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Speaker 2: It was a bombshelf that happened in the last twenty
Speaker 2: four hours, and that is New York City Mayor Eric
Speaker 2: Adams indicted after federal corruption probe. Are there's video and
Speaker 2: pictures of officers rating Gracie Mansion, where the mayor lives.
Speaker 2: It's something. It is definitely a moment here in New
Speaker 2: York political history. So we wanted to talk to Scott Stringer,
Speaker 2: former New York City Comptroller, on.
Speaker 3: All of this.
Speaker 2: Scott, the latest that we've heard is that Mayor Adams
Speaker 2: is going to fight this. He definitely doesn't look like
Speaker 2: he's resigning. What is your take on that?
Speaker 3: Look, he should and must fight it. This is his
Speaker 3: life and he has to have full focus on a
Speaker 3: very serious federal indictment. But that is what he has
Speaker 3: to do for himself. Unfortunately, you can't govern the city
Speaker 3: and fight the indictment. And that is why he should
Speaker 3: step aside for the good of the city. I presume
Speaker 3: no guilt or no innocence. That's for the courts to decide,
Speaker 3: But I do think we have to be laser focused
Speaker 3: on the city. Look, the business community in particular has
Speaker 3: invested billions of dollars in the financial capital of the
Speaker 3: world called New York City. We have citizens, middle class
Speaker 3: people who are struggling to pay their rent, struggling to
Speaker 3: get their kids through school. The job of mayor is
Speaker 3: to be that person who works every single day laser focused.
Speaker 3: That cannot happen anymore in an administration where not only
Speaker 3: is the mayor indicted, but almost the entire leadership team
Speaker 3: is under some indictment or federal investigation. So, with great
Speaker 3: respect to the man, recognizing innocent until proven guilty, it
Speaker 3: is time to step aside. We've got to govern this
Speaker 3: town in a way that's never been governed before, and
Speaker 3: I think he's got to just step back and Scott.
Speaker 4: If he doesn't do that, how what's your view on
Speaker 4: the timeline of how these events can unfold? Because I
Speaker 4: just think back to last November when the FBI agents
Speaker 4: rated the home of an Adams campaign fundraiser that's really
Speaker 4: what kickstarted that, and that's ten months in the rearview mirror.
Speaker 3: Well, look, at the end of the day, that's what
Speaker 3: investigations are for. I mean, the federal government has obviously
Speaker 3: taken time to look at all of this. They're announcing
Speaker 3: charges probably as we speak. And my concern as a citizen,
Speaker 3: as a public school parent, as somebody who's managed the
Speaker 3: finances of this city for eight years. You know, this
Speaker 3: is a tender moment for New York. We have to
Speaker 3: send a signal internationally that we are open and ready
Speaker 3: for business. We cannot play the you know, the political
Speaker 3: game back and forth. We need strong leadership now. We
Speaker 3: need leadership and finance. We need leadership to actually get
Speaker 3: things done. Look, I love this city. This is a
Speaker 3: sad day for me, but I've seen corruption scandals over
Speaker 3: the years. I fought corruption my entire life, and it's
Speaker 3: a very sad moment at this point that we have
Speaker 3: to be going through this.
Speaker 2: So there's a couple of things to unpack to that
Speaker 2: with me. So as a parent of a child in
Speaker 2: public school, I totally hear you on that. In terms
Speaker 2: of a business or CEO making an investment in New
Speaker 2: York City. I'm struggling to see how this really moves
Speaker 2: the needle in that a lot of us are now
Speaker 2: desensitized to these kind of indictments and scandals, rightly or wrongly.
Speaker 2: When you have a former president also accused and convicted
Speaker 2: of crimes, everyone here is like, yeah, okay, and then
Speaker 2: let's move on. So is it really going to impact
Speaker 2: it in the way that maybe twenty years ago we
Speaker 2: would or should have.
Speaker 3: Well, I'm not going to give up on the sensibilities
Speaker 3: of both the American public and certainly New York City residents.
Speaker 3: First of all, we New Yorkers, we get this stuff.
Speaker 3: We are savvy, We've seen it all. So I don't
Speaker 3: think this is going to sit well with the public.
