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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. This

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Speaker 1: is what's known as Lawrence called headlines. This guy is

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Speaker 1: the king of transparency, who wasn't danaher for years? And

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Speaker 1: these are I'm counting, I'm John quickly nine maybe eleven

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Speaker 1: brutal headlines as they moved through the accounting. Do we

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Speaker 1: have the correct gentleman to speak to about this? I

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Speaker 1: think maybe we do. Steven Iceland with us with New

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Speaker 1: Burger Bourbon today. Do you own General Electric Shot? Sir?

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Speaker 1: Used to be you were short cleared it out in December?

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Speaker 1: What lent you to Colvery Steak? Um? It had gotten

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Speaker 1: to my price target? Um. I still thought things were bad,

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Speaker 1: but Culp is a good CEO, and I think that

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Speaker 1: people might keep a free passed. And I didn't have

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Speaker 1: a theory that the company was going to go to zero.

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Speaker 1: So I think you know what, be a gentleman, cover

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Speaker 1: your position and walk away. This is a really important distinction.

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Speaker 1: And then some short sellers they almost want to not

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Speaker 1: squeeze every penny out of the transaction, but they want

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Speaker 1: to count the company into into death and and with

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Speaker 1: with harm to employees, etcetera. Which is the sort of

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Speaker 1: the social response. What you're saying is, here's the opportunity,

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Speaker 1: let's make the price, but let's not found the company

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Speaker 1: into death. And look, Jeff Emilt, in my humble opinion,

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Speaker 1: butchered the company. Um every acquisition that he makes made

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Speaker 1: was a disaster, the worst being the last one, which

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Speaker 1: was Alstome And everything he sold he sold at the bottom,

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Speaker 1: and the balance sheet was impaired. The accounting was a

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Speaker 1: trap stee And this has all come out I know

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Speaker 1: in the in the Iceman house, if there was no

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Speaker 1: Velvita cheese, you are Velvita cheese free. We have been

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Speaker 1: Velveted cheese free for a very long long time. Okay, fine,

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Speaker 1: But nevertheless, there are really smart people making colossally bad decisions,

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Speaker 1: involving massive write downs in goodwill, bad will and whatever will.

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Speaker 1: How does this happen when smart guys get in the room.

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Speaker 1: Why why do you have the alstoms occur? Why do

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Speaker 1: you have the awesome. It's a very good question. I mean,

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Speaker 1: Will maybe one of the worst CEOs in corporate American history. UM,

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Speaker 1: that doesn't mean he's stupid. You know, smart people make

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Speaker 1: mistakes all the time, and sometimes when they get on

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Speaker 1: a sort of way of thinking about things, they can

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Speaker 1: get off it. Um, just because you're smart doesn't make

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Speaker 1: you right. But John, I maybe I'm still John. I

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Speaker 1: find extraordinary that write down at Kraft Times at least,

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Speaker 1: and so rapidly. I got it quickly. But this is

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Speaker 1: what happens when you can right steve, you slash are

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Speaker 1: and the aggressively. Doesn't your products suffer in the end? Well?

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Speaker 1: I mean, you know, part part of the issue is

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Speaker 1: that UM, corporate America has been rewarded in terms of

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Speaker 1: stock price for buying back stock and not investing in

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Speaker 1: their companies. And that works best for companies that don't

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Speaker 1: need much cap X. It doesn't work particularly well for

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Speaker 1: companies like Craft that do need cap X and are

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Speaker 1: indeed to improve their businesses. But that's been the trend

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Speaker 1: of corporate America for the last twenty years. I've got

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Speaker 1: to get to the Brexit discussion with you. UM. Some

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Speaker 1: well publicized shorts of some British banks. Steve, help me

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Speaker 1: understand the process. At what point do you look at

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Speaker 1: the political situation in the UK and say it's time

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Speaker 1: to cover. Just walk me through your process as you

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Speaker 1: short these individual banks. I'm short three banks. Yeah, they're

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Speaker 1: not large positions. So even if I lose money, I'm

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Speaker 1: not going to lose a lot um. I still think

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Speaker 1: a bad outcome here is possible. You know, if if

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Speaker 1: if there's a very if is a very long delay

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Speaker 1: of twenty months, I'll probably cover because people will just

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Speaker 1: forget about it. If the delay is only for three months,

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Speaker 1: I'll stay. And you know people are the way the

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Speaker 1: markets acting. They're thinking that getting a delay from the

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Speaker 1: EU was automatic. It's not automatic. You need all twenty

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Speaker 1: seven countries unanimously to agree. All you need is one

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Speaker 1: to say no. You mentioned Zillo earlier. You were at

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Speaker 1: a negative view on Zillo, and then it's bounced up

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Speaker 1: a little bit. Uh, do you reaffirm caution on Zilo?

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Speaker 1: Do you short here? I actually look, I was here

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Speaker 1: in August when Zilo I think was in the sixties,

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Speaker 1: and I pitched it as a short and the stock

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Speaker 1: went down quite precipitously. I think from a fundamental perspective,

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Speaker 1: I actually think Zillo is a better short today than

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Speaker 1: it was in August. Two reasons. Number one, in January

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Speaker 1: when the company when the company recently report its fourth

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Speaker 1: quarter earnings, they said that they were owing that their

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Speaker 1: entire growth initiative was this business of flipping homes and

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Speaker 1: giving people mortgages. They are taking their entire free cash

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Speaker 1: flow and putting it into that business. That is a

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Speaker 1: high risk business. It has the potential to really anger

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Speaker 1: all of its real estate broker customers on its platform,

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Speaker 1: and so it's it's potentially impairing its actual base business.

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Speaker 1: And finally, it's the reverse of what's worked in the

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Speaker 1: market for years. Market pays for high free cash flow

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Speaker 1: low cap x. This is a company that is taking

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Speaker 1: all its free cash flow from that business and plow

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Speaker 1: it into a financial services company. We're gonna leave it there, Steve.

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Speaker 1: I's from thank you so much on any shorts at

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Speaker 1: Bloomberg News. Here's we of course contact the company's will

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Speaker 1: contact Zerlo as well. This is a joy Patrician monster

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Speaker 1: with us UM with the MBA program and Economic Policy

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Speaker 1: Management at Columbia University were thrilled that she could be

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Speaker 1: with us now on the FED, on the policy forward,

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Speaker 1: and maybe a little bit on this raging debate of MMT. Patricia.

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Speaker 1: Wonderful to have you with us today. You were at

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Speaker 1: welles Leye. Did you did you learn your initial economics

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Speaker 1: with the legendary and greatly missed Carl Case. I certainly did.

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Speaker 1: He was actually one of my professors very early on there.

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Speaker 1: Chip was, um one of my mentors as a as

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Speaker 1: an undergraduate. That is a good and advantaged thing in

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Speaker 1: what Chip Case would say is foundational economics. Begin is

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Speaker 1: the Federal Reserve of the United States? Are they working

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Speaker 1: Chip Case economics? Are they in original territory? Yeah? Well

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Speaker 1: a little a little about part of what they're doing,

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Speaker 1: uh is pretty traditional monetary policy. I think they're the

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Speaker 1: way that they have UH both given some guidance and

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Speaker 1: talked about their strategy for setting the policy. Right. UM's

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Speaker 1: pretty classic central banking. Um, they're right now obviously everyone

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Speaker 1: knows on a pause. UM, I think the prospects are

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Speaker 1: and I think they've been pretty clear that they're going

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Speaker 1: to be data driven. That's pretty classic central banking there.

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Speaker 1: You know, it's inflation or the growth picks up a

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Speaker 1: lot they're gonna frighten the more if we stay in

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Speaker 1: this limbo. They're gonna wait and see. And UM, I

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Speaker 1: have no doubt that if growth and inflation taken those

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Speaker 1: time that they'll they'll that they'll cover rate. The balance sheet,

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Speaker 1: of course, is the new is the new territory compared

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Speaker 1: to history. Um, they have been drinking their balancies. Everybody knows. Um,

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Speaker 1: I have to say that. And they have tried very

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Speaker 1: much to separate what they're doing with the balance sheet

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Speaker 1: from these from the short term. Yes, well, I think

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Speaker 1: they're doing it right now. Um. They they paused on

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Speaker 1: race and they're still shrinking the balance sheet. Um, I

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Speaker 1: think you certainly can. I think the question will become

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Speaker 1: the interesting question will be is if output and growth

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Speaker 1: will uh actually deteriorate very significantly and they begin to

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Speaker 1: cut rates, Um, would they put the balance sheet on pause?

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Speaker 1: And eventually, as we know, they don't have a whole

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Speaker 1: lot of bandwidth to cut rates compared to say, if

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Speaker 1: we the economy went into a recession, for example, typically

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Speaker 1: the FED is cut at least basis points. They have

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Speaker 1: three basis points to cut, and then they would They've

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Speaker 1: been very clear that day the balance let me bring

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Speaker 1: in my colleague John Ferrell. That's nice of you. You know,

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Speaker 1: I've been to Wusley, very to the Linden Store for breakfast,

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Speaker 1: which was fantastic, great breakfast. Now, so we get back

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Speaker 1: to the federal reserves. Okay, Um, Patricia, you actually spent

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Speaker 1: a long long time on the open market desk at

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Speaker 1: the New York FED And for people that aren't on

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Speaker 1: Wall Street, I'm not sure they're quite aware that actually

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Speaker 1: the open market operations take place at the New York FETE.

