WEBVTT - Surveillance: BAC Is Growing Organically, Cassidy Says 0:00:02.640 --> 0:00:13.040 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jai Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:28.280 Bloomberg dot Com, and of course on the Bloomberg Joann 0:00:28.400 --> 0:00:30.520 Farrell and Tom Keene on the American banks, and there's 0:00:30.520 --> 0:00:33.680 no better place to be than with Gerard Cassidy of 0:00:33.800 --> 0:00:38.360 RBC Capital Markets. Gerard, we're just talking about the minting 0:00:38.600 --> 0:00:40.760 of money. You look at operating and come on an 0:00:40.760 --> 0:00:43.840 annual basis of so many banks, and it sure looks 0:00:43.880 --> 0:00:47.800 like minting money. Is that the right phrase, Tom? I 0:00:47.800 --> 0:00:51.000 think is correct. In fact, if you look at the industry, 0:00:51.920 --> 0:00:56.440 this will be the fourth consecutive year of record profitability. Now, 0:00:56.560 --> 0:01:00.560 granted we have the lower tax rates that have contributed 0:01:00.600 --> 0:01:02.920 to that, but even when you take those out, we 0:01:02.960 --> 0:01:05.880 are going into our fourth year of record profitability for 0:01:05.959 --> 0:01:10.560 the banking industry. The most interesting comes since from the 0:01:10.560 --> 0:01:14.920 Bank of American Lending Business this morning. Gerard. Clearly higher 0:01:15.000 --> 0:01:18.200 rates are translating into a high night interest marchin at 0:01:18.240 --> 0:01:21.959 some of these big lenders in America. Clearly, higher rates 0:01:21.959 --> 0:01:25.720 are translating into higher interest income. None of this, though, 0:01:26.080 --> 0:01:30.200 seems to be translating into stock price out performance. Why not, Gerard? 0:01:31.680 --> 0:01:34.759 You you you framed it properly, and I would suggest them. 0:01:34.800 --> 0:01:39.040 What we hear from many investors today is the expression 0:01:39.160 --> 0:01:43.600 late cycle, and they're concerned that the U. S economy 0:01:43.800 --> 0:01:46.360 is not going to be able to maintain this growth 0:01:46.600 --> 0:01:48.800 and therefore, what do I need to own a bank? 0:01:49.280 --> 0:01:52.120 If the US economy grows the way we think it will, 0:01:52.440 --> 0:01:55.200 similar to the way it grew after the Kennedy tax 0:01:55.280 --> 0:01:58.000 cuts in the sixties and the Reagan tax cuts in 0:01:58.040 --> 0:02:00.480 the eighties, I think you'll see investor has come on 0:02:00.520 --> 0:02:03.800 board to the banks very shortly here. So, Jerard, the 0:02:03.840 --> 0:02:05.760 loan growth that you and I have been talking about 0:02:05.840 --> 0:02:08.359 for quite a few quarters, now, are you slowly seeing 0:02:08.400 --> 0:02:12.960 it come through? We are for the industry. What's interesting 0:02:13.080 --> 0:02:14.959 is that if you look at the weekly data comes 0:02:14.960 --> 0:02:17.840 out of every Friday afternoon, this past week, it was 0:02:17.919 --> 0:02:19.880 up around four and a half percent year of a 0:02:19.919 --> 0:02:22.400 year growth. That's up from about two percent at the 0:02:22.440 --> 0:02:25.400 beginning of the year, So you're seeing a creep up. However, 0:02:25.560 --> 0:02:28.720 amongst the biggest banks, the top twenty five banks. That 0:02:28.840 --> 0:02:30.760 growth is still on a year of a year basis 0:02:30.919 --> 0:02:33.760 in the low two percent range, but the smaller banks 0:02:33.760 --> 0:02:36.720 are growing loans close to ten percent over a year, 0:02:36.800 --> 0:02:39.320 so that there's a real market share battle going on. 0:02:39.960 --> 0:02:42.480 Well within the market share battle is the word that 0:02:43.080 --> 0:02:47.240 I think Gerard, you wrote about it about nine. Scale. 