WEBVTT - Summers on Tariffs, EU Capital Markets, Business of Tuna 0:00:12.160 --> 0:00:15.000 This is Wall Street Week. I'm David Weston bringing you 0:00:15.200 --> 0:00:18.360 stories of capitalism. This week, we go to the waters 0:00:18.400 --> 0:00:21.360 off of Mexico to see the role private equity is 0:00:21.400 --> 0:00:24.560 playing in getting you that high end blue fin tuna 0:00:24.680 --> 0:00:28.560 for your favorite sashimi. And we hear from Anna Botina 0:00:28.680 --> 0:00:32.440 Santander about prospects for growth in the US and Europe 0:00:32.600 --> 0:00:35.159 and how the crisis in Ukraine may serve as a 0:00:35.200 --> 0:00:37.599 wake up call for the EU to make the financial 0:00:37.680 --> 0:00:41.040 reforms it has needed for years. But we start with 0:00:41.159 --> 0:00:43.960 the big story for global Wall Street this week, the 0:00:44.000 --> 0:00:46.600 tale of Trump tariffs and what they may do to 0:00:46.640 --> 0:00:50.320 the US economy. For his views on tariffs and the economy, 0:00:50.360 --> 0:00:54.000 we welcome back our very special contributor, Larry Summers of Harvard. 0:00:55.640 --> 0:00:58.960 We will charge them approximately half of what they are 0:00:59.000 --> 0:01:04.640 and happened to, so the tariffs will be not a 0:01:04.720 --> 0:01:08.320 full reciprocal I could have done that, yes, but it 0:01:08.360 --> 0:01:10.560 would have been tough for a lot of countries who 0:01:10.600 --> 0:01:11.440 didn't want to do that. 0:01:11.800 --> 0:01:15.959 Will these increased costs be passed along the consumer? I 0:01:16.000 --> 0:01:18.360 know you've taken a position on that. The Secuar and 0:01:18.400 --> 0:01:22.680 Treasury current Secuary and Treasury Scott Besson has questioned exactly 0:01:22.880 --> 0:01:24.120 why they would be passed on. 0:01:24.760 --> 0:01:26.360 I'm not going to get in a back and forth 0:01:26.400 --> 0:01:30.080 with Professor Summers, And you know, maybe Professor Summers should 0:01:30.240 --> 0:01:32.120 let the world know who his client lift is and 0:01:32.160 --> 0:01:35.679 why he's talking about things like this, because he does 0:01:35.760 --> 0:01:39.320 have professional clients away from Harvard. But you know, I 0:01:39.360 --> 0:01:43.760 would also add that I have seven years of empirical 0:01:43.840 --> 0:01:47.800 data and which showed that the China terrifts were not 0:01:48.000 --> 0:01:49.880 passed on to the American people. 0:01:50.160 --> 0:01:50.960 What's your response. 0:01:51.520 --> 0:01:53.720 He's tried to call me out like I've got some 0:01:53.840 --> 0:01:57.360 kind of importer clients who's paying me. 0:01:57.480 --> 0:01:59.000 That's ridiculous. 0:02:00.120 --> 0:02:03.880 Maybe we ought to pay some attention to the various 0:02:03.920 --> 0:02:07.280 financial affiliations of all the people in the Trump administration 0:02:08.040 --> 0:02:09.280 involved with Crypto. 0:02:10.200 --> 0:02:12.960 On the marriage, we've got a clear test. 0:02:13.760 --> 0:02:17.080 They put a tariff on steel, and the price of 0:02:17.120 --> 0:02:21.679 stealing the United States is up thirty percent since inauguration day. 0:02:22.600 --> 0:02:26.679 We got many economists at the Peterson Institute. There's a 0:02:26.720 --> 0:02:31.280 different study in the American Economic Review that looked at 0:02:31.320 --> 0:02:35.680 the effects of President Trump's tariffs in his first administration. 0:02:36.160 --> 0:02:38.280 Those are much smaller. 0:02:37.800 --> 0:02:42.280 Tariffs than are being discussed and put in place today. 0:02:42.880 --> 0:02:45.480 But the evidence looks like it's pretty close to dollar 0:02:45.520 --> 0:02:52.440 for dollar in terms of increased prices that consumers face. 0:02:53.400 --> 0:02:56.800 And the economic logic is, if you put a dime 0:02:56.919 --> 0:02:59.919 tax on a hot drug, the guys selling the hot 0:03:00.040 --> 0:03:03.639 rug's going to sell it for ten cents more. If 0:03:04.040 --> 0:03:07.079 he could have squeezed to suppliers, he would have already 0:03:07.080 --> 0:03:10.800 squeezed his suppliers. Putting that ten cents on doesn't make 0:03:10.800 --> 0:03:15.000 it any easier. So I don't understand the argument, and 0:03:15.560 --> 0:03:20.640 I'm not alone among serious economists in not being able 0:03:20.680 --> 0:03:24.840 to understand the argument that this will be absorbed. 