Volcker Rule Is Cumbersome, Goldman Sachs CEO Blankfein Says

down in flames, is now at Credit Squeeze. He's had a global quantitative equity research and really has major credit out of Chicago. In the Greek letters and trying to figure out in this quiet time of low volatility, want to do? Joining us well, taking notes, Gabrielle Santos of JP Morgan, Matt, wonderful to have you with us here this morning. I wanted to a look back of ten years. We all read Fooled by Randomness, We read this that other quantz stuff. I think of ken Osban and binomial

clouds and Bob dot dot. Have we learned anything? Are we any smarter ten years down the road than the quants were ten years ago or a lot smarter today than we were ten years ago. Um, we're really now, I would kind of say, almost in quant three point oh, where ten years ago we were really at the end of quant one point Um. We've learned a lot more about how to get out of each other's way, We've learned a lot about trading, We've learned really what other

people know U and really have. The world has become so much more digitalized every day. Uh, and so just the levels of data that we have, machines that are at our at our fingertips are just so much more powerful. Um that we've just made a lot of advance. Whether it's seven or or two thousand seven, it's about blown up certitude of hedges or arbitrage, or I've got a constructed trade that blows up, maybe it's leverage or whatever. What is the constructive trade of two thousand and seventeen

that worries you? What worries me is um one. There's just been a a rush into quant and there's almost been a little bit of a mania on the belief that of what machine learnings can do, can can do for you, uh, and what what it's capable of. I think we need to take a step back and really think about where we are and what it can do

and can't do. Full editorial agree with that statement, and you see the FT article today which really shows the wall of money going into your world not seeing till Eban is anti fragile, talks about stressing and testing the system, about robustness found through small failures. Are we there yet? Are we more anti fragile where you've got a greater

confidence in the system. I think that what we've really learned was what I learned the first day in my class at the University of Chicago, where Eugene fam I kind of came in and said, everything I'm going to teach you is long. It's a model, right, and we know it's a model, it's not reality. And I think that most quants are very careful now to understand where

their models fail. What I worries me is that that becomes a lot harder when you get into the deep learning machines UH and artificial intelligence to really understand what your machines don't know. If you don't really know what your machines are doing and how they're doing it. And I think those are the kind of systematic failures that worry me, Matthew, where do you think the next financial

crisis will come from? What worries me most about that is that we've been in an area an era of very low volatility UH and in an era of particularly low dispersion across returns, which is different than volatility. General volatility can be driven by macro events UH, and so you can see the VIX spike on macro news, but all stocks may or may not move together at that point.

What's really remarkable about this time is that we've seen very low dispersion across returns idiosyncratic news as we kind of call it, an individual stock specific news, Those features are very low, and so that, more than the VIX being low, is what I think leads people towards leverage UM. And so what we really need to see is um for some kind of orderly pick up in dispersion across returns. Matthew.

What I'm trying to get at, right is that you're saying that quants are more careful now, so that they learned things in terms of models that they look and the analysis that they're going through because of financial crisis. But what if we had a financial crisis or a crisis that came from something that we had to even thought about. What does that mean for your models, the

quants models? It means something bad for everybody's models. Uh. You know, if there's something that none of us can foresee, of course your quant models aren't going to look at it, and of course your fundamental analysts aren't going to get it. It's bad for everybody. Okay, this is this is really important. Man.

If you bring up this chart, this is where Gabriel Santos is living every day, and the low of the quiet, you can look at any sset classes happens to be the VIX and the quiet down to nine point nine eight right now on the VIX. Is it harder for you to have certitude about fancy quant systems given dampen volatility in that all of these you know, the media talks about them's linear functions and straight lines and you

and I know they're not. Is there almost a risk of a convexity an acceleration of outcomes and bad outcomes because of where the VIX is right now? You know, the VIX is very important to look at um and to understand volatility, but it doesn't measure the volatility that concerns quants the most, which is that we want to look at the dispersion among returns. So if everything is