Speaker 3: I don't think people are going to shrug their shoulders
Speaker 3: walking to work today saying it doesn't matter. I don't
Speaker 3: think Trump's getting re elected in part because he's had
Speaker 3: criminal conduct. I think people want stable leadership. I mean,
Speaker 3: let's talk about the public schools. We have kids who
Speaker 3: are still struggling with COVID. I see, I see the
Speaker 3: difference between parents who have some resources and parents that don't.
Speaker 3: The whole public housing developments are collapsing. We're not building
Speaker 3: affordable housing fast enough. And look, the job mayor is
Speaker 3: to reach out and get to those entrepreneurs, the tech entrepreneurs,
Speaker 3: the communities that we reliant, jumpstart and pump up our economy.
Speaker 3: We want business leaders to say, you know what, we
Speaker 3: want that old New York City Compact back. We will
Speaker 3: attract the best writers to our workforce. But the job
Speaker 3: of mayor is to provide open space, public space, safety
Speaker 3: in the streets, safety in the subways, a real mental
Speaker 3: health initiative to help with homelessness. But also we've got
Speaker 3: to make sure that rather than tout a robot called
Speaker 3: K five to do policing, we actually need a policing
Speaker 3: strategy that's fair but strong, and we have to make
Speaker 3: these challenges. This mayor cannot focus on it because rightfully,
Speaker 3: he's got to focus on a major federal indictment. And
Speaker 3: I don't blame him for doing that at all.
Speaker 2: All right, Scott, we appreciate it. Thank you very much
Speaker 2: for that insight. Satstringer, former New York City Comptroller.
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Speaker 2: Thirty and I want to get more with Doctor Basil Smigel,
Speaker 2: Professor of Practice at Columbia University School at Professional Studies.
Speaker 2: He's also former executive director of the New York State
Speaker 2: Democratic Party. He's been a political strategist and policy advisor
Speaker 2: for almost twenty years with local, international, and national experience.
Speaker 2: This is quite a bombshell here, doctor, What do you
Speaker 2: think this means? How does this unfold? Can Eric Adams
Speaker 2: keep a seat?
Speaker 5: Well, you know, to the point that June just made.
Speaker 5: I mean, this wouldn't have happened had it not gone
Speaker 5: to the highest levels of the Department of Justice. So
Speaker 5: this is serious. It's serious as a lifelong in New Yorker.
Speaker 5: This is serious for me just as a voter and
Speaker 5: you know, with care and concern for my city. But
Speaker 5: if he saw his press conference earlier, he had a
Speaker 5: lot of supporters with him, and I think that's really
Speaker 5: what his future hinges on, not just the charges themselves,
Speaker 5: but politically, you know, will his base stick with him?
Speaker 5: And we saw, you know, some prominent democratic leaders, particularly
Speaker 5: African American leaders, standing behind him. So until we start
Speaker 5: to see more, if we ever see more prominent African Americans,
Speaker 5: particularly from some of the communities that he did did
Speaker 5: very well in in his election, if they sit down
Speaker 5: and saying that he needs to step down he's unable
Speaker 5: to fulfill his duties, then I think you'll see the
Speaker 5: hastening of that decision. But for now, it sounds like
Speaker 5: he's doug its heels it in and to this point,
Speaker 5: I don't really see this sort of watershed moment that
Speaker 5: would get him to step down.
Speaker 6: Doctor. What is the governor's role at Governor Hochel's role
Speaker 6: in all this? Can she essentially fire him? Would she?
Speaker 6: If it comes to that. I mean, you mentioned sort
Speaker 6: of the political delicacy of it all, given his support
Speaker 6: within the African community and elsewhere, and.
Speaker 5: I think it does come down to that she does
Speaker 5: have a role there is that there is a scenario
Speaker 5: where the governor can can take him, take him out
Speaker 5: of his seat. There's another sort of opportunity for that
Speaker 5: to happen by a separate committee should that get formed.
Speaker 5: There's a long explanation about that, but the but yes,
Speaker 5: the governor can step in and take and take him
Speaker 5: out of office at some point. But given the fact
Speaker 5: that you know, the governor has always had you know,
Speaker 5: has had a tricky election just a couple of years
Speaker 5: ago where it was a lot closer than people expected.
Speaker 5: She relies heavily on the same base that Eric Adams
Speaker 5: has in New York City, and I don't know that
Speaker 5: she would make a decision to to a very drastic
Speaker 5: decision like that without really checking with a lot of
Speaker 5: the a lot of the key leaders in those communities
Speaker 5: across the city. Because if she would do that sort
Speaker 5: of unilaterally, I think the blowback would be it would
Speaker 5: be really significant and she would feel it when she's
Speaker 5: up for re election.