0:03:25.120 --> 0:03:27.080 There was a lot of anticipation built up to this 0:03:27.240 --> 0:03:30.680 so called Liberation Day this week, But by all accounts, 0:03:30.720 --> 0:03:32.640 this is not the end of the process. This is 0:03:32.919 --> 0:03:34.800 in the middle of the beginning of the precess, which 0:03:34.840 --> 0:03:37.920 will lead to a lot more negotiation, bilateral negotiation. What 0:03:38.000 --> 0:03:41.200 about the cost of uncertainty itself in this process of 0:03:41.200 --> 0:03:43.800 President Trump trying to use tariffs to extract things out 0:03:43.840 --> 0:03:44.160 of country. 0:03:44.200 --> 0:03:47.480 I see two things about that. First, the White House 0:03:47.520 --> 0:03:48.560 can't have it both ways. 0:03:49.440 --> 0:03:52.760 Either of these taxes are a crowbar, These taffs are 0:03:52.800 --> 0:03:53.320 a crowbar. 0:03:54.120 --> 0:03:57.120 Or they're a source of revenue, but you. 0:03:57.120 --> 0:03:58.960 Can't say they are a source of revenue, so we 0:03:59.000 --> 0:04:01.360 don't need to worry about the deficit and then say 0:04:01.400 --> 0:04:03.320 we're they're a crowbar because we're going to get rid 0:04:03.360 --> 0:04:04.680 of them when other countries. 0:04:04.320 --> 0:04:08.080 Reduce their tariffs. That's just contradicting yourself. 0:04:08.760 --> 0:04:13.320 Look, all of us making decisions don't want to make 0:04:13.360 --> 0:04:16.240 them when there are a whole bunch of cards that 0:04:16.279 --> 0:04:20.040 are going to be turned over before too long. Whether 0:04:20.080 --> 0:04:23.279 it's buying a washing machine, buying a car, buying a house, 0:04:23.440 --> 0:04:27.120 or a business buying a factory. You want the situation 0:04:27.800 --> 0:04:31.080 to settle down, and you want to have some sense of. 0:04:31.120 --> 0:04:33.560 Certainty before you act. 0:04:33.960 --> 0:04:39.159 How could anybody act with confidence when you don't know 0:04:39.200 --> 0:04:42.599 what the price of steal's going to be, when you 0:04:42.600 --> 0:04:48.039 don't know what the situation of your competitors is going 0:04:48.160 --> 0:04:54.719 to be. So the traditional approach of policymakers is to 0:04:54.760 --> 0:04:59.120 try to provide as predictable an environment as possible so 0:04:59.240 --> 0:05:04.440 as to increase business confidence. And this new approach of 0:05:05.040 --> 0:05:10.720 trying to maintain maximum flexibility probably is good for raising 0:05:10.720 --> 0:05:13.080 the ratings of a TV show because you never know 0:05:13.120 --> 0:05:18.000 what's going to happen next, but it's hard to believe 0:05:18.200 --> 0:05:22.000 that it inspires the confidence that will be a basis 0:05:22.000 --> 0:05:22.680 for investment. 0:05:23.720 --> 0:05:25.680 We talk about systemic risk when it comes to the 0:05:25.680 --> 0:05:30.520 banking system. What about systemic risk the overall global economic system? 0:05:30.600 --> 0:05:33.799 I mean, apart from the individual tariffs and what consequences 0:05:33.839 --> 0:05:36.520 immediate might happen, how big at risk is there to 0:05:36.560 --> 0:05:38.640 the system? And I will say, in the past, we've 0:05:38.680 --> 0:05:41.960 had some shakeups. I mean, Margaret thatcher Ronald Reagan shook 0:05:42.000 --> 0:05:44.920 up a lot of economics. Is this that sort of 0:05:45.760 --> 0:05:47.760 a transformation or could it be more profound? 0:05:48.560 --> 0:05:51.719 I think a lot of, not everything, but a lot 0:05:51.760 --> 0:05:56.440 of what Margaret thatcher Ron reign did was a necessary 0:05:56.600 --> 0:06:00.600 corrective to various kinds of accesses. You know, we had 0:06:00.680 --> 0:06:04.520 twenty percent interest rates in the United States. They had 0:06:04.800 --> 0:06:10.120 piles of garbage twelve feet high on every street in London. 