0:02:47.919 --> 0:02:51.680 Scale is nothing. Come on, scale is the merger grab deposits, 0:02:51.720 --> 0:02:56.040 cut costs. Right, your scale is time. I think you're 0:02:56.120 --> 0:03:00.480 spot on now. I'd throw in from four or wasn't 0:03:00.480 --> 0:03:03.200 as much about technology as it is today. So the 0:03:03.280 --> 0:03:07.000 technology spend is also so Bank of America five years 0:03:07.000 --> 0:03:08.679 so now I got on listed a two and eight 0:03:08.680 --> 0:03:11.760 thousand bodies. Maybe I'm guessing off the top of my 0:03:11.800 --> 0:03:14.880 head it used to be two. I don't know where's 0:03:14.919 --> 0:03:18.079 that number in five years or ten years. If they 0:03:18.120 --> 0:03:22.400 continue to grow there they're done with their you know, 0:03:22.600 --> 0:03:27.720 significant downsizing from the crisis as we know, um now 0:03:27.800 --> 0:03:32.000 they're actually adding people and as they continue to grow organically. 0:03:32.280 --> 0:03:36.880 Remember our banking sector and went through an enormous consolidation 0:03:37.280 --> 0:03:40.480 as a result of the Clinton President Clinton signing National 0:03:40.480 --> 0:03:43.640 in Estate Banking in the early nineties. This bank, Bank 0:03:43.680 --> 0:03:46.960 America has over a tem percent deposit market share. They're 0:03:46.960 --> 0:03:51.240 prohibited from acquiring any depository now they have to grow organically, 0:03:51.280 --> 0:03:53.360 and that's what they're doing. It's quite interesting that we're 0:03:53.360 --> 0:03:58.280 talking about competition to issue more loansome, Gerard, at a 0:03:58.320 --> 0:04:01.760 time when Marcus, the unit of Colman Sacks, is pulling 0:04:01.840 --> 0:04:04.160 back on its targets for next year. What do you 0:04:04.200 --> 0:04:05.920 make of that? What's the signal that comes from that. 0:04:06.880 --> 0:04:09.760 I think under the new leadership at Goldman UH under 0:04:09.920 --> 0:04:14.000 David Solomon, he's taken a step back, wants to make 0:04:14.040 --> 0:04:16.800 sure that they're going in the right direction, and I 0:04:16.839 --> 0:04:21.000 think the Marcus pullback is part of that thinking. Um 0:04:21.040 --> 0:04:24.600 I believe that when we see the new Goldman saxon 0:04:24.680 --> 0:04:28.680 about six months, there will be a more comprehensive lending 0:04:28.760 --> 0:04:32.400 product than not just a Marcus product. But that being said, 0:04:32.760 --> 0:04:35.640 I think Goldman, you know, jumped into consumer lending, which 0:04:35.720 --> 0:04:39.800 is a very competitive area, and they're probably now want 0:04:39.839 --> 0:04:42.160 to reassess to make sure that this is the area 0:04:42.200 --> 0:04:44.240 they want to go in. You mentioned the new Goldman Sacks. 0:04:44.320 --> 0:04:46.479 What's the new Goldman Sacks gonna look like, Erard? What 0:04:46.600 --> 0:04:50.240 is it? I think they have, um, some sort of 0:04:50.279 --> 0:04:53.039 look that is going to be more similar to the 0:04:53.120 --> 0:04:56.800 JP Morgan Universal Bank. Look, I believe you're going to 0:04:56.839 --> 0:05:01.680 see less emphasis on trading, more faces on a total 0:05:01.800 --> 0:05:06.239 financial solutions to their corporate and commercial customers, and they'll 0:05:06.240 --> 0:05:09.200 be more of a commercial bank. So you know you're 0:05:09.200 --> 0:05:11.719 gonna write a forty page like you know, into the 0:05:11.839 --> 0:05:13.800 end of the year memo whatever. I'm sure you're working 0:05:13.800 --> 0:05:16.440 on it already now. And all of that is trying 0:05:16.480 --> 0:05:18.960 to game the next merger. And I know what you're 0:05:18.960 --> 0:05:21.479 gonna tell me, and your lawyers have told you you 0:05:21.560 --> 0:05:25.040 can't talk about that. Okay, guess what you're gonna talk 0:05:25.080 --> 0:05:29.280 about it? What flavor of bank will be part of 0:05:29.320 --> 0:05:33.760 the combinations, who will be the combinator, and who will 0:05:33.800 --> 0:05:39.039 be the comin combinat Tom, I think you really have 0:05:39.120 --> 0:05:41.839 put your finger on it, because that is the one 0:05:41.920 --> 0:05:46.080 piece that's missing from the banking sector. Large bank mergers, 0:05:46.520 --> 0:05:49.640 we see them coming. There's some regulatory issues that still 0:05:49.680 --> 0:05:52.240 need to be a will will you think they'll be 0:05:52.279 --> 0:05:54.960 finishing Those will be addressed by the first quarter of 0:05:55.040 --> 0:05:58.440 next year. So can we see a US BANCORPS