Speaker 2: When you take a look at the indictment, what we
Speaker 2: heard from District Attorney Damien Williams, and then excuse me,
Speaker 2: yes you Attorney Damian Williams, when we also heard from
Speaker 2: New York City Mayor Eric Adams as well his defense,
Speaker 2: what stacks up for you? Like if you were with
Speaker 2: Eric Adams, like what would you be saying, like how
Speaker 2: does the defense work? Like We're going to keep fighting.
Speaker 2: I'm going to keep fighting I'm going to keep my
Speaker 2: day job. This isn't true. They're just kind of stalking
Speaker 2: me like all all of that. Does that hold real water?
Speaker 5: You know? This is I So the short answer for
Speaker 5: me is no, because you know him. You know, for
Speaker 5: him to say that this has been he's being targeted
Speaker 5: by the Justice Department, I would remind him that the
Speaker 5: president's own son, Hunter Biden, has been indicted. So I
Speaker 5: don't think he's I don't think that that holds a
Speaker 5: lot of water. Number One one. He's also said that
Speaker 5: this is a retribution for his challenging of the Biden
Speaker 5: administration on his handling of migrants, and I would I
Speaker 5: would also say that I don't think that given everything
Speaker 5: that's happening in our national politics right now, I don't
Speaker 5: think that the Biden administration nor the Democrats nationally have
Speaker 5: the kind of time to specifically be targeting him in
Speaker 5: this way. They've just got a lot of other things
Speaker 5: to do. He's also said that you know this is
Speaker 5: that that cut. The ways in which you've been targeted
Speaker 5: are similar to what David Dinkins, the first African American
Speaker 5: mayor of the City of New York, was similar to
Speaker 5: what he went through, and I actually that bothers me
Speaker 5: a bit too, because number one, David Dinkins is not indicted,
Speaker 5: and number two, you know, he also had an antagonist
Speaker 5: in Rudi Giuliani for the entire four years that he
Speaker 5: was mayor, and there was a tremendous racial undertone and
Speaker 5: overtone to that tension, which is not present here. But
Speaker 5: I will say that it is it is true that
Speaker 5: for a lot of African American voters there is a
Speaker 5: significant amount of apprehension and concern around the ways that
Speaker 5: the community is being treated has been treated by the
Speaker 5: media and by law enforcement. That is that it is
Speaker 5: something that has been well documented over the years. But
Speaker 5: I'm also very mindful as an African American myself, I'm
Speaker 5: also mindful of how that is be how that is used,
Speaker 5: and how that's leveraged in situations like this. So I
Speaker 5: would suggest that he stay away from those kinds of
Speaker 5: those defensive tactics in that narrative and kind of just
Speaker 5: focus on saying that he still can run the city,
Speaker 5: and he's still in charge, and this is the future
Speaker 5: and envision he has for the upcoming weeks. So I
Speaker 5: would stick to that.
Speaker 6: Can a city as complex as New York City continue
Speaker 6: to operate with a mayor who's distracted by this, and
Speaker 6: with any of other department leaders in New York City
Speaker 6: who just aren't there.
Speaker 5: Well, I mean, that's one of the key concerns because
Speaker 5: if you think about the biggest agencies, the most prominent
Speaker 5: agencies in New York Fire, Police, Department of Health, and Education,
Speaker 5: and you know, for full disclosure, the former school's chancellor.
Speaker 5: The school chancellor who said he's resigning the end of
Speaker 5: the year, I've known for twenty five years and he's
Speaker 5: wanted that job but pretty much his entire career, So
Speaker 5: for him to take that step fairly significant. You know,
Speaker 5: the rating of the current Police Commissioner's House, who himself
Speaker 5: is acting because the previous one stepped down because of
Speaker 5: the investigation. All of these challenges to running the city
Speaker 5: will be on the minds of voters in the next
Speaker 5: couple of weeks. My guess, however, is that there's to
Speaker 5: go out and be so much focused on the presidential
Speaker 5: that it'll be mitigated by that. But just after and unless,
Speaker 5: of course, if something happens tragically, and I hope that
Speaker 5: doesn't happen, there will be more attention on his leadership.