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Speaker 1: So when the Federal Reserve is buying all these bonds

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Speaker 1: and building up the balance sheet, that's where it's happening. Patricia,

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Speaker 1: walked me through your experience of what happens there, why

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Speaker 1: the Federal Reserve is set to pause the balance sheet

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Speaker 1: roll that roll off, why the Federal Reserve is going

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Speaker 1: to do that, and why the market would like it

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Speaker 1: to and the difference between the two. So so I'm uh,

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Speaker 1: let me talk about the actual mechanics of the balance

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Speaker 1: sheet part um. The first thing that is interesting about

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Speaker 1: this is the balance sheet which the FET is trying

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Speaker 1: to get back to what they consider the new normal level,

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Speaker 1: which is a much much much bigger balance sheet than

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Speaker 1: it used to be for a whole host of reasons,

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Speaker 1: most particularly the extra liquidity that both regulations and the

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Speaker 1: and the banks of themselves are demanding for their own

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Speaker 1: risk management purposes. So the balance is going to be

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Speaker 1: very big. Currency itself is one point seven trillion, reserves

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Speaker 1: are one point six. They were three trillion dollars, by

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Speaker 1: the way, a few years ago there once, so they've

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Speaker 1: shrunk a lot. And then there's everything else that the

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Speaker 1: Fed keeps on its balance sheet, which gets you up

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Speaker 1: to about four. So the that's going to accommodate the

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Speaker 1: currency part. That's old fashioned central banking, and currency grows

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Speaker 1: three to five percent a year, so the balance sheet

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Speaker 1: is never going to shrink that small. The question is

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Speaker 1: that reserves piece at one point six trillion, how much

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Speaker 1: liquidity between the regulations and the bank's own risk management

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Speaker 1: needs are they going to have to keep a lot

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Speaker 1: um one point six? Maybe I think a garden variety

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Speaker 1: number floating around is one point two. So the first

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Speaker 1: thing to notice, the fifth most is more than half

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Speaker 1: done quoting the balance sheet. If you believe the market

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Speaker 1: estimates for how far they're going to go, they're already

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Speaker 1: talking about how they're going to stop, by the way,

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Speaker 1: and another year from now, the said, if currency keeps growing,

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Speaker 1: the FEED will actually have to start to buy app

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Speaker 1: well with Then that is the dynamics of the FED,

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Speaker 1: and you know, an improving economy on a relative basis.

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Speaker 1: What are the degrees of freedom the Chairman Powell has

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Speaker 1: right now, if we're the strongest economy on the block,

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Speaker 1: does he have optionality many others don't? Or is he

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Speaker 1: limited because other central banks are so challenged? Okay, Um,

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Speaker 1: certainly global growth spills back on the United States, absolutely does.

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Speaker 1: China is slow, Europe is slow, It slows down the US.

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Speaker 1: The world is just too interconnected economically and financially for

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Speaker 1: that not to be the case. And that is indeed

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Speaker 1: one of the reasons it seems pretty clear that the

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Speaker 1: FED has has paused US growth has slowed down a little,

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Speaker 1: nothing like the rest of the world. But inflation is

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Speaker 1: also slowed down a little as well. It's a little

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Speaker 1: remains a little below their target. So there's no point

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Speaker 1: not to just sit and wait and see and see

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Speaker 1: what happens. And like I said after that that they

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Speaker 1: I take them at their word. Um, And it's pretty

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Speaker 1: classic central banking that there will be data dependent on

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Speaker 1: the right side. I would think, absent a really huge

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Speaker 1: deterioration in the economy, I would I think they would

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Speaker 1: prefer to do their balance sheet normalization. Um given that

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Speaker 1: it's not going to go on too much longer though,

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Speaker 1: But I will say I think it's highly likely, based

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Speaker 1: on the announcements of FENS made today that that that

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Speaker 1: they're gonna give out a lot more information about this

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Speaker 1: at the next meeting, maybe the next two meetings, so

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Speaker 1: they'll give a much clearer picture to the public and

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Speaker 1: the markets about that. Professor, Thank you so much, Professor Patricia,

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Speaker 1: she's at the Columbia University. Greatly greatly appreciated. Uh there

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Speaker 1: on the FED dynamics. Time now to move to an

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Speaker 1: important conversation on the future banking. Here is our friends

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Speaker 1: seeing Lacroix. We are delighted to be here in Paris

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Speaker 1: at the twenty nine Global Markets Conference of JP Morgan

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Speaker 1: and the man really of the hour, Jamie Diamond, the

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Speaker 1: chief executive of the bank, joins me. Now, thank you

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Speaker 1: so much, Jamie Diamond, giving us a little bit of

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Speaker 1: your busy day. Now you've said in the police and

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Speaker 1: actually with the UK and retrenching from almost their global duties.

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Speaker 1: It makes it harder to do business. What does it

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Speaker 1: mean for running a global bankworldwide? I do think there's

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Speaker 1: an issue about the fundamentals of American farm policy and

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Speaker 1: British farm policy. Useduld be very steady, its deadfast, and

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Speaker 1: it is changing. Is a moment plans it doesn't. We

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Speaker 1: don't know exactly the potential of the future. So it's

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Speaker 1: kind of a risk factor. But it's not going to

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Speaker 1: change anything we do. I mean, we're gonna invest country

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Speaker 1: by country, a client by client, just understanding that the

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Speaker 1: risks out there we may not anticipate today that we

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Speaker 1: have to react to them, but but it must change

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Speaker 1: the business of your clients. So do you have to

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Speaker 1: be nimble and what kind of services they want and

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Speaker 1: what you need to do. So in terms of like

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Speaker 1: take a brexit, clients are preparing clients and requests. We've

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Speaker 1: got to get forms and documents that clients have to sign.

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Speaker 1: So yeah, we are very consciously whatever this is an

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Speaker 1: issue like this, what it means for our clients around

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Speaker 1: the world where they want to do business less people

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Speaker 1: you know are investing in China right now because they

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Speaker 1: want to see how the trade things to warts out.

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Speaker 1: So these things do change the flow of trade and

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Speaker 1: investments around the world, but fundamentally it doesn't change what

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Speaker 1: we're gonna do. Okay, on Brexit, it's it's the UK

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Speaker 1: ready for no deal breaks that if it happens. I

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Speaker 1: think a no deal Brexit would be a really bad idea.

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Speaker 1: And I don't think it's just the UK. I think

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Speaker 1: it's EU. You know, they didn't really prepare the last

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Speaker 1: two years for a what I call hard Brexit or

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Speaker 1: no no deal Brexit, and that means a lot of

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Speaker 1: things would change immediately, would have a huge negative effect

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Speaker 1: in the economy. There. We're prepared, kind of spoke to

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Speaker 1: Daniel earlier today, because we have to be prepared, not

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Speaker 1: that we're predicting it. We don't think it's gonna happen.

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Speaker 1: We need there to be some kind of extension. I

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Speaker 1: think the longer the better, but some kind of extension

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Speaker 1: so you know, both parties can think about what they're

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Speaker 1: really trying to accomplish and what the downsides are. So

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Speaker 1: what is it a ten percent risk a risk? And

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Speaker 1: if it does happen to no deal Brexit, does it

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Speaker 1: freeze the markets? I'd say ten, but I don't know.

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Speaker 1: It could freeze the markets, it could have added consequently,

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Speaker 1: don't expect today and if we if your closure gets that,

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Speaker 1: we're gonna go to a seven war room status to

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Speaker 1: make sure we're prepared, not just ourselves but central banks, liquidity, clients, demands.

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Speaker 1: You know. I think something like this will have unanticified

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Speaker 1: consequences that we should prepare for. But can London survive

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Speaker 1: as a financial center? I think under a soft Brexit

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Speaker 1: or a hard Brexit, London's financial center staff will diminish

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Speaker 1: over time because these other countries are going to be

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Speaker 1: demanded certain more things be done there. Uh, it could

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Speaker 1: be ops, technology, risk, legal credit order compliance regularly is

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Speaker 1: gonna assisted. So I think it actually changes the forecast

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Speaker 1: that what you expect for the financial center in Mone.

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Speaker 1: Hopefully it'll still be a financial center. It will, it

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Speaker 1: will be not quite what it is today. You mentioned

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Speaker 1: Brexit in China when we started the interview. How worried

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Speaker 1: are you on China? How should we look at China

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Speaker 1: and what kind of business do you want to do

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Speaker 1: in China? So China for the trade issues are real,

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Speaker 1: they need to be resolved. Then you resolved across all

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Speaker 1: these issues. I think the administration we expect, so we

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Speaker 1: think both parties wanted, but they're complex. They're talking about

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Speaker 1: having hundreds of pages of memorandum on this day so far.