moving together exactly, that makes it very hard. That's different than time series volatility or macro shock volatility, and um, so I'm less concerned with macro shock volatility, but I'm really concerned about if you have a huge dispersion for some reason that was to kick up in across returns. Okay, well, one one final question on this. We're gonna geek out here on the back end of the time series function as an epsilon. Gabriella learning this in Pennsylvania. Some of

them struggle through it with the CEF. Hey on the back end of a linear function. Thank you. James Hamilton out at San Diego. Is this epsilon? Do you have a clue or does she have a clue, or does Jamie Diamond have a clue? Or Nil saus have a clue where the epsilon is in this system? Today? You know, we do have some clues on where the epsilons are. Um. If you're a good quant you are stressing your models all the time exactly, and you're trying to understand what

doesn't what don't you know? Uh? And that is what is most dangerous. Uh. And that's true whether your quant or not. Now take the brilliance of this gabriella over to your world. You have to explain to pools of money, the Rothman world. How do you take his world over to mom and pop with a pot of money or

an institution with a pot of money. So a couple of the concepts we were discussed saying, first of all, in terms of all until day, that's a conversation we've been having a lot with, as you called the mom and pop Inbustorum. Our view on low volatility um is that this is a very different world than it's been for the last six years. Volatility in terms of economic data is much lower than it used to be. You now have a much better, much more solid global economy,

and the volatility and earnings has improved as well. So we would this low volatility to us makes sense and that's something we've been trying to explain to our investors. Okay,

this has been fabulous. We're gonna put this conversation with Miss Santos and Dr Rothman out on iTunes on the podcast today this is extraordinary, and I'll throw some books out on social media as well to keep up, including Sheldon Atenberg's classic on the Greek letter, James David's uh, among other things, was an admiral in the Navy, and like all people going up the food chain, he even spoke to marines, having forbid on destroyers, on aircraft carriers,

and even spoke to other parts of our military operations. UH. Mrs de Retus has moved on to international relations at the Fletcher School of Tuft University. His book, The Leader's Bookshelf. The Leader's Bookshelf is my book of the summer. I can't say enough about it. Is just absolutely spectacular, giving you a wide set of books. Admiral, good morning, great,

it's going very good. In the back of The Leader's Bookshelf, you spend more time on a general from Brighton, Massachusetts than anybody in your book, maybe with the possible exception of Maddis, but there's a beautiful point there where you have Kelly of Boston and Maddis with seven hundred or three thousand books in their library. General Kelly is a leader. The president is not. What will General Kelly teach the

president of the United States. Well, going back to the book, the Leader's Bookshelf, I would suggest that John Kelly pulled the book out and talked to the President about three books that are in there. One is by his National Security advisor, General H. R. McMaster. It's General Election and Duty, and I think Kelly needs to say to the president, Mr President, my intention is to speak truth to your power, as the Joint chiefs of Staff did not do during

the war in Vietnam. The second one is Doris Kearns Goodwin's Team of Rivals and the idea that we can have rivals in this White House, but at the end of the day, it has to be a team, not just a team of rivals. And then thirdly, I think the book that uh Donald Trump ought to read is, and this may surprise you a Connecticut Yankee and Keen Arthur's Court for Innovation for Change, because he's got to change the way he's doing business at this point. Now.

General Kelly, even with all of his characteristics, may not be able to get the President to read those books, but he can talk to him about them. He can drive on those principles and hope to bring some order out of chaos in the White House alongside Ivanka Trump has been quoted as saying she's thrilled to be alongside the marine general. Tell me about command and control in the world is of Rita's or Kelly? What does that actually mean? When the media talks about general's coming in

with command and control, translate that. So when I was the Supreme Alley Commander of NATO, I had control of hundreds of thousands of forces. And the one thing you learn early on in a military career is that there can be only one chief of staff. My chief of step by the way, Tom was a German four star general, and you haven't seen order and discipline that you've seen that German general as a chief of staff. Um. And

I think John Kelly knows this equally well. He was commander of Southern Command while I was over there in Europe, and he will seek to drive home the principle that no one stands alongside the chief of staff. That just doesn't work, and we saw it blow up already with the previous ban and arrangement. There's only one way to run the staff and a book Bonka. Trump wants to be on the staff and not just be an exocicio adviser.