0:06:10.440 --> 0:06:12.640 So I don't think that's the right example for thinking 0:06:12.680 --> 0:06:17.800 about this at all. I think a better example is 0:06:18.400 --> 0:06:25.040 the smooth Hawley tariffs that we saw. Now, the lore exaggerates, 0:06:25.440 --> 0:06:27.560 but I think it's fair to say that the smooth 0:06:27.560 --> 0:06:31.640 Holy tariffs contributed to making the depression great. 0:06:32.240 --> 0:06:35.279 Even the issue of smooth Holly raises the larger issue 0:06:35.400 --> 0:06:39.719 where are we on the likelihood or probability of recession 0:06:40.440 --> 0:06:43.279 or stagflation. Obviously we don't know where we are yet, 0:06:43.640 --> 0:06:45.040 but where is that headed. 0:06:45.760 --> 0:06:47.599 I think the odds are on one side or the 0:06:47.640 --> 0:06:52.320 other of fifty percent that we'll have a recession within 0:06:52.520 --> 0:07:01.880 the next year. The indicators of sentiment, the psychological indicators, 0:07:02.360 --> 0:07:07.800 are mostly running really very negative. The hard indicators on 0:07:07.960 --> 0:07:13.640 what's actually happening are less negative, but they've had less 0:07:13.680 --> 0:07:18.280 time to adjust and are more backward looking and are 0:07:18.440 --> 0:07:22.920 less forward looking. So I think the odds of a 0:07:22.960 --> 0:07:27.080 recession are probably fifty to fifty. And part of the 0:07:27.120 --> 0:07:31.400 reason I think they're as limited as that is because 0:07:31.440 --> 0:07:35.560 I think there's some prospect that, particularly if things turned downwards, 0:07:36.040 --> 0:07:37.760 they'll be a reversal in course. 0:07:38.240 --> 0:07:40.840 What does this do for some of our economic rivals? 0:07:40.880 --> 0:07:44.160 I mean, during the first administration of Donald Trump, he 0:07:44.240 --> 0:07:47.960 really focused on China, not exclusively, but really predominantly. This time, 0:07:48.000 --> 0:07:49.960 maybe it's not quite so sure. But if you're sitting 0:07:50.000 --> 0:07:52.720 in Beijing right now, if your president g how do 0:07:52.800 --> 0:07:54.080 you react to these tariffs? 0:07:54.160 --> 0:07:57.120 What does it do to your situation? You know? 0:07:57.160 --> 0:08:01.360 I think it goes beyond the tariffs, David. In China, 0:08:01.840 --> 0:08:05.800 the signal event in the lives of people your age 0:08:05.840 --> 0:08:10.720 and my age in China was the cultural revolution, when 0:08:10.760 --> 0:08:17.880 the government turned against all the traditional leading institutions of society. 0:08:19.040 --> 0:08:23.600 And what I hear and see is that the Chinese 0:08:24.600 --> 0:08:29.280 see that we are having a kind of cultural revolution. 0:08:30.200 --> 0:08:35.960 They also see it as a huge opportunity because they 0:08:36.040 --> 0:08:40.360 know better than anyone else how much damage a cultural 0:08:40.440 --> 0:08:44.920 revolution can do to a society. And they see us 0:08:45.080 --> 0:08:50.120 alienating all our traditional friends, and they see us increasingly 0:08:50.920 --> 0:08:58.280 internally divided, and they see us focused on domestic vengeance 0:08:59.080 --> 0:09:03.840 rather than global challenges, and they have to see that 0:09:04.760 --> 0:09:09.440 as a very big opportunity and perhaps even as a 0:09:09.480 --> 0:09:10.520 strategic gift. 0:09:11.000 --> 0:09:14.680 Larry, you always admonish me and us not to overreact, 0:09:14.880 --> 0:09:17.280 not to over predict what's happening. So I wander careful 0:09:17.320 --> 0:09:19.080 not to do that. But what you're talking about really 0:09:19.080 --> 0:09:21.160 goes to the rule of law, which sounds like it's 0:09:21.160 --> 0:09:24.160 a really nice concept, but maybe we don't always remember 0:09:24.240 --> 0:09:29.680 how that undercurds are capital markets the entire economy. Now, 0:09:29.720 --> 0:09:31.600 as you say, we're not at the cultural revolution, but 0:09:32.320 --> 0:09:34.400 even shaking it a bit in that direction. When do 0:09:34.440 --> 0:09:37.000 we start to see that in barring costs the cost 0:09:37.040 --> 0:09:37.560 of capital. 