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Speaker 1: If it doesn't get resolved, because a reasonable thing for

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Speaker 1: people in the markets be worried about out China will

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Speaker 1: be a fully developed nation thirty years. His economy is

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Speaker 1: gonna be bigger the United States, but he still has

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Speaker 1: a tough road. They're very smart, but they don't have

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Speaker 1: enough food, warrant energy, They have huge corruption, they don't

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Speaker 1: have open, transparent I men market. You have here in

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Speaker 1: terms of research and capability and knowledge and rule of

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Speaker 1: law on board, and they don't have all that there yet.

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Speaker 1: So it's not a criticism. They're gonna have a way

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Speaker 1: to go, so they'll grow now, but there will be

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Speaker 1: times in the future five years out where there will

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Speaker 1: be real bumps in the road in China. Okay, So

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Speaker 1: what does that mean that, as you know, investor in China,

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Speaker 1: you kind of slow down for four or five years

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Speaker 1: until you see the leg of the land, or you

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Speaker 1: just go all in to get markets here. We're all

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Speaker 1: in and so we're not slowing down. People are slowing

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Speaker 1: down because the trade, not because I just said. But

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Speaker 1: my point is that something when they do have problems,

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Speaker 1: you know, they might be building up huge and bounces

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Speaker 1: in the financial system that will come home to roosts

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Speaker 1: one day. Right now, they can handle it. China is

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Speaker 1: not like the rest of our countries. They can macwim manage.

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Speaker 1: They can simply tell the physical people, tell them more people,

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Speaker 1: tell the companies what they need to do, who they

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Speaker 1: need to hire. But it won't always be true. And

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Speaker 1: so one day, you know, these imbalances that may cause

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Speaker 1: a disruption, color a recession, but financial crisis kind of disruption.

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Speaker 1: It could be you know, if in America we had

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Speaker 1: a financial crisis, you know and Marcus panic. Uh. They

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Speaker 1: can handle that today, but I'm saying in five or

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Speaker 1: seven years they can have to be careful billion up

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Speaker 1: and balances because the bigger the markets get, the more

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Speaker 1: that the less they can control all the things that

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Speaker 1: that they would want to control, the stop that from happening.

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Speaker 1: So I'm not gonna say it's gonna happen, but it's

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Speaker 1: so used to China six seven that the second they don't,

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Speaker 1: I think the world reacted probably more scared than they

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Speaker 1: should be. But where is an ex finential crisis going

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Speaker 1: to come from? Is it China? Is it you know,

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Speaker 1: political maybe Europe? Or is it actually US. I don't

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Speaker 1: think they're gonna be financial crisis by meaning, but yeah,

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Speaker 1: because maybe the last one. There's former world leverage in

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Speaker 1: the system. There's far less. There's no sieves, there's no

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Speaker 1: there's not a trillion dollars of bad mortgages. There's there's

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Speaker 1: not leverage lending. I think the whole street is forty billion.

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Speaker 1: It was four hundred billion. The Bridge book on Wall

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Speaker 1: Street Financial comming to have more capital equity, but there

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Speaker 1: are mounting potholes out there. So I know Daniel said

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Speaker 1: this morning that we we see growth, we're not predicting

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Speaker 1: it won't go away. But these kind of these issues,

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Speaker 1: trade shutdowns, Italy, Brazil, you know the the amount, and

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Speaker 1: so it may not be one thing this time. It

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Speaker 1: may be just a confluence of factors that kind of

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Speaker 1: cause that dreaded recession. Where will we see when will

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Speaker 1: we see our sessions? You like, I don't know. It

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Speaker 1: doesn't look like it's gonna be twenty nineteen. Because wages

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Speaker 1: are going up, people going back to workforce has in

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Speaker 1: the short supply. Financial markets are wide open. Confidence business

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Speaker 1: consumer in spite of some of these issues, is still

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Speaker 1: in the upper quadrant and upper quartile. So it doesn't

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Speaker 1: look like anything. There's nothing we're looking as says it's

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Speaker 1: gonna go away. The consumers still spending money. Uh, you know,

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Speaker 1: some numbers weakened the ruttle bit recently, but there was nothing,

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Speaker 1: nothing that says we should grow two percent. Is the

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Speaker 1: president Trump but a two term president? Okay, there's an

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Speaker 1: article in the paper today about presidential politics and primary

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Speaker 1: and stuff like that. You know, if if very easily

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Speaker 1: could be would you have a strong economy and people

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Speaker 1: like a strong economy, you know, and the Democrats depending

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Speaker 1: who they pick, you know, if they're way left, if

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Speaker 1: they're mid center, if they have rational policy. So it

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Speaker 1: remains to be seen. But this article Tay went through

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Speaker 1: Democratic primaries, who the front runner was, how wrong they've

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Speaker 1: been all the time. Right, But what does it mean?

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Speaker 1: What do the markets ones? Is it too soon to

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Speaker 1: say whether they want, you know, a trunk twice or

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Speaker 1: someone who would be leaning more socialized democratic side. I

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Speaker 1: don't think it's a market is Shue I think it's

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Speaker 1: what individuals vote, voters in want, and that's that's too

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Speaker 1: soon to say, because they're gonna People do listen to

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Speaker 1: all sides and all issues, and uh, I think on

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Speaker 1: the on the Democratic side, my view is that people

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Speaker 1: do want a strong politician who's also more of a centrist,

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Speaker 1: who knows economics, who knows policy, knows foreign policy, and

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Speaker 1: you know, slogans are not policy, and we have to

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Speaker 1: be very careful of the road to hell is paved

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Speaker 1: with good intentions. And so among these crowds like almost

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Speaker 1: twenty people, hopefully will emerge a very strong candidates. When

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Speaker 1: you look at small businesses, small and medium businesses in

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Speaker 1: the US, how much are they getting hurt by the

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Speaker 1: you know, the Google's, the facebooks, the Amazons, And should

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Speaker 1: these big tech companies actually being broken up? They're not.

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Speaker 1: I wouldn't say they're being heard. I think some of

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Speaker 1: being helped, some of being hurt. We've all lived with

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Speaker 1: the competition of all different sources, so you can I

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Speaker 1: wouldn't say that's the reason. I think. I think the

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Speaker 1: tech coming I don't know about broken up, but there

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Speaker 1: are serious issues around privacy, which I think Europe is

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Speaker 1: ahead of us on about rights to data rights surprise

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Speaker 1: you right to delete it if you think it's inaccurate,

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Speaker 1: and I think I think the company are trying to

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Speaker 1: face that. The second one is about the democraty itself.

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Speaker 1: Should people be allowed to use some of these systems

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Speaker 1: to maybe affect our democraty and the answers absolutely not,

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Speaker 1: And there I don't know exactly to stop that. There

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Speaker 1: may be ways to do it. And the third is competition,

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Speaker 1: which you again the folks you speaking about that, you

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Speaker 1: you know, one should be using kind of their platform

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Speaker 1: to kill competitors kind of the syne quad not And

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Speaker 1: so we we've always believed in an open system and

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Speaker 1: I think someone do a quite good job of that.

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Speaker 1: I think some others haven't done a quite a good job.

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Speaker 1: But this change is right. This time it feels different

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Speaker 1: because before you competed in bricks and mortars. Yeah they yeah, exactly,

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Speaker 1: but but again that's create an opportunity and so yeah,

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Speaker 1: I think some people, obviously some small retailers have been

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Speaker 1: hurt by that. But remember the consumer votes with their feet.

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Speaker 1: You know, governments can't come and say you're not going

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Speaker 1: to buy there now. If you want to buy there,

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Speaker 1: what we have to do is find a way to

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Speaker 1: serve you in the way you're happy, so we don't

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Speaker 1: get killed by competition. Going to tell ask the government

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Speaker 1: to protect me from it is a huge mistake when

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Speaker 1: you look at him and A in the financial services

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Speaker 1: or a financial sector, B and B and T and

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Speaker 1: some trust, what does that actually mean for consolidation in

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Speaker 1: that space? So America's got a little less than five

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Speaker 1: thousand banks. We support the smaller banks. We think they

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Speaker 1: they've regular has been very tough in them. They don't

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Speaker 1: have the same as we do, and we support that.

