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Now I want to take you over to the Economic Club of Washington, where I'm pleased to say that David Rubinstein, the Carlisle co founder and host of Pets to Pair Conversations on bloombag TV, is joined by good front of this program. The Banks America CEO Brian moynihan.
Let's take a listen. There's a lot of burden upon the banking system to both report suspicious activity reports and do a lot of analysis, and we have to close accounts. We can't tell people why we did it, and often we're told by authorities to close accounts. That creates confusion. Another area comes up in this discussions in a crypto area were the regulator said you can't bank crypto operating companies, employees of crypto companies, etc. We are allowed to do
We bank everybody but the operating company. They said, that's a high risk activity. Ask us for authority and guess what, you would have never gotten the authorities. So that came up as issue. So at the end of the day, it's about getting these regulations right now. I think it opens a dialogue about how to get these regulations correct, and the end of the day, we were open for everybody. We serve millions and millions of Americans trallions and transactions a year, and we continue to do so.
Okay. So when this administration was elected, there was a lot of i would say, jubilation in the streets the banking where all people thought that the banking regulation had been too tough. Under President Biden, some people thought that regulation would be more amenable to banks. Has that turned out to be the case, shat, or it's still too early to know, and is the Banking Committee happy with the direction that the current administration is going, or you just don't know yet.
So you have to start people sort of step back and say the regulation, the regulation of banking has been always been true since our charter or was part of a bank was some seventeen eighty four. So we've been regulated from that day forward. If you think about the Great Financial Crisis and Dodd Frank and a lot of capital rules and quite rules and all that stay came in, there was a reason for the world wh at large really not happy with banks in a way, and non
banks that became banks. Golden sax Morgan, Stanley, MARYLANDT cetera. So you could understand that when you go fast forward through the fifteen years hence plus, you go through the pandemic and the banking system stands up and stabilizes the economy. You go through the regional banking crisis, the banking system steps up and stabilize it, and they keep adding capital and LIQUIDI you're sort of saying, wait a second. You know,
we are a source of strength. And by the way, the American bank industry is really a source of strength. So the penlan kept just swinging even though the reason why it had swung had stopped. And so our industry was say, wait a second, why are we have twenty percent more capital and we did during the pandemic. The risk is the same. It's just by mathematical creep of calculations.
Why are you saying we're going to limit your fees charged for certain activity or demon activity alone when it wasn't alone, and with one hundred years of history saying an overdraft is alone, somebody just says, I want to make it alone. And so this idea of the regulators sort of imposing new rules and regulations that Congress did not intend actually was kind of an interesting question, right.
So many people when they talk about the Federal Reserve, they wonder whether the Fed are going to increase interest rates or decrease interest rates. But in the banking community, you're often worried about.
The stress tests.
And do you think the FED has pushed stress tests to two tough a limit on banks? Or are you okay with the current stress tests?
It's so the stress tests are publicly available were I think the first one was twenty ten and then picked up an earnest eleven or twelve, and so every year you can see this report card in the bank industry's health, and every year the bank industry has great health. But the issue we got in the bank industry ended up suing the FED was behind the scenes that the rules
kept changing the test. So if you think of the last four or five years, you had volatility and capital requirements that were went from fifties seventy five basis points up and down a year with basically tests that said ten percent employment, fifty downturn in the equity markets, thirty percent drop in housing, thirty to forty percent drop in commercial real estate. Uh, you know, high yield spreads blowed
out by a thousand two thousand basis points. Whatever it was, you look at all it the same test produced as different results. It didn't make sense. So behind the scenes, the transparency wasn't there, and that's what we end up suing them on. So the stress tests are a very good thing. Frankly gives us state of health for thirty one banks, which cover most the industry. The way the
United States run was far superior. We do stress tests every quarter, multiple scenarios, and you know, our trading book is stressed every day. So if you think about it's a good thing, it's just behind the scenes. What was happening is that dials were being turned on us and the numbers were becoming irrational to the market, and we have investors and we have to raise capital and have capital available for the industry.
So there was somebody there's a vice chairman of the Federal Reserve who's in charge of regulating the banks and so forth. That person has given up that position recently, and was that something in the banking community was happy with that he stepped aside or you didn't really care whether he stepped aside or not.
Well, at the end of the day, is I think he had a year left on his term in the new administrator president, who would point someone for that position. We'll get it today. We're as when people always ask me, do you have different approaches for different administrations, and you say, well, in the long term, we've been around since Washington was president. So if we geared ourselves up for this president, not that present, we'd have to change forty five times whatever
it is. And if you think even of in the form soil, think how many different prime ministers there's been in England or so even in my tenure CEO. So the end of the day, you run the company the right way, and what we're trying to say is get us to rationalatory structure that and have it stick to the ribs. If you keep swinging like this, our clients can't be it can't depend on us. When eighty is so, before.
The Great Recession, there were a number of large banks the United States and Europe and Asia. And now it seems as if the Great Recession and post COVID, the United States is dominating the global banking world. What happened to the European banks? So they're not really competing with you and JP Morgan and well as Fargo, as much as they used to. What happened What are the American banks doing that enabled them to become so much not so dominant in the banking world.
