Surveillance: BAC Is Growing Organically, Cassidy Says

of money. You look at operating and come on an annual basis of so many banks, and it sure looks like minting money. Is that the right phrase, Tom? I think is correct. In fact, if you look at the industry, this will be the fourth consecutive year of record profitability. Now, granted we have the lower tax rates that have contributed to that, but even when you take those out, we are going into our fourth year of record profitability for

the banking industry. The most interesting comes since from the Bank of American Lending Business this morning. Gerard. Clearly higher rates are translating into a high night interest marchin at some of these big lenders in America. Clearly, higher rates are translating into higher interest income. None of this, though, seems to be translating into stock price out performance. Why not, Gerard? You you you framed it properly, and I would suggest them.

What we hear from many investors today is the expression late cycle, and they're concerned that the U. S economy is not going to be able to maintain this growth and therefore, what do I need to own a bank? If the US economy grows the way we think it will, similar to the way it grew after the Kennedy tax cuts in the sixties and the Reagan tax cuts in the eighties, I think you'll see investor has come on

board to the banks very shortly here. So, Jerard, the loan growth that you and I have been talking about for quite a few quarters, now, are you slowly seeing it come through? We are for the industry. What's interesting is that if you look at the weekly data comes out of every Friday afternoon, this past week, it was up around four and a half percent year of a year growth. That's up from about two percent at the beginning of the year, So you're seeing a creep up. However,

amongst the biggest banks, the top twenty five banks. That growth is still on a year of a year basis in the low two percent range, but the smaller banks are growing loans close to ten percent over a year, so that there's a real market share battle going on. Well within the market share battle is the word that I think Gerard, you wrote about it about nine. Scale. Scale is nothing. Come on, scale is the merger grab deposits, cut costs. Right, your scale is time. I think you're

spot on now. I'd throw in from four or wasn't as much about technology as it is today. So the technology spend is also so Bank of America five years so now I got on listed a two and eight thousand bodies. Maybe I'm guessing off the top of my head it used to be two. I don't know where's

that number in five years or ten years. If they continue to grow there they're done with their you know, significant downsizing from the crisis as we know, um now they're actually adding people and as they continue to grow organically. Remember our banking sector and went through an enormous consolidation as a result of the Clinton President Clinton signing National in Estate Banking in the early nineties. This bank, Bank

America has over a tem percent deposit market share. They're prohibited from acquiring any depository now they have to grow organically, and that's what they're doing. It's quite interesting that we're talking about competition to issue more loansome, Gerard, at a time when Marcus, the unit of Colman Sacks, is pulling back on its targets for next year. What do you make of that? What's the signal that comes from that.

I think under the new leadership at Goldman UH under David Solomon, he's taken a step back, wants to make sure that they're going in the right direction, and I think the Marcus pullback is part of that thinking. Um I believe that when we see the new Goldman saxon about six months, there will be a more comprehensive lending

product than not just a Marcus product. But that being said, I think Goldman, you know, jumped into consumer lending, which is a very competitive area, and they're probably now want to reassess to make sure that this is the area they want to go in. You mentioned the new Goldman Sacks. What's the new Goldman Sacks gonna look like, Erard? What is it? I think they have, um, some sort of look that is going to be more similar to the

JP Morgan Universal Bank. Look, I believe you're going to see less emphasis on trading, more faces on a total financial solutions to their corporate and commercial customers, and they'll be more of a commercial bank. So you know you're gonna write a forty page like you know, into the end of the year memo whatever. I'm sure you're working on it already now. And all of that is trying to game the next merger. And I know what you're gonna tell me, and your lawyers have told you you

can't talk about that. Okay, guess what you're gonna talk about it? What flavor of bank will be part of the combinations, who will be the combinator, and who will be the comin combinat Tom, I think you really have put your finger on it, because that is the one piece that's missing from the banking sector. Large bank mergers, we see them coming. There's some regulatory issues that still need to be a will will you think they'll be finishing Those will be addressed by the first quarter of

next year. So can we see a US BANCORPS and of BB and T looked emerge with other large banks or could we ever do a merger of vehicles in Ohio? Do you put a fifth third in a key corps together? Honey? Right, And that's what we need to see, and I think that's coming on the board. It's going to take a

little time. I mean, John, there was a point where Gerard Cassidy was daily, hourly on the streets of Boston and you could turn around three hundred and sixty degrees and see seven bank towers, and then all of a sudden it was four bank towers, and then it was one name. What was the final name of bank, like Fenway Banking or something like that. I mean, everybody merged with everybody else, and it all became Bank of America.