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Speaker 1: They're gonna You're gonna see consolidation. You know, the banking

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Speaker 1: system everywhere around the world needs diversification. It has a

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Speaker 1: kinds of scale, and so people do various ways to

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Speaker 1: find that. So the more they do a good job

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Speaker 1: at execution will be a tougher competitor. If they do

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Speaker 1: a bad job at execution, will be lesser competitor. Can

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Speaker 1: they be a real competitor you're actually afraid of some

428
00:22:02,080 --> 00:22:04,080
Speaker 1: of the companies were our competition. Every city is that

429
00:22:04,119 --> 00:22:06,919
Speaker 1: bank in the city that could be Bank America could be, Suntrusted,

430
00:22:06,920 --> 00:22:09,080
Speaker 1: could be and they could be really good in the city,

431
00:22:09,080 --> 00:22:12,200
Speaker 1: and sometimes it's different, you know in different cities, who's

432
00:22:12,280 --> 00:22:14,560
Speaker 1: running a great system in that city. So but yes,

433
00:22:14,640 --> 00:22:18,679
Speaker 1: at the small business smme individual yes, they could be

434
00:22:18,720 --> 00:22:22,159
Speaker 1: real competitors doing global markets. No, because that costs a

435
00:22:22,200 --> 00:22:24,639
Speaker 1: lot of money and it's a huge network effect and

436
00:22:24,760 --> 00:22:27,240
Speaker 1: huge e times of the scale. What do European banks

437
00:22:27,240 --> 00:22:30,719
Speaker 1: need to do to become more like US banks? So

438
00:22:30,760 --> 00:22:34,320
Speaker 1: the europe the American system recovered quicker, reacted quicker, and

439
00:22:34,320 --> 00:22:38,639
Speaker 1: probably started more conservatively. But I'm very sympathic to European banks.

440
00:22:38,680 --> 00:22:41,119
Speaker 1: The point of the common market, which is excellent and

441
00:22:41,200 --> 00:22:44,360
Speaker 1: still true at a big market, allows companies to compete,

442
00:22:44,359 --> 00:22:47,359
Speaker 1: have very efficient competing around the world, and because the

443
00:22:47,359 --> 00:22:52,120
Speaker 1: global crisis, they were constrained. So these banks need to emerge.

444
00:22:52,160 --> 00:22:55,960
Speaker 1: You have the kinds of scale diversification, product diversification, but

445
00:22:56,000 --> 00:22:58,080
Speaker 1: it's hard to do if you don't finish regulations like

446
00:22:58,119 --> 00:23:02,240
Speaker 1: the single regulatory mechanism, the insurance mechanism, and if politicians

447
00:23:02,280 --> 00:23:05,040
Speaker 1: fight it, they will be subscale forever and that's not

448
00:23:05,080 --> 00:23:06,800
Speaker 1: good for their economies. They as you really think through

449
00:23:06,840 --> 00:23:09,560
Speaker 1: the choices here and allow these banks to to merge

450
00:23:09,560 --> 00:23:12,080
Speaker 1: and go pan European Okay, but does it first of

451
00:23:12,119 --> 00:23:13,760
Speaker 1: all need to start domestically. So do we need to

452
00:23:13,800 --> 00:23:16,199
Speaker 1: see a Deutsche Bank Commerce Bank merger for that to

453
00:23:16,240 --> 00:23:18,560
Speaker 1: go through to then look at cross the border in Europe? Yeah?

454
00:23:18,600 --> 00:23:20,880
Speaker 1: I think I'm not. I haven't analyzed that. I don't know.

455
00:23:21,080 --> 00:23:24,720
Speaker 1: And to me, all mergers of the bank mergers the same.

456
00:23:25,160 --> 00:23:28,360
Speaker 1: Is the business logic real? Okay? And it better be real?

457
00:23:29,080 --> 00:23:32,360
Speaker 1: Is the price right? And and can you execute properly?

458
00:23:32,480 --> 00:23:36,840
Speaker 1: Execution is usually people fail on and that's management technology,

459
00:23:36,920 --> 00:23:40,360
Speaker 1: emerging systems, you know, emerging cultures really want to call it.

460
00:23:40,560 --> 00:23:42,679
Speaker 1: And so if they do it right, yes there'll be

461
00:23:42,680 --> 00:23:44,640
Speaker 1: a better bank. If they do it wrong, they won't

462
00:23:44,640 --> 00:23:46,000
Speaker 1: be you know, and say they should never have done it,

463
00:23:46,000 --> 00:23:48,320
Speaker 1: but it will be based on the execution. Do you

464
00:23:48,359 --> 00:23:50,040
Speaker 1: have a number of how many European banks do you

465
00:23:50,040 --> 00:23:53,240
Speaker 1: think should be in the region? I mean, for the moment,

466
00:23:53,359 --> 00:23:55,240
Speaker 1: a lot of people are saying this is an overbanked

467
00:23:55,240 --> 00:23:57,600
Speaker 1: region that just has too many banks. Well, I think

468
00:23:57,600 --> 00:23:59,919
Speaker 1: there's some truth there, but the way you fix that

469
00:24:00,000 --> 00:24:02,880
Speaker 1: to allow them America had thirty thousand banks and now

470
00:24:02,920 --> 00:24:06,920
Speaker 1: it's five thousands. Okay, So the merger has a hard process,

471
00:24:06,920 --> 00:24:09,480
Speaker 1: and as you know, a lot of those mergers failed,

472
00:24:09,560 --> 00:24:11,760
Speaker 1: but they did put together bigger companies that could be

473
00:24:11,800 --> 00:24:14,800
Speaker 1: globally competitive. In America has a huge market. So but

474
00:24:14,840 --> 00:24:17,639
Speaker 1: this is what regulation. What is Europe not doing that

475
00:24:17,680 --> 00:24:19,280
Speaker 1: it should be doing. I think they need to change

476
00:24:19,280 --> 00:24:23,760
Speaker 1: the regulation to allow pan European banking allow consolidation. You know,

477
00:24:23,880 --> 00:24:26,159
Speaker 1: even in Germany, if you allow consolidation, you have to

478
00:24:26,160 --> 00:24:29,480
Speaker 1: allow them become efficient. That does mean layoffs is better

479
00:24:29,520 --> 00:24:31,840
Speaker 1: for the long term health of the industry, it's not

480
00:24:31,880 --> 00:24:34,600
Speaker 1: good in the short run and particularly for those people.

481
00:24:34,680 --> 00:24:37,560
Speaker 1: I'm very sympathetic that that's a political issue, not a

482
00:24:37,600 --> 00:24:40,600
Speaker 1: regulatory issue, So both sides have to think about what

483
00:24:40,640 --> 00:24:42,639
Speaker 1: they really want one day. Do you think the Western

484
00:24:42,680 --> 00:24:46,280
Speaker 1: economies will go through and even bigger wave of populism.

485
00:24:46,320 --> 00:24:48,680
Speaker 1: I don't know, but you know, when to popular effort.

486
00:24:48,840 --> 00:24:51,359
Speaker 1: I think mccron has done an excellent job here. And

487
00:24:51,440 --> 00:24:54,639
Speaker 1: like I said, policy slogans are not policy, but there

488
00:24:54,680 --> 00:24:57,560
Speaker 1: are legitimate complaints. They're segments of society. I don't know

489
00:24:57,600 --> 00:25:01,040
Speaker 1: if it's twenty who are left behind, inner city school

490
00:25:01,080 --> 00:25:03,520
Speaker 1: kids aren't graduating the United States, is true for for

491
00:25:03,600 --> 00:25:05,560
Speaker 1: inner city stool kids in Paris. We have this Advancing

492
00:25:05,600 --> 00:25:08,920
Speaker 1: Cities program to get skills. Infrastructure is not being built,

493
00:25:08,920 --> 00:25:12,359
Speaker 1: the opioid problem, the felon problem. We have these issues

494
00:25:12,400 --> 00:25:15,840
Speaker 1: and living minimum wages not living wages anymore. They need

495
00:25:15,880 --> 00:25:18,359
Speaker 1: to be and so we need government working with the business.

496
00:25:18,359 --> 00:25:20,520
Speaker 1: You on how we can educate the kids, get them

497
00:25:20,560 --> 00:25:22,720
Speaker 1: living wage jobs. Maybe have you know we have an

498
00:25:22,720 --> 00:25:24,960
Speaker 1: earned a tax credits like a negative income tax in

499
00:25:24,960 --> 00:25:27,320
Speaker 1: the United States. We need to fix these problems. I

500
00:25:27,320 --> 00:25:29,000
Speaker 1: I my view of the business has to really help.

501
00:25:29,359 --> 00:25:32,280
Speaker 1: Business has to step up and help because it can't

502
00:25:32,280 --> 00:25:36,040
Speaker 1: be done by governments alone. And you've put in here

503
00:25:36,119 --> 00:25:38,280
Speaker 1: that's a five hundre million dollars. Is it working. How

504
00:25:38,280 --> 00:25:41,480
Speaker 1: do you measure success? Yeah, we measure the same. What

505
00:25:41,520 --> 00:25:43,480
Speaker 1: do we expect. How much do we put into the place,

506
00:25:43,520 --> 00:25:45,520
Speaker 1: how many kids were trained, how many got jobs, how

507
00:25:45,600 --> 00:25:47,960
Speaker 1: much we put into affordable housing, how many housing years

508
00:25:48,000 --> 00:25:50,200
Speaker 1: were And we're getting better at this and so we

509
00:25:50,200 --> 00:25:52,720
Speaker 1: we we run it, we review it, we reviewed all

510
00:25:52,760 --> 00:25:56,240
Speaker 1: the time. But basically, helping cities grow, it's affordable housing,

511
00:25:56,480 --> 00:25:59,800
Speaker 1: it's it's it's venture capital for entrepreneurs of color, it's

512
00:26:00,040 --> 00:26:04,160
Speaker 1: you cabitot for women, adventure. Uh, the skills are probably

513
00:26:04,160 --> 00:26:06,520
Speaker 1: the biggest part of it. There are a lot of jobs.