The American banking system is probably a story as much of American capitalism being successful because the odds the banks in the country, the banks in the country, or the banks represent the size, scale, and scope in the vibrancy
of that economy. So what happened from pre financial crisis now is at that time you and I have been sitting here talking about how China's economy is going to be bigger in the United States in the very like by now the European economy was as big and was going to outgrow the United States under the enthusiasms the U framework. And guess what were one and a half, one three quarters times the size economy back then? You're like point one or whatever it is. So we've outgrown.
That's part of the vibrancy. And frankly, dealing with the financial crisis, recapitalized industries, failing, a bunch of company industry participants, bringing people into the tent the right regulations, and then going forward. And so what's happened is Europe is not kind of crawled out economically. Therefore, the banking system has been hamstrung. At the same time.
Now you've been the CEO for fifteen years, and the bank has covercovered from a lot of problems that had when you took over. You've got a great career. Suppose the President of United States said next year, I need a new chairman of the Federal Reserve Board, and you've been running Bank of America. Why don't you come in and be chairman of the Federal Reserve Board. Your response would be.
I think, I say, talk to David Rubinston. I don't think so. I'm sorry. So our company an end of day. Yeah, I get up every morning and I've got teammates out here in the audience, and this team is unbelievable. And if you see what we do for a customer, and my emails and the public demand customers send me when we're doing great things for him, and when we're not doing great things for him, come directly to me. Nobody
reads about me. And so if you see what we can do for a company, for individual, you see the enthusiasm for young kid who's open an account, enthusiasm for the four or five thousand kids we hire between eighteen and twenty two that come into our company every year. The communities that we support, that just does a great job. And I love doing it as long as I'm healthy, as long as I have the energy, as long as you know, the team in the board support good.
So recently another banker you probably heard of, Jamie Diamond, and he testified on Capitol Hill that maybe the regulators and Congress should get together and say, let's just start afresh and take a look at all the banking regulations from a fresh perspective, building from scratch. Do you have a comment on that.
Is that a good idea or well, I think this spaghetti chart of overlap is a question. So it just take the Consumer Bureau. In two thousand ten U with Dot Frank ten or eleven, they set up the Consumer Bureau. The theory was that all the consumer regulatory activity would move to a new agency. Guess what, we still have the occ regulars Consumer Activity stud, the Federal Regulars Consumer Activity stud. The FDC will hit consumer activity on occasion, and you have the Consumer Bureau. And if you have
the FDIC as regular, you have the FDIC. So none of that happens, so you end up with another added regular it much like after nine eleven HIHS came in and it was supposed to swoop everything in and it
didn't quite happen that way. So I think you could start with a fresh sheet of paper recognizing that in UH, you know, the the National Banking Act in the eighteen hundreds, so whether the Federal Reserve Act and the FDIC Act in the thirties, the world has changed a lot since then, and so you know, the idea of national reglatory UH consolidation, even on a dynamic country like the United States, is probably more appropriate today than it was when you had
ten fifteen thousand banks, all the stry beat it all over and Tom Barkin's coming from the Richmond Fed. Tom is terrific, But there was a day when everything went on in Richmond and the Richmond Fed catchment basin was only there that day.
Is you're regulated by the Federal Reserve, the FDICE, the Comptrol of the Currency, and anybody else, the.
Consumer Bureau, the SEC, the CFTC. Then for this way, there's one hundred plus regulars in our building every day.
So do you spend a lot of time with the regulators or you try to avoid that.
I'd like to spend time when they're telling us we're doing good stuff, but no, I spent We all spent a lot of time on I great chief risk officer and Jeff Greener who organized that for the company. All my senior executives spend time with him, and look the day to day regulators are helped trying to help us be better, and we understand that we are on the road to perfection as a company. And fincel Party said you strive for perfection next since we found that's which
I do. If they've got ideas for all ears, simplifying the organization will allow frankly, cost to be taken out from the regatory side, and we pay fees to support it, and it wouldn't be the worst idea.
Now. When interest rates go up, the theory is that banks can charge more for loans and therefore their more profitable. And banks have been very profitable in recent years. When interest rates go down, is that a concern to banks because you're less profitability or you really don't care well?
The toughest time to be a bank with a trillion two trillion dollars deposits is when interest rates are zero because we have we can't charge people to store their money. It's it's we're not like a self storage unit or something like that. So the end day you have a floor on interest rates, and so when interestrates came down, you start squeezing margins. So the loan rates came down,
but the deposit rates have a zero floor. When rates move up, that changes and so the zero just checking accounts, all that stuff become worth more and the loan rates go up. So as long as the rate structure is more normal, and you know, anybody there in the age of forty has never seen a real rate structure except for like right now. Yeah, they're they're if the probably a little older than that now. And so the idea of a three percent fed fund rate isn't high rates,
it's the usual rate. In fact, on the lower side, a four and a half percent tenure the usual rate. And so in that environment banks will make money. But the end of the day, the NETS's margin, which is the difference between what we lend at and what we pay for funds, tends to run two hundred and fifty basis points in that benefit goes back to the depositor side and to the debtholder side, and as rates go up and the ups and downs, it's just what hits
that floor. That margin got down to one fifty or something like.