We have a moment of silence here for Fleet Bank, A moment of silence for how you framed M and A a combanate tour and accompany. Yeah, that's story, British. I have not heard that one before. We're talking about Wait, I can't concentrate today. The Duchess Sussex with child. I was so happy You've gone fifty four minutes without even talking about it. We're not doing it, Tom A couple then, no, no Gerard Banks, Tom banks we do in Banks Edwards, you stop it, Come on your kissidy, help me out here.

You always name the first kid after the richest grandfather, right, that's Card and Roll, So it's got to be Charles, right, Who wins? Inning seasoned Gerard, I would say, so far, what we're seeing, the JP Morgan numbers were strong. Bank America's numbers today are also very strong. So and in the even city. So who wins in the The universal bank model appears to be outperforming right now. The regional bank model. We only have P and C so far in the regionals, and their numbers came in a little

light on long growth. But we'll see what happens with the rest of the regional banks. But right now, the universal bank models put up good numbers here in the third quarter. Did you pick for the next twelve months? Still? I think so, John, I would stick with Bank America. If you believe that the U. S economy is going to grow as fast as we do, Bank America's very well positioned to capture that. Plus, remember these banks are

still giving back excess capital. In Bank America is of the universal banks is giving bank the least amount of capital relative to the city JP Morgan Wells and I think they're gonna up that number in the c CAR two thousand nineteen. Jug Cassidy, thank you so much with

the RBC Capital UH markets. You spoke with our Benjamin Harvey and instabule running all of our Bloomberg News operation UH in Turkey UH and out of that part of the Middle East earlier and now without question or interview of the day and this on the uproar over the disappearance of Mr Kashogi UH and as the Turks have said, the murder of Mr Kuschogi as well. John Svakiankists joins us. He has been on the show any number of times

with a Golf Research Center Foundation, their economics research director. John, I have visited your office is in Riad. You are a student of the royal family. Does um does the Does the prince have the support of his royal family?

I think he has a support of the royal family, and I also think he does have the support of his father, and that's why the father decided that he has to send a personal envoy to Turkey, and that was the governor of the Western Province, Prince Khalat Alfasal And at the same time, they have agreed to investigate the matter of the Saluadis themselves and begin an investigation on the issue of how Jamal Hashoji has disappeared and

what's going on. If the Turks say that there is audio, there are images, etcetera, etcetera, etcetera, does Saudi Arabia accede to those items of evidence or do they have to find their own evidence. It's a very good question. I think that it will be difficult for the Saudis too

demonstrate that they have convincing evidence. To the contrary, if the Turks do share this evidence with the wider media, and at the same time, it could be that there is an agreement, because if things continue as is, things are going to heat up and both sides are going to begin to reciprocate. And by both sides I mean the West, the US, UK, France, UM so Saudi Arabia needs to show and demonstrate clearly that they are looking into this affair and they're trying to find solutions and

um find answers to the many questions of how he disappeared. John, let's have the ugly conversation of leverage. The President of the United States said he's prepared to take action. Saudi Arabia has hardly stood back. They say it will also avowed threat that they vow to retaliate um and talk about their standing in the global economy, John, what does action and retaliation look like and what kind of leverage does Sauly Arabia have to ensure that the kind of

action the United States takes isn't that harmful to the kingdom? Right? I think, Jonathan, that if things do continue in this heated fashion, we've seen already an editorial by Saudi, who is very close to the center of power to kill the hail who did say that oil could be used as a weapon. And of course God forbid if this happens at this point when the global economy is going through some first reverberations of challenges in terms of growth, we see oil prices at a hundred fifty or two

hundred dollars a barrel. I don't think that the US will take that quite lightly, and it could very well then italiate and say, look, business comes second, and we're going to have a general embargo, and then Saudi Arabia is found in a position similar to that of Russia. I don't think we're going to get there. I think that there will be cooler heads that dominate both in

Saudia and the rest of the world. And I think at the end um the perpetators or the people involved in the possible event of murdering this journalist could be found guilty and given to international justice. Again, this is all speculation, well, the alleged murder of this journalist that we are discussing at the moment, it's just one of a range of issues that the Crown Prince has opened up for the international stage to question. And I wonder John.

Over the last couple of years, the Crown Prince has gone on a fantastic charm offensive with several leaders across

the developed world and many multinational companies as well. How much harm has been done with this specific incidents on the international stage for Saudi standing well, there is no doubt that when you have a major conference taking place literally next week and many of the global leaders businessmen who are planning to attend, including Jamie Diamond, have decided not to do so, it is a blow to Saudi Arabia's image making to the rest of the world, and

that has to be taken quite Seriously, mistakes are made all the time, and the reform is excellent. The change that is happening in Saudi Arabia is very much welcomed over the last few years. But a blunder like this should not curtail and hold back what Saudi Arabia can attain, and so I do believe that cooler heads will prevail. John, Thank you so much. Chiankis Golf Research with the Golf Research Center Foundation, and now for our interview of the

day within Bloomberg News. Vivian near him is out of the University in Earth his three and holds court in Riod, which is a challenging assignment at any time, but evermore so right now. Vivian joins us from Riad. Vivian, what has been the reaction of Saudi officials, what has been the reaction of the domestic and elite media in Saudi Arabia to these announcements by the Prince, by the King

and by the government. Well up until today we had seen a very firm narrative that Jamal Hashoji, you know, as prominent Saudi journalist, to his last scene entering the Saudi consulate in Istanbul, had left the consulate shortly after he entered, and they had continued to reiterate that narrative despite repeated statements from Turkish authorities that they believed that