514
00:26:06,960 --> 00:26:10,640
Speaker 1: Kids are graduating or not graduating, and they aren't job ready.

515
00:26:10,760 --> 00:26:14,720
Speaker 1: And jobs create dignity. Aren't you going to politics? That's

516
00:26:14,720 --> 00:26:16,879
Speaker 1: just not me? Why I don't want you're doing it?

517
00:26:16,920 --> 00:26:20,520
Speaker 1: Aren't you doing it? Was trying to bridge the divide? Yeah,

518
00:26:20,600 --> 00:26:24,240
Speaker 1: that's that's the best I can do. Would you ever

519
00:26:24,359 --> 00:26:26,600
Speaker 1: if somebody offered you a job in politics, what do

520
00:26:26,640 --> 00:26:28,720
Speaker 1: you think about it? I don't think so. I love

521
00:26:28,720 --> 00:26:31,119
Speaker 1: what I do, Uh, you know, and hopefully I can

522
00:26:31,119 --> 00:26:33,440
Speaker 1: do it for a while longer. So how do politicians

523
00:26:33,880 --> 00:26:36,640
Speaker 1: regained that trust from citizens which seems to have been lost?

524
00:26:36,920 --> 00:26:39,200
Speaker 1: All lost trust? Right? I mean, we have this crisis

525
00:26:39,240 --> 00:26:41,680
Speaker 1: and the elite got blamed. And I would tell well,

526
00:26:41,720 --> 00:26:43,960
Speaker 1: if anyone is to blame, it is the elite. That elite.

527
00:26:43,960 --> 00:26:45,800
Speaker 1: By the way, it's not just banks, it was companies,

528
00:26:45,840 --> 00:26:49,440
Speaker 1: it was government leaders, it was union leader. Something went

529
00:26:49,560 --> 00:26:52,600
Speaker 1: terribly wrong. People paid a heavy price. And the only

530
00:26:52,600 --> 00:26:54,240
Speaker 1: way you can earn back trust is day by day,

531
00:26:54,320 --> 00:26:57,439
Speaker 1: every interaction with every client, with every company. There are

532
00:26:57,480 --> 00:27:00,359
Speaker 1: a lot of great politicians out there. I think McCrow

533
00:27:00,440 --> 00:27:03,280
Speaker 1: is doing a great job, says the same thing to everybody.

534
00:27:03,520 --> 00:27:06,080
Speaker 1: He knows that economic policy may not fit a slogan,

535
00:27:06,280 --> 00:27:08,639
Speaker 1: but if you grow the economy, there's a there's but

536
00:27:08,680 --> 00:27:10,919
Speaker 1: there's huge protests in France. I know, I understand. But

537
00:27:10,920 --> 00:27:12,320
Speaker 1: he's doing I think he's doing that right too, which

538
00:27:12,320 --> 00:27:14,840
Speaker 1: is listened to them. They reversed the gas tax, which

539
00:27:14,920 --> 00:27:17,720
Speaker 1: was regressive and hurting lower paid people, and he didn't

540
00:27:17,760 --> 00:27:20,320
Speaker 1: reverse his good policies. What he said I read about.

541
00:27:20,400 --> 00:27:23,240
Speaker 1: What he's saying is let's tell you your problems and

542
00:27:23,320 --> 00:27:24,760
Speaker 1: fix them. What could you do to help you? And

543
00:27:24,800 --> 00:27:26,760
Speaker 1: that's what he should be doing. You know, normally pod

544
00:27:26,840 --> 00:27:28,360
Speaker 1: do is a huge flip flop and it's not good

545
00:27:28,359 --> 00:27:31,360
Speaker 1: for the country. There's a mayor in Detroit who's turned Detroit.

546
00:27:31,680 --> 00:27:36,080
Speaker 1: He got civic institutions, not for profits, schools, companies helped

547
00:27:36,119 --> 00:27:40,080
Speaker 1: me with streets, streetline security, schools, jobs, and we're all

548
00:27:40,119 --> 00:27:43,960
Speaker 1: helping them and it's working. That's it's working at that level. Jamie,

549
00:27:43,960 --> 00:27:45,560
Speaker 1: thanks so much for joining us. That is of course

550
00:27:45,720 --> 00:27:49,359
Speaker 1: Jamie Diamond. He is the chief executive of JP Morgan.

551
00:27:49,480 --> 00:27:51,480
Speaker 1: We were here all day at the two thousand and

552
00:27:51,560 --> 00:27:54,800
Speaker 1: Time Global Markets Conference in Paris. And we talked about bragsit.

553
00:27:54,920 --> 00:27:57,600
Speaker 1: He talked about the U. S economy. We talked, of course,

554
00:27:57,760 --> 00:28:01,080
Speaker 1: also about the risks of a global recession. Friends Laqua

555
00:28:01,359 --> 00:28:16,960
Speaker 1: in Paris with Mr Diamond. This is always well timed.

556
00:28:17,000 --> 00:28:19,680
Speaker 1: A conversation with David Rubinstein, who has made a huge

557
00:28:19,680 --> 00:28:22,439
Speaker 1: success of what we do with surveillance, and that is

558
00:28:22,480 --> 00:28:26,760
Speaker 1: extended conversation with newsmakers. I still speak of his conversation

559
00:28:26,800 --> 00:28:29,840
Speaker 1: with Mr Bezos of Oh I'm gonna say fourteen months

560
00:28:29,920 --> 00:28:32,680
Speaker 1: or so ago, and we're thrilled at Mr Rubinstein of

561
00:28:32,800 --> 00:28:36,040
Speaker 1: Carlisle darkened the door of her studios. Today, Paul Sweene

562
00:28:36,119 --> 00:28:38,920
Speaker 1: and I have fourteen ways to go. But I'm going

563
00:28:38,960 --> 00:28:43,600
Speaker 1: to suggest in Baltimore a few years ago that a

564
00:28:43,720 --> 00:28:46,600
Speaker 1: postal worker couldn't fake that you were a water polo

565
00:28:46,720 --> 00:28:50,000
Speaker 1: athlete to try to get you into Duke University with

566
00:28:50,040 --> 00:28:53,560
Speaker 1: a six figure bribe. That didn't happen, Did it? Did not?

567
00:28:53,960 --> 00:28:56,880
Speaker 1: I just filled out my application. I wasn't sure I

568
00:28:56,920 --> 00:28:58,880
Speaker 1: get in because my handwriting was so bad, but I

569
00:28:58,880 --> 00:29:00,560
Speaker 1: wouldn't sure. They had to read it, and maybe because

570
00:29:00,560 --> 00:29:02,400
Speaker 1: they couldn't read it, they admitted me. What was the

571
00:29:02,480 --> 00:29:06,240
Speaker 1: sweat factor at the Rubinstein house as you opened an

572
00:29:06,400 --> 00:29:10,880
Speaker 1: envelope from Duke. My parents were not college educator or

573
00:29:10,920 --> 00:29:13,640
Speaker 1: high school educated, so they really didn't understand the process

574
00:29:13,720 --> 00:29:16,360
Speaker 1: that much. So they didn't understand when a thick envelopement

575
00:29:16,480 --> 00:29:19,120
Speaker 1: versus a thin envelope. But when a thick envelope came

576
00:29:19,120 --> 00:29:21,360
Speaker 1: from Duke and I got a scholarship, they were pretty happy.

577
00:29:21,480 --> 00:29:26,560
Speaker 1: We always always talk about this, this this uproar here,

578
00:29:26,680 --> 00:29:29,840
Speaker 1: and we've all got our own stories. There's a famous

579
00:29:29,880 --> 00:29:33,880
Speaker 1: financier and philanthropist in New York. Every time I see him,

580
00:29:33,880 --> 00:29:36,240
Speaker 1: I'll be blunt. I thank him for the swimming pool

581
00:29:36,520 --> 00:29:40,200
Speaker 1: that he built in western Massachusetts at a fancy boarding school.

582
00:29:40,520 --> 00:29:43,600
Speaker 1: You live this, You've given millions away. How do you

583
00:29:43,680 --> 00:29:48,120
Speaker 1: respond to the non David Rubinstein's, the haves who have

584
00:29:48,240 --> 00:29:50,840
Speaker 1: done this with their kids. They're so desperate to get

585
00:29:50,840 --> 00:29:54,720
Speaker 1: into schools like Duke. I am surprised by this. Obviously.

586
00:29:55,160 --> 00:29:57,480
Speaker 1: I'm one a lot of college boards. I've served on

587
00:29:57,520 --> 00:30:00,680
Speaker 1: four of them, Johns Hopkins uh Duke University for a

588
00:30:00,720 --> 00:30:03,480
Speaker 1: long time as the chair, now on the Harvard Board

589
00:30:03,480 --> 00:30:05,680
Speaker 1: and the Chicago Board. So I see a lot of

590
00:30:06,000 --> 00:30:08,640
Speaker 1: people interested in getting their kids in but I've never

591
00:30:08,680 --> 00:30:11,239
Speaker 1: heard of anything like this. I'm stunned that I've been

592
00:30:11,240 --> 00:30:13,360
Speaker 1: around the college world so long and I've never heard

593
00:30:13,400 --> 00:30:15,760
Speaker 1: of this. I'm just uh surprised that this could have

594
00:30:15,800 --> 00:30:18,600
Speaker 1: gone on for so long and it wasn't discovered by anybody.