0:09:37.920 --> 0:09:41.600 One of the things people have talked about is American exceptionalism, 0:09:42.160 --> 0:09:47.120 and one aspect of American exceptionalism is that multiples the 0:09:47.320 --> 0:09:50.320 ratio of prices to earnings are higher here. 0:09:51.080 --> 0:09:52.680 And that's for many reasons. 0:09:52.960 --> 0:09:55.960 But one of those reasons is that if you have 0:09:56.000 --> 0:10:00.400 earnings today here, it's more secure than you're going to 0:10:00.440 --> 0:10:04.240 have earnings tomorrow because you can count on your property rights, 0:10:04.280 --> 0:10:08.200 you can count on being able to enforce contracts. And 0:10:08.240 --> 0:10:12.200 if we start attenuating the rule of law, that starts 0:10:12.280 --> 0:10:16.199 to go away, and that can take a turn two turns, 0:10:16.240 --> 0:10:21.160 three turns off of price earnings ratios, and that's a 0:10:21.320 --> 0:10:28.080 loss of trillions of dollars of investment. And so we 0:10:28.400 --> 0:10:35.400 take for granted that we make investments with partners, and 0:10:34.840 --> 0:10:38.080 we have lawyers who write contracts, and then we know 0:10:38.880 --> 0:10:40.839 that contracts. 0:10:40.160 --> 0:10:41.880 Will be enforced. 0:10:42.520 --> 0:10:45.680 You know, one of the things I used to not understand, 0:10:45.760 --> 0:10:49.360 and I think I understand better today is why it 0:10:49.480 --> 0:10:52.280 is that in so many parts of the world you 0:10:52.480 --> 0:10:59.000 have these family clan businesses that are in twenty different industries, 0:10:59.640 --> 0:11:02.560 and we have so little of that in the United States, 0:11:03.440 --> 0:11:07.200 And the answer is that if you don't have contracts, 0:11:08.040 --> 0:11:12.280 then what you have is blood, and so you get 0:11:12.280 --> 0:11:16.320 these clan businesses because you can't trust people outside of 0:11:16.360 --> 0:11:19.920 your clan, and so you choose your cousin rather than 0:11:19.960 --> 0:11:24.640 the best person. That's a price those societies pay economically, 0:11:24.679 --> 0:11:27.720 and because we've been so good at the rule of law, 0:11:28.400 --> 0:11:33.439 it's not a price that we've paid in the last century. 0:11:34.000 --> 0:11:40.520 But we may be moving back a bit in that direction. 0:11:42.440 --> 0:11:45.640 Coming up, as the US comes to terms with Trump tariffs, 0:11:45.760 --> 0:11:49.240 Europe does an about face on defense spending. We talk 0:11:49.320 --> 0:11:52.200 with Anna Botine of Santander about what it could mean 0:11:52.360 --> 0:12:04.920 for her bank and potential reform of capital markets. This 0:12:05.080 --> 0:12:08.199 is a story about two economies in transition. In the 0:12:08.280 --> 0:12:12.679 United States, as President Trump shakes the foundations through tariffs. 0:12:12.320 --> 0:12:14.960 Foreign nations will finally be asked to pay for the 0:12:15.040 --> 0:12:18.920 privilege of access to our market, the biggest market in 0:12:18.960 --> 0:12:21.320 the world, where right now the biggest market in the world. 0:12:21.360 --> 0:12:24.959 We had a great country four years ago in terms 0:12:25.000 --> 0:12:27.840 of the economics. We were doubling up when China we 0:12:27.840 --> 0:12:30.160 were doing so well, nobody was going to catch us. 0:12:30.600 --> 0:12:33.880 And in Europe suddenly facing the need for massive defense 0:12:33.920 --> 0:12:36.119 spending it never really expected. 0:12:36.679 --> 0:12:39.960 The era of the peace dividend is long gone. 0:12:40.520 --> 0:12:43.080 The security architecture that we relied on. 0:12:44.480 --> 0:12:46.439 Can no longer be taken for granted. 0:12:47.679 --> 0:12:50.520 The age of spheres of influence. 0:12:51.840 --> 0:12:52.360 And power. 