1
00:00:02,480 --> 00:00:05,880
Speaker 1: Global business news twenty four hours a day at Bloomberg

2
00:00:05,920 --> 00:00:09,000
Speaker 1: dot Com, the Radio plus mobile LAP and on your radio.

3
00:00:09,240 --> 00:00:13,080
Speaker 1: This is a Roomberg Business Flash and I'm Karen Moscow.

4
00:00:13,119 --> 00:00:16,520
Speaker 1: This updates brought to you by Brown University, where the

5
00:00:16,560 --> 00:00:19,800
Speaker 1: new Executive Master and Cyber Security prepares leaders in law,

6
00:00:19,840 --> 00:00:23,200
Speaker 1: technology and business to face tomorrow's greatest threats. The Brown

7
00:00:23,280 --> 00:00:27,600
Speaker 1: University Executive Master and Cyber Security strategy is the best security.

8
00:00:27,880 --> 00:00:30,319
Speaker 1: The pounds sliding is a split in the UK's ruling

9
00:00:30,360 --> 00:00:33,519
Speaker 1: party over European Union membership increase the potential for an

10
00:00:33,560 --> 00:00:36,640
Speaker 1: exit from the block. Stalks across the globe are rallying,

11
00:00:36,680 --> 00:00:40,280
Speaker 1: sending Dubai shares into a bowl market as oil rebounds

12
00:00:40,280 --> 00:00:42,880
Speaker 1: and medals advanced. We checked the markets every fifteen minutes

13
00:00:42,920 --> 00:00:46,239
Speaker 1: throughout the trading day on Bloomberg SNP EVENI futures up

14
00:00:46,280 --> 00:00:49,320
Speaker 1: twenty points, Dow EMUNI futures up a hundred seventy seven,

15
00:00:49,520 --> 00:00:52,440
Speaker 1: nasadac EMUNY futures up forty nine. The Dacks in Germany's

16
00:00:52,520 --> 00:00:55,240
Speaker 1: up one point eight per cent, Tenure treasury down seven

17
00:00:55,280 --> 00:00:58,520
Speaker 1: thirty seconds, the yield one point seven six percent. Nimex

18
00:00:58,560 --> 00:01:00,560
Speaker 1: screwed oil up three point six per cent or a

19
00:01:00,600 --> 00:01:03,880
Speaker 1: dollar six to thirty seventy barrel. Comex goal down one

20
00:01:04,440 --> 00:01:07,720
Speaker 1: cent or fifty cents to twelve o eight thirty announced

21
00:01:07,880 --> 00:01:10,319
Speaker 1: and the pound is at a dollar forty one oh five.

22
00:01:10,600 --> 00:01:13,279
Speaker 1: And that's a bloomberg business flash, Tom and Mike Karen,

23
00:01:13,600 --> 00:01:15,520
Speaker 1: thanks so much. Brady hints with us with New York

24
00:01:15,600 --> 00:01:18,560
Speaker 1: University for years with Sanford. That weird seeing Brad. One

25
00:01:18,600 --> 00:01:20,120
Speaker 1: thing that drives me is, I know Mike's got some

26
00:01:20,200 --> 00:01:22,920
Speaker 1: adult questions for you. But one of the things that

27
00:01:22,959 --> 00:01:27,120
Speaker 1: absolutely drives me to drink is people blathering about banking

28
00:01:27,280 --> 00:01:32,800
Speaker 1: who have no understanding of the size of these beasts

29
00:01:32,840 --> 00:01:37,160
Speaker 1: on the balance sheet. It Fortress Diamond credit card loans

30
00:01:37,160 --> 00:01:40,720
Speaker 1: are a hundred and thirty one billion. That's that's almost

31
00:01:40,720 --> 00:01:42,760
Speaker 1: a double from where they were at the bottom of

32
00:01:42,800 --> 00:01:45,960
Speaker 1: the market, a hundred thirty one billion. They have three

33
00:01:46,000 --> 00:01:49,800
Speaker 1: hundred thirty one billion commercial loans, like a twenty eight

34
00:01:49,840 --> 00:01:52,800
Speaker 1: billion in cash they don't know what to do with,

35
00:01:53,240 --> 00:01:56,280
Speaker 1: and on and on and on. Goodwill, bad will, and

36
00:01:56,320 --> 00:01:59,840
Speaker 1: whatever will summed up is something in the vicinity of

37
00:02:00,000 --> 00:02:03,480
Speaker 1: fifty billion. These things are huge, aren't they think of

38
00:02:03,520 --> 00:02:06,600
Speaker 1: how difficult they are to manage well. And Jakie has

39
00:02:06,640 --> 00:02:09,720
Speaker 1: said that on and off the record any number of times.