Speaker 5: But what he has to wonder right now and hope
Speaker 5: for is that a lot of voters are going to
Speaker 5: be focused on more on the presidential than on him.
Speaker 5: But once that happened, all eyes quickly turned back to
Speaker 5: him because the male primaries in June, it's really right
Speaker 5: upon us and just very quickly. There is a succession plan,
Speaker 5: and I think everybody should understand that that the state
Speaker 5: and the state constitution, city charter have a succession plan
Speaker 5: built in. If you work stut Down, the New York
Speaker 5: City Public Advocate becomes the acting mayor.
Speaker 2: All right, doctor, we really appreciate it. That was extraordinarily helpful,
Speaker 2: Doctor basilsmikel Professor of Practice and Columbia University School of
Speaker 2: Professional Studies, also former executive director of the New York
Speaker 2: State Democratic Party.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: So let's continue the story. Tom or Lake as Bloomberg
Speaker 2: Economics Chief Economists, and he joins us now now Tom
Speaker 2: had lived in Beision for a very long time. He
Speaker 2: was the chief China economics correspondent over the Wall Street Journal.
Speaker 2: He also headed Bloomberg economics coverage in China, Japan, and Korea,
Speaker 2: and now he joins US from DC. But he has
Speaker 2: a long history of looking at these kind of interventions
Speaker 2: from the government as well as monetary authority. I hate Tom,
Speaker 2: Is this the end?
Speaker 7: So I think we need to break it down into
Speaker 7: two different problems. So the first problem is the cycle.
Speaker 7: And if we think about the cycle, well, growth was
Speaker 7: very weak, deflation was coming, markets were slumping, and this
Speaker 7: intervention by China's Central Bank and now the Pollit Bureau,
Speaker 7: well it looks pretty decisive. The equity market has broad
Speaker 7: back higher, the Chinese yuan has strengthened, bond yields have
Speaker 7: ticked up, and expectations for growth out to the end
Speaker 7: of twenty twenty four and into twenty twenty five, well
Speaker 7: they're a little bit stronger. So on the cycle, this
Speaker 7: is certainly a positive moment, maybe a decisive moment. The
Speaker 7: second set of issues, though, is around structure, right, and
Speaker 7: that's where we have to worry about the massive overhang
Speaker 7: of property supply. The shrinking workforce, the increasingly fractious relations
Speaker 7: with the United States. These are the factors which are
Speaker 7: going to be weighing on China's growth, not just in
Speaker 7: twenty twenty four, twenty twenty five, but out into the
Speaker 7: next decade. And on those well, nothing we've seen in
Speaker 7: the last few days really changes the picture.
Speaker 4: Yeah, Tom, With that in mind, we're seeing a tremendous
Speaker 4: rally across assets, especially in China. Just looking at the
Speaker 4: Shanghai composite up more than nine percent in the last
Speaker 4: three days. Does this have sticking power? It feels like
Speaker 4: in the past we've seen these moments were stimulus is
Speaker 4: kind of drummed up in China, talks about injecting money
Speaker 4: into the economy, and then those moments are relatively fleeting.
Speaker 7: So the last couple of years has seen what you
Speaker 7: might call a kind of steady drip drip of micro
Speaker 7: policy moves. The PBOC cuts interest rates by ten basis
Speaker 7: points or twenty basis points. The PBOC frees up a
Speaker 7: bit more funds for China's banks to lend. The Ministry
Speaker 7: of Finance puts a bit more money in the pockets
Speaker 7: of local governments. What we've seen in the last few
Speaker 7: days is a kind of a package of more powerful
Speaker 7: measures rolled out at the same moment, and the Pollit Bureau,
Speaker 7: the twenty four men who kind of call the shots
Speaker 7: on China's economy, coming out with some pretty sort of
Speaker 7: firm statements about how they want to turn the cycle round.
Speaker 7: Hold the decline in property, give equities a boost. Right, So,
Speaker 7: if we think about markets, if we think about growth
Speaker 7: for the next few months, maybe even into early twenty
Speaker 7: twenty five, this is a pretty important move. If we
Speaker 7: think about those bigger structural problems, if we think about
Speaker 7: the millions and millions of empty homes in China, we
Speaker 7: think about the shrinking working age population. No, nothing which
Speaker 7: has happened so far is going to move the dial
Speaker 7: on those big structural problems.