That because interest rates come down, though you're not it's not going to affect your profitability, not a lot, because you have right So you don't want Jpale's job. It sounds like, but suppose he called you and said, should I increase interest rates? Decrease interest rates are holding the same? What would your advice be.
Our team right now is basically says there'll be no further rate cuts through their forecast period, which is this year next year. And they were one of the first people to pull that off the table, and they did because they said, inflation is coming down, but is a bigger fight. An there's the dual mandate, employment, inflation, employment. They're in great shape on inflation. It's been coming down, it's working this way down. It takes multiple years to
squeeze inflation out. They started in twenty two and so think of you know, twenty six is actually a normal period to squeeze it out. And there's a drag on economy today and so you're seeing economic growth from three percent in the last couple of quarters to two percent. We haven't moved down to two percent, so he shouldn't our expectations. They won't cut rates. I think we have the little rest of the year. Yeah, for the rest of the year, in the next year and frankly until inflations.
And okay, so let me ask you. The business that my firm has been in is private equity. But now private equy firms have become private credit firms as well. And private credit firms they lend money, but they're not regulated quite the way you are. So is that a source of concern that we can lend money and we're not as highly regulated as you are, and you're lending money but you're highly regulated, or you don't care about that.
You know, I think I care about your firm. But look in the private capital has grown because they can do something we can't. Along a couple dimensions. One is they can finance companies that may have more leverage, and we are basically stopped out at six times leverage. And that used to be a rule that it was taken back then it was a guidance and then it was like wait too, we examine you so and we do go above it for certain credits and stuff like that.
So that's one thing. The second thing is the ability to bring the whole capital structure, debt, equity, the mezzanine, whole nine yards. That's hard for a bank because we don't engage yet business. But on top of that, you know, we we have a trillion dollars a commercial loan commitments, a half a billion plus of drawing loans. We don't fear any competitor, and we work with those companies, including yours, to generate assets for them. But it's just a different style.
I think the world should be concerned and make sure that those enterprises making loans to you know, billion dollar operating company have the ability to work with the times of stress. That that's going to be a interest question. We haven't gone through a stress period with this practice out there.
I think JP Morgan, maybe other banks. Maybe you have gone out and raised private credit funds that you can then lend out without the normal constraints that you have the money you have from the positors. Is that something you've done or you think it's a good idea.
We've created some some capacity. In the end, the credit we like we're willing to do is important as much as we can, so we have you know, we're dying for more loans. We have two trillion dollars of positive to trillion dollars loans. We're trying to do all the loans we think have good out of quality and so we don't feel this constraint.
Let's talk about in your background. I am an only child. You have how many siblings?
Seven?
Seven? So you know growing up with eight people in the family. Wasn't that crowd at a time?
Sir? I'm trying to think I didn't have I was set up to get my own bedroom for the first time in my life for my younger brother decided he wanted to move into the bedroom because he was scared to sleep alone. So I think I'm trying to think probably when I was in college, his first time I ever had a bedroom to myself. So yes, it was gad.
What did your father do to support eight children? Might see him private equity or something.
He was He was a research chemist for DuPont and so he spent his whole life on plastics. So the graduate, you know, plastics, young man, my dad was at you.
Know, he's so that's what he grew up in Ohio And then you went to college in the East Coast and at Brown. Yes, and you were the co captain of the rugby team.
Yes.
And do you still play rugby or not so much?
No, I don't play. I played rugby at Brown, I played rugby at law school, and I played rugby after. It's a great sport. Have never played it till I played it at college. It is, in a way the most intense. It looks like disorganization out there is extreme ill organized. But it's unique and that it's physical and tackling. You kick, you run. Everybody gets to handle the ball and you run for eighty minutes. And so it's a very demanding game. It was a lot of fun. Okay.
So now you are the chancellor of Brown University, which means the chairman of the board essentially. So how do you have time for that?
I've been on the board for fifteen years and at the end of the day, the chair of a board, Chris Packson runs university. Doesn't spectacular job. And our job is to govern and not you know.
So after you graduated from Brown, you went to law school Notre Dame. Yes, sir, and okay. And did you play rugby at Notre Dames? I did, okay. So then you went to practice law back in Rhode Island? Is that right? Why did you move back to Rhode Island? You're from Ohio, you went to Notre Dame and the Midwest. Why did you go back to Rhode Island.
Well, none of the Boston law firms would hire a person from not Dame law school, so I.
Had, you know, okay, it was, it was.
It's hard to believe, but literally I was the first lawyer hired by the firm and I'm from Notre Dame. And they did it more because I had the Brown you know connection stuff. But the big law firms in Boston, you know, just even with one of my teammates working there, founding John Theclair, they couldn't convince them to hire me. So I ended up with a great law firm and had a great short legal career there, and it didn't.
So I'm a big fan of people who are lawyers getting out of law and going into finance. So I can empathize with you. Okay, so you're practicing lawyer, minding your own business. I assume you're a good lawyer. What kind of were your corporate lawyer.
