tv The David Rubenstein Show Peer to Peer Conversations Bloomberg February 9, 2020 3:00am-3:30am EST
and watch all the shows you love. ♪ david: so what did you do to make bank of america the largest consumer bank in the united states? brian: pare the company back. david: you called a man named warren buffett? brian: he put $5 billion overnight in this company. david: if the president of the united states said the country needs you, you would say? brian: call mr. rubenstein. [laughter] >> would you fix your tie, please? david: well, people wouldn't recognize me if my tie was fixed, but ok. just leave it this way. all right. ♪
david: i don't consider myself a journalist. and nobody else would consider myself a journalist. i began to take on the life of being an interviewer even though i have a day job of running a private equity firm. how do you define leadership? what is it that makes somebody tick? let's talk about your career at bank of america and how you rose up and actually became the ceo. i think it is quite interesting. go back to your background. you are from ohio. your father was a chemist? brian: yeah. david: dupont? brian: yeah. david: you were six of eight children. i guess you share a lot. brian: you have to be aggressive getting your share. let's say that. david: ok. you went to brown university. you were the cocaptain of the
rugby team. it is a tough sport. i assume that is not as tough as banking. brian: there is nothing more powerful but i was never in there and that was one of the roles are played on the team. it is a fantastic teamwork game. you want the game were all 15 players participate fully. david: ever break any bones? brian: i got knocked out once by my own teammate, which irritated me, because i was about to score. i got kicked in the head on the way to the goal. david: ok. you graduated and went to notre dame. brian: i played rugby there. david: where were you more of a star? at notre dame for at brown? brian: i don't know, but we had fun at notre dame. david: you went to rhode island to practice law. you were a corporate lawyer? brian: corporate securities, m&a, private equity deals. david: the highest calling of mankind, private equity.
[laughter] brian: one of the reasons why i quit being a lawyer is i had worked with our private equity firm, fleet equity. i structured deals with them. that is what led to the ceo saying come work with us and quit being a lawyer and i went to work with them. david: it was an acquisitive bank and did a merger with bank boston. you stayed with the combined company. then when the ceo of bank boston took over, chad gifford, took over, he decided the combined bank wasn't big enough, so he openly discussed selling it to a number of other people. ultimately it was bought by bank of america. brian: correct. that goes to the scale of banking and what you can achieve. it was ultimately the first nationwide bank and that is something no one else has right now. david: what was your job in the new bank company? brian: the wealth management business, columbia asset management, private business.
david: for a while you became the general counsel of bank of america. brian: for 40 days. david: 40 days. 40 nights. was there that flood or anything? ryan: there was a transaction and if you other things in the second round of tarp and a few other gems. david: by that time, the u.s. was in the middle of a financial crisis. all banks were in trouble. i think that is fair to say. bank of america was doing a favor for the u.s. government when it was told it should buy merrill lynch, is that right? brian: there was a scramble to stabilize the firms that were less stable, jp morgan, bear stearns, ourselves, and we couldn't stabilize lehman brothers. we even looked at it as a company. david: at one point, the ceo of bank of america was leaving and they needed a new ceo.
how did they pick you? you were the general counsel. brian: at that time i wasn't. i was general counsel for a short time. after that, i had the commercial banking business and investment banking business. i couldn't keep a job, let's just say that. i had five jobs in one year. largely, we were doing deals and things were shifting around and it was interesting. the late summer, early fall of 2009, the ceo told the board he wanted to leave at year end. they went through a search process. it was something i told our board i will never leave you in the position to have to do. soi owe them a successor at all times, now, at some time in the future. it was a difficult process for all involved. they finally concluded i would be ceo and i have been ceo since. david: since you have been running it for 10 years, market capitalization is up 54%, stock
price is up about 76%. what did you do to make these events happen and make bank of america largest consumer bank in the u.s.? brian: it was straightforward and there was some additive stuff that made it more interesting, but basically to pare the company back to what made it great. what makes it great is the lines of business. we got rid of 40 different units we didn't need. we got rid of visits is like the business outside the u.s. wealth management business. the issue that got in the middle and made it more interesting was that the defaults and mortgages cap taking care that issue was building. unique. the question was, he had to take it and get it away. the vision was to have everything a customer, company, or institutional investor needs, but keep it to that. not get into stray business. we had $70 billion of funded
private equity investments when i took over, and now we have less than $1 billion. david: you can't have too many funded private equities. brian: that is your business. our business is to help you do it. david: before you read the ceo, the bank made an investment in countrywide, then acquisition. ultimately, it turned out to cost the bank may be $50 billion or something like that. so maybe one of the worst acquisitions in the financial services world for quite some time. countrywide got in trouble because of subprime mortgages. are you making a lot of subprime mortgages today? brian: we are 20% of the mortgage market, and 15% was done through other people. we don't do that anymore. the only way a person gets a mortgage at bankamerica is by sitting with a teammate or directly from us. we don't fight mortgages from other people. that has left us with 5% of the market. it is a much more stable environment.