That's a different role. But if she wants to be on the staff, she reports to the key word here chief of Staff, and well Strees, let me ask you a question here about how you might approach this job. Something that's been highlighted here in recent days is that John Kelly doesn't have a whole lot of experience dealing with Congress. A lot of what the chief of Staff does is finesse the president's agenda with the legislative agenda

on Capitol Hill. If you were in his shoes, how would you foster or build that relationship or better that relationship between the White House and the Congress. Great point, David um One. A little notice thing about John Kelly I'll add to the conversation is that he spent two years on Capitol Hill as a one star Marine general in charge of the U. S. Marine Corps relationships with the Congress. So he has traveled, he has interacted. He is well known up there, not as a political figure

but as a military figure. So the key for him, Your point is that he has to be able to translate his previous role on Capitol Hill of representing Marine Corps to now representing the President of the United States and the executive branch. He needs to talk to the people on the hill, use the personal relationships he has, but convinced them that he can make that transition, and I think he can. I interviewed him shortly after he became the Secretary of the Department of Homeland Security, and

I was struck by his sense of duty. He told me that he hadn't met the president before their first meeting after Donald Trump had been elected president. He was asked to do the job right after that. As I said, a real sense of duty evaded his conversation about what led him to take that that job. From your your relationship with him, knowing him, help us understand why he

would take this job. This seems like a real dog's dinner in a way to become White House Chief of Staff at this point, Uh, well, I know John Kelly for over four years. We were a young lieutenants banging around on Carrier Forestall back in the late seventies. Um, and he is all about dude. He comes out of a tough neighborhood in Boston, where you stand with your friends, you work for someone, it matters. The relationships you have are who you are. So it is a dog's breakfast

for him to shift the meal time slightly. And I think that that General Kelly took the job because he thinks he can help the country move forward. His whole life has been about that. Well. I agree with that on duty and of course you know some of the critics have said the president was born on third base. General Kelly was out of the grand stand as the chief seats of fenwayn park Um on page one of your book, and again, folks, the leader's bookshelf my book

of the summer. I'd also note that Stravidez doesn't stop writing every day see powers jaw dropping view of our oceans as well. But Admiral, you've got the chief of Staff of the Army or Di Naro writing about George Marshall, who is of generation before us, their hero. And one of the features here is speak your mind, George Marshall on speak your mind. How does anyone thought, as someone with a charm of General Kelly actually sit the commander in chief down and go, no, sir, this is how

we do it. Can you envision that's going to occur? I do Tom, and he'll do it exactly the way you just said. It, but he'll do it privately. It will not be leaked. You and I aren't going to be talking about the details of those conversations. And I think General Kelly will establish rapport with the President that allows him to uh take the bark off the tree, as don rumsfl calls it, and really have that conversation. If he does, he'll succeed. If he cannot do that,

he will fail. And I'd say there's a better than even chance that he'll succeed, but not much over a better than even chance. Let me get you to react to the announcement that was made on Twitter last last week, a policy announcement from the President. Tom and I were on areas. These three tweets came out of the President saying that the transgender individuals will not be allowed to

serve in any capacity in the US military. I wonder if you could just react to how that announcement was handed down and if you were a commander at this point, what you would make of of of that directive communicated in three three tweets of a hundred forty characters each. Yeah, I think it would be extremely charitable to call it a policy at all that Um, they really was a

series of disconnected tweets. You've watched both the uniform military in the Department of Defense effectively walk away from it, uh and say, hey, if you are transgender and you are an active duty you're gonna continue serving until the policy actually changes. It's a pretty good example of why Jim Maddis took the right course of action when confronted