and 0:05:58.520 --> 0:06:01.680 of BB and T looked emerge with other large banks 0:06:01.960 --> 0:06:04.320 or could we ever do a merger of vehicles in Ohio? 0:06:04.720 --> 0:06:07.840 Do you put a fifth third in a key corps together? Honey? Right, 0:06:08.200 --> 0:06:10.640 And that's what we need to see, and I think 0:06:10.720 --> 0:06:12.960 that's coming on the board. It's going to take a 0:06:13.000 --> 0:06:14.880 little time. I mean, John, there was a point where 0:06:14.920 --> 0:06:18.919 Gerard Cassidy was daily, hourly on the streets of Boston 0:06:19.240 --> 0:06:21.520 and you could turn around three hundred and sixty degrees 0:06:21.520 --> 0:06:24.120 and see seven bank towers, and then all of a 0:06:24.160 --> 0:06:26.839 sudden it was four bank towers, and then it was 0:06:26.920 --> 0:06:29.400 one name. What was the final name of bank, like 0:06:29.440 --> 0:06:32.920 Fenway Banking or something like that. I mean, everybody merged 0:06:32.960 --> 0:06:35.640 with everybody else, and it all became Bank of America. 0:06:35.720 --> 0:06:38.119 We have a moment of silence here for Fleet Bank, 0:06:39.160 --> 0:06:41.680 A moment of silence for how you framed M and 0:06:41.760 --> 0:06:46.160 A a combanate tour and accompany. Yeah, that's story, British. 0:06:46.160 --> 0:06:50.240 I have not heard that one before. We're talking about Wait, 0:06:50.320 --> 0:06:54.160 I can't concentrate today. The Duchess Sussex with child. I 0:06:54.839 --> 0:06:56.920 was so happy You've gone fifty four minutes without even 0:06:56.960 --> 0:07:03.919 talking about it. We're not doing it, Tom A couple then, no, 0:07:04.360 --> 0:07:08.560 no Gerard Banks, Tom banks we do in Banks Edwards, 0:07:11.280 --> 0:07:14.240 you stop it, Come on your kissidy, help me out here. 0:07:14.480 --> 0:07:18.360 You always name the first kid after the richest grandfather, right, 0:07:18.840 --> 0:07:22.480 that's Card and Roll, So it's got to be Charles, right, 0:07:24.040 --> 0:07:27.440 Who wins? Inning seasoned Gerard, I would say, so far, 0:07:28.000 --> 0:07:31.800 what we're seeing, the JP Morgan numbers were strong. Bank 0:07:31.840 --> 0:07:35.640 America's numbers today are also very strong. So and in 0:07:35.720 --> 0:07:39.200 the even city. So who wins in the The universal 0:07:39.240 --> 0:07:43.000 bank model appears to be outperforming right now. The regional 0:07:43.000 --> 0:07:45.640 bank model. We only have P and C so far 0:07:45.720 --> 0:07:48.120 in the regionals, and their numbers came in a little 0:07:48.200 --> 0:07:50.800 light on long growth. But we'll see what happens with 0:07:50.840 --> 0:07:52.920 the rest of the regional banks. But right now, the 0:07:53.040 --> 0:07:56.080 universal bank models put up good numbers here in the 0:07:56.160 --> 0:07:58.480 third quarter. Did you pick for the next twelve months? Still? 0:07:59.720 --> 0:08:02.080 I think so, John, I would stick with Bank America. 0:08:02.200 --> 0:08:04.440 If you believe that the U. S economy is going 0:08:04.480 --> 0:08:07.120 to grow as fast as we do, Bank America's very 0:08:07.200 --> 0:08:10.480 well positioned to capture that. Plus, remember these banks are 0:08:10.520 --> 0:08:14.840 still giving back excess capital. In Bank America is of 0:08:14.960 --> 0:08:18.360 the universal banks is giving bank the least amount of 0:08:18.480 --> 0:08:21.880 capital relative to the city JP Morgan Wells and I 0:08:21.960 --> 0:08:24.560 think they're gonna up that number in the c CAR 0:08:24.640 --> 0:08:28.200 two thousand nineteen. Jug Cassidy, thank you so much with 0:08:28.240 --> 0:08:34.880 the RBC Capital UH markets. You spoke with our Benjamin 0:08:34.920 --> 0:08:38.719 Harvey and instabule running all of our Bloomberg News operation 0:08:39.280 --> 0:08:42.680 UH in Turkey UH and out of that part of 0:08:42.720 --> 0:08:46.520 the Middle East earlier and now without question or interview 0:08:46.520 --> 0:08:49.080 of the day and this on the uproar over the 0:08:49.160 --> 0:08:52.760 disappearance of Mr Kashogi UH and as the Turks have said, 0:08:53.240 --> 0:08:56.520 the murder of Mr Kuschogi as well. John Svakiankists joins us. 0:08:56.760 --> 0:08:58.760 He has been on the show any number of times 0:08:58.760 --> 0:09:04.040 with a Golf Research Center Foundation, their economics research director. John, 0:09:04.120 --> 0:09:06.640 I have visited your office is in Riad. You are 0:09:06.679 --> 0:09:10.760 a student of the royal family. Does um does the 0:09:11.040 --> 0:09:14.720 Does the prince have the support of his royal family? 