We had this instant when I came out. I've lost When I went to law school, I was going to be a criminal lawyer, because it was afinutely Bailey, it was the rock of the world at that point. And or I was going to be a labor lawyer. And then I went to law school, and I went to a firm, and oddly enough, you know, I went to law school. From eighty one to eighty four, there were no corporate lawyers in America because it was before the eighties took off, and after the seventies the activity died.
So I, being a person that is impatient life, I said, when I'd be a corporate lawyer, to much the scrint of the litigation lawyers and stuff. Who thought that I lost my bard? But so I became a corporate lawyer more by I could see the opportunity to get responsibility. And I did that for nine years and Praham a partner.
And now how did you escape from being a corporate lawyer? What did you do?
There's a fellow named one of my mentors is named Terry Murray, who ran Fleet and I did corporate law. A lot of work I did for Fleet and then Terry after we did a transaction called the Bank Canoeing and transaction with KKR put money into the bank industry, and we bought the Bank Aneing, And I mean you, Fleet bought the bankneeing And from the federal government in
the early nineties after the real estate crisis. I'd structured that deal in a way that I'd structured private equity deals for our bank private equity firm, which was a thing called dual convertible preferred stock converted into a parent company stock or bank stock, never been done in the public array. Terry said to the General Council, he's too smart to be a lawyer, which I never figured out
what the General Council thought about. He was a brilliant guy, and he said, get him in here and we'll figure out if he's gonna do something.
So he and I went to work at Fleet, which is headquartered in Rhode Island.
I just went to work for Fleet, and I was deputy general counsel for like three months and then went on a special project to re engineer the company, and I came.
In and Fleet ultimately merged with Bank Boston. And how did you survive?
That. Well, that was the last deal I did is I was a head of M and A and strategy and Terry Murray and Chad gift or put thing of that deal. And Chad took a liking to me.
I was acquired give who was ahead of Bank Boss.
It was acquired taste for Chad because I was in the middle of negotiating getting all the cost structure and getting the alignment, and I was meant to be the pain in the butt. And so Chad ultimately took a liking to me as a great mentor and said you got to run a business, and put me in running a business. And we were merging two companies together. And I survived and ran the wealth management business.
For if he ran the wealth management business for the combined Bank Boston Fleet and then Bank Boston Fleet combined company was sold to Bank of America.
In two thousand and three fall.
Yeah, and so how did you survive that one?
Well, they asked me to run the wealth management business and the combined companies, and I did that, and Ken Lewis wanted to integrate some of the people because the companies were maybe at sixty forty, but they're very sizeable companies, and so he was trying to get a manager team that represented both companies, and so Chad was chair and Ken for CEO, and I went and ran in the wealth management business of the combined company.
Right, But then you became the general counsel.
For four days for.
How long?
Forty days and forty nights.
All right, So we became the general counsel of the combined Bank of America.
Ye. And then well then, so what happened was in December of two thousand and eight. We remember we bought Merril and the Lehman the weekend and everything, so we were originally trying to buy it Leman. We said we couldn't do it as a company I was running at that point the corporate Investment Bank and other parts of
Bank of America. We couldn't do that. And then over the weekend that's when the world became very ugly, and so we bought Meryl, and remember Morgan stand they got investment from the Japanese bank and investments were made around and so after that, I'm sort of running the integration a bunch of stuff as we're going through from October or whatever it was till the fall and then uh, around the time Merrill showed up without with a seven billion dollar loss in the quarter at Les Captain's supposed
to have. We started telling the government we couldn't do the deal and stuff, and so Ken asked me to be a general counsel because we were limiting a lot of jobs. And I actually eliminated my job and I was basically out of the company. Said you know what, stay and become general counsel because we need somebody. And from December ninth to.
All right, became the general counsel the Combined Bank of America.
As we as we negotiate with the government to figure out how to get the Meryl deal done. And then I went back in business right after. But then you left after that for a while, no, no, I became. So then in early mid January of nine I took over a bunch of the businesses after John Thane left and went back into business. And then by the end of a nine MCU it had a lot of jobs in a short period of time. So now it wasn't what somebody should know.
Now, you bought Merrill Lynch at a discount, I guess the low price, but it turned out to be a pretty good deal.
I guess from an operating base, it was always a good deal. The issue. The issue was that the hole in their capital cost us something delution. So we worked through that over time. So you know, with new capital rules and everything, we had about seven a half eight billion shares at the time. It went up to almost twelve billion. Now we're down about seven point four, so back down to where we should have been. But it took a lot of work twelve But from an operating base, it was always on home.
Right before your bank came back, and from a rough position you borrowed in effect five billion dollars from Warren Buffett? Is that right? More or less? And it was pretty expensive capital. Some people say so did Warren Buffett got a better deal? The Bank of America had a better deal out of that.
Well, if you our stock was trading at five dollars, he converted seven to fourteen a share, so it was a class of twenty percent. He had a six percent dividend. We were paying low dividend. But if you bought the comment or the preferred deferred had a ten percent dividend in that day in the common, you would have done better because you would have picked up more the first two bucks.