Speaker 2: And here's the question we've all been waiting for, right
Speaker 2: when when is China going to cut checks to people?
Speaker 2: I mean, they already mentioned that they're going to do
Speaker 2: it for their low incomes, just to one off, but
Speaker 2: that's literally what needs to happen. No, So like, when
Speaker 2: are they going to do that?
Speaker 7: So it's a great question, Alex so that I'm sure
Speaker 7: we're all familiar with the term pushing on a piece
Speaker 7: of string. Right, At some point, there's just too much
Speaker 7: debt in the economy. And when you cut interest rates, well,
Speaker 7: because debt is already so high, no one rushes to
Speaker 7: borrow more, no one rushes to invest more, right, And
Speaker 7: I think that's almost where China is, right. Debt's really high,
Speaker 7: so rate cuts they help a little bit, But there's
Speaker 7: certainly that pushing on a piece of string aspect to it.
Speaker 7: So if you really want to accelerate China's growth, what
Speaker 7: do you have to do? Well, the government has to
Speaker 7: open its checkbook and put money in household's pockets. Now
Speaker 7: we've seen the Polyt Bureau say they're going to amp
Speaker 7: up fiscal stimulus, so it seems like the checkbook, the
Speaker 7: government wallet is starting to creak open. The question is, well,
Speaker 7: how much money are they going to put to work
Speaker 7: and where are they going to put it to work.
Speaker 7: Is it going to be a kind of traditional infrastructure
Speaker 7: style stimulus, let's build some more bridges, or is it
Speaker 7: going to be the consumer stimulus, let's put money in
Speaker 7: household's pockets so they can upgrade their Electroney baby switch
Speaker 7: to electric vehicle?
Speaker 2: All right, Tom, we appreciate that. Thank you very much,
Speaker 2: Tom or like Bloomberg Economics chief economists joining us on
Speaker 2: the China Latest.
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Speaker 2: We bring you all the tough news and business economics
Speaker 2: and finance through a lens of our Bloomberg Intelligence folks.
Speaker 2: They cover two thousand companies and one hundred and thirty
Speaker 2: industries worldwide. The news that broke yesterday is that open
Speaker 2: ai is going to transition from being a nonprofit organization
Speaker 2: to a for profit company. I have no idea what
Speaker 2: that means, but the goal of the company was supposed
Speaker 2: to quote benefit humanity as a whole, unconstrained by a
Speaker 2: need to generate financial return. If that changes, what does
Speaker 2: that due to the actual company? Joining us now, as
Speaker 2: Man Deep Sing, Bloomberg Intelligence senior tech industry analyst joins, now, Okay,
Speaker 2: I don't get it. What does it mean?
Speaker 8: Well, I mean they've been looking to do that for
Speaker 8: a while in terms of becoming a profitable company similar
Speaker 8: to other tech companies that are out there. And I
Speaker 8: guess we had hints all along because they never open
Speaker 8: source their model. You know, they are the leaders when
Speaker 8: it comes to generative AI, and there are two approaches
Speaker 8: right now with companies keeping their model proprietary versus open source,
Speaker 8: and they are one of those who have kept it proprietary.
Speaker 8: So it's not a surprise that they wanted to convert
Speaker 8: to a profit structure. Given all this has happened, I
Speaker 8: think the bigger thing here is the CTO Mira Murrati
Speaker 8: leaving and pretty much all the co founders of the
Speaker 8: company leaving at this point, with Altmann being the only
Speaker 8: one there. So that's to me the bigger news.
Speaker 4: Capitalism strikes again. But real question though, if it's valued
Speaker 4: around one hundred and fifty billion dollars and you mentioned
Speaker 4: CTO Mira Muradi resigning, does she keep her stock like
Speaker 4: is she leaving the company with a nest egg worth
Speaker 4: a few billion dollars?
Speaker 8: Well, again, I think once the entity changes, there are
Speaker 8: a lot more things that will happen subsequently in terms
Speaker 8: of you know, the new profitable structure, what sort of
Speaker 8: equity sam Altman would have. So in terms of the
Speaker 8: prior structure, they already had a subsidiary which was profitable.
Speaker 8: So it's a pretty convoluted structure. So when the November
Speaker 8: thing happened, number twenty twenty three, when sam Altman was
Speaker 8: asked to leave and then he came back, at that time,
Speaker 8: they changed the board composition and they created a profitable subsidiary.
