WEBVTT - Bill Rhodes: European Banks Will Be Challenged By Brexit(Audio)

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<v Speaker 1>You're listening to Taking Stock with Kathleen Hay and Pim

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<v Speaker 1>Fox on Bloomberg Radio. The startling decision to pull out

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<v Speaker 1>of the European Union setting off a cascade of aftershocks,

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<v Speaker 1>costing Prime Minister David Cameron his job, plunging the financial

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<v Speaker 1>markets into turmoil and leaving the UK's future in doubt.

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<v Speaker 1>That decisive win by the Leave campaign exposing deep divides.

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<v Speaker 1>So can central banks, trade and finance ministers around the

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<v Speaker 1>world do anything to calm financial markets? Here to tell

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<v Speaker 1>us more, Bill Rhodes, President, Chief Executive William R. Rhodes

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<v Speaker 1>Global Advisors. Bill Rhodes, always a pleasure and thank you

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<v Speaker 1>for coming into the studio. Well, it's great to be

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<v Speaker 1>with you guys on this important occasion because I think

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<v Speaker 1>it is very important. Fortunately for the UK, they've got

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<v Speaker 1>Mark Karney there who's battle tested, as you know he

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<v Speaker 1>uh in his career, Uh, he worked for Goldman Sage.

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<v Speaker 1>He understands the private sector. Uh and uh he also

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<v Speaker 1>during the Great Recession ran the Bank of Canada. But

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<v Speaker 1>very importantly he runs a financial stability board and so

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<v Speaker 1>he's got a lot of cloud. He's a very smart guy.

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<v Speaker 1>And UH, if you want anyone running your central bank

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<v Speaker 1>when the politicians don't know what to do, it's Mark Arney.

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<v Speaker 1>And then I think, also you've got Mario drag you

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<v Speaker 1>at the e c B. So you've got two real

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<v Speaker 1>pros doing this because obviously the politicians are complete disarray

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<v Speaker 1>in the UK. You know, I just want to jump

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<v Speaker 1>into the bill because politicians in disarray. We get that,

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<v Speaker 1>But at this point about Mark Arney, aren't you glad

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<v Speaker 1>to have him there? If you're Boris Johnson, who is

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<v Speaker 1>a House of Commons Member of Parliament, But as you said,

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<v Speaker 1>most popular politician right now in London, in in UK

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<v Speaker 1>for many people. One of our guests said, why would

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<v Speaker 1>you want to keep Mark Arney around? Because the opposition,

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<v Speaker 1>the Breggsit people were saying the Bank of It's skewing

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<v Speaker 1>its analysis of how hard this would hit the UK economy.

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<v Speaker 1>They're playing politics, They're trying to affect the vote. They

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<v Speaker 1>want people to vote to stay. So Boris Johnson's he's political,

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<v Speaker 1>he's smart. Does he maybe make some noises publicly, but

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<v Speaker 1>let Mark know, hey, I realize, let's put that behind us.

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<v Speaker 1>We've gotta keep you k together. Now there's gonna be

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<v Speaker 1>a lot of instabilities. He is he smart enough to

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<v Speaker 1>say maybe his best bet is to make sure that

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<v Speaker 1>Carney stays at the helm of the Bank of England.

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<v Speaker 1>I think, Uh, you never want to under a underestimate.

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<v Speaker 1>Boris Johnson is a very shrewd operator and what he

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<v Speaker 1>wants now is is confidence to return. He wants stability.

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<v Speaker 1>That's why he's signed off. Uh. You know that memo

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<v Speaker 1>of Conservative MPs to keep Cameron in for the moment.

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<v Speaker 1>So he obviously wants the best person in that job.