Did you negotiate the deal with Warren Buffett? Or is he called smart?
It's Apocryphay, he's told the story, so it's not my but he The idea came to in the bath. He called up, got into the call center believe or not, then finally got someone to get a number, called me and said, I want to put five billionaire bank and I said, we don't need the capitol. Warren, he said, oh, no you don't. That's why I'm calling you. You need stability and I can provide stability. And I said, yes
you can. The night before a found named Mike Longs and now runs viser who has work for us at the time, and found name Bruce Thomps. And I were sitting here saying we need to we need to get some stability because remember what people think about if government shutdowns in defaults. The government was really in trouble in August of twenty eleven. They couldn't come together and funding. They were starting to overdraft their accounts, let's just call
it that. So that was going on, and then we were getting background because all the mortgage litigation, and so he came in put the money in and from then, you know, from basically five dollars share price up to forty four, forty five dollars whatever. It's been pretty unbroken since. So he's faredwell, we fared well.
She's don't have the stock erse he sold mostly.
Sold, He sold about a third of it and then yeah, actually he bought another three hundred million shares. He ended up with a billion shares. He sold down at like six hundred last I know. But he's he did very well and we did very well, and he's been a great investor.
Let's talk about the beginning of Bank of America. So Bank of America started as a Bank of Italy. So who started Bank of America And why did you name it after Italy as opposed to America.
Well, apg And who was Italian descent, started the Bank of Italy when he came to the country in San Francisco to help the local the Italian community that emigrated to San Francisco. And so and he became famous in the San Francisco earthquakes and fires in the early nineteen hundreds by setting up a barrel and starting one money. And then fast forward to nineteen ninety nine when the Nation's Bank, which was the North Carolina Bank, which is the bank the bank today and the Bank of America
merged good names. Nation Bank wasn't a bad bank that name, and but Bank of America is a better name, so they took the name. But the operating company has survived as bank.
It was Nation's Bank moved from San Francisco headquarters to Charlotte headquarters where you are headquartered now.
And and you know, it's interesting because with the la fires, we've We've asked our teammate Raoul and I to step in because you know, we have a herriage in California helping in times of stress that we have a big business in California, and Raoul was doing a great job. But you do have these historical ways that we've done business around the We were the first bank to make a loan in Japan after over two ended at the request of the US government to start lending money. We've
been in the UAE since it was formed. So you go back and heritage, it's just a wonderful herriage. And the Bank of Italy herriage is apocryphal because of been any but the reality is the bank that is the bank that survived on us and drove all This was the North Carolina Bank, which formed and bring capital to the Southeast as a group because the New York bankers
wouldn't come down to as much business. That is the bank that survived all this, and it's it's so all these rivers came together and formed this Hunage River.
One of your predecessors is the head of Bank of America, became the head of the World Bank at one point. You have any interest in being the head of the World Bank, You've.
Got a j coming in. I'll let him. Let him win that because okay, I haven't been asked, and he does a great he'll be terrific for it.
So let's says, I'm going to ask you about this banking today. Why do we need all these bank facilities, bank branches, buildings, financial centers because everything is done online. It seems that do you actually have a lot of buildings. You really need all those buildings you have where you have your bank.
This is the classic do as I do, not as I say. Because in the day between this morning when the banks open up to tomorrow morning, four hundred thousand people come into our branches. So this idea nobody goes to bank branch. Just is not true. The idea nobody uses cash. Well, about a quarter billion dollars and we'll go out of our ATM machines in the next twenty four hours the idea, but nobody writes checks. There were one millions.
How many How many banks do you have around the country an hour?
We have three thousand, seven hundred. We went from six thousand down to three seven.
And what about eight pms? You have a lot of them.
We have about fourteen thousand of them. To the high point you had eighteen thousand. And that's technology, end of the day. The huge technology impact in banking over a long period of time. But since the team started in twenty ten, coming together really started a few years before that, we have been basically engineering head count, the facilities. We had one hundred and twenty million square feet of real estate in two thousand and ten. We have about seventy million to day.
Now, have you ever gone to get money out of an ATM and been denied?
Not since college. During the Great Blizzards eight Blizzards of seventy eight, when we were at the wrong we had a friend gave us an ATM card to go out and get some money to buy liquor before everything shut down and we went to the wrong bank.
What about give us some money About credit cards? You ever had our credit card denied?
Not that I'm aware of, but so hopefully nobody else has. It shouldn't have been either.
How has the world of technology affected the banking world? So right now so called fintech? Has fintech dramatically changed the way Bank of America operates.
