Facebook Takes Heat From Skeptical Senators on Libra

expecting to learn from these hearings? Why are they important? Well, I think the opening comments testimony from David Marcus kind of lays out already what the important parts are, I mean, from from the from the regulatory political point of view. They clearly have to answer or push on two questions, which is, where does the day to go? How is

it really kept at our length from Facebook? And what does libor mead for financial stability given that it's going to be investing in big currencies like the dollar, like the euro. And I think that's already the opening testimony from David Marcus, who is trying to tell everyone looks, don't worry. We're not even going to move. We're not going to budge on this until everyone is happy, and we're going to want to be regulated to an almost

extreme level before this even gets off the ground. So it's going to be a lot of kind of soothing language from from Facebook on this and hopefully more transparency. So you know, I'm glad you brought up to kind of the type that the statement from Mr Marcus, because it was extremely conciliatory. I would say, in terms of as you mentioned that they will not move until they

get full regulatory approval. What is this sense within kind of the technology world of financial regulatory world whether Facebook can ever get approval for this type of currency. So I think that's what we're seeing now is primarily a political reaction. It is as though came with Analystica was happening. Again.

This is from the lawmaker Congress side of things. I think on the on the regulation front, I think that there is actually a lot of debate, a lot of kind of open debate about whether there should be there should be a trigger for say, digital currencies to be shue directly by the central bank. I think that regulators like Mark Karney, for instance, have been more open than others and saying why don't we just bring them into our tent and keep a really close eye on them

as the condition for letting them launch. I have yet to hear anyone say let's band this, So I think that a lot of this reaction is primarily about politically keeping a check on Facebook's power, and not because everyone has suddenly agreed that this should never see the light of day. You know, I'm trying to figure out what what exactly liberal is. Do we have a sense of what exactly it is or is it more concept than even a firmed up reality or potential of reality in

the near future. So I think Facebook would would like it to be seen as money, electronic money. This is why they're saying Libra is cash. It's why they're saying they will be regulated as a money services business. But

they how can I put this? May be disappointed to find that regulators don't agree with the definition, because remember, on the cryptocurrency France, there were plenty of discussions like whether Bitcoin and ethereum were securities or commodities, and Libra may endure being viewed as an exchange traded fund because theoretically or conceptually, you can see how someone is putting money into Libra and receiving in exchange a slice of

something that is investing in currencies, in testing in assets. So there's a very good argument to say it's it's an ETS. So there's a whole debate about what it

should be that may not go Facebook's way. Leon. I know some Facebook investors have been asking the basic question of why why would Facebook, you know, attempt to get into a business that is so highly regulated, not just in the US but around the world, particularly given a time when there are serious concerns being raised about some of their core business the privacy and data security and

so on. Well, it's interesting because in it's very easy to say in hindsight, but I remember when Libra was first announced, there are plenty of self had analysts saying this is fantastic, It's a whole new revenue stream. It's the question is almost why this particular structure with the crypto side of things. Because Facebook has tried several times to get a payments business off the ground, you can

see why. It's a business model of ninety percent advertising is way too concentrated and could do with an actual revenue stream where people pay for things on Facebook. That makes complete sense, but because their previous bids have flopped, they clearly entrusted David Marcus with finding a new way to do it a successful way. He went the cryptocurrency route. And I think that is a big question, that is,

why why go down this blockchain route? Why go down this attempt at being decentralized and trying to please all types of people, including blockchain developers and bitcoin buyers. That that's a declution question. Lena Laurent, thank you so much for being with us calumnist for Blueberg Opinion. Well, the grocery business clearly has historically been a very competitive business, very tough, tight margins, particularly in New York City with

all of the bodegas and independent groceries. The question I've always had is who supplies these small bodegas and independent grocers. Well we found the answer Krasdale food Steve Silver as president and CEO of Krasdale Foods based on White Plains and the Bronx New York. Steve, thanks so much for joining us. Tell us about Crassdale Foods. What is who are your customers and kind of what is the history of your company. Certainly, thank you, Paul, thanks for having

me here. Uh quite a story. Cras Sdale Foods hundred ten year old, family owned business, now in its third generation. UM servicing, as you said, Odega's and independently owned supermarkets throughout the metropolitan area. Company for the longest period of time, up until maybe the mid seventies, strictly serviced any supermarket,

any chain. If you had a convenience store, if you had a Delhi, we had an army of salespeople out in the street that would take orders and just uh and then we would follow it up and deliver you goods.