Hashoji had been murdered inside the consulate. And we've seen, you know, a great amount of resistance in Saudi media and a great amount of resistance from Saudia's who say that they do not trust the Turkish statements, and many people feel that this is an attack on Saudi Arabi it it can't possibly be true, um, And there's been

quite a lot of pushback. UM. We saw that shift a bit today with an announcement from an anonymous Saudi official that the kingdom has actually begun an internal investigation into the disappearance of hush Ogi. Now, um, I mean that's a bit subtle, but what it basically shows is that they have started to look inwards as well, and so they're considering another narrative that perhaps didn't just walk

out of the consulate shortly after he entered. Vivian, can you explain for people that may not be following this as closely as you are or we are, what are the implications for this for US Saudi relations? Right? I mean, this has turned out to be a much bigger story than many people thought it would be. At the start. You know, Jamal Hushogi was very well known, UM among

people who knew Saudis into New Saudi Arabia. But I don't think anyone expected that it was going to have quite so many consequences in the business world and for the Saudi economy. UM. And it's testing the really long running times between Saudi Arabia and UH in the United States. Was a US resident UM, and the US has been demanding answers from Saudi Arabia. And meanwhile, there's been quite

a strong reaction from the business community. There's a very massive investment conference that's coming up in Riad the early later this month, and we've seen really big names pulling out of it, including Nami Diamond, UM and Richard Branson just saying we're not coming Vivian the distinction here. And I understand the delicacies of you being domiciled in Ria as we speak. I don't know if you're aware, but twenty nine minutes ago, the President of the United States,

let me get this accurately. I got to do a refresh on the computer. Twenty nine minutes ago the President put out a tweet where it is language from Saudi Arabia quote to our Saudi Arabian citizen unquote. And you just stated, as many others have stated, that Mr Kashogi was an American citizen. Can he be both? Is he one is the other? Where does that sit within Saudi Arabia right now? So he was a U s residence

but not a US citizen. UM. He was actually a saudiast citizen who had been living in a self opposed exile for about a year. So he left the kingdom under fears that he would be detained there or something like that, and he had moved to the US and was residing there with within this is his disappearance. What will the internal probe be? I mean? Is it a police probe? Is it a special probe? Do we have any idea from your reporting of who who will be

the who of the probe? So what we were told is that the Saudi King Salmon himself ordered over the weekend that this probe begin and it will be done by the Saudi public prosecutor, who reports directly to the king. UM. So we don't know necessarily what that will entail. We were told that it will be very speedy, that they've been told to do as quickly as possible, and that we could hear some sort of announcement within days of what they conclude. Vivian, why is the probe itself significant? Well,

I think it's that bit. But it shows they are rethinking or reconsidering, um, the previous narrative which they had really strongly stuck to, which was that absolutely nothing happened, you know, to at the consulate and we had absolutely nothing to do with this UM. This disappearance, the fact that they are sort of, you know, potentially looking inwards, um, you know, looking for the story what could have happened, It could show that they might be perhaps willing to

make some sort of partial admission of guilt. Analysts are saying that could then still absolve higher authorities, or they could perhaps open up the way for them to blame rogue elements within the state for anything that might have happened. It's still up in the air, and it's too early to say what the fate is of Hashog. They're not admitting it publicly yet UM or saying anything publicly yet about that, but it basically is a sign that they are no longer sticking to this really you know, tense

narrative that he went in and he went out. Vivian Just finally, you've previously talked written about Turkey and uh their role in this. Can you just elaborate there a little bit? Yeah, I mean that's a complicated relationship between Turkey and Saudi Arabia. Um. They are both you know, regional powers. They don't always get along. Um. You know, they do have diplomatic relations. It's not as bad as

it is with other countries in the region. But their tense you know, Turkey has traditionally supported a particular kind of political Islam that the Saudi government you know, believes to be a danger to their security and stability. Um. And Turkey has sided with a Thought um in this recent dispute between Thought and the other Gulf states, which

Saudi Arabia also is very offended by. So naturally, when these kind of you know, anonymous leaks started coming out from Turkish authorities accusing Saudi Arabia of these very grizzly allegations, a lot of Saudia's were immediately distroy full of that. You know, Turkey is not our friend. We can't trust with her thing. Vivian, thank you so much for joining us today and short notice. Vivian ner Um with that

question the article today for Bloomberg News. I'll get it out in social on Saudi Arabia setting up some form of investigation and the disappearance of Mr Kushogi as well.