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<v Speaker 1>Forget about what was said before. What counts now is

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<v Speaker 1>what happens now and what happens tomorrow. And so he

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<v Speaker 1>will be a big advocate of doing the right thing

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<v Speaker 1>because if things go the wrong way, who are they

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<v Speaker 1>going to blame Boris Johnson? Because there's no doubt in

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<v Speaker 1>my mind from a trip I took their to UK

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<v Speaker 1>a couple of months ago talking with my English friends, Uh,

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<v Speaker 1>is that Boris Johnson, the most popular politician in the UK,

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<v Speaker 1>made all the difference in the world. Without Boris Johnson,

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<v Speaker 1>you wouldn't have had this vote without a doubt. And

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<v Speaker 1>so it rests very much on his shoulders. And sure

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<v Speaker 1>he wants to be Prime minister, but he wants to

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<v Speaker 1>get in there, uh, with an ability to calm the

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<v Speaker 1>situation and do the right thing. Bill Rhodes, the French

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<v Speaker 1>Prime Minister Manuel Vows has said that at stake is

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<v Speaker 1>the breakup, pure and simple, of the European Union. Now

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<v Speaker 1>is the time to invent another Europe on Gla Merkel

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<v Speaker 1>today saying that it is a turning point for the

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<v Speaker 1>European unification process. What do they mean by that, Well,

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<v Speaker 1>we're gonna find out pretty soon. I think Volves, who

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<v Speaker 1>I've gotten to know, is a very common but in person,

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<v Speaker 1>he's the most competent person they've had in that role

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<v Speaker 1>for some time. And he's the one who's pushing the

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<v Speaker 1>you know, revision of the labor laws. He's the one

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<v Speaker 1>who convinced Oland, which is what France needs because you

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<v Speaker 1>saw that they're manufacturing uh dropped and uh their overall

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<v Speaker 1>uh you know, growth is starting to slow again after

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<v Speaker 1>a very good first quarter. Uh. I don't think that

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<v Speaker 1>the leaders of of the Eurozone and the rest of

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<v Speaker 1>the European Union really know what they want to do

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<v Speaker 1>at this point in time, and that's something they're going

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<v Speaker 1>to have to decide over the coming days. And UH

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<v Speaker 1>in weeks and as we know, we have elections next

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<v Speaker 1>year in France and you have elections in Germany. You

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<v Speaker 1>already having real le penn talking about a referendum. UH.

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<v Speaker 1>Wilder's in Holland talking about one, and various parties in

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<v Speaker 1>UH in Italy. So I think the UH, the EU

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<v Speaker 1>has got to get its act together in the euro Zone.

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<v Speaker 1>UH has to get its uh it's act together on

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<v Speaker 1>how they want to handle it. I think it suits

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<v Speaker 1>everybody to have a a very positive negotiation out because

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<v Speaker 1>let's face it, UH, Europe sells a lot to the

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<v Speaker 1>UK and UH for the UK, everyone is so negative now.

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<v Speaker 1>But with a weaker pound, manufacturing exports will benefit. Also,

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<v Speaker 1>tourism into the country will benefit. So I don't think

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<v Speaker 1>it's all quite the doom and gloom that everybody thinks.

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<v Speaker 1>It will depend on who becomes prime minister and how

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<v Speaker 1>they negotiate their way out of this. So I think

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<v Speaker 1>that's what's gonna tell the tale going forward. So Boris

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<v Speaker 1>Johnson isn't a slam dunk to be the next prime minister, UH,

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<v Speaker 1>not necessarily, He's obviously the favorite, but UH, you know

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<v Speaker 1>this party, the Conservative Party, has been very Uh, you know,

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<v Speaker 1>I think ripped apart over this issue, and they're lot

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<v Speaker 1>of strong feelings and uh, he will have to assuage

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<v Speaker 1>those who wanted the remain side that he is the

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<v Speaker 1>best one to run the country. So I think nothing's

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<v Speaker 1>for sure at this particular, uh point in time, but

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<v Speaker 1>I think it suits both parties, Europe and the UK

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<v Speaker 1>to have a negotiation. Uh that's done in a positive

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<v Speaker 1>fashion because they both need each other still going forward.

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<v Speaker 1>This is taking Stock with Pim Fox and Kathleen Hayes

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<v Speaker 1>on Bloomberg Radio. We continue our conversation now with Bill Rhodes,

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<v Speaker 1>head of William R. Rhodes Global Advisors. He's a former

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<v Speaker 1>vice chair of City Group. He is the author of

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<v Speaker 1>Banker to the World, Leadership Lessons from the front Lines

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<v Speaker 1>of Global Finance. Bill's got into the area of restructuring

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<v Speaker 1>indebted nations back in the eighties when he helped work

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<v Speaker 1>out the Latin American debt crisis, and his book is

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<v Speaker 1>all about all the kinds of negotiations he did. Maybe

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<v Speaker 1>Bill should people should be reading your book as the

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<v Speaker 1>UK gets ready to deal with the European Union. Well,

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<v Speaker 1>I'm I'm sure it's going to be quite a negotiation.