with a set of decisions. And these are decisions that have to be made about whether we perform surgeries, whether we take people as they are, what what are the specifics of this? And General Man has said, look, I need six months to figure this out. He's in the middle of doing that. So for the president to try and pre empt something uh, this sensitive makes no sense. And I think, frankly, those tweets have been relegated to the tweet bin of history at this point. And you're

going to see the military. You're gonna see the military figure it outcome to the president regular order, make a recommendation, then we'll have a policy going forward. That's how you do business. And James Travites of course at Toughs the Fletcher School. His new book is Seapower History and Geopolitics of the World Oceans. The opening of it is absolutely spectacular. Young stevidies translating tweets on the deck of the destroyers. It goes out of San Diego Harbor, and he had

to take his dramam me no, I'm kidding. Anyways, Stevinus will be with us the Seed Powers, wonderful new book, a surprising book on our oceans, and of course the Leader's Bookshop. We will continue where the Admiral Strevinus much more, of course, on international relations and your Washington. This is Bloomberg yesterday afternoon, animal Stevidus. So we had a moment in foggy Bottom we haven't had in a while. The Secretary State waltzed out to a podium and spoke to

reporters for a pretty extended period of time. He marked at the end of six months in that office. And one of the things that he talked about was the U s relationship with Russia. And he said that he talked to President Putin and to Sergei Lavrov, the Ford Minister, recently, and told him that while the relationship is bad between

the US and Russia, indeed it could get worse. The Secretary State scheduled to meet with Mr laugh Rov in Manila, I believe later this week give us your sense of the state of this relationship now and your prescription for what Secretary Tylorson could do to mend things a little bit here going forward. First of all, it's good to see the Secretary out and about and actually conducting some public diplomacy. He needs to do a lot more of

that than he has been, and that's salutary. In terms of the relationship with Russia, David and Tom were at the lowest point since the end of the Cold War. I'd say that we have still some further bottom below us, however, and what we need to be doing is confronting Russia where we have to things like Syria where they support a brutal dictator, Ukraine where they've annexed Crimea, the cyber

intrusions above all into our own electoral process. We have to confront where we must, but we should cooperate where we can. We have to look for some zones of cooperation. At the moment there are few and far between. But if I were the Secretarian State, I would put cooperation in Afghanistan, cooperation in the Arctic, cooperational counter terrorism and cooperation and counter narcotics at the top of my list.

So you can at least keep a dialogue open confront where you must cooperate where you can and over time, let's hope that this Russian investigation is completed. We need to get that behind us, find out what happened, respond to it before we can really repair this relationship. We had news at the beginning of the week here Russia expelling or requesting that two thirds of our diplomatic staff

in Russia leave that country. Aside from the symbolism of that, and sure enough there there, there is a lot of it there. What are the consequences of that, This this back and forth with regard to diplomatic personnel, it will further degrade relations between the countries. It's unfortunate that it occurs just as we begin to move our new ambassador to Russia, very competent uh individual John hunt Smun, former governor,

former ambassador to China. Uh. He's moving towards Moscow now, but he'll arrive with a gutted staff and that he's going to create real challenges for him as he tries to get his teat on the ground. Top. We could talk for three hours this morning, Ed, Well, let me ask you about David and Nish's the Washington Post this morning with just a scathing and interesting and smart op ed on China. He talks about how the Secretary of

Commerce has been humiliated by the White House. The White House was strong, harsh language, untraded on sanctions, and then the Secretary of Defense has to deal with the same dialogue of threats to the Korean How does a pro like you synthesize the bellicost nature of a White House

that even defeats two visible and principal cabinet officers. But I'm really worried about with China, Tom, The big prize in this uh, in this relationship between the United States and China, is the South China Sea, which is full of hydrocarbons, which is the one piece of the puzzle China doesn't happen. They don't have oil, they don't have natural gas. They want control of those shipping lanes. This is a vast body of water size in the Gulf of Mexico, and we're gonna twist and turn over it.