0:12:52.400 --> 0:12:55.640 Competition is well and truly back. 0:12:56.559 --> 0:12:59.839 While the new administration in the US slashes regulations and 0:13:00.200 --> 0:13:02.559 the size of the government to keep the country competitive, 0:13:03.040 --> 0:13:06.000 the EU is dealing with a stalling economy that is 0:13:06.040 --> 0:13:08.000 falling behind its western piers. 0:13:08.720 --> 0:13:12.400 So the US has something really important, which is what 0:13:12.440 --> 0:13:17.000 I call a growth mindset. So whatever government is in place, 0:13:17.520 --> 0:13:19.319 it has always been more pro growth. 0:13:19.880 --> 0:13:23.600 Anne Boutine is the executive chair of Santander Group, the 0:13:23.679 --> 0:13:27.920 fourteenth largest banking institution in the world, with operations in 0:13:27.920 --> 0:13:32.080 Europe and the Americas North and South. Thirty eight percent 0:13:32.120 --> 0:13:35.240 of its net revenue comes from Europe and South America 0:13:35.280 --> 0:13:37.920 comes in second, contributing thirty two percent. 0:13:38.559 --> 0:13:40.280 You can see that in the growth of the last 0:13:40.320 --> 0:13:44.640 decade than Europe. So it's early, but I believe that 0:13:44.640 --> 0:13:49.480 that is a very positive sign. And as I like 0:13:49.559 --> 0:13:52.559 to say, Europe is awakening and the alarm clock has 0:13:52.559 --> 0:13:56.400 been President Trump because what I have never seen is 0:13:56.640 --> 0:14:01.120 the President of the Commission saying that we're in extraordinary 0:14:01.200 --> 0:14:05.040 times and we need to take extortly measures. So it's 0:14:05.040 --> 0:14:07.120 not just good for the US, it's good for Europe. 0:14:07.840 --> 0:14:12.000 What's happening is good for growth. It's good for citizens 0:14:12.080 --> 0:14:15.520 and society, because I believe that is. I mean, there 0:14:15.559 --> 0:14:17.480 are the factors that are not as positive, but this 0:14:17.600 --> 0:14:22.000 is a very positive signal that businesses will be able 0:14:22.080 --> 0:14:24.920 to do more, invest more and create more growth. 0:14:25.080 --> 0:14:26.840 Are we seeing action yet and how much of it 0:14:26.880 --> 0:14:29.720 is being triggered frankly by what's going in Ukraine and 0:14:30.040 --> 0:14:33.200 European countries deciding they really have to step up and 0:14:33.320 --> 0:14:35.200 spend more on defense. 0:14:35.640 --> 0:14:38.560 It's a combination, I think geopolitics and what's going on 0:14:38.600 --> 0:14:43.160 in Ukraine, but also the economic, let's say, policies of 0:14:43.200 --> 0:14:47.040 the US administration. So I think both of those drivers 0:14:47.080 --> 0:14:50.440 for what I see, as you know, the German awakening, 0:14:50.760 --> 0:14:54.760 the lifting of the breaks on debt, Germany lifting the 0:14:54.800 --> 0:14:59.720 brakes on debt. It's harder except when Europe isn't a crisis. 0:15:00.080 --> 0:15:02.800 Feeling now in Europe is we are in a crisis 0:15:03.400 --> 0:15:06.160 or we could get into a crisis, and unless we 0:15:06.240 --> 0:15:08.280 do something fast, and so there is a sense of 0:15:08.360 --> 0:15:11.880 urgency I have not seen before and this is good 0:15:11.960 --> 0:15:15.000 also for companies and banks. I mean, we do business 0:15:15.000 --> 0:15:17.880 in Europe. You know, one of our biggest markets is Spain. 0:15:17.920 --> 0:15:20.360 Spain is going to grow at those two and a 0:15:20.400 --> 0:15:24.000 half even three percent depends on who you ask. So yes, 0:15:24.120 --> 0:15:26.960 I think what's going on is both structural but also 0:15:27.080 --> 0:15:30.200 due to the pressure that we're feeling on both the 0:15:30.760 --> 0:15:32.280 war and the economy. 