david: the future of the bank looks strong, but at one point during the crisis, the bank needed more money and you had to call a man named warren buffett. was that easy to make that call? did you say any terms you want is fine? how did that work? brian: warren buffett called us. david: he did? brian: he called and got into the call centers and asked to speak to me. they don't transfer anybody to transfer you to the ceo, so he found an investment banker. they worked with the cfo and they called and i talked to him. he basically said i want to make an investment in the company. i said we don't need the capital. he said, i know that is why i am calling. you needs stability, the capital will do you good. that was in 2000 and 11 when the
world was interesting, because the government was almost going to default. you had real uncertainty about the litigation out of the mortgage industry. he put the money in. from that day forward once he put the money in, it was the smartest investment in the world, $5 billion overnight in the company. he literally called me and i talked to him the first time on monday at 11:00 and we had the agreement signed on tuesday and the money by thursday. he does that. the interesting thing is you if were common shareholder, you had to have courage at the time. he had $5 billion at a time others didn't have it. david: he bought was the stock was less than half of where it was now. brian: was like 15% to 20%. david: if i had some extra money today and wanted to buy stock in the bank, should i buy your bank stock and at bank of america would i do well? brian: you would do well. you would do well. we have the best franchise across all the businesses in the
largest economy in the world. we have two or three franchises doing with global companies. what more do you want as investors? david: do you think dodd-frank legislation is working or would you modify it? brian: capital liquidity, stress tests, those are critical. the reason why the u.s. bank is strong and active and growing. ♪
david: during the great recession, you spent a lot of time in washington. more than probably you wanted to. you very often testified and so forth. do you think that attitude today in washington towards banks is more favorable than the great recession? brian: the attitude in general is more favorable because the economy is growing, unemployment is low. that is a better backdrop then severe delinquency in homes in housings and foreclosures going on in the unemployment at 10%. our customer service is at an all-time high. our growth is exceeding the industry. those are all very good things for our company. but that was built, and the general atmosphere is better, largely because people see we are trying to help. david: i think it is fair to say
that the banks were beaten up by the regulators and congress and the dodd-frank legislation was passed. do you think dodd-frank is working or would you modify it? brian: the banking industry self-insures itself. if you are an insured institution with insured deposits, it is a cooperative. when the bank fails, we paid 15% of it. we have a high interest in a safe industry. sometimes you see activity leak outside the industry. that is what the problem was. most of the major issues were companies that weren't covered by the court regulatory. dodd-frank changed that. that was a good thing. we still struggle half the. mortgage business is not in the banking system today. when it wasn't before, that gave rise to countrywide and others when it wasn't. overall, dodd-frank has corrected a lot of the issues. underneath it, there are pieces like the volcker rule that swung in a direction where you say i don't think that is what we are
trying to do. we are trying to get them more rational. the capital liquidity, stress tests, those regimes are critical. the reason the u.s. banking system is strong and active and growing and supporting the economy and other banking systems are is because we got to it. david: there are four big banks, citicorp, jp morgan, wells fargo, and bank of america. do you think that's a good thing to have only four big banks that are based in the united states or is it working? brian: i think it works well. a large amount of the industry, 5000 banks, so you have much more varied financial industry. one thing that makes our industry strong is the variety. we have the largest market share along with those colleagues. if you look at us as a percentage of gdp relative to other countries, we have the largest retail share, about 15%. if we were coca-cola or pepsi, we think that is not good market share.
so there is a lot of room to grow. david: what percentage of profits or revenues are from outside the u.s.? brian: 15% to 20%. david: are you reasonably happy with that? is that where expansion can come? brian: we are expanding outside the u.s., we are expanding and doing capital markets, trading for asset managers and other firms. we have a company that does corporate and investment banking and treasury services around the world. we are investing in those by adding people. it doesn't mean acquisitions, just adding more and more people with opportunities in asia, latin america, middle east, europe, etc. we can grow because basically the connectivity of the largest companies and midsized u.s. companies, which we are the largest provider of services to around the world, it needs
people like us, and we are happy to do it to help them transact, engage in trade, import, export, and it is a great business. david: 20 years ago or so, if i wanted cash i would go to a bank and write a check and they would probably cash it. if they make sure i had enough money in the account. do you really need banks, physical banks these days? how many people walk in and cash checks that way? brian: the numbers are surprising. we have 4300 branches today. at the highest point, 6100. today, you have to be high touch and high-tech. in those branches, about 800,000 people come in and transact. but during the course of the last quarter, second quarter, 1.4 billion consumer actions and 1.3 billion would be digital. david: people my age and my color hair, are they the ones
going into the banking branches, and are the people doing online banking mostly younger, by a lot? brian: i would say a decade ago, the cohort would've been age determinant. now, not. we had a 100-year-old person sign up for mobile banking. david: do you get a discount if you're 100 years old? brian: it's free. it's hard to give it away. we do a great job with millennials. we open accounts at twice the rate, so we are gaining the share of millennials, but we also hold a lot of money and transact with people our age. david: the most common dollar currency you use, the $100 bill? is that the most frequent? brian: the $20 bill. david: what about cryptocurrencies, do you believe they will replace u.s. dollar currencies or just supplement them? brian: if you separate the two different thought processes, one is moving money digitally. 55% of payments by consumers moves digitally today.
