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tv   The David Rubenstein Show Peer to Peer Conversations  Bloomberg  February 12, 2020 9:00pm-9:30pm EST

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>> what did you do to make bank of america now the largest consumer bank in the united states? did you have to call warren buffett? >> warren called us. if the president of the united states called you and said the country need you to be secretary of treasury, you would say --? >> call mr. rubenstein. could you fix your tie, please? >> people wouldn't recognize me
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of my tire was fixed. there we go. ♪ >> i don't consider myself a journalist. no one else would consider myself a journalist. anegan taking on the life of interviewer even though i have the day job at 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 euros up and became the ceo. let's go back to your background. you are from ohio. your father was a chemist. for dupont? you are the sixth of eight children. a lot and so >> you have to be very aggressive with stuff, getting your share. university to brown
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and you were the cocaptain of the rugby team. rugby is a tough sport. i assume that is not as tough as banking, or is rugby tougher? >> i was never in there, because i was not big enough but it is a fantastic teamwork game. you want teamwork, all 15 players participate fully. bones?you ever break any 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 law school at notre dame. brian: i played rugby there. david: where were you more of a star at notre dame or 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.
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[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 at the time saying come work with us and quit being a lawyer and i went to work with them. david: and fleet 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 ultimately discussed selling it to a number of other people. ultimately it was bought by bank of america. brian: right. that goes to the scale of banking and what you can achieve. it was ultimately the first nationwide bank and that is something that we have that no one else has right now. david: when bank of america came in, what was your job in the new bank company? brian: the wealth management business, columbia asset management, private business.
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i had a group of businesses. david: for a while you became the general counsel of bank of america. brian: for 40 days. david: 40 days. brian: december of 2008 to january of 2009. david: 40 nights. was there a flood or anything? [laughter] brian: there was a transaction and a few 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
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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 period of 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. so i owe them a successor at all times, now, at some time in the future. it was a relatively difficult process for all involved. in december, they finally concluded i would be ceo and i have been ceo since. david: since you have been
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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 united states? 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 out of businesses like outside of the united states wealth businesses which we did not make any money on. the defaults and mortgages kept building. taking care of that issue was unique. the question was you had to take that stuff and get it away. the vision was to have everything a customer, company, or institutional investor needs, but keep it to that. and not get into stray business. we had $70 billion of funded private equity investments when i took over, and now we have
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less than $1 billion. david: you can't have too many funded private equities. brian: that is your business. our job is to help you do it, not to be competitive. those were major changes. david: before you were the ceo, the bank made an investment in countrywide, then acquisition. ultimately, it turned out to cost the bank maybe $50 billion or something like that. so maybe one of the worst acquisitions in the financial services world for quite some time. they got in trouble free wide because of subprime mortgages. are you making a lot of subprime mortgages today? is the bank doing that? brian: we are 20% of the mortgage market, and 15% was done through other people. brokers and correspondence. we don't do that anymore. the only way a person gets a mortgage at bankamerica is by -- bank of america is by sitting with a teammate or directly from us. we don't buy mortgages from other people. that has left us with 5% of the
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market. it is a much more stable environment. david: today, the bank's future looks very 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 he say any terms you want is fine? how did that work? brian: warren called us. david: he did? brian: this story i have heard from warren. but 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 2011 when the world was kind of interesting. remember, the government was almost going to default. you had real uncertainty about the litigation out of the
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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 are a common shareholder, you would have fared as strong as he did. he had $5 billion at a time others didn't have it. david: he bought the stock was less than half of where it was now. brian: his conversion price 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
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largest economy in the world. we have two or three franchises daily 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
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recession, you spent a lot of time in washington. more than probably you wanted to. and 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: i think the attitude towards banks in general is more favorable because the economy is growing, unemployment is low. that is a better backdrop then than severe delinquency in homes in housings and foreclosures going on and 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 through a lot of tactics we took. 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
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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 pay 15% of it. we have a high interest in a safe industry. what happens sometimes is you see the activity leak outside the industry. that is what the problem was. most of the major issues were companies that weren't covered by the core regulatory. dodd-frank changed that. that was a good thing. now they have purview over the whole industry. 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. the question is, 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.