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<v Speaker 1>And uh. I also uh thinking we uh, we're just

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<v Speaker 1>talking offline here about the banking situation uh in the UK,

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<v Speaker 1>in the UK and the EU and the Eurozone. And

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<v Speaker 1>uh obviously the retail banks in the UK got hit

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<v Speaker 1>real hard today, you know, Barclay's, Lloyd's, Royal Bank of Scotland. Ah,

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<v Speaker 1>because of the concern over what's coming next. But I

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<v Speaker 1>think one of the things that you're going to see

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<v Speaker 1>the French starting to push, and this is going to

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<v Speaker 1>be a problem with Germany, is to finalize the banking

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<v Speaker 1>union in the Eurozone because as you know, they're there

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<v Speaker 1>are large parts of that banking union that have never

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<v Speaker 1>been finalized. And I think given all that's going on

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<v Speaker 1>the French you're gonna push that very hard. It will

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<v Speaker 1>be very interesting to see how that works out. Ah.

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<v Speaker 1>And we have the Spanish elections on Sunday, and most

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<v Speaker 1>people have seemed to forget about that, but I think

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<v Speaker 1>the Spanish elections are going to be very very important

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<v Speaker 1>also to see what sort of, if any fallout from

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<v Speaker 1>Brexit you're going to have on those elections, because the

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<v Speaker 1>polls are showing that ROHOI and the Partido Popolata the

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<v Speaker 1>Popular Party, the Conservatives would get the vote and the

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<v Speaker 1>Left would get slightly left less than that, and then

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<v Speaker 1>uh you have some medium you know, middle of the

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<v Speaker 1>road parties. They're getting some and so it's not clear

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<v Speaker 1>that anyone's going to emerge as a winner. And this

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<v Speaker 1>issue of Brexit obviously has an impact on Spain because

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<v Speaker 1>as we know, Catalunia wants to leave. And in addition

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<v Speaker 1>to that, people are now talking, as you know about

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<v Speaker 1>the comments of Premiers Sturgeon up in Scotland saying that

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<v Speaker 1>it may be necessary, uh, depending on how this negotiation

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<v Speaker 1>works out with the Eurozone and the UK, to have

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<v Speaker 1>another referendum on on Scotland to stay or leave, because

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<v Speaker 1>over I think it was seventy of the votes in

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<v Speaker 1>Scotland for remaining. That was the strongest area in the UK.

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<v Speaker 1>And so I think there's so many ramifications here and

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<v Speaker 1>uh so I think what's very very important. First of

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<v Speaker 1>all here is as we talked about, is to make

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<v Speaker 1>sure you've got enough liquidity in the markets. I think

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<v Speaker 1>this is where Mark Karney uh will be very good

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<v Speaker 1>on bringing some confidence back. But second of all, there

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<v Speaker 1>has to be a process set up as soon as

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<v Speaker 1>possible about the negotiation arrangement with the UK, and very

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<v Speaker 1>very importantly, I think the Conservative Party has to decide

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<v Speaker 1>who the next Prime Minister is going to be. All

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<v Speaker 1>of that would bring some sort of confidence back and ability. Otherwise,

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<v Speaker 1>I think we're in for a rough ride over the

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<v Speaker 1>next weeks and months visa V volatility, not just in

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<v Speaker 1>Europe but obviously worldwide. Look what happened here in the US,

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<v Speaker 1>Look what happened in the Asian markets. And we shouldn't

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<v Speaker 1>get China because China's got pretty plenty of problems on

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<v Speaker 1>its own, including this tremendous debt that keeps rising in China,

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<v Speaker 1>and so I think that you can say the world

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<v Speaker 1>is replete with problems. What we need is leadership. I

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<v Speaker 1>was gonna say civilization and its discontentedness at least right now,

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<v Speaker 1>as opposed to as discontent. I just want to give

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<v Speaker 1>you the figures because you mentioned the Royal Bank of

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<v Speaker 1>Scotland shares down more than eighteen percent today, Standard Charter

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<v Speaker 1>down two and a half percent, Lloyd's Banking Group down

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<v Speaker 1>twenty one, Barkley's down more than seventeen per cent. I

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<v Speaker 1>want you to turn your attention to an event that

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<v Speaker 1>is taking place on Monday June, the Brenton Woods Committee.