the u.s. is still a cash society. you're trying to move paper and currency out. an anonymous currency is a separate question. that doesn't work so well, but digitizing cash. we spend $5 billion in checks. there was no one more highly interested in that. we are driving that now. it is just americans don't use it. david: i read that another bank in the united states, jp morgan, you have heard of them? brian: yep. david: they were thinking of having their own cryptocurrency. is that true? are you going to do something similar? brian: blockchain is the connection between them. we have 45 patents on blockchain, another 45 in the process. we believe in the technology as a way to move money and uses around trade.
we use a lot of information and money at the same time and documents are good uses for that. i don't know if it would be called a cryptocurrency. it is still u.s. dollars from a fiat currency distributor electronically. that is going to happen. david: if i am a college student watching this discussion and i'm getting ready for a bank of america interview, what should i do? dress appropriately, right? brian: make sure you demonstrate curiosity and make sure that you really want to help people. ♪
david: i don't think the people watching the show are generally bank robbers, but for those bank robbers who might have tuned in, is it easy to go to a bank today put up a gun and get some cash out and escape or is it harder than ever? brian: it is harder than ever. david: because? brian: because it is not very fruitful exercise. david: are people still doing that? brian: it doesn't happen often. it still happens. you catch the people. our teammates, once i went -- we have cameras that work all around the firm. the branches record things. i went to see it. they were going to show me what a bank robbery looked like and there was a live robbery at that time. there is nothing worse than seeing someone pull out a gun and point it at one of your teammates. we do everything we can to make ourselves less attractive to that activity. and the teams do a good job. david: you have used the word
teammates a few times, an employee, a colleague? why do you use the word teammate? brian: we are in competition to beat everyone else, and that is what teammates do. david: how is the diversity? brian: we are half men, half women. david: minorities? brian: representative of population levels and ethnic breakdowns. we have work to do and some of the traditional financial advisor work, in terms of women. we have areas we need to work on. we know those. we are driving at them but we measure it carefully. half my management team is women. so from top to bottom -- david: half of your management team is women? brian: yes. david: are they better than men? brian: i think you would have to ask him that. david: today, if i wanted to graduate from college and get a good job, why should i want to
go to a bank? is a bank a good career? do you think young people are coming in in greater numbers or lesser numbers to banks? brian: we bring in to the core training program, we have 1400 for the summer, hiring 1000 this year. just in the commercial and as corporate banking. you get more broadly in the company, we hire 4500 recent college graduates a year in the branch system. there is no doubt people want to work for us. it is a great career. it is a chance to help people -- people work for a company because they want to help. david: you have three children. do you recommend banking services to them? brian: two of them work in finance. and they like it. they work at competitors because they can't work for our company. they like it. david: if i am a college student watching this discussion and
getting ready for a bank of america interview, what should i do? i should dress appropriately, right? cut my hair maybe? brian: in my mind, it is the same thing. make sure you demonstrate curiosity and you really want to help people. david: bank of america has a large charitable undertaking, and you have a good-sized team doing it. what are your areas of focus and how important is that to bank of america? brian: there is the charity we have and it is at $250 million a year of giving. there is community development, low and moderate income development work for housing and development. there is volunteer, which is 2 million hours on top of that. there is employee giving on top of that. so you are working all these things. so the areas we work are largely
around economic development work. we have a commitment we just renewed. we have done $125 billion so far. david: some people say ceo's , because of their prominence, should take more public positions on issues of public policy. do you agree with that or do you try to stay out of public policy or controversy? brian: there are two parts to that question. we firmly believe that we have to create profits and returns for shareholders, and we have to deliver what society needs. as a bank, we are only going to be successful. part of our decision about guns and things like that that we made two years ago, a year and a half ago, we had well over 100 people in the venues where these horrible tragedies had taken place, inside the pulse nightclub, las vegas, so the teammates are saying you need to do something here. david: what are the leadership secrets?
is it hard work, intelligence, luck, persistence? what is it that you would say enabled you to rise to the top and what would enable someone looking at you as a role model? brian: it is all those things. i'll let the intelligence be decided by other people. you have to work hard. you have to find out what is important to the company. you have to be successful in areas that have impact. the number one thing is be curious, keep learning. david: you have been the ceo of bank of america almost 10 years now. at some point would you like to come to washington and the secretary of the treasury, chairman of the federal reserve, member of congress or some other position in government? brian: i had the honor of having one of the best jobs you can have. i am completely happy and i am happy to do it as long as the board will have me. david: if the president called you someday and said, the country need you to be the
♪ david: as a child, he grew up doing mathematics and was perplexed by anomalies that did not make sense to him, even the rules for scrabble and monopoly. so he changed the rules. he could not make mathematics work for him in the way he would have liked and in a way that would let him follow in the footsteps of his actuary father, so he turned to economics. richard thaler got his phd at the university of rochester where he entered faculty until he discovered work of daniel kahneman and amos tversky and made his way to stanford to study with them. this led him to new ways of using economics to explain the way people actually behave rather than how theory says they should. and so, thaler once agn
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