In this relationship, the White House has got to construct a fundamental strategy for how we're going to approach China because China is playing the long game and they're gonna say quickly if we don't map, does this start with the Philippines? I mean, how do you how do you develop a dialogue with the Philippines? And Mr Doutarte I would put Mr to Turk in the ice box at the moment. We're just not going to get anywhere with

the Filipines while he's there. We ought to be focused instead on Vietnam and Malaysia, the two other principal name around that about China Sea never enough time. Thank you so much. I can't say enough about his two books see Power on Your Oceans. It is illuminating in my book of the Summer by James te Vitas and Manning Ansel, The Leader's Bookshelf. I just rave about it. It's just a fabulous, fabulous book. Throw it at every single board kid at home and say shut up and read some

of the books in this book. That's what John Tucker did this summer with his kids. My colleague Alex Steel

sitting down with Lloyd blank Find and Michael Bloomberg. Here is Alex, Lloyd tell us why we're here in Baltimore today, we're here in Baltimore to um to attend a graduation of our first cohorts in our program ten thousand Small Businesses, which is something which is a program that educates kind of a mini n b A, if you will, for established but established small business people who are in the threshold who have the potential for explosive growth, and we

provide a lot of education, mentor ship in some cases financing to get them over that hump and to have them grow and then to hire people to get on that virtuous cycle of more hiring, more employment. Therefore more small businessmen get their products bought, etcetera, etcetera. So you know, it's uh, it's the example of a program that we've done in fourteen other cities around the country and it's

been very successful for us graduates. But for the first time, Mike Bloomberg Philanthropies and Goldman is going to usher another ten million dollars to the fund really to promote in Baltimore. If you had this when you were starting out, what would that have been like for you? Well, I might have been success. Might have been success. I mean, you know, I got ganging at Solomon Brothers. But funny thing we're doing, we're copying to some extent Goldman's ten thousand Small Businesses

with Mayors. So we've had a bunch of program program where we bring in mayors and train them. We do it joint with Harvard University. The Case School and the b School helped train In the end, it's management that makes these organizations work. Whether it's a company or a uh government or even your family. Somebody has to be in charge and know how to bring people and make them work together and bring them along and train them.

But small businesses. The ten Small Businesses reaches out to people who have already started their business and now they've got something going now they need some management training and Bloomber Philanthropies is happy to partner with them. But we're also doing it for cities may as who have already been elected and giving them the management skills. Lloyd, you obviously run an enormous company, but for a small business, what's the hardest part for them? Now? Some of that

is very similar. I mean we're all wrestling around with regulation, anxiety about whether an investment will be back over time. Um, you know what the economic climate is going to be, The risk that you take limitation of resources. I mean, do you have the bandwidth, do you have enough people can to help you manage a bigger enterprise than what you have? What are the consequences of it not working out? Uh?

The only problem is is for a small business person, all that's magnified that in many cases it's you, maybe you and your immediate family, maybe you and your immediate family and three employees or ten employees, and so the consequence is a much more dramatic and you know something, at the end of the day, Goldman Sachs has departments to deal with regulation, to deal with planning, to deal with assessing the investment return on a capital good that we buy. But in a small business, uh, you don't

have that. And so what we are trying to do is we're trying to give people, um, the the information lessons you know, we have on the various segments that we bring people through. We have things on business planning, negotiations, strategy, how to negotiate with a bank for financing, how to estimate the return profile of an investment that you make in your business, and Uh, but what one thing we

do start out with these are fabulous people. We're already keep it with taking people, as Mike has alluded to, who are already somewhat successful in their business. Their commitment is established, their ambition is establishment. The capable that he has established there on the threshold possibly of a breakout, and that really is a sweet spot for growth relative to the investment you put in by getting them over

that hump. In addition to everything else, I think we give them, we give them confidence in who they already are and what they've already accomplished. And part of that confidence, Mike obviously comes from that support, but also it comes from visibility in the economy, and right now that feels like visibility in d C. And the story that we continually here is that nothing's gonna get done, no change is going to happen. Is that the correct story? Well,