Vivian ere Um with Bloomberg News in Gary Gensler is of course we know him as the former head of the Commodity Futures Trading Commission or better known as the c f TC, former Under Secretary of the Treasury for Domestic Finance as well as for financial markets, former Goldman Sachs executive and currently at the Media Center at the m I T at the Media Lab. Gary, thanks very

much for your being here and for your patients. We were talking about debt just before President Donald Trump was speaking, and I want to really try to get you to crystallize that should we be concerned about all of the government debt, corporate debt and individual debt that has been created. And it looks like interest rates are at least moving up, not down. How's that good for people that are in debt? I think that the high level of debt that we

have in America these last ten years. It competes with the high level debt we had in the nineteen twenties, and so just that it's about three and a half times the economy. Three sixty percent of our economy was about seventy trillion dollars of corporate, government and household debt. We've done some good things in the last ten years.

There's a little less household debt as mortgage debt has come down after the housing bubble, but we've backfilled and we have a lot more government debt and corporate debt. So I think it's something to be aware of. We normally have lower levels of debt than we've had the last ten years. Well, does that make it more concerning if there were to be an economic downturn or whether there were to be some shock to the you know,

economic system that then creates a crisis. UH debt does provide a lot of opportunity for UH businesses to innovate, for individuals to buy that home and send their kids off to college. But we have too high level of student debt, for instance, And yes, in downturns than debt cuts the other way, it's great on the upside, it's rough on the downside, Gary, I want to talk about the golden sex management. If you don't want to answer this, I understand that you may want to step aside here.

But you are one of the few people on the planet that have actually lived the shift from banking m and A over to thick over to trading and all. You're one of the very few people it's actually done with a lot of people blather about but then on the clue what they're talking about. How big a shift is from the smooth banking world over to rough and trumble trading where you could enjoy watching the bid walk

away in seconds. Well, there is a difference. I started in the merger and acquisition area at Coman Sacks and then I was honored to be asked to go over to the fixed income and currency trading. What do they take you into a room and say we've got bad news, Gar, How does that work? No? No, there was there was a time when, uh, there was. Some of us younger partners were asked, would we be willing to take the

risk and move around? But you're right, the time horizons are shorter a merger transaction you might be negotiating Vermonts and the markets move in seconds or nano seconds, and so um uh there is a different uh time horizon. Um. But the people that when I was there twenty plus years ago, the people on the trading side were excellent and they they allowed me to distill the modern the modest uproar of Mr Salomon taking over and he's not like those guys. How do you how do you distill

that well? In any firm, even if it's not a wall street, there's multiple cultures and in what you're highlighting is there's the trading culture and the banking culture, and sometimes it ebbs and flows. And even at Godman Sachs when I was there, it was initially the bankers John Weinberg, John Whitehead and led the firm, and then Bob Rubin and others who are excellent from the trading side, you know, ascended and and help lead the firm and guide the firm.

So it ebbs and flows. Gary Yes, I mentioned in the introduction your senior advisor and director at the m I T Media Lab. Plus you're a senior lecture at the Sloane School of Management at m i T. Your course, you teach a course on blockchain technology, is it standing room only? Sometimes it's blockchain and money money, and uh M I T community is very engaged in this subject.

Of course, it's M I T. And we're really trying to find ground truth how much of this technology that underlines bitcoin can really be used to change the world of finance or medical records or supply chains and in just quickly in the class, in the course that you teach, is there one thing you want or recommend that the students take away from so that they can further their understanding.

Because it's a topic with a lot of supposed experts, So I'm really trying to teach ground truths that they have critical reasoning skills to sort of separate the hype and the maximalists that say will solve every problem and say, well, how will this actually be applied, this database technology to move something of value money on the internet without a central bank or commercial bank. How how can that technology actually be used as a catalyst for change and ultimately

for them to be entrepreneurs and start their businesses. Um So critical reasoning skills. This has been wonderful. Thank you so much, Thank you so much for having me here. Wide ranging. I thought he was gonna say that the blockchain technology makes it easier for the money to leave Tom Keane's pocket and got over the blood chain. We want to protect Tom. No, it'll be it's a huge debate,

won't Gary Gunster, Thank you so much. I know you're off to you now here at Bloomer the former chairing of the CFTC, among other duties, and of course this public service to the Nation and Treasury a few years ago. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.