Speaker 8: Now this is like converting the full company to a
Speaker 8: profitable entity, and there will be changes that will come along.
Speaker 8: So hard to say exactly who keeps what at this
Speaker 8: point of time, but suffice to say that you know,
Speaker 8: the Microsoft relationship would come into play as well. I mean,
Speaker 8: they are one of the biggest stakeholders in the company,
Speaker 8: and all the signs are they want more investors in
Speaker 8: the company. So sam Altman is trying to raise more
Speaker 8: money and it will be at a higher valuation one
Speaker 8: hundred and fifty billion dollars. That's expected, and at some
Speaker 8: point I think they will go public as well.
Speaker 2: When you brought up the CTO leaving, wasn't that also expected?
Speaker 2: Hasn't she stayed on longer than everyone had anticipated because
Speaker 2: she covered for Sam Welt when he was out, so
Speaker 2: it was understood that she was leaving once he came back.
Speaker 8: Well, I mean, I look at it this week again,
Speaker 8: it's from the outside. I obviously I am not privy
Speaker 8: to anything that's going on inside the company, but there
Speaker 8: is clearly some tension. Whether it's tied to the you know,
Speaker 8: the profitable or non profitable aspect, or any other risks
Speaker 8: related to large language models, whether it's come down to
Speaker 8: safety issues or copyright issues. We don't know that level
Speaker 8: of transparency, and I think the fact that all the
Speaker 8: co founders have left clearly there is disagreement and tension.
Speaker 8: And we can only speculate from the outside, but it's
Speaker 8: never a good sign when you know the core team
Speaker 8: that started the company and these are the technical guys
Speaker 8: who have left. So Sam Altman is the face of
Speaker 8: the company, is the CEO, but these are the real
Speaker 8: technical guys who built the product. So I mean, look,
Speaker 8: they have a big bench and the company is much
Speaker 8: bigger now. The fact that we haven't heard a lot
Speaker 8: about GPT five that worries me a little bit because
Speaker 8: when you are a company like open ai, who is
Speaker 8: leading the charge, you want that product roadmap to be
Speaker 8: out there. You want to set expectations when is the
Speaker 8: next version of the large anglid model coming out? And
Speaker 8: I think that's where they could be delayed.
Speaker 2: All right, Mandy, really appreciate it. Thank you so much,
Speaker 2: many saying, joining us Boomberg Technology senior analysts for Bloomberg Intelligence.
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Speaker 2: In other news, Wells Fargo is said to send some
Speaker 2: fed crucial review for lifting cap. Shares rise by about
Speaker 2: two percent to a session high.
Speaker 5: This is like the deal.
Speaker 2: This is the It's like consistent things that Wells Fargo
Speaker 2: has to do, Bailey in order to get that asset
Speaker 2: cap lifted so they can really start to grow again exactly.
Speaker 4: And when you look at kind of some of these updates,
Speaker 4: so it's a big step in trying to kind of
Speaker 4: write the ship, if you will, for Wells Fargo. As
Speaker 4: you mentioned, stock right now at more than four percent
Speaker 4: so when you see these sharp immediate reactions, it's Wall
Speaker 4: Street obviously applauding those deals. And the big thing going
Speaker 4: forward is how can Walls Fargo kind of again re
Speaker 4: emerge from some of those issues that they had a
Speaker 4: number of years ago and the kind of reworking of
Speaker 4: the company that's been taking I believe it's just over
Speaker 4: five years, six years at this point, and trying to
Speaker 4: get over some of these regulatory sanctions. And obviously the
Speaker 4: stock again of four percent. I want to say it's
Speaker 4: been underperforming relative to some comps, but I'm waiting on
Speaker 4: a terminal to load right now.
Speaker 2: And also the idea is that you know, you'd like
Speaker 2: to say that they do this one thing and the
Speaker 2: asset cap is lifted, but in actuality it's going to
Speaker 2: be chipping away at compliance, transparency, getting all their ducks
Speaker 2: in a row, and that it takes a lot of
Speaker 2: time not to be bested. There is other breaking news here.