0:09:17.200 --> 0:09:19.800 I think he has a support of the royal family, 0:09:19.880 --> 0:09:22.800 and I also think he does have the support of 0:09:22.880 --> 0:09:27.680 his father, and that's why the father decided that he 0:09:27.760 --> 0:09:31.680 has to send a personal envoy to Turkey, and that 0:09:31.840 --> 0:09:38.040 was the governor of the Western Province, Prince Khalat Alfasal 0:09:38.320 --> 0:09:41.880 And at the same time, they have agreed to investigate 0:09:41.920 --> 0:09:45.640 the matter of the Saluadis themselves and begin an investigation 0:09:45.720 --> 0:09:49.120 on the issue of how Jamal Hashoji has disappeared and 0:09:49.240 --> 0:09:52.600 what's going on. If the Turks say that there is audio, 0:09:52.720 --> 0:09:58.160 there are images, etcetera, etcetera, etcetera, does Saudi Arabia accede 0:09:58.200 --> 0:10:01.840 to those items of evidence or do they have to 0:10:01.880 --> 0:10:07.280 find their own evidence. It's a very good question. I 0:10:07.320 --> 0:10:11.760 think that it will be difficult for the Saudis too 0:10:12.520 --> 0:10:16.280 demonstrate that they have convincing evidence. To the contrary, if 0:10:16.320 --> 0:10:20.640 the Turks do share this evidence with the wider media, 0:10:20.960 --> 0:10:23.520 and at the same time, it could be that there 0:10:23.679 --> 0:10:27.680 is an agreement, because if things continue as is, things 0:10:27.720 --> 0:10:30.560 are going to heat up and both sides are going 0:10:30.600 --> 0:10:33.520 to begin to reciprocate. And by both sides I mean 0:10:33.640 --> 0:10:38.320 the West, the US, UK, France, UM so Saudi Arabia 0:10:38.400 --> 0:10:42.280 needs to show and demonstrate clearly that they are looking 0:10:42.280 --> 0:10:46.280 into this affair and they're trying to find solutions and 0:10:46.400 --> 0:10:50.680 um find answers to the many questions of how he disappeared. John, 0:10:50.800 --> 0:10:53.959 let's have the ugly conversation of leverage. The President of 0:10:54.000 --> 0:10:57.840 the United States said he's prepared to take action. Saudi 0:10:57.880 --> 0:11:01.600 Arabia has hardly stood back. They say it will also 0:11:01.679 --> 0:11:04.959 avowed threat that they vow to retaliate um and talk 0:11:05.000 --> 0:11:08.920 about their standing in the global economy, John, what does 0:11:09.000 --> 0:11:12.240 action and retaliation look like and what kind of leverage 0:11:12.240 --> 0:11:15.120 does Sauly Arabia have to ensure that the kind of 0:11:15.160 --> 0:11:21.600 action the United States takes isn't that harmful to the kingdom? Right? 0:11:22.200 --> 0:11:26.959 I think, Jonathan, that if things do continue in this 0:11:27.240 --> 0:11:31.920 heated fashion, we've seen already an editorial by Saudi, who 0:11:32.040 --> 0:11:35.719 is very close to the center of power to kill 0:11:35.800 --> 0:11:39.160 the hail who did say that oil could be used 0:11:39.200 --> 0:11:41.280 as a weapon. And of course God forbid if this 0:11:41.400 --> 0:11:45.200 happens at this point when the global economy is going 0:11:45.400 --> 0:11:50.440 through some first reverberations of challenges in terms of growth, 0:11:50.640 --> 0:11:52.760 we see oil prices at a hundred fifty or two 0:11:52.800 --> 0:11:55.600 hundred dollars a barrel. I don't think that the US 0:11:55.640 --> 0:11:59.520 will take that quite lightly, and it could very well 0:11:59.640 --> 0:12:04.120 then italiate and say, look, business comes second, and we're 0:12:04.160 --> 0:12:07.280 going to have a general embargo, and then Saudi Arabia 0:12:07.400 --> 0:12:09.679 is found in a position similar to that of Russia. 