It's so we invest about four billion dollars in new code every year. Every weekend, we'll have a couple million lines of code go in to amend our systems and change our systems or add new technology that's not to run the systems. That's an their eight or nine billion dollars that is just new activity. So the impacts have been unbelievable, But people over it's still human beings and what they do and how they do it. So you
have to be high touch in high tech. So in the mid nineties when I was ahead of strategy, it's the company I remember, you know, consultants coming in saying twenty years will be no bank branches. Well it's thirty years and guess what we still have thirty seven hundred. The reality is people want it all the ways. So but the impact of the phone iPhone in particular was so different, and we were the first app available on
the iPhone. And the reason why is we'd built our technology through someone's pressions and the compressions in the company to be a web based technology. Back when people didn't do that. It was really an app based technology. So it could be app made an app back we don't think of these things they but back then that was an unusual thing to have an app. Everybody went to the websites, et cetera. So that took off. And so from that start, you know, you now have forty million
consumers who bank digitally with us all the time. Last year we had about ninety plus percent of our interactions with consumers are digital. And yet the critically importance of a person going into one of our stores and saying, I got to figure out how to save more money. Can you help me do a financial plan. My mother's sick, I've got a power of attorney. I need you to figure out how I can manage our affairs. My kid wants to go to college. I need to figure out
how to borrow the money. All those things are critically important, so you have to be able to do both.
So people still writing checks the way they did ten twenty thirty years ago. You set a big business for your check cashing.
Check cashing is not a business, it's a convenience for the customer. The check's written from like twenty nineteen and now probably down thirty or forty percent, there's still a fair amount of them. What you've seen is a dollar volume written staates flat right, but the number written comes down, and we track that literally every week. But we track all our spending every week. But we can see what's
going on in the Americans consumer. But in the dynamic there is people are still paying their rent or the mortgage or something like that car payment with it. What they've done with Zell, which didn't exist a decade ago and now is the dominant course. Our clients send more money over zel than total VEMO is sent to give you a cent said so in so it's become the dominant way. That's replaced a lot of small dollar checks. But the big dollar checks still go through the system.
Old days, and I used to write a check, bank eventually would send me back the canceled check. What happened to those canceled checks? Where do you keep them all? Now, they're all.
Document destruction policies, but they're all image based. So even if you went to a branch and deposit check, it's image based, right then the actual checks destroyed. It's the idea of taking a check deposit ATM. So about fifteen percent of the banks deposits checks are deposited at the physical of ATM a lot of small business activity. The other yep, that's called eighty five percent. About fifty percent of it goes through mobile taking a picture of it,
which is you imaging the check. The other thirty percent goes through the ATMs, which the ATM takes a picture of check. The check disappears in all cases.
So if I want to go to use an ATM, and I have a Bank of America ATM card, but I don't see any Bank of America ATMs, I go to some other bank ATM, I pay a fee.
Is that you would, David, because you're you wouldn't, but other people might.
I thought you have to pay a fee, right be? I mean is that a profit center for banks? Those fees are?
You know, at the end of the day, we get fifty five percent of our revenue, our one hundred million dollars of revenue last year, fifty five percent came from interest, forty five percent fees. The dominant part of those fees are trading revenue and asset management fees and things like that. We have consumer fees, but they've come down dramatically because basically you said that the consumer is you keep changing
your behavior. We keep driving on the cost to serve, and we'll give that back by low and lower fee structure. So we have a no feed checking account. We have a five dollars simple checking account that people know that you can't overdraft. We've we do our overdraft fees. When we first start changing the policies fifteen years ago, where you have five billion dollars a year and now there are one hundred and twenty million dollars a year, do you.
Think we will have in our collective lifetime no more currency, everything will be digital or you think that's not likely?
If not in our lifetime, what.
About a digital currency which doesn't preclude other things, but a digital currency, Well, I think the.
New administration wants to push. So you have to think about three parts of this dialog there's a blockchain question, there's the stable coin type of currency question, and then there's the bitcoin and other types of things. It's pretty clear there's going to be a stable coin, which is going to be a full dollar backed type of thing, which is no different than a money market fund, a check access is no different than a bank account really, and so if they if they make that legal, we'll
go into that business. So you'll have a be a Bank of America coin in a bank and a US dollar deposit, and we'll be able to move them back and forth, because now it hasn't been legal for us to do it, but it's just then like another foreign currency. The question of what it's useful for is going to be interesting.
Right. So in the old days, old ten twenty thirty years ago, if you had a lot of coins, you put them in a jar or your desk. Eventually could wrap them up and take them to the bank. Now, if you go to the bank, they don't want the coins, so that the what do you do with these coins? Now?
They we're got to get rid of the pennies. So maybe uh yeah, today, if you roll over bring them in, they'll they'll count them up and stuff. But it's a tricky thing because it's just a lot of work for.
Okay, so now President Trump said, we're not going to make the penny anymore.
We'll take all your coins.
Don't worry, Okay, the penny, the penny. What about the penny? We don't making the penny? Is that a problem?
You know? I think the economics that they're talking about is it costs more to distribute it. Look, yeah, to day we when you think about the bills, you know the currency and what it's coin or bills, and it's mostly bills in terms of value. If it's an interesting thing. So ninety percent of all the bills that move around the world we move one day, as at the government. And yeah, there's nothing bigger than a hundred. So a
billion dollars of hundreds weighs a few tons. A million dollars of one hundreds is a twenty five foot stack. So there's a big physical part of this. Now, the reality is that's done for reserve currency in central banks. That's who holds the rest of the money. All moves digitally day. So we move, We'll move three trillion dollars
today digitally. So the idea in our consumers money movement is dominated digitally, whether it's a z L payment, a wire an ach you know, at the end of the day, that doesn't include credit and debit cards, which would take another big part because the end the day, what's what's a debit card? Is just an introduction to digital so getting rid of pennies and stuff. There's economics supportive, but the reality is will always have currency because that represents you.