595
00:30:18,640 --> 00:30:21,160
Speaker 1: And you wonder, pul Sweeney were the discussion here of

596
00:30:21,240 --> 00:30:23,680
Speaker 1: will there be many more to come? I mean, I

597
00:30:23,800 --> 00:30:25,800
Speaker 1: just got I'm not saying it's the tip of the iceberg,

598
00:30:25,880 --> 00:30:28,240
Speaker 1: but is it over? I doubt it. I don't know, David,

599
00:30:28,280 --> 00:30:30,960
Speaker 1: why do you think universities do, not just the elite universities,

600
00:30:30,960 --> 00:30:33,960
Speaker 1: but just higher education in general in terms of making

601
00:30:34,000 --> 00:30:38,160
Speaker 1: it available to a diverse group of students across this country?

602
00:30:38,280 --> 00:30:41,040
Speaker 1: When I went to Duke and this I graduated Duke

603
00:30:41,040 --> 00:30:44,520
Speaker 1: in nineteen seventy. Those days, these schools were relatively white,

604
00:30:44,840 --> 00:30:47,840
Speaker 1: I would say, more Christian than Jewish, I would say,

605
00:30:48,000 --> 00:30:51,560
Speaker 1: more domestic students than foreign students, and more male than

606
00:30:51,680 --> 00:30:55,200
Speaker 1: than female. Obviously this has changed. Diversity is something that

607
00:30:55,320 --> 00:30:57,400
Speaker 1: all these schools care much more about, and they have

608
00:30:57,480 --> 00:31:01,760
Speaker 1: spent much more time getting first generations to into these schools. Uh,

609
00:31:01,840 --> 00:31:04,600
Speaker 1: first generation students being like me, someone whose family had

610
00:31:04,640 --> 00:31:07,040
Speaker 1: not had anybody go to college before ub you can

611
00:31:07,080 --> 00:31:08,840
Speaker 1: always do better. I would say in the elite schools

612
00:31:08,840 --> 00:31:11,760
Speaker 1: in the United States, probably fifty to sixty of the

613
00:31:11,760 --> 00:31:14,640
Speaker 1: students are on some type of financial way. And at Harvard,

614
00:31:14,640 --> 00:31:17,959
Speaker 1: for example, I think that's the undergraduates are paying nothing,

615
00:31:18,280 --> 00:31:20,280
Speaker 1: I mean nothing at all because their parents don't make

616
00:31:20,400 --> 00:31:24,320
Speaker 1: enough money to justify their being paying tuition. So, um,

617
00:31:24,360 --> 00:31:26,200
Speaker 1: it's better than it has been, but it can do

618
00:31:26,280 --> 00:31:29,000
Speaker 1: better still. Yeah, you talk about the the tuitions, and

619
00:31:29,120 --> 00:31:30,840
Speaker 1: you know, obviously the issues that's really become more and

620
00:31:30,880 --> 00:31:32,760
Speaker 1: more parent over the last ten or fifteen years has

621
00:31:32,760 --> 00:31:34,920
Speaker 1: been the amount of student debt that students come out

622
00:31:35,080 --> 00:31:37,480
Speaker 1: when they when they graduate. The solution there do you

623
00:31:37,520 --> 00:31:41,600
Speaker 1: think it's some combination of the universities themselves with government?

624
00:31:42,000 --> 00:31:44,160
Speaker 1: What do you think the ideal solution is to try

625
00:31:44,200 --> 00:31:47,800
Speaker 1: to ameliorate that somewhat well? When the elite private schools,

626
00:31:47,800 --> 00:31:50,880
Speaker 1: Remember there are thousands of college United States, and most

627
00:31:50,920 --> 00:31:53,080
Speaker 1: of them are not that difficult to get into. We're

628
00:31:53,080 --> 00:31:56,000
Speaker 1: talking about a relatively small number of schools where there's

629
00:31:56,040 --> 00:31:57,880
Speaker 1: great demand to get into those schools. And the reason

630
00:31:58,000 --> 00:32:00,720
Speaker 1: is there's a perception that you have an advanced UH

631
00:32:00,920 --> 00:32:03,080
Speaker 1: position in life if you have a degree from Harvard,

632
00:32:03,160 --> 00:32:05,880
Speaker 1: Yale or Stanford or some schools like this, And maybe

633
00:32:05,920 --> 00:32:08,280
Speaker 1: that's true. On the other hand, many people who don't

634
00:32:08,320 --> 00:32:10,000
Speaker 1: go to these elite schools do quite well in life

635
00:32:10,000 --> 00:32:11,880
Speaker 1: as well. Okay, let's answer this, and you've been more

636
00:32:11,920 --> 00:32:14,920
Speaker 1: than generous. You've re up with a lot of contributions

637
00:32:14,960 --> 00:32:18,320
Speaker 1: to your University of Chicago and the contributions you've made

638
00:32:18,360 --> 00:32:20,960
Speaker 1: to the philanthropy you've done with the the Duke University as well.

639
00:32:21,360 --> 00:32:24,720
Speaker 1: The heart of the matter, David Rubinstein, is a bunch

640
00:32:24,760 --> 00:32:27,760
Speaker 1: of halves want their kids to take Western city that

641
00:32:27,920 --> 00:32:30,600
Speaker 1: name the school because it's going to be a better course.

642
00:32:30,680 --> 00:32:34,440
Speaker 1: They think that another two hundred schools. How do you

643
00:32:34,480 --> 00:32:40,720
Speaker 1: define these elite schools excellence versus another given two hundred schools?

644
00:32:41,280 --> 00:32:44,640
Speaker 1: Or is it just social mobility and networking and all

645
00:32:44,680 --> 00:32:47,560
Speaker 1: the other stuff? I know, David Rubinstein hates many many

646
00:32:47,680 --> 00:32:50,280
Speaker 1: factors are involved. But clearly, if you can have your

647
00:32:50,360 --> 00:32:52,760
Speaker 1: child go to an elite school, uh, you think this

648
00:32:52,800 --> 00:32:54,520
Speaker 1: person will do better in your child will do better

649
00:32:54,520 --> 00:32:56,680
Speaker 1: in life. You think the person will meet people who

650
00:32:56,680 --> 00:32:58,920
Speaker 1: will do better in life. You think that will be

651
00:32:58,920 --> 00:33:01,120
Speaker 1: more presstigious. Perhaps for you, the parent, to have your

652
00:33:01,200 --> 00:33:04,440
Speaker 1: child at elite school. But again, if you go through

653
00:33:04,480 --> 00:33:07,160
Speaker 1: the list of people who are running Fortune five companies,

654
00:33:07,520 --> 00:33:09,719
Speaker 1: many of them have not going to elite schools. They

655
00:33:09,720 --> 00:33:11,640
Speaker 1: went to state schools that are good, but maybe not

656
00:33:11,720 --> 00:33:14,200
Speaker 1: quote an elite. So there's no evidence that you have

657
00:33:14,280 --> 00:33:15,760
Speaker 1: to go to these elite schools in order to do

658
00:33:15,800 --> 00:33:18,320
Speaker 1: well in life. But parents want to do the most

659
00:33:18,360 --> 00:33:20,000
Speaker 1: that they can for the kids, and they think getting

660
00:33:20,000 --> 00:33:22,000
Speaker 1: into these elite schools will be helpful. This should be

661
00:33:22,040 --> 00:33:25,120
Speaker 1: like comparing Duke to Syracuse. Right, Well, I don't want

662
00:33:25,120 --> 00:33:27,280
Speaker 1: to want to make that comparison. I don't want to

663
00:33:27,840 --> 00:33:30,160
Speaker 1: this time of year. Certainly. I would only say that

664
00:33:30,680 --> 00:33:33,840
Speaker 1: the basketball game between Duke and Syracuse tonight will be

665
00:33:33,920 --> 00:33:36,800
Speaker 1: quite interesting. But um, do you have the Jack Nicholson

666
00:33:36,880 --> 00:33:40,600
Speaker 1: seat ringside? You know, the courtside? Um. I'm not going

667
00:33:40,640 --> 00:33:45,360
Speaker 1: to night. But I do think that good schools will

668
00:33:45,400 --> 00:33:49,800
Speaker 1: always attract um students who think that going there will

669
00:33:50,080 --> 00:33:53,160
Speaker 1: make them have a better life. Now, the most important

670
00:33:53,160 --> 00:33:56,480
Speaker 1: thing to realize is that parents who are trying to

671
00:33:56,520 --> 00:33:58,360
Speaker 1: do these kinds of things to get their kids in

672
00:33:58,640 --> 00:34:01,040
Speaker 1: if it's the case that they're doing it, it's a tiny,

673
00:34:01,120 --> 00:34:03,360
Speaker 1: tiny fraction of the kids who actually apply to these

674
00:34:03,400 --> 00:34:06,480
Speaker 1: kind of schools have these kind of quote advantages relatively small.