0:15:33.400 --> 0:15:36.760 It wasn't always a positive picture for Spain. During the 0:15:36.760 --> 0:15:40.040 European debt crisis of the late two thousands, Spain was 0:15:40.080 --> 0:15:43.040 among the five EU member states that were struggling to 0:15:43.080 --> 0:15:47.480 repay their debt. Now it's economic growth outpaces Germany, France 0:15:47.600 --> 0:15:50.520 and the United Kingdom. Part of the problem is a 0:15:50.600 --> 0:15:54.840 European wide monetary policy coupled with fiscal policy run by 0:15:54.880 --> 0:15:59.200 the member states, often in different directions. What about capital 0:15:59.200 --> 0:16:01.680 markets in Europe, because it's been thought that part of 0:16:01.720 --> 0:16:03.880 the driver of growth in the United States has been 0:16:04.160 --> 0:16:06.960 the robust capital markets. So people want to raise capital 0:16:07.000 --> 0:16:10.440 to invest in, for example, startups and tech companies. Can 0:16:10.480 --> 0:16:14.280 you move in that direction to have more robust capital markets? 0:16:15.160 --> 0:16:19.080 This is one of the big goals we've had for years. Again, 0:16:19.160 --> 0:16:22.360 what's happened. The awakening that I can see in Europe, 0:16:22.720 --> 0:16:27.480 led by Germany and possibly France, means that Germany will 0:16:27.800 --> 0:16:32.400 invest one trillion euros one trillion dollars over the next 0:16:32.440 --> 0:16:35.440 decade in defense and the way they're going to finance 0:16:35.480 --> 0:16:40.120 that is through a common eurobond. So that effectively is 0:16:40.160 --> 0:16:43.960 one of the potential drivers for this Common Capital Markets Union, 0:16:44.000 --> 0:16:46.400 which we call it in Europe, which again is good 0:16:46.440 --> 0:16:47.040 for banks. 0:16:47.520 --> 0:16:50.640 What is the role of regulation in all of this? 0:16:50.880 --> 0:16:52.960 I mean, when it comes to the United States. You 0:16:53.080 --> 0:16:57.560 famously asked President Trump about deregulation at Davos earlier this year. 0:16:58.280 --> 0:17:01.080 What are the regulations that can help or hinder what 0:17:01.160 --> 0:17:02.520 you want to do? At Santadre. 0:17:03.920 --> 0:17:07.360 So, regulations matter, That's why I asked the question. I've 0:17:07.359 --> 0:17:10.080 been very vocal about this. It's about regulation, but it's 0:17:10.160 --> 0:17:15.159 also about supervision, how the agencies interpret the regulation, and 0:17:15.240 --> 0:17:17.000 this is one of the quick wins. That's why I 0:17:17.000 --> 0:17:21.800 asked the question. So I see governments as enablers for business. 0:17:22.240 --> 0:17:26.080 Businesses create wealth, you know, create companies and jobs. That's 0:17:26.119 --> 0:17:30.159 where you know, we pay taxes. Government can deliver other services. 0:17:30.800 --> 0:17:34.920 So just by getting the balance right on regulation. And 0:17:35.320 --> 0:17:38.280 at the end, regulation is there to protect consumers, but 0:17:38.359 --> 0:17:40.840 if you overprotect them, you don't grow. 0:17:41.680 --> 0:17:45.639 The European Commission turned to former ECB President Mario Draghi 0:17:46.040 --> 0:17:49.360 to study the effects of the single market and competitiveness 0:17:49.400 --> 0:17:52.840 in the EU. In the report, published in September twenty 0:17:52.880 --> 0:17:57.680 twenty four, Dragi says regulation should be designed to facilitate 0:17:57.800 --> 0:18:01.560 market entry, not become a bear to Europe's goals. 0:18:01.920 --> 0:18:06.160 A little over a decade ago, the US and European 0:18:06.240 --> 0:18:09.920 GDPs were They weren't exactly on top of each other, 0:18:09.920 --> 0:18:14.359 but they were pretty close sixteen versus fifteen roughly. And 0:18:14.400 --> 0:18:18.400 now the European GDP is fifteen or sixteen trillion, I think, 0:18:18.440 --> 0:18:21.000 and the US GDP is about thirty trillion over the 0:18:21.000 --> 0:18:23.480 course of a little more than a decade. And that 0:18:23.720 --> 0:18:26.280 is a function. Again, that's a function of a lot 0:18:26.320 --> 0:18:30.080 of things, but it's a function of a lack of 0:18:30.359 --> 0:18:36.400 investment in productivity and an over regulation of the European economy. 0:18:36.800 --> 0:18:38.840 And just as I think that we could have a 0:18:38.880 --> 0:18:43.600 significant effect on American growth by streamlining our regulation, I 0:18:43.600 --> 0:18:45.760 think you could have an even more dramatic effect on 0:18:45.800 --> 0:18:50.479 European growth if they were willing to undertake that deregulatory project, 0:18:50.600 --> 0:18:55.439 some of which has been suggested recently by Mario Draghi. 