40
00:02:09,919 --> 00:02:14,560
Speaker 1: People don't understand the size and as a as a CEO,

41
00:02:15,080 --> 00:02:18,200
Speaker 1: what you don't want to do is to go to

42
00:02:18,240 --> 00:02:22,200
Speaker 1: hell for a sin of oh mission right, something that

43
00:02:22,240 --> 00:02:27,000
Speaker 1: you didn't know you did write it, just it just happened. Uh.

44
00:02:27,120 --> 00:02:30,440
Speaker 1: And the so control is an issue, and you see

45
00:02:30,480 --> 00:02:32,919
Speaker 1: that in terms of compliance, you see that in terms

46
00:02:32,919 --> 00:02:35,160
Speaker 1: of cultural issues. You know, I want to have trusted

47
00:02:35,200 --> 00:02:37,320
Speaker 1: lieutenants working for me. And that's one of the reasons

48
00:02:37,320 --> 00:02:40,120
Speaker 1: why you see these banks talk about you know, you

49
00:02:40,240 --> 00:02:42,560
Speaker 1: know I've I've worked with him for a period of time.

50
00:02:42,600 --> 00:02:46,920
Speaker 1: You see the management teams come as groups because how

51
00:02:47,000 --> 00:02:49,320
Speaker 1: you know, how do you ensure that you know, you

52
00:02:49,360 --> 00:02:51,160
Speaker 1: don't get in trouble. You try to make sure that

53
00:02:51,160 --> 00:02:55,480
Speaker 1: the value systems are similar. The Uh, the banks have

54
00:02:55,560 --> 00:03:00,280
Speaker 1: been shedding people right and left. But is that what

55
00:03:00,280 --> 00:03:03,400
Speaker 1: we're going to see or are people going to actually

56
00:03:03,680 --> 00:03:07,680
Speaker 1: shut down business lines uh and shrink these banks as

57
00:03:07,760 --> 00:03:11,040
Speaker 1: the President cash Cary and others would have them do,

58
00:03:12,320 --> 00:03:16,480
Speaker 1: um well, shrinking the banks, and you know, there's there's

59
00:03:16,520 --> 00:03:20,560
Speaker 1: certain it's very difficult to shrink them. And you know

60
00:03:20,680 --> 00:03:24,600
Speaker 1: you can can carver on the edges, but it here's

61
00:03:24,639 --> 00:03:27,400
Speaker 1: a here's a really good example. Years and years ago,

62
00:03:27,800 --> 00:03:31,560
Speaker 1: Solomon Brothers at that time, a private public company UM

63
00:03:31,720 --> 00:03:35,360
Speaker 1: and Independent shut down commercial paper. It's a terrible business.

64
00:03:35,360 --> 00:03:38,760
Speaker 1: It wasn't a great return business. And their clients rose

65
00:03:38,880 --> 00:03:41,480
Speaker 1: up in righteous indignation about this, saying, I'm not going

66
00:03:41,560 --> 00:03:43,960
Speaker 1: to give you any more investment banking business if you

67
00:03:43,960 --> 00:03:46,320
Speaker 1: don't place my commercial paper for you. So you think

68
00:03:46,320 --> 00:03:48,520
Speaker 1: of all these businesses that the banks have on the

69
00:03:48,520 --> 00:03:51,120
Speaker 1: institutional side, they're all tied together by bungee cords, and

70
00:03:51,120 --> 00:03:54,480
Speaker 1: the client relationships are are mixed across the board. So

71
00:03:54,840 --> 00:03:58,200
Speaker 1: you can you can shrink and try to resize each

72
00:03:58,240 --> 00:04:01,280
Speaker 1: of these businesses. But it's very difficult to say I'm

73
00:04:01,280 --> 00:04:03,280
Speaker 1: just going to get out of a business without having

74
00:04:03,320 --> 00:04:06,080
Speaker 1: implications to all the others. It's like a domino effect.