675
00:34:07,080 --> 00:34:24,440
Speaker 1: David Rubinstein, thank you so much. With the Carlisle Group, Garen,

676
00:34:24,640 --> 00:34:26,839
Speaker 1: thank you so much. Paul Sweni and Tom keenan New

677
00:34:26,920 --> 00:34:30,880
Speaker 1: York and joining us now. Always an important note is

678
00:34:31,080 --> 00:34:36,200
Speaker 1: William Joseph Burns. Bill Burns is always an important conversation

679
00:34:36,719 --> 00:34:39,359
Speaker 1: because of his public service to the nation. He is

680
00:34:39,400 --> 00:34:43,480
Speaker 1: truly one of our diplomats. People parachute in for a moment,

681
00:34:43,840 --> 00:34:48,000
Speaker 1: they usually have big, lofty titles, where without question, in

682
00:34:48,040 --> 00:34:51,080
Speaker 1: the twentieth Center, he is one of the earned titles

683
00:34:51,080 --> 00:34:54,960
Speaker 1: of diplomacy with his years and years and years of

684
00:34:55,040 --> 00:35:00,480
Speaker 1: public service uh with the State Department. His new The

685
00:35:00,560 --> 00:35:03,800
Speaker 1: Back Channel, a memoir of American diplomacy in the case

686
00:35:04,400 --> 00:35:07,879
Speaker 1: for its renewal, is the definitive read for anybody who

687
00:35:07,960 --> 00:35:11,920
Speaker 1: cares about American diplomacy. Bill Burns, what was your first

688
00:35:12,000 --> 00:35:15,080
Speaker 1: day like when you were annointed, when you were allowed

689
00:35:15,120 --> 00:35:20,319
Speaker 1: to enter the State Department to open envelopes. That's great

690
00:35:20,360 --> 00:35:23,160
Speaker 1: to be with you, guys, Thanks so much. Um. You know,

691
00:35:23,320 --> 00:35:25,320
Speaker 1: I I didn't my career didn't get off to a

692
00:35:25,400 --> 00:35:28,200
Speaker 1: rocket propelled start. One of my first jobs as a

693
00:35:28,239 --> 00:35:32,520
Speaker 1: new diplomat was driving a truck full of communications equipment,

694
00:35:32,600 --> 00:35:37,000
Speaker 1: unclassified communications equipment, from our embassy in Jordan's to our

695
00:35:37,040 --> 00:35:40,760
Speaker 1: diplomatic facility in Baghdad. This is in the early nineteen eighties,

696
00:35:40,880 --> 00:35:43,480
Speaker 1: midst of the Iran I Rock War, and to make

697
00:35:43,520 --> 00:35:46,520
Speaker 1: a long story short, I managed to get the truck

698
00:35:46,520 --> 00:35:49,120
Speaker 1: and its contents confiscated. So, as I said, it wasn't

699
00:35:49,120 --> 00:35:51,840
Speaker 1: a rocket propelled start for my career, but it shows

700
00:35:51,880 --> 00:35:56,360
Speaker 1: the granularity of this. Do you have any enthusiasm within

701
00:35:56,560 --> 00:36:00,600
Speaker 1: your wonderful memoir of the Back Channel and Forward about

702
00:36:00,640 --> 00:36:05,000
Speaker 1: the future of the State Department? Is the tone of

703
00:36:05,000 --> 00:36:08,520
Speaker 1: our present president? Is it a one off or does

704
00:36:08,560 --> 00:36:13,480
Speaker 1: it have some permanence? Well, I'm really concerned, as I

705
00:36:13,560 --> 00:36:15,760
Speaker 1: try to explain in the book, and to be fair,

706
00:36:15,800 --> 00:36:19,320
Speaker 1: President Trump didn't invent all the drift and the challenges

707
00:36:19,360 --> 00:36:22,400
Speaker 1: in American diplomacy. I think the truth is, since the

708
00:36:22,520 --> 00:36:24,560
Speaker 1: end of the Cold War, you know, when the United

709
00:36:24,560 --> 00:36:27,960
Speaker 1: States was the singular, dominant player on the international landscape,

710
00:36:27,960 --> 00:36:30,120
Speaker 1: we got a little bit complacent, and so there were

711
00:36:30,200 --> 00:36:33,000
Speaker 1: periods in which either we didn't put as much focus

712
00:36:33,040 --> 00:36:35,959
Speaker 1: on diplomacy as we might have or after the huge

713
00:36:35,960 --> 00:36:38,680
Speaker 1: shock to our system at nine eleven, we tended to

714
00:36:38,680 --> 00:36:42,440
Speaker 1: put more emphasis on the military and less emphasis on diplomacy.

715
00:36:42,480 --> 00:36:45,239
Speaker 1: I think, on today's landscape, when we're no longer the

716
00:36:45,280 --> 00:36:48,439
Speaker 1: only big kid on the geopolitical block, with the rise

717
00:36:48,480 --> 00:36:52,120
Speaker 1: of China, the resurgence of Russia, diplomacy is actually more

718
00:36:52,160 --> 00:36:55,320
Speaker 1: important than ever for promoting American interests in the world.

719
00:36:55,440 --> 00:36:58,759
Speaker 1: And in a way, it's our alliances. It's our capacity

720
00:36:58,840 --> 00:37:02,799
Speaker 1: through diplomacy to build coalitions of countries that sets us

721
00:37:02,840 --> 00:37:06,120
Speaker 1: apart from lonelier powers like China and Russia. And so

722
00:37:06,239 --> 00:37:09,759
Speaker 1: my concern in the current administration is, you know, the

723
00:37:09,800 --> 00:37:12,919
Speaker 1: President is so dismissive of the hard work of diplomacy

724
00:37:12,960 --> 00:37:17,160
Speaker 1: and its practitioners. It's also reflected in repeated budget requests

725
00:37:17,200 --> 00:37:21,040
Speaker 1: from the White House to cut historically low levels. The

726
00:37:21,080 --> 00:37:24,680
Speaker 1: budget for the State Department um cut this year, it's

727
00:37:24,719 --> 00:37:28,680
Speaker 1: proposed by twenty three and you end up with a result,

728
00:37:28,760 --> 00:37:30,439
Speaker 1: at least in terms of the White what the White

729
00:37:30,440 --> 00:37:34,040
Speaker 1: House is proposing, where the defense budget is nineteen times

730
00:37:34,480 --> 00:37:37,279
Speaker 1: the size of the budget for the State Department and

731
00:37:37,360 --> 00:37:40,040
Speaker 1: for foreign assistance. Now, of course you're never going to

732
00:37:40,120 --> 00:37:43,120
Speaker 1: get any place in diplomacy unless it's backed up by

733
00:37:43,160 --> 00:37:46,360
Speaker 1: military and economic leverage, by the power of our example,

734
00:37:46,719 --> 00:37:49,400
Speaker 1: I think it's foolish to let that imbalance get bigger

735
00:37:49,400 --> 00:37:52,760
Speaker 1: and bigger. So, Ambassador in the age of America First,

736
00:37:53,239 --> 00:37:56,200
Speaker 1: what does that really mean for American diplomacy going forward?

737
00:37:56,200 --> 00:37:59,360
Speaker 1: In your opinion, I think America at its best. What

738
00:37:59,520 --> 00:38:02,640
Speaker 1: I over the course of my very fortunate career, what

739
00:38:02,760 --> 00:38:06,040
Speaker 1: I learned, for example, working for Secretary of State James

740
00:38:06,040 --> 00:38:08,759
Speaker 1: Baker and President George H. W. Bush at the end

741
00:38:08,760 --> 00:38:11,839
Speaker 1: of the Cold War, is that we best promote our

742
00:38:11,880 --> 00:38:15,280
Speaker 1: interests in the world through enlightened self interest, in other words,

743
00:38:15,640 --> 00:38:19,759
Speaker 1: not seeing every challenge just in narrow transactional terms, but

744
00:38:19,880 --> 00:38:22,839
Speaker 1: trying to widen the circle of countries who share our

745
00:38:22,960 --> 00:38:27,280
Speaker 1: interests and our values. That's why alliances matter and set

746
00:38:27,360 --> 00:38:30,360
Speaker 1: us apart. And my my concern about America First is

747
00:38:30,360 --> 00:38:33,799
Speaker 1: not the obvious. Of course, any country wants to put

748
00:38:33,800 --> 00:38:36,920
Speaker 1: its interest first, but I think it misses the point

749
00:38:37,280 --> 00:38:41,120
Speaker 1: that we multiply and expand our reach and our influence

750
00:38:41,160 --> 00:38:43,680
Speaker 1: in the world when we try to work as hard

751
00:38:43,719 --> 00:38:47,040
Speaker 1: as we can with other countries who share those interests Sebastad.