Speaker 2: FED Vice Chare for Supervision Michael Barr delivers in a
Speaker 2: speech that he says the FED is exploring liquidity rule
Speaker 2: tied to uninsured deposit Now that rule would address those
Speaker 2: constraints on hold to maturity assets Part of the issue
Speaker 2: that brought down SVB. At the end of the day,
Speaker 2: have an asset on your books, you're holding for safety,
Speaker 2: You're going to hold them till the end of the term.
Speaker 2: Yet when rates move violently up or down, it really
Speaker 2: creates a disparity. Then in that asset price. You also
Speaker 2: have potential requirements that could complement some of the existing rules,
Speaker 2: exploring some large bank requirement on minimum liquidity. So many things,
Speaker 2: so many things happening. It's so exciting.
Speaker 3: Good thing.
Speaker 2: Alison Williams is here Bloomberg Intelligence, chief US Bank's asset
Speaker 2: manager person. She covers all of these things just in
Speaker 2: terms of Wells Fargo moving forward to lifting the cap
Speaker 2: in your estimate, like how close is Wells Fargo to
Speaker 2: actually be able to lift their cap their asset cap.
Speaker 9: You know, it's tough to say, you know, certainly this
Speaker 9: has been unprecedented, right, I mean, this began with a
Speaker 9: fine in twenty sixteen. I think Wells Fargo initially thought
Speaker 9: it would be a few months. It's been several years,
Speaker 9: but you know, they one of the biggest things I think,
Speaker 9: you know, one of the biggest changes I thought was,
Speaker 9: you know, they changed over the boar they brought in
Speaker 9: all new management, Charlie Sharf as the CEO. He was
Speaker 9: the sort of the third CEO in a short time period,
Speaker 9: but almost fully turned over the board, brought in a
Speaker 9: lot of x JP Morgan people, and then it's just
Speaker 9: been sort of locking and tackling since. And we've seen
Speaker 9: a number of the consent orders get resolved, but there
Speaker 9: still are a few more out there that they need
Speaker 9: to take care of.
Speaker 4: Yeah, just looking at the Bloomberg News story stands out
Speaker 4: the caps lifespan so far, JP Morgan has swelled sixty
Speaker 4: four percent to more than four trillion dollars of assets,
Speaker 4: meaning they've added almost an entire Wells Fargo to the
Speaker 4: balance sheet. What's the timeline for Wells Fargo to potentially
Speaker 4: catch up?
Speaker 6: Is that possible?
Speaker 4: How would that work out?
Speaker 5: Yeah?
Speaker 9: I mean to some extent, there was, you know, a
Speaker 9: lost opportunity, right, So, I think the biggest, you know,
Speaker 9: the biggest hurt from the asset cap was during COVID
Speaker 9: when JP Morgan and Bank America were able to add
Speaker 9: all these retail deposits, right and Wills far Ago really
Speaker 9: could not participate because they they did, but it was
Speaker 9: a lot more work right, because it wasn't the loan
Speaker 9: side of the balance sheet. It was really the deposit
Speaker 9: side of the balance sheet that was a constraint because
Speaker 9: they were growing so rapidly, and they did do things
Speaker 9: to try to manage their balance sheet in the most
Speaker 9: profitable way, you know, getting rid of things like non
Speaker 9: operational deposits that are you know, less profitable and less
Speaker 9: valuable long term than core deposits. They have sold off
Speaker 9: businesses over time, so I mean, but for banks such
Speaker 9: as Bank American and JP Morgan, granted, some of those
Speaker 9: balances did go away over time, but they were able
Speaker 9: to retain at least, you know, some of those customers,
Speaker 9: and so I would say that's where sort of the
Speaker 9: big harm from the assa cap has come from. You know,
Speaker 9: if you fast forward to today, the balance sheet constraint
Speaker 9: is not as significant. They have started investing in banks
Speaker 9: like businesses like card and trading where they're under index,
Speaker 9: so they are growing their businesses. So one, you know,
Speaker 9: if the cap was removed, that would certainly give them
Speaker 9: more flexibility in those businesses. But on the deposit, But
Speaker 9: on the deposit point, that's that's really sort of a
Speaker 9: lost opportunity.
Speaker 2: Yeah, Allison.
Speaker 4: Thank you.
Speaker 2: You weren' booked on this, but you came in exactly
Speaker 2: the right time, so thanks so much. We really appreciate you.
Speaker 2: Alson Williams of Bloomberg Intelligence senior analysts for global banks
Speaker 2: and asset managers.
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