0:18:56.280 --> 0:18:59.080 In his report delivered to the European Commission. 0:19:00.040 --> 0:19:02.640 During his tenure as Vice Chair of the Federal Reserve, 0:19:03.160 --> 0:19:07.640 Randy Korrels dealt with policy recommendations for regulating financial institutions. 0:19:08.160 --> 0:19:11.520 He agrees with drog these concerns that regulations have played 0:19:11.520 --> 0:19:13.680 a part in holding Europe back. 0:19:14.400 --> 0:19:17.800 They really haven't created a European wide financial regulatory system, 0:19:18.600 --> 0:19:23.879 and that fragmentation contributes to a great deal of cost. 0:19:23.960 --> 0:19:31.040 Where there are not conceptually dramatic, but material and important 0:19:31.080 --> 0:19:34.480 differences from one jurisdiction to another within Europe with respect 0:19:34.480 --> 0:19:38.600 to financial regulation that continue to increase cost. And so 0:19:39.119 --> 0:19:42.439 from my point of view, the most important thing that 0:19:42.480 --> 0:19:46.160 Europe could do would be to accelerate in advance its 0:19:46.720 --> 0:19:53.240 europe wide framework for financial regulation, even more than some 0:19:53.320 --> 0:19:57.200 of the important particular changes that they could make. If 0:19:57.280 --> 0:20:02.800 Europe could refine its relation of capital provision. The venture 0:20:02.880 --> 0:20:06.480 capital ecosystem in Europe, for example, is very underdeveloped, and 0:20:06.520 --> 0:20:11.080 the provision of financing really of any sort to startup 0:20:11.119 --> 0:20:16.080 companies is not terribly robust, certainly compared to America. The 0:20:16.200 --> 0:20:19.600 reason that we have such an advanced tech sector is 0:20:19.640 --> 0:20:24.480 that for decades we have had nurtured, tried to develop 0:20:24.720 --> 0:20:29.760 a capital financing system that supports the provision of capital 0:20:29.840 --> 0:20:33.840 to these risky startup enterprises. And Europe has not done that. 0:20:34.440 --> 0:20:37.440 Were they to make changes to the governance of capital 0:20:37.440 --> 0:20:42.120 provision that supported particularly that sort of financing, I think 0:20:42.160 --> 0:20:45.520 you could, in a relatively short period of time, call 0:20:45.560 --> 0:20:48.240 it a decade, make a big dent in that when 0:20:48.240 --> 0:20:53.159 you consider how much the technological landscape has changed in 0:20:53.240 --> 0:20:57.640 the United States, how different the technologies that are being 0:20:57.680 --> 0:20:59.960 deployed now in the US are from what they were 0:21:00.080 --> 0:21:02.760 ten or fifteen years ago, all of which supported by 0:21:02.880 --> 0:21:06.400 our financing system. If Europe had had a financing system 0:21:06.440 --> 0:21:09.520 that was as well geared as ours to supporting that 0:21:09.600 --> 0:21:12.879 kind of innovation, they would have participated in that to 0:21:12.880 --> 0:21:14.359 a much greater degree than they have. 0:21:15.200 --> 0:21:18.400 Unifying capital markets is not a new concept to Europe, 0:21:18.640 --> 0:21:21.400 but the idea has never really gotten off the ground, 0:21:21.800 --> 0:21:24.639 and Quarrels thinks that the Trump effect might be what 0:21:24.680 --> 0:21:28.479 Europe needs to start moving towards making the changes it needs. 0:21:29.160 --> 0:21:31.720 I think it's true, nonetheless, that Europe has had a 0:21:31.760 --> 0:21:34.600 wake up call and it's been very unpleasant. But I 0:21:34.640 --> 0:21:38.320 have talked to a number of European policy makers over 0:21:38.320 --> 0:21:41.480 the course of the last month that really hasn't been 0:21:41.560 --> 0:21:43.119 much more than a month. That seems like it's been 0:21:43.200 --> 0:21:45.600 much longer than that. Certainly seems like that to the Europeans, 0:21:46.119 --> 0:21:52.040 and there is a intensity and practicality to what they 0:21:52.040 --> 0:21:54.800 are now saying they would be prepared to do in 0:21:54.840 --> 0:22:00.000 the way of accelerating regulatory change, accelerating investment in defense 0:22:00.480 --> 0:22:05.600 that really never was there before. And again, well, it 0:22:05.600 --> 0:22:08.280 has been unpleasant medicine, I think it could have a 0:22:08.359 --> 0:22:09.520 very good result for Europe. 