I don't know what the future is gonna hold. The Trump administration has only been in office for six months. I've always thought that what Trump should focus on is building a team. He's been struggling to do that. But he'll eventually get it right, I think, and I hope the country needs that. But the bottom line is it's small businesses. They're creating most of the job growth in the country. Big businesses are doing okay. The economy is

better than most people thought. The stock market certainly seems to like what's going on. But the future of this country is to create small businesses that will take people from the old industries that will eventually downsize and maybe even disappear as taste change, technology changes, the marketplace changes, and this is where the next group of big businesses will come from. They start out small with somebody that's

got an entrepreneurial spirit. At that point, if Golden Stacks steps in or others and gives them some of the management skills, they can keep growing. And the transition from doing it all yourself to learning how to delegate and bring in other people is the toughest thing for small businesses to do. Giving up some control and return for a depth of bench if you will to continue to grow. That's what Golden Stacks ten small businesses can really do.

And Blomberg Philanthropies with them and similar program keeps saying with the mayors and Lloyd, you touched on the other part of it, and that's regulation, like give a whole department as scared towards that a small business doesn't really have that opportunity. Um, what going to be the easiest part of regulation that you feel like would be material

for growth and for woman. Well, I think, um, you know the one thing that that you know people are talking about, you know, the administration where they're going to get things, and you know there's some things that are already getting done that you have to say, which is that there's a bit of a change in sentiment and attitude. And I think the way rules are implemented, the attitude of the new new class of regulators that are coming in.

And again we operate obviously in the financial services, but where you know, we're big corporate advisor, re business and M and A and so we get involved in every industry, and every industry is regulated and tell you the truth, in this day a lot more highly regulated than they had been. So I would say that a almost an instantaneous thing which doesn't need Senator approved in some cases doesn't need approval, uh some case it does, but certainly

doesn't need legislation. Is just the way regulations are implement existing laws are implemented, and the attitude towards it. And I think we're I think we're already witnessing in some of these industries a changing sentiment. What I find fascinating his Goldman Sex big company known for being aggressive, phenomenally profitable, successful firm with a great history, go back a long ways,

and they're focusing on the next generation small businesses. And you can say, what do they have, what do they know about small businesses? Because all businesses, like all cities, are the same. People need respect and recognition. They need to have a product that people want, whether it's a service or something that physically you can touch. They need to be able to adjust as the world changes and

we want to create jobs. And so what I find fascinating is Goldman's taking all of their resources or some of them and working on the next generation's problem because some of those cut those ten thousand small businesses someday will be Goldman customers. The making an investment in the future, which is great for the country. Yeah, there's a lot of big business goes you have to keep growing in where to make those. But I you just elaborate a bit.

It is no thought. I mean, these are very small businesses, were very institutional firm. A lot of the impetus for us is to have and demonstrate on a human scale what we do on an institutional scale. You know, everybody who goes you know, if you go into pharmaceuticals, you really want to find cures for things. If you are in Manufet, you know, people have an ethic and a narrative and a sense of purpose that goes beyond making

a living. And you know, people in our industry also we believe in capitalism and the capital markets, in growth that gets created by finding capital for entrepreneurs, and the virtuous circle of people making money and then paying families and they in turn by products from others and spawn

new entrepreneurs. And we believe in that, and sometimes in our business we can lose sight of the human element of that because we operate on such a government or big corporate or big institutional level that you that you don't see the human scale of things. And what makes it so attractive in our firm is not that thirty years from now someone might grow and become a customer. What makes it is that becomes a validation a really our purpose in life, other than the mere fact that

we make a good living doing what we do. We really believe, you know, you could do philanthropy and write a check and you better write that check every year. If it's strictly philanthropy. If you invest in somebody and you build a business and that is endors and survives and grow, it's not only good for that family that has that business, but also the families getting employed about that.