75
00:04:06,160 --> 00:04:08,440
Speaker 1: This is why you're so good. That was absolutely brilliant

76
00:04:08,480 --> 00:04:11,960
Speaker 1: that bungee cord idea. Are the bungee cords a little

77
00:04:12,000 --> 00:04:15,760
Speaker 1: brittle right now? Sure? Sure you see the bungee cords

78
00:04:16,040 --> 00:04:19,120
Speaker 1: with with with Mr Fink. From Mr Fink's point of view,

79
00:04:19,120 --> 00:04:21,479
Speaker 1: he gives a lot of business to Wall Street and

80
00:04:21,520 --> 00:04:24,680
Speaker 1: he's not getting liquidity in return. Larry, think of black.

81
00:04:25,080 --> 00:04:29,080
Speaker 1: That's exactly right. So you know, so the the and

82
00:04:29,279 --> 00:04:33,200
Speaker 1: why this the model has broken. The model of fixed

83
00:04:33,200 --> 00:04:35,719
Speaker 1: income was a model that said, I will provide free

84
00:04:35,760 --> 00:04:38,200
Speaker 1: liquidity to you as a as a as a fixed

85
00:04:38,200 --> 00:04:40,560
Speaker 1: income department. You will provide me flow, and I'll be

86
00:04:40,600 --> 00:04:43,120
Speaker 1: able to take risk against that flow, and therefore I

87
00:04:43,160 --> 00:04:45,040
Speaker 1: will make money from the risk taking and I'm gonna

88
00:04:45,040 --> 00:04:48,840
Speaker 1: provide you easy execution. That's that model is broken. Now

89
00:04:48,880 --> 00:04:50,800
Speaker 1: I can't do that. I'm not allowed to take the

90
00:04:50,880 --> 00:04:53,200
Speaker 1: level of risk that I used to take. So fixed

91
00:04:53,240 --> 00:04:56,080
Speaker 1: income has As you take risk out of fixed income,

92
00:04:56,400 --> 00:04:59,279
Speaker 1: the profitability of fixed income drops. Now I have a

93
00:04:59,320 --> 00:05:02,560
Speaker 1: large balance generating low returns, I shrink my balanchie Suddenly

94
00:05:02,600 --> 00:05:04,839
Speaker 1: you have no liquidity and there you go. That gets

95
00:05:04,880 --> 00:05:07,640
Speaker 1: us back to the future, abhorring a vacuum. How does

96
00:05:07,680 --> 00:05:11,919
Speaker 1: that get fixed repricing in the marketplace? I mean, you

97
00:05:11,960 --> 00:05:14,240
Speaker 1: can you know it's easy for us to say, right,

98
00:05:14,440 --> 00:05:17,440
Speaker 1: you know, Larry, Mr Fink, you know, if you want liquidity,

99
00:05:17,480 --> 00:05:19,600
Speaker 1: you're going to have to pay for it. That means

100
00:05:19,640 --> 00:05:22,960
Speaker 1: wider bid offer spreads like that has a secondary effect,

101
00:05:23,200 --> 00:05:26,920
Speaker 1: wider bid offer spreads in in fixed income lower trading value,

102
00:05:27,160 --> 00:05:31,040
Speaker 1: so fixed income shifts from being a flow business to

103
00:05:31,720 --> 00:05:35,280
Speaker 1: smile and dial sales guys execute working trades over long

104
00:05:35,320 --> 00:05:37,200
Speaker 1: periods of time, which is you know, that's like a

105
00:05:37,279 --> 00:05:40,360
Speaker 1: throwback to the nineteen eighties. Right. So we're seeing, you know,

106
00:05:40,600 --> 00:05:44,760
Speaker 1: with baby steps, we're seeing a business model evolve. Well,

