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tv   The David Rubenstein Show Peer to Peer Conversations  Bloomberg  February 16, 2020 2:30pm-3:01pm EST

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david: so what did you do to make bank of america the largest consumer bank in the united states? brian: basically it was to pare the company back. david: you called a man named warren buffett? brian: he called us. he put $5 billion overnight in this company. david: if the president of the united states said the country need you to be secretary treasury or chairman of the fed, 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. ♪
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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
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rose up and actually became the ceo, because i think it is quite interesting. to go to your background, you are from ohio. your father was a chemist? brian: my father was a chemist, yeah. david: for dupont? brian: yeah. david: you were sixth of eight children. i guess you share a lot. brian: you have to be aggressive with stuff, at least getting your share. let's say that.
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david: ok. you went to brown university. and you were the cocaptain of the rugby team. brian: right. david: rugby is a tough sport. i assume that is not as tough as banking. or is banking tougher than rugby? brian: there is nothing more powerful to see one of those scrums push, but i was never in there and that was one of the rules are played on the team. it is a fantastic teamwork game. you want the game where 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. the guy kicked me in the head on the way to the goal. david: ok. you graduated and went to law school at notre dame.
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brian: correct. 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. [laughter] brian: one of the reasons why i quit being a lawyer was i had worked with our private equity firm, the company called 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 inquisitive bank, and did a merger with bank boston. you stayed with the combined company. -- 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
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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. 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. 40 days -- david: 40 days and 40 nights, was there any flooding or
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anything? [laughter] brian: 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 try 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 period of time. after that, i had a run in the commercial banking business and
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investment banking business. i couldn't keep a job, let's just say that. i had probably 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, not only now but sometime in the future. it was a relatively difficult process for all involved. in mid-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 that made these events happen and make bank of america largest consumer bank in the united states? brian: it was a fairly straightforward thing, and there were additives 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. andy cipla city -- and the simple a city between that. 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. what made it more interesting is that the defaults and mortgages kept building. so, taking care of that issue was unique. the question was you had to take
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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 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, and then they made an acquisition of countrywide, and 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.
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are you making a lot of subprime mortgages today? is the bank doing that? brian: what we were, we were 20% of the mortgage market, and 15% was done through other people. brokers and correspondence. best correspondents. -- correspondents. we don't do that anymore. the only way a person gets a mortgage at 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 market. it is a much more stable environment. david: do you think dodd-frank legislation is working or would you modify it? brian: capital liquidity, stress tests, those regimes are critical. the reason why the u.s. bank is strong and active and growing. ♪
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david: during the great recession, you spent a lot of time in washington, more than you probably wanted to. and, you very often testified and so forth. do you think that attitude today in washington towards banks is more favorable than it was when the great recession was going on? 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 scores are at an all-time high. our growth is exceeding the industry. those are all very good things
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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 the regulators and congress and the dodd-frank legislation was passed. do you think the dodd-frank legislation 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. what happens at times, 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 umbrella. dodd-frank changed that. that was a good thing. now they have purview over the whole industry. we still struggle.
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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. both, the capital, liquidity, stress tests, those regimes are critical. the reason why that u.s. banking system is strong and active and growing and supporting the economy, and other banking systems are not, is because we got to it. david: there are four big banks, -- banks in the united states, 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. a large amount of the industry is in the hands of -- 5000 banks, so you have much more varied financial industry. one thing that makes our industry strong is the variety. -- the variety of participants. we have the largest market share along with those colleagues. if you look at us as a percentage of gdp, relative to
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other countries, this is completely on solid dated business. we have the largest retail share, about 15%. if we were coca-cola or pepsi, we would think that is not very good market 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: about 15% to 20%. david: are you reasonably happy with that? do you think that is where expansion can come?
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brian: we are expanding outside the united states, so we have services doing capital trading for big firms in other companies, and then we have a company that does corporate and commercial banking 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.
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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 all of that stuff. 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
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to my bank, write out a check, and they would probably cash it to make sure i have 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. david: 4300. brian: at the highest point, we
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were probably 6100. today, you have to be high touch in high-tech. in those branches, about 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 or 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 it is not. now, we had a 100-year-old person sign up for mobile banking. 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. ♪
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david: i don't think the people watching this show are generally bank robbers, but for those bank robbers who might have tuned in, is it easy to go to a bank today and 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? [laughter] brian: because it is not a very fruitful exercise. david: are people still doing that? brian: it doesn't happen often. it still happens. you catch the people. that's the deterrent. our teammates, once i went -- we
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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. david: you have used the word teammate a few times. it's a teammate like an employee, a colleague? why do you use the word teammate? brian: because we are in
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competition to beat 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 and ethnic breakdowns. we've got work to do in terms of sonority 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. six board members are women and have 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 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, you know, into the core training program, we have 1400 for the summer, and we hire about 1000 per 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 --you know, people come to work for a company because they want
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to help. david: you have three children. do you recommend banking services to your own children? 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 getting ready for a bank of america interview, what should i do?
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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?
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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 which is about $4.5 billion for housing and development. then, there is a volunteer, which is 2 million hours on top of that. then 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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develop mental 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 public controversy? brian: i think there are two parts to that question. --
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kailey: coming up on "bloomberg best," the stories that shaped the week in business around the world. the coronavirus continues to dominate attention, as cases increase day by day while risks ahead remain unclear. michael: the fed anticipates there will be an impact in china. >> saying that is a risk. >> i have not worked down my forecast. kailey: earnings are also top of mind, with another flood of companies releasing results.


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