up with this idea to give students 254 00:12:59,320 --> 00:13:02,480 Speaker 5: small grants to finish their degrees. What the conversation was 255 00:13:02,600 --> 00:13:04,160 Speaker 5: like with Arthur Blank. 256 00:13:05,600 --> 00:13:06,240 Speaker 2: Absolutely. 257 00:13:06,320 --> 00:13:09,280 Speaker 8: I think if you know Arthur Blank and his family foundation, 258 00:13:09,520 --> 00:13:13,640 Speaker 8: they are deeply committed to the Atlanta community. But he 259 00:13:13,800 --> 00:13:19,240 Speaker 8: also has a great commitment to accessible education and he's 260 00:13:19,240 --> 00:13:21,480 Speaker 8: made that very clear to us over the years. This 261 00:13:21,600 --> 00:13:24,319 Speaker 8: is actually the second grant that we've received as Spelman 262 00:13:24,400 --> 00:13:27,600 Speaker 8: College from the Arthur Blank family Foundation. The first one 263 00:13:28,120 --> 00:13:31,040 Speaker 8: was a ten million dollar grant towards our Center for 264 00:13:31,120 --> 00:13:34,600 Speaker 8: the Innovation in the Arts He named the Innovation Lab 265 00:13:35,160 --> 00:13:39,319 Speaker 8: after his family and himself. But this was really a 266 00:13:39,360 --> 00:13:43,920 Speaker 8: combination of discussions around how we both believe the game 267 00:13:44,040 --> 00:13:49,440 Speaker 8: changer of education through accessibility and affordability, and he stepped 268 00:13:49,520 --> 00:13:52,920 Speaker 8: right in. This wasn't an easy grant, let me just say, 269 00:13:52,960 --> 00:13:56,800 Speaker 8: because we wanted to make sure that this was mutual 270 00:13:56,920 --> 00:13:59,160 Speaker 8: and that we would meet his expectations. 271 00:14:00,160 --> 00:14:03,840 Speaker 2: Talk to us about, you know, the typical student at Spelman. 272 00:14:05,120 --> 00:14:07,720 Speaker 2: What's the financial burden on them? These days we hear 273 00:14:07,920 --> 00:14:10,719 Speaker 2: in read and we all experience the spiring cost of 274 00:14:10,800 --> 00:14:13,240 Speaker 2: higher education. Talk to us about maybe a typical student 275 00:14:13,240 --> 00:14:13,720 Speaker 2: at Spelman. 276 00:14:14,640 --> 00:14:18,760 Speaker 8: Yes, a typical student at Spelman actually is what we 277 00:14:18,840 --> 00:14:22,200 Speaker 8: call a pal eligible student, usually coming from a family 278 00:14:22,560 --> 00:14:25,160 Speaker 8: of you know, roughly about one hundred and fifty thousand 279 00:14:25,160 --> 00:14:28,720 Speaker 8: dollars or less of income and has more than one 280 00:14:28,840 --> 00:14:32,240 Speaker 8: child in the family. And so when you think about 281 00:14:32,320 --> 00:14:35,280 Speaker 8: the cost of higher ed tuition, room and board at 282 00:14:35,280 --> 00:14:39,200 Speaker 8: an institution like Spelman College is roughly fifty six thousand dollars, 283 00:14:39,800 --> 00:14:43,680 Speaker 8: and a young woman from Spelman could graduate with as 284 00:14:43,800 --> 00:14:46,880 Speaker 8: much as thirty two thousand to forty thousand dollars worth 285 00:14:46,920 --> 00:14:51,520 Speaker 8: of student loans alone. And so when you think about that, 286 00:14:51,520 --> 00:14:55,720 Speaker 8: that's sometimes a non starter, especially if they're thinking of 287 00:14:55,800 --> 00:14:57,160 Speaker 8: going on to graduate school. 288 00:14:58,200 --> 00:15:00,640 Speaker 5: Jennet just put this into context for us because President 289 00:15:00,640 --> 00:15:04,480 Speaker 5: Trump in his second term has boosted funding for historically 290 00:15:04,520 --> 00:15:08,600 Speaker 5: black colleges and universities while taking aim. 291 00:15:08,440 --> 00:15:12,800 Speaker 3: At Higher ED. Has he followed through on that funding The. 292 00:15:12,800 --> 00:15:16,840 Speaker 6: Details of that, I don't know, but typically historically black 293 00:15:16,880 --> 00:15:21,320 Speaker 6: colleges do not have as high graduation rates as other colleges. 294 00:15:21,840 --> 00:15:25,720 Speaker 6: And part of the reason our large populations of eligible students' 295 00:15:25,720 --> 00:15:29,600 Speaker 6: lower income students where potentially just a couple of one 296 00:15:29,680 --> 00:15:33,040 Speaker 6: hundred dollars, a couple of thousand dollars can get them 297 00:15:33,320 --> 00:15:35,680 Speaker 6: again to that next semester to graduate. 