0:12:10.240 --> 0:12:12.080 I don't think we're going to get there. I think 0:12:12.160 --> 0:12:15.679 that there will be cooler heads that dominate both in 0:12:15.760 --> 0:12:18.280 Saudia and the rest of the world. And I think 0:12:18.320 --> 0:12:22.920 at the end um the perpetators or the people involved 0:12:24.280 --> 0:12:30.880 in the possible event of murdering this journalist could be 0:12:31.000 --> 0:12:34.800 found guilty and given to international justice. Again, this is 0:12:34.840 --> 0:12:37.640 all speculation, well, the alleged murder of this journalist that 0:12:37.720 --> 0:12:39.400 we are discussing at the moment, it's just one of 0:12:39.440 --> 0:12:42.280 a range of issues that the Crown Prince has opened 0:12:42.360 --> 0:12:45.240 up for the international stage to question. And I wonder John. 0:12:45.320 --> 0:12:47.679 Over the last couple of years, the Crown Prince has 0:12:47.720 --> 0:12:51.079 gone on a fantastic charm offensive with several leaders across 0:12:51.120 --> 0:12:54.160 the developed world and many multinational companies as well. How 0:12:54.240 --> 0:12:57.199 much harm has been done with this specific incidents on 0:12:57.280 --> 0:13:01.839 the international stage for Saudi standing well, there is no 0:13:01.960 --> 0:13:05.959 doubt that when you have a major conference taking place 0:13:06.120 --> 0:13:11.640 literally next week and many of the global leaders businessmen 0:13:11.679 --> 0:13:15.880 who are planning to attend, including Jamie Diamond, have decided 0:13:16.000 --> 0:13:19.400 not to do so, it is a blow to Saudi 0:13:19.440 --> 0:13:23.079 Arabia's image making to the rest of the world, and 0:13:23.240 --> 0:13:26.640 that has to be taken quite Seriously, mistakes are made 0:13:26.679 --> 0:13:30.040 all the time, and the reform is excellent. The change 0:13:30.120 --> 0:13:32.880 that is happening in Saudi Arabia is very much welcomed 0:13:33.240 --> 0:13:35.920 over the last few years. But a blunder like this 0:13:36.080 --> 0:13:40.040 should not curtail and hold back what Saudi Arabia can attain, 0:13:40.720 --> 0:13:44.800 and so I do believe that cooler heads will prevail. John, 0:13:44.880 --> 0:13:48.360 Thank you so much. Chiankis Golf Research with the Golf 0:13:48.559 --> 0:13:54.839 Research Center Foundation, and now for our interview of the 0:13:54.880 --> 0:13:58.480 day within Bloomberg News. Vivian near him is out of 0:13:58.520 --> 0:14:01.720 the University in Earth his three and holds court in Riod, 0:14:02.320 --> 0:14:06.040 which is a challenging assignment at any time, but evermore 0:14:06.120 --> 0:14:10.920 so right now. Vivian joins us from Riad. Vivian, what 0:14:11.040 --> 0:14:14.000 has been the reaction of Saudi officials, what has been 0:14:14.040 --> 0:14:18.000 the reaction of the domestic and elite media in Saudi 0:14:18.040 --> 0:14:21.840 Arabia to these announcements by the Prince, by the King 0:14:22.040 --> 0:14:26.000 and by the government. Well up until today we had 0:14:26.040 --> 0:14:30.800 seen a very firm narrative that Jamal Hashoji, you know, 0:14:30.880 --> 0:14:33.720 as prominent Saudi journalist, to his last scene entering the 0:14:33.840 --> 0:14:37.520 Saudi consulate in Istanbul, had left the consulate shortly after 0:14:37.640 --> 0:14:40.840 he entered, and they had continued to reiterate that narrative 0:14:40.920 --> 0:14:45.800 despite repeated statements from Turkish authorities that they believed that 0:14:45.920 --> 0:14:49.480 Hashoji had been murdered inside the consulate. And we've seen, 0:14:49.600 --> 0:14:52.680 you know, a great amount of resistance in Saudi media 0:14:52.800 --> 0:14:54.960 and a great amount of resistance from Saudia's who say 0:14:55.000 --> 0:14:57.880 that they do not trust the Turkish statements, and many 0:14:57.920 --> 0:14:59.960 people feel that this is an attack on Saudi Arabi 0:15:00.040 --> 0:15:03.000 it it can't possibly be true, um, And there's been 0:15:03.080 --> 0:15:06.160 quite a lot of pushback. UM. We saw that shift 0:15:06.400 --> 0:15:10.320 a bit today with an announcement from an anonymous Saudi 0:15:10.400 --> 0:15:14.000 official