And that's the virtuous circle that we believe operates at a huge scale across the country, but we get to see it on a human scale in our ten thousand small Business program. I'd like to welcome our TV and radio viewers. We're here at the Baltimore Center stage with Mike Bloomberg and the CEO of Goldman Sax, Floyd blank Find. I want to stay in Washington for two seconds. Uh. First,

is the Vocal Well talking about regulation? Lloyd, we heard that the Office of the Controller of the Currency is now starting the official process where companies like you can go and comment of what you want to see rolled back. Can you help quantify what the Vocal Rule did like with if it was still not in place, what your profits would be like what you want to roll back there? Well, I'd say with the Vocal Rule, look when they were when they were trying to when they were going through

financial um, financial regulation you could have. You know, you could regulate the amount of capital. You can regulate processes, you can regulate leverage, you can regulate, and you can regulate activities. Um, you can do this transaction. You can't do that kind of a transaction. What the vocal rule did was it imposed a little bit of a state of mind test. You can do. You could take positions, but they wanted to. They wanted to damp down speculation.

But the line between speculation, which has a word thinks very easily that we should all back off of, and market making facility hating other people's trading. Taking the other side of what your client wants to do is also a risk taking principal activity, and the line between the two is very blurry and indistinct. But with the vocal rule basically says, in effect, if you are taking positions, points of view in anticipation or in connection with a

specific client operation, that's good. If you're doing it away from that specific it's not good. But if you're a market maker sitting in a desk, it's very hard to know where that distinction is. Because what really makes a market is a million people all at the same time buying and selling because someone thinks it's going to go down, someone thinks it's going to go up, and then clients are join that kind of moving sidewalk that's called a market.

And really in practice it's been very cumbersome, very hard to do, makes people who sit on trading desks very very nervous. And I think what it's done is it's real put had a dampening effect on liquidity uh in the marketplace. And I think the regulators appreciate by the way, the regulators didn't cause that. The regulators were filling in the regulations of statutes. But I think, um, I think now that it's been in place for a while and they see how it operates, I think there's a consensus

it has to be re examining. You know, what we have in this country as a problem with employment. We want to create jobs. If you want to create jobs, you have to have banks that have money to invest. Banks make money by taking risk. Now nobody wants speculation. As Lloyd points out, it's very hard to tell the difference between investment and speculation. After the facts, you can

look back. If it didn't work, it was speculation, If it did work, it was But but nobody knows in advance what to do, and so what we want to do is make sure that the industry can't get in trouble the way it did back eight years ago. But nevertheless, it doesn't pull back and stop taking the risks that would generate the capital that let us expand our economy, give everybody the ability to feed their family, give create moneys for curing diseases and advancing art and all of

those things that we want. And whether or not this piece of regulation goes too far, that's Lloyd's express. Some of the rules is so obscure it has killing effect on activity. So we have a couple more minutes left, So Lloyd, I want to ask you a question about Goldman Sack specific business. Uh. The question after the quarter was your FICK business? How can something not be wrong with Fick at the last two quarters, Well, we didn't make as much money, so that was that was that

was wrong. First of all, we have many you know we have we're diversified business group, and everyone performed very well, so well that we actually did well as a firm. Are are we return on equity is doubled? Is still for the six months double digit? Are we that being said, we didn't perform well. And thick thick is a risk business. We don't always perform well. That being said, other people who are other firms, who are operating the same environment did better than us, and so we are on the

balls of our feet. You know, we're of course concerned about it. In my thirty five years doing this, they've been long. They've been periods long, a lot longer than this period where we've underperformed only to outperform. It's been very, very newsworthy. Not because we're a chronic underperformer, but because we've been a chronic outperformer. That being said, we underperformed. We know, we know what we have to do and