Know, what's the most common uh currency? Is it one hundred dollars bill or the one dollar bill?
I don't know that, but I'm sure there's more ones than hundreds. But the end the day, all the big you know, the real money movement to the central banks is all the hundreds. It's paaladed one hundreds. It's it's it's a wild scene to watch, you know, pallets go through this. We go to the federal Reserve. We pick up these pallets of cash and send them around with the Central Bank of you know, France to have the reserves.
Well, when you need cash, do you go to the bank and get cash at the end of the week or do you just go to ATM or you don't use cash so much?
I do everything and every one of our clients. Does I look at the end of the day, you know, I go and off and go and say hi to the teammates because that's kind of fun. So I try if the bank's open, I'll go and say hello and get some money out. But you know, like you like me, like everybody you become. You know, if you look at the way the money, so you're to date, about seven percent more money got moved by Bank America consumers over
last year, so it's pretty healthy. If you look, twenty five percent went by credit card movement payments uh in, about fourteen percent went by uh uh checks and and zell and other stuff. Cash was probably in a single high single it's you know, so it's not a lot of cash goes out the ATMs every day when you put it against these other payments. So four trillion, four and a half trillion will go out and cash, how the aten to day is a couple hundred million, and
that's going on economy being spent. So a healthy consumer spends money and that's good, but they use all the device as cash is becoming less, but it's still critically important and so that's why you have ATMs, and that's why you have branches, and that's your small businesses receive cash especially and bring in deposit, and that's why you need a physical plan.
So if I go to your bank and I want to make a deposit of ten thousand dollars in cash, yeah, I'm going to get reported to the federal government. Yes, and ten thousand isn't what it used to be.
Well, that's one of the one of the reforms are saying is and somebody testified a few weeks ago to this fact site. I'm paraphrasing their story, is they said, when nineteen seventy two they set the ten thousand dollars level.
The theories even goes back to the forties. But just let's just say nineteen seventy two and nineteen seventy two, you could buy a full loaded Cadillac for ten thousand dollars out this many years later, and we still report not only if you did ten thousand, but if you did three or four transaction a period of time that looked like you were trying to evade the ten thousand, we'd have to report that too. Well, the simple answer, we're saying, just index set to where it should, which
would be like one hundred thousand. When you do that, that takes out all this activity and moves it away. And one hundred thousand dollars is the inflation adjusted amount from fifty years ago for ten or maybe seventy eight or eighty thousand, and so if you're saying lift that amount, you'll take the average transactor completely off the table, and you really will be looking for people who are trying to move amounts of money or avoid the transaction level.
It's such a simple fix, and I think people can see that. And by the way, in twenty two, in twenty or twenty two, there was an act pass that became law that gave the authority the Treasury to do that. They just need to do it now.
So now you live in the Boston area as you have for many many years, the main biggest headquarters I office, I think you have or financial center offices in New York.
And your headquarters is in Charlotte.
Charlotte, So is that inconvenient for you to go all these different places?
It's not, because we also travel all of It's like, you know, I'm here today, I'll be in Florida for a couple of days, and et cetera. So We move all over as executives and big companies, and you do too. But you know, the idea of moving people around and moving their you know, where they work, and moving their families, it's more difficult then, you know, we have twenty years ago when we said we're moving the headquarters of Boston.
Thirty years ago, you just got to move. It was not a question that you said, oh, maybe I got a better idea. So as we look across that, we have sixteen thousand plus people in Charlotte. We have about the same amount when you take New York in the areas around New York, but we also have five thousand people in Boston. Around there, we have you know, thirty five forty thousand people in the state of California. We have twenty five thirty thousand people in Texas, you know,
so Florida. We have operations centers in Jacksonville. So you have people everywhere. And the idea is we try to always look at it and level load activity around the country to avoid you know, to use time its own differences to our advantage for call centers, and that's access talent pools. And then remember all our branches and our private banking teammates, our maryrial teammates, and our business lending
teammates across all the businesses. They're all in the field during ninety seven hundred markets out there every day.
So if I wanted to buy make an investment in a bank stock, would you say it's a good idea to invest in bank stocks now? Or do you think bank stocks may be overvalued?
Or what?
Do you think?
Our valuation difference to the S and P is lower than it's been and I think our company is a great value and rest the banks a pretty good day.
So now when you took over the bank, you had more employees than you have today. The bank has expanded. Why do you have fewer employees because your bank's so much bigger.
So that's technology, and that's applied technology. In twenty ten, we opened with two hundred and eighty two hundred eighty four thousand ployees. We went up to three hundred and five thousand to peak, and we ran as low as two hundred and four thousand. Now we're about two hundred and thirteen thousand, and so all that was done with
applied technology and digitization, new technologies both. So if you think about work, the way to get rid of work is to eliminate and re engineer the work and eliminate steps and things like that. You can do that through automation, you can do that through just not doing them, et cetera. Goalay duplication. Then you can eliminate management of work because if you have less people, you need less managers, and then you eliminate the real estate that people sit in.