that the kingdom has actually begun an internal investigation 0:15:14.200 --> 0:15:17.600 into the disappearance of hush Ogi. Now, um, I mean 0:15:17.680 --> 0:15:19.840 that's a bit subtle, but what it basically shows is 0:15:19.960 --> 0:15:22.640 that they have started to look inwards as well, and 0:15:22.720 --> 0:15:26.200 so they're considering another narrative that perhaps didn't just walk 0:15:26.240 --> 0:15:29.440 out of the consulate shortly after he entered. Vivian, can 0:15:29.520 --> 0:15:31.920 you explain for people that may not be following this 0:15:32.080 --> 0:15:35.200 as closely as you are or we are, what are 0:15:35.240 --> 0:15:40.240 the implications for this for US Saudi relations? Right? I mean, 0:15:40.320 --> 0:15:42.760 this has turned out to be a much bigger story 0:15:42.800 --> 0:15:44.720 than many people thought it would be. At the start. 0:15:44.840 --> 0:15:48.200 You know, Jamal Hushogi was very well known, UM among 0:15:48.360 --> 0:15:51.560 people who knew Saudis into New Saudi Arabia. But I 0:15:51.600 --> 0:15:53.200 don't think anyone expected that it was going to have 0:15:53.320 --> 0:15:55.760 quite so many consequences in the business world and for 0:15:55.880 --> 0:15:59.760 the Saudi economy. UM. And it's testing the really long 0:16:00.040 --> 0:16:03.120 running times between Saudi Arabia and UH in the United States. 0:16:03.840 --> 0:16:06.720 Was a US resident UM, and the US has been 0:16:06.880 --> 0:16:10.640 demanding answers from Saudi Arabia. And meanwhile, there's been quite 0:16:10.640 --> 0:16:12.960 a strong reaction from the business community. There's a very 0:16:13.640 --> 0:16:17.320 massive investment conference that's coming up in Riad the early 0:16:17.360 --> 0:16:20.200 later this month, and we've seen really big names pulling 0:16:20.200 --> 0:16:24.000 out of it, including Nami Diamond, UM and Richard Branson 0:16:24.160 --> 0:16:27.720 just saying we're not coming Vivian the distinction here. And 0:16:27.800 --> 0:16:31.320 I understand the delicacies of you being domiciled in Ria 0:16:31.480 --> 0:16:33.640 as we speak. I don't know if you're aware, but 0:16:33.720 --> 0:16:36.040 twenty nine minutes ago, the President of the United States, 0:16:36.120 --> 0:16:37.760 let me get this accurately. I got to do a 0:16:37.840 --> 0:16:41.240 refresh on the computer. Twenty nine minutes ago the President 0:16:42.040 --> 0:16:46.000 put out a tweet where it is language from Saudi 0:16:46.040 --> 0:16:51.680 Arabia quote to our Saudi Arabian citizen unquote. And you 0:16:51.880 --> 0:16:55.360 just stated, as many others have stated, that Mr Kashogi 0:16:55.480 --> 0:16:58.400 was an American citizen. Can he be both? Is he 0:16:58.560 --> 0:17:02.120 one is the other? Where does that sit within Saudi 0:17:02.120 --> 0:17:05.800 Arabia right now? So he was a U s residence 0:17:05.920 --> 0:17:09.280 but not a US citizen. UM. He was actually a 0:17:09.320 --> 0:17:12.160 saudiast citizen who had been living in a self opposed 0:17:12.240 --> 0:17:15.280 exile for about a year. So he left the kingdom 0:17:15.400 --> 0:17:18.520 under fears that he would be detained there or something 0:17:18.640 --> 0:17:20.600 like that, and he had moved to the US and 0:17:20.800 --> 0:17:25.600 was residing there with within this is his disappearance. What 0:17:25.840 --> 0:17:28.920 will the internal probe be? I mean? Is it a 0:17:29.080 --> 0:17:31.680 police probe? Is it a special probe? Do we have 0:17:31.800 --> 0:17:35.520 any idea from your reporting of who who will be 0:17:35.640 --> 0:17:40.000 the who of the probe? So what we were told 0:17:40.240 --> 0:17:43.560 is that the Saudi King Salmon himself ordered over the 0:17:43.640 --> 0:17:46.520 weekend that this probe begin and it will be done 0:17:46.520 --> 0:17:50.760 by the Saudi public prosecutor, who reports directly to the king. UM. 0:17:51.320 --> 0:17:53.840 So we don't know necessarily what that will entail. We 0:17:53.920 --> 0:17:56.560 were told that it will be very speedy, that they've 0:17:56.600 --> 0:17:58.600 been told to do as quickly as possible, and