we're doing it. And it's a big it's a it's it's an execution matter for us, and guess what, that's what we do. So execution seems to me like it's cyclical. There are many saying that there's a structural or problem in that the commodities business because a lot of the other guys dumped. There's you've stood by yours, uh and

you have to rethink that view. Now, well, we've all cut back a lot because we had to meet the environment but the fact of the matter is if we were simply bigger and had more invest in more assets, we would have made more money. That's why I tell you it's an execution issue because as we should have, the expectation is we would do better because historically we have and we really haven't. And we know there's several reasons in retrospect that we can look at and say, gee,

we may have slipped up. We tend to be overly weighted in our business to a client base, which is a terrific lient base, which will never abandon, but we're disproportionately involved in trading kind of clients who trade a lot, let's say, hedge funds and other things. Again, we're an investment bank, the more corporate banks tend and I have much more business with corporates and others. That's something that we should fix. You shouldn't have let it get that disproportionate,

but we did. We'll fix it. Some of the products we tend to focus on. We are in the commodities business. Commodities has been in recession, and very few of the other banks that are compared to us are in that business. Well, if you look out and about and you look at other firms that transacting commodities, commodity firms, oil companies that's been in a bit of a recession. That's a cyclical matter.

Do I think that oil is always going to be this price and within three dollars of this price for a long time and then it's no, I don't think so. But still you have to scale it to the environment that we're in. So whether it's the you know, the kinds of things that we trade, we have to focus on. Whether it's the people we serve. We should be serving

everybody and not a disproportionately more focused base. And we're working on it, but I'll tell you we've been I can't say that we're right all the time because we're obviously not um, but I will tell you we have a good reputation for resilience and adaptation, and that really is our core UH skill set. The markets are always changing, but never that dramatically. I've been watching Goldman Sex since I came to New York in nineteen sixty six, where they offered my first job and instead I went to

Solomon Brothers. This is a firm that has changed with the times, has certainly been down years there's up years and that sort of thing, but they're still around. And if you go back and look at the list of companies that were in this business in nineties, six of them have gone, so I mean about one quarter right there. He's terrific. True. No, but also you know you sit here. I mean, look, I've gone through the like Jamie Diamond on the taping mark, and that's gonna happen through the

financial this is we're sitting here with you again. For the year so far, double digit. Are we investment, you know, merging and acquisitions number one doing great. Inequities are investing businesses are doing great. Our asset management business and a slow time for for active managers is growing assets consistently. There's a ton of things. Everything is going well. But but but I do agree that believe me, I'm not. I'm not, you know, none of us are hysterical about this,

but we're focused on it. And I'm sure you're going to tell him that the solution to his problem to fix what terminals, more terminals and more other services from Bloomberg. It's more terms. Well, obviously that's the number one. But to wrap up really quickly. Part of the reason also as you wind up seeing a lot of Goldman employees now in d C. I'm not gonna ask Lloyd that, but Mike, I wanted to get your take on if you did. Gary Cohen at the Fed, Steve Manutian in there.

Is that a good thing for you? Do you like to see the Wall streeters doing that? Jerry Cohen I know very well. He's a very confident guy. Steve Manuchan I met once or twice. His father used to be a good friend of mine when he was a competitor at Goldman. The fact that Goldman has these people that government keeps wanting to take says something about the kind of people that Goldman hires and the kind of people

and what they learn at Goldman. And a lot of them have records if you go back particular and financial side. That is really impressive of these people. Goldman alumni who have done enormous things for this country, including incidentally Paulson and Steele when they went and bailed out the country and the crisis. That has an awful lot to be proud of of what they've done to this Let me, you didn't ask me, but I'll say I'm enormously proud of the Goldman people that went in there. I think

they're very, very capable, very capable, um and UM. I think they've done that at an enormous personal sacrifice to themselves and we should. You know, I support them totally, and you know, we miss them, but they're doing a lot for us because of what they're doing for the country. 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 Keene David Gura.

Is that David Gura before the podcast? You can always catch us worldwide. I'm Bloomberg Radio.