752
00:38:47,120 --> 00:38:51,399
Speaker 1: Are you concerned that America currently maybe abdicating its role

753
00:38:51,680 --> 00:38:54,600
Speaker 1: on the global stage? I am. I mean, I think

754
00:38:54,640 --> 00:38:56,359
Speaker 1: what we've seen over the last couple of years as

755
00:38:56,400 --> 00:38:59,560
Speaker 1: a pattern of a of a major power in the world.

756
00:38:59,600 --> 00:39:01,360
Speaker 1: The power are in the world, the United States, it

757
00:39:01,480 --> 00:39:03,360
Speaker 1: still has a better hand to play than any of

758
00:39:03,400 --> 00:39:06,960
Speaker 1: its rivals, becoming a power in retreat. So it's not

759
00:39:07,000 --> 00:39:10,160
Speaker 1: just pulling back from a whole range of agreements. The

760
00:39:10,160 --> 00:39:13,799
Speaker 1: Trans Pacific Partnership, as you guys know, would have knit

761
00:39:13,920 --> 00:39:20,200
Speaker 1: together the global economy across Asia around that mattered to

762
00:39:20,239 --> 00:39:24,040
Speaker 1: the United Investment on Nuclear Agreement, the Paris Climate Agreement.

763
00:39:24,120 --> 00:39:28,720
Speaker 1: And I think that abdication um not only creates opportunities

764
00:39:28,719 --> 00:39:31,400
Speaker 1: for our rivals, but it causes our allies to lose

765
00:39:31,440 --> 00:39:34,879
Speaker 1: faith and a hitch. But Ambassador Burns, Marshall scholar and

766
00:39:34,960 --> 00:39:38,080
Speaker 1: all that, I understand what you just said, except both

767
00:39:38,160 --> 00:39:44,200
Speaker 1: presidential candidates had to walk away from TPP to get elected.

768
00:39:44,400 --> 00:39:48,720
Speaker 1: Both candidates had to do that. How do liberal elite

769
00:39:48,760 --> 00:39:51,280
Speaker 1: and I don't mean liberal elites in terms of politics,

770
00:39:51,320 --> 00:39:55,720
Speaker 1: how do people of liberal diplomacy of an outward looking

771
00:39:55,760 --> 00:40:01,960
Speaker 1: America respond to the inherent historic American inwardness. How do

772
00:40:02,000 --> 00:40:05,800
Speaker 1: you recon what we had? It's a really good question

773
00:40:05,880 --> 00:40:08,160
Speaker 1: because I think what we saw in the two thousand

774
00:40:08,200 --> 00:40:10,759
Speaker 1: and sixteen you know, debate over these issues, and what

775
00:40:10,840 --> 00:40:13,280
Speaker 1: we've seen for a number of years is a widening

776
00:40:13,400 --> 00:40:17,000
Speaker 1: disconnect within our own society between to be honest, people

777
00:40:17,080 --> 00:40:19,640
Speaker 1: like me, you know, card caring members of the Washington

778
00:40:19,800 --> 00:40:24,160
Speaker 1: establishment and lots of American citizens who don't, in my experience,

779
00:40:24,200 --> 00:40:27,920
Speaker 1: need to be persuaded of the importance of disciplined American

780
00:40:28,040 --> 00:40:30,760
Speaker 1: leadership in the world. But where there skeptical is about

781
00:40:30,800 --> 00:40:33,319
Speaker 1: the disciplined part, you know, whether it's the experience of

782
00:40:33,360 --> 00:40:35,600
Speaker 1: the Iraq War in two thousand three, at the global

783
00:40:35,600 --> 00:40:39,200
Speaker 1: financial crisis five years later, they wonder about that. And

784
00:40:39,239 --> 00:40:42,120
Speaker 1: so I think, you know, it's really essential as people

785
00:40:42,200 --> 00:40:46,440
Speaker 1: look at the campaign to recognize that disconnect and to

786
00:40:46,520 --> 00:40:49,600
Speaker 1: be able to make the argument plainly to people across

787
00:40:49,640 --> 00:40:53,600
Speaker 1: our society that, you know, smart foreign policy, smart leadership

788
00:40:53,600 --> 00:40:56,160
Speaker 1: doesn't just begin at home in a strong you know,

789
00:40:56,239 --> 00:40:59,719
Speaker 1: political and economic system, but it ends there too, in

790
00:41:00,000 --> 00:41:03,239
Speaker 1: at our jobs and a healthier environment and more security.

791
00:41:03,280 --> 00:41:05,800
Speaker 1: And that's that's an argument we we have too often

792
00:41:05,840 --> 00:41:09,360
Speaker 1: taken for granted in Washington. So, ambassadors, as you well know,

793
00:41:09,440 --> 00:41:12,600
Speaker 1: trade talks are ongoing with China. How do you think

794
00:41:12,719 --> 00:41:16,200
Speaker 1: our country should view China deal with China to try

795
00:41:16,239 --> 00:41:18,919
Speaker 1: to work with China over the next several years, given

796
00:41:19,000 --> 00:41:22,960
Speaker 1: their incredible growth into global space. Well, I mean, the

797
00:41:23,000 --> 00:41:25,080
Speaker 1: first thing I'd say is I think President Trump and

798
00:41:25,120 --> 00:41:28,600
Speaker 1: his administration are right to push back against predatory Chinese

799
00:41:28,600 --> 00:41:33,000
Speaker 1: trade and investment practices, and in some senses that's overdue. Um.

800
00:41:33,040 --> 00:41:34,920
Speaker 1: I think this is going to be a long struggle.

801
00:41:34,960 --> 00:41:36,680
Speaker 1: I don't think that there's going to be any kind

802
00:41:36,680 --> 00:41:40,440
Speaker 1: of comprehensive grand bargain which fixes all of our concerns

803
00:41:40,880 --> 00:41:43,920
Speaker 1: about China's practices, but this could be a useful first step.

804
00:41:44,239 --> 00:41:47,000
Speaker 1: What I'm concerned about is how we go about doing that,

805
00:41:47,120 --> 00:41:49,640
Speaker 1: in the sense that it would be more logical to

806
00:41:49,719 --> 00:41:52,560
Speaker 1: try to make common cause with our partners in Asia,

807
00:41:52,640 --> 00:41:55,879
Speaker 1: countries like Japan, with our partners in the European Union

808
00:41:55,920 --> 00:41:59,000
Speaker 1: who share a lot of those concerns about Chinese practices,

809
00:41:59,360 --> 00:42:02,200
Speaker 1: and instead we've kind of, you know, opted for starting

810
00:42:02,239 --> 00:42:05,560
Speaker 1: second and third front trade conflicts with them. I think

811
00:42:05,600 --> 00:42:08,040
Speaker 1: the issue here, it seems to me anyways, is not

812
00:42:08,680 --> 00:42:13,600
Speaker 1: containing China's rise. China's rise economically politically over the next

813
00:42:13,640 --> 00:42:16,719
Speaker 1: few decades is the reality. But I think what we

814
00:42:16,800 --> 00:42:19,920
Speaker 1: do have an enormous capacity to do is shape the

815
00:42:20,040 --> 00:42:24,040
Speaker 1: environment into which China rises. That's the virtue of the

816
00:42:24,080 --> 00:42:28,160
Speaker 1: Transpacific Partnership. It's the virtue of working with allies and partners,

817
00:42:28,160 --> 00:42:31,200
Speaker 1: and that's what we It's that affirmative vision that I

818
00:42:31,600 --> 00:42:34,680
Speaker 1: see as missing oftentimes in this administration, and I think

819
00:42:34,680 --> 00:42:37,520
Speaker 1: we all need to focus more on Ambassador Burns. Thank

820
00:42:37,520 --> 00:42:40,520
Speaker 1: you so much. Bill Burns with the Back Channel, a

821
00:42:40,560 --> 00:42:43,840
Speaker 1: memoir of American diplomacy in the Case for its renewal.

822
00:42:43,840 --> 00:42:48,560
Speaker 1: And I'll emphasize there the phrase the case for its

823
00:42:47,760 --> 00:42:51,719
Speaker 1: renewal I've mentioned is is he did. James Baker and

824
00:42:51,800 --> 00:42:54,640
Speaker 1: his support of the book, and of course Secretary Clinton

825
00:42:54,760 --> 00:42:58,520
Speaker 1: and uh DR Kissinger as well. But what I really

826
00:42:58,560 --> 00:43:02,279
Speaker 1: note is John Lewis Gadis says Burns has written the

827
00:43:02,320 --> 00:43:06,759
Speaker 1: best diplomatic memoir of the post Cold War period. That's all,

828
00:43:06,800 --> 00:43:12,560
Speaker 1: you know, absolutely definitive for those interested in American diplomacy.

829
00:43:14,560 --> 00:43:18,799
Speaker 1: Thanks for listening to the Bloomberg Surveillance Podcast. Subscribe and

830
00:43:18,840 --> 00:43:24,160
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

831
00:43:24,200 --> 00:43:28,440
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before

832
00:43:28,480 --> 00:43:32,320
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg

833
00:43:32,400 --> 00:43:32,680
Speaker 1: Radio