0:22:10.480 --> 0:22:13.359 In a global economy, the race to grow is not 0:22:13.760 --> 0:22:14.880 a solo sport. 0:22:15.680 --> 0:22:18.760 Economics and economic growth is not a zero sum game. 0:22:19.240 --> 0:22:22.199 When you have a vibrant Europe, that is you know, 0:22:22.280 --> 0:22:26.879 that's better for us. There are many many win win 0:22:27.040 --> 0:22:33.160 opportunities when you have two dynamic economies that are interacting, competing, 0:22:33.520 --> 0:22:36.960 partnering with each other, and you know, we would be 0:22:37.040 --> 0:22:41.159 much better off if Europe were economically healthier than it 0:22:41.200 --> 0:22:41.880 is currently. 0:22:42.760 --> 0:22:46.880 And Anna Boutein believes that opportunity for growth and scale 0:22:47.040 --> 0:22:51.359 and diversification is the path forward for Santander as well. 0:22:52.000 --> 0:22:56.120 Going back to the key competitive advantages of Santander Global 0:22:56.119 --> 0:22:59.200 and in market scale one hundred and seventy three million customers, 0:22:59.200 --> 0:23:03.439 one of the largest consumer basis in the world. The 0:23:03.520 --> 0:23:07.680 second key strength is diversification. We do better when things 0:23:07.720 --> 0:23:12.160 get difficult because we have geographies and businesses that tend 0:23:12.160 --> 0:23:16.240 to compensate each other. Now, having said that, we obviously 0:23:16.280 --> 0:23:20.520 factor geopolitical risk into our risk analysis, and this is 0:23:20.560 --> 0:23:22.840 where being a bank that has been around for one 0:23:22.920 --> 0:23:26.280 hundred and sixty eight years helps, right, So we've gone 0:23:26.320 --> 0:23:29.879 through many crises, We've gone through Industrial revolution. You know, 0:23:29.920 --> 0:23:32.960 we're going through another change in an era right now 0:23:32.960 --> 0:23:36.480 with AI, and so we factor that into our processes 0:23:36.520 --> 0:23:39.280 and that's one of the things that we do, I 0:23:39.359 --> 0:23:41.879 believe better than others. 0:23:43.680 --> 0:23:46.719 Coming up the story of how all that delicious tuna 0:23:46.800 --> 0:23:49.639 you enjoy at high end restaurants makes it from the 0:23:49.720 --> 0:23:53.360 sea to the table with a little help from private equity. 0:23:53.840 --> 0:24:05.879 That's next on Wall Street Week. This is a story 0:24:05.920 --> 0:24:11.199 about investing in fish. Those giant bluefin tuna favored by 0:24:11.240 --> 0:24:14.480 the best sushi restaurants in New York and all around 0:24:14.520 --> 0:24:17.680 the world. Our colleague Danny Berger went to the waters 0:24:17.680 --> 0:24:20.199 off of Mexico to see where it comes from and 0:24:20.280 --> 0:24:23.080 how private equity is helping to make sure we can 0:24:23.160 --> 0:24:26.000 all enjoy it even as demand grows. 0:24:31.880 --> 0:24:34.800 You can thank private equity for this tuna farm. In 0:24:34.840 --> 0:24:38.040 November twenty twenty three, a group of investors purchased a 0:24:38.080 --> 0:24:41.560 majority steak in Baja Aqua Farms, a producer of high 0:24:41.680 --> 0:24:45.400 quality sashimi grave bluefin tuna in the Pacific Ocean off 0:24:45.440 --> 0:24:47.080 of Baja California, Mexico. 0:24:47.359 --> 0:24:49.639 This is the only farm in the world that is 0:24:49.680 --> 0:24:52.159 being fed by a centralized figure. So there is no 0:24:52.240 --> 0:24:55.320 other feeding vessel like this one in the world. So 0:24:55.359 --> 0:25:00.400 this was designed by us in integration with Mexicanca Company 0:25:00.440 --> 0:25:04.199 and a Chillian company that was working on the engineering 0:25:04.359 --> 0:25:08.080