298 00:15:36,680 --> 00:15:38,800 Speaker 2: Ros's just kind of follow up a little bit on that. 299 00:15:39,440 --> 00:15:42,000 Speaker 2: President Trump and this administration have taken aim at some 300 00:15:42,120 --> 00:15:47,720 Speaker 2: very high profile, large research universities, including Harvard and Columbia. 301 00:15:48,400 --> 00:15:53,000 Speaker 2: As an educator yourself, how are you viewing this environment? 302 00:15:54,720 --> 00:15:57,160 Speaker 8: Well, you know, it is a tough environment in higher 303 00:15:57,320 --> 00:15:59,760 Speaker 8: ED right now because you know, on their early on 304 00:16:00,320 --> 00:16:03,760 Speaker 8: of this administration, we saw deep cuts in research funding. 305 00:16:04,240 --> 00:16:06,960 Speaker 8: And the one thing that I know for sure, you know, 306 00:16:07,040 --> 00:16:10,400 Speaker 8: having a corporate background now combined with higher ED is 307 00:16:10,440 --> 00:16:13,760 Speaker 8: that research funds a lot of innovation and technology that 308 00:16:13,800 --> 00:16:17,880 Speaker 8: happens at the corporate level which becomes commercial opportunities. So 309 00:16:18,080 --> 00:16:20,520 Speaker 8: I think, you know, more understanding of cutting off the 310 00:16:20,600 --> 00:16:23,920 Speaker 8: lifeline of innovation in this country is something that should 311 00:16:23,960 --> 00:16:29,240 Speaker 8: be explored. I will, you know, agree with Samantha that 312 00:16:29,360 --> 00:16:32,760 Speaker 8: you know, we don't know what these new funds are 313 00:16:32,800 --> 00:16:36,920 Speaker 8: that are directed towards HBCUs and we're interested to learn more. 314 00:16:37,480 --> 00:16:41,560 Speaker 5: And of course, Ros with your background leading Walgreens, leading 315 00:16:42,000 --> 00:16:44,840 Speaker 5: Starbucks as COO and of course CEO of Sam's Club, 316 00:16:45,200 --> 00:16:47,480 Speaker 5: what kind of best practices can you take from the 317 00:16:47,480 --> 00:16:52,040 Speaker 5: corporate boardroom to the academic institutions that you're now running 318 00:16:52,120 --> 00:16:53,960 Speaker 5: to dispel them In college, for instance, that would kind 319 00:16:53,960 --> 00:16:56,200 Speaker 5: of dispel some of those concerns that people have about 320 00:16:56,480 --> 00:17:00,520 Speaker 5: higher ED not knowing how to run their institutions efficiently. 321 00:17:01,640 --> 00:17:03,640 Speaker 8: Yes, you know, one of the things I've committed to 322 00:17:03,680 --> 00:17:06,199 Speaker 8: this board of trustees at Filman College is that I 323 00:17:06,240 --> 00:17:09,400 Speaker 8: will try to bring as much business to this institution 324 00:17:09,520 --> 00:17:11,720 Speaker 8: as I possibly can, and that would be through a 325 00:17:11,760 --> 00:17:15,160 Speaker 8: new financial or business model. You know, we live off 326 00:17:15,200 --> 00:17:19,080 Speaker 8: of very few sources of revenue, but if we looked 327 00:17:19,080 --> 00:17:21,560 Speaker 8: at our institutions through the lens of what we could 328 00:17:21,600 --> 00:17:26,000 Speaker 8: monetize things like our online learning programs that right now 329 00:17:26,080 --> 00:17:29,480 Speaker 8: through the number of you know, high school students that 330 00:17:29,600 --> 00:17:33,840 Speaker 8: need certifications, could we provide those. So there's some avenues 331 00:17:33,880 --> 00:17:36,880 Speaker 8: that we're researching right now in terms of how we 332 00:17:36,920 --> 00:17:39,520 Speaker 8: look at monetizing the things we do on our campus. 333 00:17:39,560 --> 00:17:43,360 Speaker 8: I would also say strong fiduciary responsibility. You know, we're 334 00:17:43,359 --> 00:17:46,879 Speaker 8: proud of ourselves at Spelman that we actually balance our 335 00:17:46,880 --> 00:17:49,600 Speaker 8: budget really for the last twenty to twenty five years. 336 00:17:50,320 --> 00:17:54,520 Speaker 8: But that takes discipline and also to looking at unique partnerships. 337 00:17:54,560 --> 00:17:57,160 Speaker 8: You know, I reflect on my corporate career and said, 338 00:17:57,200 --> 00:17:59,720 Speaker 8: you know, when we wanted to venture into a new category, 339 00:18:00,040 --> 00:18:02,680 Speaker 8: please oftentimes select the partner to go with. 340 00:18:03,760 --> 00:18:08,440 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify, 341 00:18:08,640 --> 00:18:12,120 Speaker 1: and anywhere else you get your podcasts. 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