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<v Speaker 1>This is the spirit of Breton Woods multilateral leadership in

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<v Speaker 1>turbulent times. Speak a little bit about why you see

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<v Speaker 1>this discontent among voters in Spain as you just referenced,

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<v Speaker 1>also SISA Party in Greece, Italy's Five Star Movement. Where's

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<v Speaker 1>this discontent coming from and what's the subject of this

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<v Speaker 1>Breton Woods Committee meeting and obviously what we're seeing in

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<v Speaker 1>France and Portugal too. I'll be chairing the meeting, and uh,

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<v Speaker 1>we're very fortunate to have a Secretary, lou Will, who

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<v Speaker 1>will be giving his first formal statements on the question

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<v Speaker 1>of Brexit at this conference first thing in the morning.

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<v Speaker 1>Later on, we also have Mike Frohman, who's our trade

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<v Speaker 1>secretary and this is very very important as to how

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<v Speaker 1>we're gonna handle this relationship with the UK on the

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<v Speaker 1>trade side. And uh, we also have the number two

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<v Speaker 1>persons of the first Deputy Managing Director of the I

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<v Speaker 1>m F and the meeting will be at the I

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<v Speaker 1>m F H David Lifton, to talk about all of

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<v Speaker 1>these issues. So I think it's a very important event

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<v Speaker 1>coming at this particular time, and obviously the top of

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<v Speaker 1>the list is going to be Brexit. Well it's interesting,

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<v Speaker 1>that's the Breton Woods conference, which was historic in its

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<v Speaker 1>own way. Um, is this potentially build this, this EU voting,

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<v Speaker 1>UK voting to leave the EU? Is this potentially some

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<v Speaker 1>turning point? Are we gonna look back and say, see

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<v Speaker 1>that's where it started or that's where we realized that

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<v Speaker 1>the world had gone you know, a d eighty degrees

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<v Speaker 1>from one point to another. Well, I think this is

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<v Speaker 1>very representative of the unhappiness you see among the voting

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<v Speaker 1>population in the so called Western world. We see it

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<v Speaker 1>all across Europe, not just in the UK. And uh

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<v Speaker 1>that's coming out of the Great Recession, the debt crisis,

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<v Speaker 1>and the Eurozone voters are very very unhappy. And you

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<v Speaker 1>take a look at this country. Uh, Ernie Sanders who

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<v Speaker 1>was basically an unknown uh senator uh from Vermont and

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<v Speaker 1>Donald Trump who two years ago no one would have

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<v Speaker 1>thought that Donald Trump would be the candidate for the

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<v Speaker 1>Republican Party. Let's say a year ago they wouldn't have

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<v Speaker 1>And this is all also the discontent about you know,

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<v Speaker 1>where the economy is going. Uh, you know what's going

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<v Speaker 1>on on inequality, all of these issues I think are

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<v Speaker 1>replete with in the Western world, and the way ahead

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<v Speaker 1>here is to get firm leadership is how we're going

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<v Speaker 1>to work these issues. And frankly, we haven't seen the

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<v Speaker 1>leadership in the Western world. Well, I guess it's ironic

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<v Speaker 1>that Freud wrote Civilization and It's discontents. He wrote it

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<v Speaker 1>in n I want to thank you very much Bill Rhodes.

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<v Speaker 1>He is the president and the chief executive of William R.

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<v Speaker 1>Rhodes Global Advisors. And also just on a personal note,

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<v Speaker 1>I want to extend to Bill Rhodes our deepest sympathy

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<v Speaker 1>and condolences on the passing of his dear wife. Bill

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<v Speaker 1>has been a valuable guest here at Bloomberg and we

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<v Speaker 1>extend our thanks and we look forward to his continued participation.

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<v Speaker 1>Many thanks, Thank you, Bill Rhodes. You're listening to Taking Stock.

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<v Speaker 1>I'm pim Fox my co host Kathleen Hayes. You're listening

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<v Speaker 1>to Brexit coverage on Bloomberg Radio.