I mean, we were essentially a Dreyer. Where Crasdale transformed into a full service company is in the seventies when most of your vertically integrated chains were leaving the city, leaving the urban area, heading out to suburbia looking for more golden grounds, larger formats, larger stores, and essentially abandoned the people of New York, leaving food deserts all over the place. Management at the time that's prior to me is which as you know, I've been there thirty eight years,

but that was still prior to me. Had the insight and the foresight to see if they can collectively grab up many of those independently owned supermarkets and see if we can't get them to operate under common banners. And that was the birth of our Sea Town program. So while we don't own the stores, we service those stores. We give the store owner the opportunity to operate as

if he was a vertically integrated chain. We provide all the specialized services of a supermarket would need from professional help, front and help, specialty help, perishables, anything that a chain would deliver it to their vertically integrated stores, we would

deliver it to those supermarkets. And then obviously we would get them all to run o the common Merchandising program, so collaboratively and collectively they could get the cloud, the purchasing cloud that we could bring to bear and go to our CpG companies and essentially become a portal for them to ship goods into the city. So we when we can talk about food deserts, there is a concept. We've see it play out across the country, across the

United States. How in UH poorer areas, typically it's harder to get fresh foods and and really anything other than fast food or processed foods. Highly processed foods, it tends to also be cheaper. I understand very much the social case of why it's important to get healthier foods to some of those neighborhoods. What is the business case from Crasdale's perspective about why it is beneficial to go into those areas well? Quite quite frankly, we've always been in

those areas, um but opportunity. Obviously, when these chains left the city at left a vacuum, we figured out the best way to essentially and economically drive those products into those to us of those consumers could eat healthy, good meals at a reasonable price. Um. Again, that was the

C Town Group. Uh. It took you know, independently owned supermarkets who were very not very skilled and not very professional in terms of their built to raise capital and go to banks and maybe operate like a story you would typically see in suburbia to to use our expertise. We would provide capital for expansion, remodeling, getting the stores to look essentially the way they do today and be you know, really shopping places to go look for a consumer and where they can get a healthy meal at

a reasonable price. Uh So, it's basically opportunity. The opportunity was there, we filled the vacuum. We did it well. We did it so well that we got a lot of copy cat you know, companies coming in after the fact. And now there are no more food deserts in New York. In fact, there's probably too many supermarkets. It gets more and more difficult, you know, for not only us, but for US store owners to run profitably. It's a very

low margin business. Uh. And when you're where it used to be, as you said, Lisa, one one seat down on the corner, and it might not be three or four stores on the corner on top of drug stores, convenience stores, dollars stores, big box stores. Now we have to deal with online order ring so everybody picking away. So in New York City is obviously tremendously diverse in

the in terms of ethnicity population. I mean, how do you have to you have to have the knowledge of to have you know, Korean food in the Korean neighborhood, Hispanic food in Hispanic neighbor exactly right, well, exactly right. In fact, you could go five blocks away and being an entirely different neighborhood than when you just came from

the beauty of our program. While we put together a base merchandising program that every store would have to run, what we did that was not common at the time was we gave those independent leone supermarkets the ability to tailor or customize that program so that they could then sell those items that they need to sell to their customers that are in that neighborhood. We were smart enough to realize that the owner of that supermarket knows his

area better than us. Just use us to be able to bring the cloud of the two hundred stores that we now have working collectively to bring them the best products at the best price. And that's how it grew, and it was wildly successful. It went from just a handful of stores in the seventies to maybe two hundred stores by so successful at it, you know, we start another band is Bravo. Supermarkets are AIM supermarkets aims a

little twist AIM. A lot of these independently owned supermarkets still like the independence of their own name, so we call AIM. They can operate like a de Chico is an AIM program. North Sure Foods is an AIM program, all right, So i AM become secondary then name their family name. These are royal family owned businesses like Rasdale, and we're dealing with, yeah, that they can keep their own identity. Steve Slilver, thank you so much for being here, President,

Chief Operating Officer of Crasdale Foods. Very much in New York City, story near and dear to my heart, considering that's where I was born and raised. Steve Silver, thank you so much for being here. Let's turn our attention to Amazon Prime Day, not because we want to necessarily push this, but because we think it is important to sort of gauge the consumer sentiment currently as well as Amazon's overall goal going forward and and their success in

getting new Prime members joining us now. Evan Clark, Deputy Managing editor for Women's Where Daily. Evan, I want to just first start by what are you expecting this Amazon Prime go around and how important is it to retailers. Well, I think it's really important for Prime and for the

rest of the industry. But I think there's also kind of a little bit of context in that Amazon's really kind of packaged this in a really savvy way, but it's a sale and retail has been holding sales forever from you know, It's something that kind of comes between the fourth July Memorial Day sales and Labor Day. Evan, thank you for the real speak. By the way, let's just talk about what it actually is. A sale go on, right, So, but it's uh, you know, but all that we're we're