107
00:05:44,800 --> 00:05:46,880
Speaker 1: I gotta ask you, as the business model evolves in

108
00:05:47,200 --> 00:05:51,080
Speaker 1: h what do you teach your students? Uh? What are

109
00:05:51,080 --> 00:05:59,440
Speaker 1: you preparing them for? Oh the uh how do you manage? Well,

110
00:05:59,520 --> 00:06:04,400
Speaker 1: that would have the old answer. You know, this is

111
00:06:04,440 --> 00:06:09,000
Speaker 1: an opportunity. You remember, there aren't many kids who are

112
00:06:09,040 --> 00:06:11,800
Speaker 1: going into Wall Street and you're seeing you know, if

113
00:06:11,800 --> 00:06:14,800
Speaker 1: you're seeing the technology, everybody wants to go into technology.

114
00:06:16,279 --> 00:06:19,640
Speaker 1: That's probably a wonderful time to go to the banks, right,

115
00:06:19,760 --> 00:06:24,480
Speaker 1: because if anybody needs capable management teams for the future,

116
00:06:25,520 --> 00:06:28,039
Speaker 1: it's the commercial banks, right. They're the ones who you know,

117
00:06:28,080 --> 00:06:30,400
Speaker 1: they're not going to go away. The business isn't going

118
00:06:30,440 --> 00:06:33,480
Speaker 1: to go away. We need we need a generation of

119
00:06:33,480 --> 00:06:35,960
Speaker 1: people to come and take it over. And and happily

120
00:06:36,040 --> 00:06:37,480
Speaker 1: the baby women were say, kind of getting out of

121
00:06:37,520 --> 00:06:40,480
Speaker 1: the way, or why is one. Why is Ruth Portt

122
00:06:40,520 --> 00:06:43,919
Speaker 1: done so well at Google? What's in the pixie dust off?

123
00:06:43,960 --> 00:06:46,880
Speaker 1: You CFO type of analysts people like you and Ruth

124
00:06:47,360 --> 00:06:50,480
Speaker 1: she goes back out to Google. She's you know, basically

125
00:06:50,520 --> 00:06:53,120
Speaker 1: she can run for governor in California. She's done so well.

126
00:06:54,560 --> 00:06:58,720
Speaker 1: She knows how to gain confidence with with think of

127
00:06:58,839 --> 00:07:02,440
Speaker 1: a CFO on Wall straight in many ways, you're hurting cats, right.

128
00:07:04,120 --> 00:07:08,920
Speaker 1: I suspect that. I suspect there's many, many, UH comparable

129
00:07:09,320 --> 00:07:11,840
Speaker 1: challenges that go on when you're when you're dealing with

130
00:07:12,320 --> 00:07:17,440
Speaker 1: UH with technology. People to the technology, people think they

131
00:07:17,440 --> 00:07:20,240
Speaker 1: know everything, which and just as the traders thought they

132
00:07:20,280 --> 00:07:23,560
Speaker 1: knew everything, and Ruth has to gain a consensus. She's

133
00:07:23,600 --> 00:07:26,360
Speaker 1: been she's very good at that. She's a team she's

134
00:07:26,400 --> 00:07:29,680
Speaker 1: a team leader and UH and and people learn to

135
00:07:29,720 --> 00:07:31,720
Speaker 1: trust a very credit. It's never enough time. Thank you

136
00:07:31,800 --> 00:07:35,160
Speaker 1: so much. Brents is a New York university where I

137
00:07:35,240 --> 00:07:37,120
Speaker 1: think he forces people to learn how to use a

138
00:07:37,200 --> 00:07:41,200
Speaker 1: slide rule. We continue to stay with us Bloomberg Surveillance.

139
00:07:45,680 --> 00:07:47,840
Speaker 1: Bloomberg spoke to by New Yor Community Bank and New

140
00:07:47,920 --> 00:07:50,320
Speaker 1: York Commercial Bank, the NYCB family of banks. Bank with

141
00:07:50,360 --> 00:07:52,840
Speaker 1: confidence anywhere you see the NYCB logo throughout the New

142
00:07:52,920 --> 00:08:00,040
Speaker 1: York Metro is an NYCB family dot com. It