that 0:17:58.720 --> 0:18:01.920 we could hear some sort of announcement within days of 0:18:02.040 --> 0:18:09.080 what they conclude. Vivian, why is the probe itself significant? Well, 0:18:09.119 --> 0:18:11.080 I think it's that bit. But it shows they are 0:18:11.240 --> 0:18:15.640 rethinking or reconsidering, um, the previous narrative which they had 0:18:15.800 --> 0:18:19.080 really strongly stuck to, which was that absolutely nothing happened, 0:18:19.240 --> 0:18:23.119 you know, to at the consulate and we had absolutely 0:18:23.200 --> 0:18:26.480 nothing to do with this UM. This disappearance, the fact 0:18:26.520 --> 0:18:29.359 that they are sort of, you know, potentially looking inwards, um, 0:18:29.560 --> 0:18:33.280 you know, looking for the story what could have happened, 0:18:33.440 --> 0:18:37.440 It could show that they might be perhaps willing to 0:18:37.480 --> 0:18:40.240 make some sort of partial admission of guilt. Analysts are 0:18:40.240 --> 0:18:44.600 saying that could then still absolve higher authorities, or they 0:18:44.640 --> 0:18:47.000 could perhaps open up the way for them to blame 0:18:47.160 --> 0:18:50.280 rogue elements within the state for anything that might have happened. 0:18:50.680 --> 0:18:52.280 It's still up in the air, and it's too early 0:18:52.359 --> 0:18:55.600 to say what the fate is of Hashog. They're not 0:18:55.680 --> 0:18:58.560 admitting it publicly yet UM or saying anything publicly yet 0:18:58.600 --> 0:19:02.280 about that, but it basically is a sign that they 0:19:02.320 --> 0:19:05.280 are no longer sticking to this really you know, tense 0:19:05.400 --> 0:19:08.160 narrative that he went in and he went out. Vivian 0:19:08.240 --> 0:19:13.080 Just finally, you've previously talked written about Turkey and uh 0:19:13.600 --> 0:19:16.200 their role in this. Can you just elaborate there a 0:19:16.240 --> 0:19:20.440 little bit? Yeah, I mean that's a complicated relationship between 0:19:20.480 --> 0:19:22.720 Turkey and Saudi Arabia. Um. They are both you know, 0:19:22.960 --> 0:19:26.080 regional powers. They don't always get along. Um. You know, 0:19:26.160 --> 0:19:28.520 they do have diplomatic relations. It's not as bad as 0:19:28.560 --> 0:19:30.879 it is with other countries in the region. But their 0:19:31.200 --> 0:19:35.159 tense you know, Turkey has traditionally supported a particular kind 0:19:35.160 --> 0:19:38.359 of political Islam that the Saudi government you know, believes 0:19:38.400 --> 0:19:42.120 to be a danger to their security and stability. Um. 0:19:42.560 --> 0:19:45.200 And Turkey has sided with a Thought um in this 0:19:45.359 --> 0:19:47.680 recent dispute between Thought and the other Gulf states, which 0:19:47.680 --> 0:19:50.920 Saudi Arabia also is very offended by. So naturally, when 0:19:51.000 --> 0:19:53.239 these kind of you know, anonymous leaks started coming out 0:19:53.320 --> 0:19:56.920 from Turkish authorities accusing Saudi Arabia of these very grizzly allegations, 0:19:57.359 --> 0:20:00.520 a lot of Saudia's were immediately distroy full of that. 0:20:00.720 --> 0:20:02.720 You know, Turkey is not our friend. We can't trust 0:20:02.800 --> 0:20:05.000 with her thing. Vivian, thank you so much for joining 0:20:05.080 --> 0:20:07.320 us today and short notice. Vivian ner Um with that 0:20:07.520 --> 0:20:09.879 question the article today for Bloomberg News. I'll get it 0:20:09.920 --> 0:20:13.880 out in social on Saudi Arabia setting up some form 0:20:13.920 --> 0:20:17.320 of investigation and the disappearance of Mr Kushogi as well. 0:20:17.480 --> 0:20:25.680 Vivian ere Um with Bloomberg News in Gary Gensler is 0:20:25.840 --> 0:20:28.960 of course we know him as the former head of 0:20:29.200 --> 0:20:33.600 the Commodity Futures Trading Commission or better known as the 0:20:33.960 --> 0:20:37.960 c f TC, former Under Secretary of the Treasury for 0:20:38.280 --> 0:20:42.000 Domestic Finance as well as for financial markets, former Goldman 0:20:42.080 --> 0:20:48.159 Sachs executive and currently at the Media Center at the 0:20:48.520 --> 0:20:50.760 m I T at the Media Lab. Gary, thanks very 0:20:50.840 --> 0:20:53.480 much for your being here and for your patients. We 0:20:53.600 --> 0:20:57.680 were talking about debt just before President Donald Trump was speaking, 0:20:58.359 --> 0:21:00.760 and I want to really try to get you to 0:21:00.840 --> 0:21:04.080 crystallize that should we be concerned about all of the 0:21:04.480 --> 0:21:09.600 government debt, corporate debt and individual debt that has been created. 