talking about Amazon. A lot of consumers are out there. There's over a hundred million Prime members. Two thirds of them are expected to be shopping on this kind of prime to day uh event here, So they're generating. They're doing exactly what merchants always are trying to do is kind of gin up some interest in some buzz, and a lot of retailers have you know, not to be

kind of outdone, have jumped on this. Amazon or eBay has a crash sale, which is kind of a reference, cheeky reference to Amazon has crashed in the past on this day. I think it's total two fifty retailers are expected to be holding some kind of Prime Day events. So there's a lot going on. But in the end, yeah, it's a it's a it's a basically a way to cut price and you know, kind of get shopper and motivate shoppers. So what do the typical Prime Day customers

buy is anything different than what typically is done. Now, I think it's this it looks like we've seen in the past. I mean, the two of the big categories are electron Onyx and fashion, and fashion is an area. You know, Electronics is something that Amazon's in in its own right. There's a lot of Alexa deals, there's a lot of echo speakers and things like that. And fashion is an area where Amazon is very kind of keen to build. So that those are two of the categories

to watch. One thing I'm trying to figure out is how retailers that are not affiliated with Amazon feel about all of this. In other words, they're being forced to discount things yet again during the year, and they potentially have to pay, you know, to Amazon. Bloomberg opinion Columnistsura Ovidate calculated twenty six cents on each dollar to Amazon, and that doesn't include any additional fees to pay for advertising to get better placement in the search results. How

what's their what's their sense of this type of day? Well, I think, you know, retailers don't need again, they don't need a whole lot of pressure to cut price. It's kind of what they do. Um. But Amazon certainly is is a is an immense competitive force on the online sphere, and retailers have to answer this, so you know, they're whether or not they want to, they they kind of

really have to jump in. And I think it's also a chance to you know, it might be a little bit of glee here in a certain sense, and that here's an opportunity for retailers to try to kind of not let Amazon just run away with the day. So they're trying to you know that they on on their own. Individual retailers really have a difficulty kind of standing up against Amazon. But if you have Amazon having their big sale and two fifty retailers are trying to counter them,

there's actually a little bit of juice there. So I think it's all of this just gets the conspetitive spirit firing. So Evan, I saw yesterday that there's actually a small strike at one of the filming centers for Amazon. You

can tell us about is anything for Amazon to worry about? Well, yeah, I think Amazon has in the past been criticized for how it's treated some of its workers and and and and you know, there was a big expose a few years back, and since then, I think they've really tried to rehab their image to uh to an extent, and they've focusing on the um and they've used their their might. They're kind of financial might going to minimum wage of fifteen an hour. So it really that's kind of what's

going on. I think it's it's you know, Amazon's big you know, namesake day, so people who are trying to you know, raise complaints about the company or the working conditions kind of use that as the moment to hit. So it's Amazon's big day, but it's also kind of Amazon pile one day, right, a big day for Amazon. Looking at I'm seeing some numbers, you know, five to six billion dollars of goods bought and sold, So being bought by consumers on Amazon during Prime days just extraordinary.

So I'm not one of them, are you, Lisa? I did buy a gift, Yeah, I figured why not? Right? Well, Tom was scrolling. Tom was scrolling across it all this morning finding great deals. Seriously, you're you're you're outing him, you're basically outing what he was doing while he was on radio. He was actually scrolling through deals on its exactly. We could find we could find some scooter deals for you could, yeah, and helmets because We're gonna be safe.

Evan Clark, Deputy Managing editor, Women's World Barely. Thank you so much for joining us again. A big day for Amazon. It's interesting these big days. It's it's is what it is. It's a sale, and it's a sale in the summer to drive traffic. It's also a way to I think, really attract more prime members. And we know the prime members spend so much more on Amazon than non prime members, and it's just good business, so they continue to drive

the prime membership. Well. It is bank earnings day today, JP Morgan, Goldman, Sachs, Wells Fargo, all reporting earnings to get the latest. We welcome y'allman On Iran, senior finance writer for Bloomberg News, joining us here in our Bloomberg Interactive Broker studio. Yaman, thanks so much for joining us. I know you're busy crunching all these numbers, getting out your notes on these companies. What's your key takeaways maybe

from some of these big investment banks reporting today? Um, you know, I think investors are are kind of happy with Goldman's numbers. Um, although and that's probably because their equities trading was was up while everybody else's was down.