And so we've been doing that on and on again. But the key to make it really move was technology. And so whereas we had in twenty ten we would have had five thousand, five hundred branches, we now have
thirty seven hundred branches. We actually have probably almost one thousand those in places we did not have branches back then, in different cities, and so if you think about maybe six or seven hundred like that, so you think about that those brains are bigger and more efficient, but all the transactions that come out and what's in their sales activity and relationship activity, and so it's just that concept re engine We have this thing called opt X. Every
year we come up with thousands of IDAs to take out and re engineer the company and so at the end of the day, more customers, more activity more people, and yet you've driven the head count down and our costs are two thirds people and then basically the other third is some advertising, the buildings, technology and electricity.
And now there's an acronym today that some people in Washington don't like, called DEI. Do you have a DEI policy or not anymore?
We have diversity inclusion in our company. But let's step back. What we've always been as a bank of opportunity. So we think about creating an opportunity for our teammates. And how do we do that. We go out and hire from all areas and bring people in to our companies. So we go to four hundred different schools to recruit kids. We go we have a program we called Pathways. So Pathways we announced in twenty eighteen, we said we'd hire ten thousand people from low and modern income neighborhoods to
come work in our company. We complete the first ten thousand, then we went out and said we'll do another ten thousand. We're up to thirty thousand people over the last decade almost that we've hired from LMI communities to come work for our company, from high school, junior college, and colleges to come work. So once we have a very diverse company in terms of representation from all economic status, all races and ethnicities. Once they get in, the opportunity is
there of a lifetime. We equal pay for equal work, the ability to promote, we train, we do all the work, and so the idea is that's an opportunity. When we look outside our company, we try to work with other employers to create the same opportunity we create. We try to work with nonprofits and communities to create opportunity for them to be successful. And so the idea is just create opportunity. So we have a diverse team, we have we stressed inclusion. When you're at our company, you can
be who you want to be and be successful. Including we have three hundred thousand memberships in our employee resource groups, of which about sixty percent of people are in one. The average SMP company five hundred company has five percent employees. Our employees love to work together, they're open to all, even though at coolhort and so we just try to create opportunity.
Now that's a young profession. Young person's graduate in college, why should they go into the banking profession as opposed to private equity investment, banking, healthcare. What's the appeal of working in a bank.
Well, when we bring the two thousand kids in and I talked to them, I always say the same thing. You can make a lot of money doing a lot of things. You can have a great career, do a lot of things. But if you're going to come to our company, you really want to help people. You want to provide the answer. Our market position is what would
you like the power to do? And I said, your job at this company is to help people answer that question, whether it's a customer, whether it's a teammate, there's a shareholder, whether it's a community, And you've got to come and want to do that. You want to deliver a lot of profits done the right way with a purpose around it. And if that's what makes the place special in our turn of rates and all time low, it's and we are sought after by young kids to work. So here
everybody's going to tech companies and stuff. It's we have hundreds of thousand applications for the two thousand higher.
Your Bank of America is mostly focused in America, I assume, But do you have a lot of business outside and do you want more business outside of the United States.
Yeah, we do business one hundred and thirty countries. We're in thirty forty core countries. We've been in like I said, in Japan that you have for eighty years now, in India for sixty five years, and Brazil since nineteen fifty four, in Argentina since nineteen fourteen. You know. So we have an national business. And the amount of loans we have outside the United States for commercial customers exceeds what we have in the United States and for large corporate customers.
So we're a global business for global investors, global firms, that private equi firms, global investors, global companies. And so we do investment banking, corporate banking, treasure, cash management, and trading across the world. And we're you know, the top two three in the world. And these businesses going back to you early point that the US companies that come to dominate those businesses were right at the top.
Were you ever at a cocktail party or lunch and somebody gives you a resume that ever happened to you? If somebody they thinks should be hired by the bank.
There's this thing called email that gets in their fashion.
Right, and now on the personal side, You've been there fifteen years, you haven't announced any time, and you might step back and you're not prepared to announce that today.
Right, No, I don't thin, So I'll tell you first.
Okay, So have you been able to convince your children to go in the banking world.
My oldest son's an investment banker for a different firm, obviously, in my middle child is a risk manager for another firm in financial services, and my youngers and communications, and I think I never said, Look, being a CEO's child is not the easiest thing being a CEO's spouse. So they and they saw me work in different ways across the years, and so it's their decision with their careers. And it's nice. My son, he's a deal doer, he's an m and a type of guy. So it's fun because I used.
To do that.
I haven't done that long time.
What do you do for rest and relaxation all your spare time?
You know, I do whatever else does.
And that was David Rubinstein speaking with Bank of America Chief Executive Officer Brian moynihan at the Economic Club of Washington, and you can watch
More of that interview on The David Rubinstein Show Peer to Peer Conversations on March twelfth at nine pm in New York