0:21:10.720 --> 0:21:14.840 And it looks like interest rates are at least moving up, 0:21:15.040 --> 0:21:18.560 not down. How's that good for people that are in debt? 0:21:19.520 --> 0:21:21.720 I think that the high level of debt that we 0:21:21.880 --> 0:21:25.320 have in America these last ten years. It competes with 0:21:25.480 --> 0:21:27.600 the high level debt we had in the nineteen twenties, 0:21:27.680 --> 0:21:30.480 and so just that it's about three and a half 0:21:30.600 --> 0:21:34.080 times the economy. Three sixty percent of our economy was 0:21:35.040 --> 0:21:40.480 about seventy trillion dollars of corporate, government and household debt. 0:21:40.800 --> 0:21:42.560 We've done some good things in the last ten years. 0:21:42.560 --> 0:21:45.040 There's a little less household debt as mortgage debt has 0:21:45.119 --> 0:21:48.639 come down after the housing bubble, but we've backfilled and 0:21:48.760 --> 0:21:51.520 we have a lot more government debt and corporate debt. 0:21:51.880 --> 0:21:56.240 So I think it's something to be aware of. We 0:21:56.440 --> 0:21:58.639 normally have lower levels of debt than we've had the 0:21:58.720 --> 0:22:03.680 last ten years. Well, does that make it more concerning 0:22:04.400 --> 0:22:07.640 if there were to be an economic downturn or whether 0:22:07.720 --> 0:22:10.159 there were to be some shock to the you know, 0:22:10.400 --> 0:22:15.480 economic system that then creates a crisis. UH debt does 0:22:16.119 --> 0:22:21.080 provide a lot of opportunity for UH businesses to innovate, 0:22:21.320 --> 0:22:25.600 for individuals to buy that home and send their kids 0:22:25.680 --> 0:22:27.879 off to college. But we have too high level of 0:22:27.960 --> 0:22:31.760 student debt, for instance, And yes, in downturns than debt 0:22:31.920 --> 0:22:35.880 cuts the other way, it's great on the upside, it's 0:22:36.080 --> 0:22:39.119 rough on the downside, Gary, I want to talk about 0:22:39.480 --> 0:22:41.680 the golden sex management. If you don't want to answer this, 0:22:41.760 --> 0:22:43.840 I understand that you may want to step aside here. 0:22:43.880 --> 0:22:45.359 But you are one of the few people on the 0:22:45.480 --> 0:22:49.080 planet that have actually lived the shift from banking m 0:22:49.160 --> 0:22:51.800 and A over to thick over to trading and all. 0:22:51.880 --> 0:22:54.400 You're one of the very few people it's actually done 0:22:54.440 --> 0:22:56.760 with a lot of people blather about but then on 0:22:56.880 --> 0:22:59.479 the clue what they're talking about. How big a shift 0:22:59.720 --> 0:23:03.720 is from the smooth banking world over to rough and 0:23:03.840 --> 0:23:06.920 trumble trading where you could enjoy watching the bid walk 0:23:07.000 --> 0:23:10.080 away in seconds. Well, there is a difference. I started 0:23:10.119 --> 0:23:12.720 in the merger and acquisition area at Coman Sacks and 0:23:12.800 --> 0:23:14.520 then I was honored to be asked to go over 0:23:14.600 --> 0:23:17.639 to the fixed income and currency trading. What do they 0:23:17.840 --> 0:23:20.200 take you into a room and say we've got bad news, Gar, 0:23:20.960 --> 0:23:23.359 How does that work? No? No, there was there was 0:23:23.400 --> 0:23:26.400 a time when, uh, there was. Some of us younger 0:23:26.520 --> 0:23:29.480 partners were asked, would we be willing to take the 0:23:29.640 --> 0:23:32.959 risk and move around? But you're right, the time horizons 0:23:32.960 --> 0:23:36.760 are shorter a merger transaction you might be negotiating Vermonts 0:23:37.320 --> 0:23:40.879 and the markets move in seconds or nano seconds, and 0:23:41.000 --> 0:23:47.960