Fixed income is down across the companies, but that was sort of more expected, you know, fixed income going down, but equities was also down at City and JP Morgan, while Goldman held up on that and trading is is so crucial for these guys that that that that's really the bottom line. Everybody looks at UM the universal banks that also do a lot of lending, and you know they take deposits like JP Morgan, City and and Wells Um. There we see net income nets. Interest income is still rising,

which is amazing because interest rates are dropping again. But they're writing more loans, right right, I mean they are, so the volume is growing exactly. You you got, you hit it on the head. They're able to expand how much they land even though their margin strengths because rates are dropping. But but that's great because you know, for the rest of the developed world that's something they can't really they just don't have the margins and they don't

have the growth. So that's what it's they're hurting. So the story that I gather from JP Morgan, Bank of America, City Group, and Wells Fargo is that the consumer is very strong. You're seeing a very robust deliverance there from those units, and that investment banking is lagging behind that They're just there isn't the type of fee revenue that there has been, at least the fee revenue growth that

there has been in the past. I'm just wondering did Goldman Sacks given any indication of why they are not in that crew, because they have come out and actually beat on equities trading, and they beat on investment banking revenue. Um, you know they do. But even while beating, you know, you look at investment banking revenue for Goldment it's down. So so investment banking is not doing great. Um. And this has been a few quarters now. It's not just disquarter.

Really you look at the last couple of quarters. The consumer is is still kicking strong, but but the trading investmentking side of the business is really slowed down. Um. It's still general and great revenues, but they're they're lower when you look at last year's quarters similar quarters. So so that's across the board. UM. Goldman had an incredible wonderful jump in its uh on Investing and Lending UH division,

which is their their their own investments UM. Like merchant banking, I mean, you know, and and the companies their private equity where they buy the companies investing companies and then then they I p o them. So they had several I pos I guess during the quarter and and monetize those those uh increases. So so they did great on that,

but the other sides of the businesses are not doing well. Um. They talked a lot during the call at Goldman about Marcus and and their consumer lending as well, because they're trying to make more money on there and and there they are probably able to, but it for Goldman that's still such a small amount that it doesn't really showing their earnings. But their you know, their goal is to really bring consumer lending and consumer deposits to be a

bigger revenue item for them. Is there a sense that we've had, you know, several quarters, you know, maybe even longer, I think longer where the capital market side of the business, that whether it's the equity trading the fixed income trading sides of the business, you know, is there an expectation that those businesses are going are ever going to become meaningful profit drivers in the future, or they're just as a regulatory environment changed so much that you know, it's

just not worth the capital to really drive those businesses. For the U S banks, they still make good money on that side. Europeans are having second thoughts about that. That's why which really UH going down um and not just just even b MP party which is now like the stronglooking European bank that's trying to take away some of Dot's businesses as does shrinks. They've slowed down in

some areas of capital markets as well. Because for the Europeans whose capital markets are not that strong and they have to be really in the US to get more volume and more more value for their buck um, they're not It's not great UH proposal for them. But for US banks they still make a lot of money. They'll stay in and they'll keep grabbing more markets share from from the European peers. Did we hear anything on the calls or elsewhere about how much business some of the

US banks are getting from Deutsche Bank? Vaguely people were asked about it and they all said, well, we do expect to, but nobody has really said, you know, this has been a boon. We're getting everything, you know. I'm sure they're all and you know, today we have a story on the Bloomberg terminal about about dotsches hedge fund clients already deserting before it could be transferred to two b MP part but which is an agreement that to have UM. So they're all probably going fleeing, but they

all go in different directions. So it's not going to one firm. They're all going to go to different firms. And though they probably have relations with those firms anyway. Typically one fund doesn't work with just one broker firm UM. They have multiple brokers, so they probably cut one broker and and increase or stay with three brokers that they already had. So spent a minute on Wells Fargo. They've got a little bit of a problem there that they don't have a CEO. Did they have any new news

today about there? They have a lot of problems, not just not having I mean their biggest when you look at the numbers which which which are announced today and and those several quarters that that I've looked at their numbers, their problem is that they cannot grow. So when you can't grow, when you have a cap on your growth, you have, it's very hard to really do, you know, make more money. You cannot make more money when you can't grow unless the margins keep expanding, and you can't

expand margins when rates are falling. So initially they did manage to expand their margins a little bit by cutting costs um and squeezing more out of of the loans they were making. But now there you know, rates are falling, the margins are shrinking, and they can't grow the volume because they're they're capped with with their asset and and and balance sheet size, so so it's a problem for them.

So their numbers are always restricted and they don't have leadership, and it's a tough sounds like a great job for me. Go ahead, feedba yelloman owner on, Actually please don't. I would miss you too much. Y'elloman owner on, a senior finance writer for Bloomberg. Thank you so much for being here with us. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm

Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woods. I'm on Twitter at Lisa abram woits one before the podcast. You can always catch us worldwide on Bloomberg Radio