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the capital liquidity, stress tests, those regimes are critical. the reason why that u.s. banking system is strong and active and growing in supporting the economy and other banking systems are not is because we got to it. david: there are four big banks, in the united states today. 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 ok? brian: i think it works well. there is a large amount of the industry in the hands of -- there is 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, this is completely unconsolidated. we have the largest retail share, about 15%. if we were coca-cola or pepsi, we think that is not good market
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share. so there is a lot of room to go to grow. david: what percentage of profits or revenues are from outside the u.s.? is it a large percentage? brian: 15% to 20%. david: are you reasonably happy with that? is that where expansion can come? brian: we are expanding outside the united states, and so we have a business, doing capital markets, trading for asset managers and other firms. we have a company that does corporate and commercial banking and investment banking and treasury services around the world. we are investing tremendously in those by adding people. it doesn't mean acquisitions, just adding more and more people and the opportunities in asia, latin america, middle east, europe, etc. we can grow because basically the connectivity of the largest companies and the connectivity of midsized u.s. companies, which we are the largest provider of services to around the world in these supply chains and everything it needs people
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, 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: in the old days, 20 years ago or so, if i wanted cash i would take out my checkbook, go to my bank and they would probably cash it. if they could 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. david: how many physical facilities do you have? brian: we have 4,300 branches today. at the highest point we were probably 6100. today, you have to be high touch and high-tech. in those branches, about about 24 hours, 800,000 people come in and transact. but during the course of the last quarter, second quarter, i think we had 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,
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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 determined. now it is not. we had a 100-year-old person center for mobile banking, which is optimism. david: do you get a discount if you're 100 years old? brian: it's free. it's hard to give it away. if you look we do a great job , with millennials. we open accounts at twice the rate of the millennial population 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? are you a believer that 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.
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55% of payments by consumers , that $3 trillion, moves digitally. 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 the idea of digitizing cash, we spend $5 billion in checks. there was no one more highly interested in that. we are driving that now. -- driving that down. 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 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 idea of distributed technology as a way to move money and uses around trade.
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we use a lot of information and money at the same time and documents are good uses for that. i don't know if i would call that 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? i should dress appropriately, right? brian: make sure you demonstrate curiosity and make sure that you demonstrate that you really want to help people. ♪ david: i don't think the people
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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 a very fruitful exercise. of thatre a lot anymore? 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 go 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.
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david: you have used the word teammates a few times, an employee, a colleague? why do you use the word teammate? brian: because we are in competition to knock the crap out of everyone else, and that is what teammates do. david: how is the diversity among your teammates? brian: we are half men, half women. david: minorities? brian: representative of population levels at various ethnic breakdowns. we have work to do and some of the traditional financial advisor work, in terms of women. there are areas we have got to work on. we know those. we are driving at them but we measure it carefully. six board members are women and half my manager 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 them. david: today, if i wanted to graduate from college and get a
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good job, why should i want to go to a bank? is a bank a good career? do you think young people graduating from college or business school are coming in in greater numbers or lesser numbers to banks? brian: we bring into the core training program, we bring in 1000 plus -- we have 1400 for the summer, hiring 1000 this year. just in the core training problem in commercial and 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. one has been in for five years, the other, three. 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
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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 make sure you demonstrate that 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 work 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. it is about $4.5 billion. 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
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environmental work. we have a commitment we just $3 million 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 if society -- our decision about guns and things like that that we made two years ago, a year and a half ago, was driven by the fact that 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?
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is it hard work, intelligence, luck, persistence? what is it that you would say enabled you to rise to the top and what would you say to someone who is looking at you as a role model to say here's how i got where i am? 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 when i talk to young teammates 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 be secretary of the treasury, chairman of the federal reserve, member of congress or some other position in government? brian: i have 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 e esident called you someday and saidthe
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country needs you to be secretary, chairman of the fed, you would say? brian: call mr. rubenstein. [laughter] david: that call is unlikely to happen. ♪
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francine: mark carney will soon end his term as governor of the bank of england. carrying the u.k. economy through crises and years of brexit related uncertainty. a high-stakes, divisive issue that has been impossible to forecast. good preparation for his next job, tackling climate change. born in 1965, the young mark carney dreamed of greatness in the world of economics, getting a doctorate at oxford.


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