Bloomberg Audio Studios, Podcasts, Radio News. Hello and welcome to The Money Stuff Podcast, your weekly podcast where we talk about stuff related to money. I'm Matt Levian and I read the Moneys dot Com for Bloomberg Opinion.
And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.
You were reporting live from the field this week.
I was. I am a studio anchor. I like being in the studio. Boy, boy do I love sitting behind a desk and screaming at a camera. But I had to go into the field this week because JP Morgan was having their ribbon cutting ceremony for their big, beautiful building at two seventy Park Avenue. Beautiful, one big beautiful building. They actually own a bunch of buildings, Yes they do.
It's not fun to have a campus, and it is really cool. I joked. I joked this week that the JP Morgan building at a forest ory gold statue of Jamie Diamond in the lobby, which you can now report.
They can tell you it's not true. They do. I don't know if they had the three story I don't know if they have this all the time. But when I was there for the ribbon cutting ceremony.
They had uh had a live Jamie Diamond.
There was a live Jamie Diamond or really convincing AI robot. But they also had a flagpole and they had a fan on the flag so that the flag was waving in the artificial breeze.
Wait. Wait, like they had an HVAC system that circulated air in such a way that the end of our flag waved, or they had like a desk fan.
I could not see the fan.
Everything was it wasn't It wasn't like a guy with a stick with a dusk van.
No, No, the fan was hidden. If it was circulating, I didn't feel any of it. But yeah, it was specifically for the flag so that it would flap.
That's awesome.
It was awesome, and it was fine. A few people, including you, asked me who did you interview there? And I said, no one. I was just there to be like, I'm here the building. Yeah, I'm inside the building, but the thing is Matt to prepare.
For Jamie Diamond's physical ribbon cutting, which happened. Of course.
I mean, I wasn't going to go there and not see you. No, they wouldn't let me that Close's crazy, but yeah, I know. He held a giant pair of scissors. I believe New York Governor Kathy Hokeel was next to him for that. And he cut the ribbon so it was awesome.
Did they have backup ribbons?
They must have. They must have.
I mean he cut the angle and do it again.
Imagine if they spent five billion dollars on this building. Yeah, no, no, they were gonna they were going to get this over the finish line properly. But Matt, to prepare for these hits that I had to do about the building, I accumulated so much knowledge, so many facts about the building.
That you're going to tell us, tell me and the listener. I'm going to step that I need.
I need to use it somewhere. It's not it's not knowledge that I can build on.
You can use it during the hits or not as.
Much as you would think. You always you always over prepare and then me and then they ask you, like one question. I forgot what it's like to be a reporter, and you have just these anchors who don't care about what you're saying. No, are all my colleagues are lovely.
Okay, some facts, all.
Right, So to so Many Park Avenue is the new building, that's what we're talking about. Six years of construction.
Yes, so that I noticed that. Yeah, it's on the wactor ground Central.
It's not over because their temporary headquarters has been at three eighty three Madison Avenue, which is directly across forty seventh Street. And now now that the new headquarters is open, now they're going to spend a billion dollars to renovate three eighty three Madison. So they're going to close it in twenty twenty six, redo the exterior, redo the interior, and it'll open at the end of twenty twenty seven.
So we're just getting started when it comes to JP Morgan doing construction in that specific area of New York City. But let me go on, let me go on. It's sixty stories tall, Okay, a normal number of Well that's the thing. It's nearly fourteen hundred feet tall. So the ceiling, oh yeah, no, the ceilings are super high. And the lobby specifically it's the building itself is raised eighty feet off the ground, so just as a super huge lobby.
And the reason why is because they wanted to like have more outdoor space outside of the building, theoretically giving space back to the city. But I don't know. I don't think you're going to be eating your sandwich up against the JP Morgan building necessarily, but it's a nice idea.
Yeah, I find the overhang slightly alarming, which it does look like a somewhat precariously balanced building. I understand at an intellectual level that they employed good architectes and the building will not topple over in a slight preece. But i'd like, you know, if you're on that overhanging, yeah, there's a big building above me.
Well, those architects were there. Lord Norman Foster designed this building. He's done a bunch of famous buildings over in Europe. But he also did Apple Park in Kupertino, so that's cool park. Yeah, yeah, yeah. Anyway, so I'm just getting started. So six years of construction on this building, matt As, we've established that, includeed demolishing the old building that was there. So in terms of the features, I know that you're dying about the amenities on the thirteenth floor of the building,
which I did get to see. They have a pub called Morgan's it's reservation only, so you can't just make your.
Reservation three o'clock for the pub or he just immediately fired.
That's the thing I was thinking, like, would I be bold enough, Like if Bloomberg had a pub that you had to make reservations at, would I ever do that? I don't know.
I would definitely go to the Bloomberg pub all the time.
But like, well, you have a certain amount of clout here, so they'd be like, oh, he's thinking his thoughts.
I just feel like Jamie Diamond has really gone on record being like everyone in the office all the time. And I understand that the pub is in the office, but still.
Yeah, well it's a great way to keep them in the office all the time.
Now I think about it, like taking the clients to the JP Morgan and has pub is kind of a nice Oh yeah at all.
I would like to go. Invite me please, I'll go. I have to expense it though, So anyway, apparently JP.
Morgan, you and I just like into the JP Morgan.
That'd be great. Let's do a podcast episode for there from Jamie Diamond. If you're listening, you're our special guest.
I think that we could know the guest be like the bartender at Morgan's. Oh true, twelve hours Yeah.
Right, yeah, that would be a lot of fun anyway, JP Morgan imported the parts needed to pour a proper pint of guinness at Morgans, so just no, it's quality. There's also a fitness center at two seventy Avenue. I'm reading off the notes that I printed out for TV. I was prepared to say all of this on air. So they have a fitness center and Bloomberg News reported that this was an uphill battle. Apparently Jamie Diamond personally dislikes in office gym's and didn't want it, but eventually
he was brought over. Which again, if you're trying to get your employees to live at the office, you need a pub, but you also need a jim.
Yeah, I'm not an in office gym guy.
But no, I think I would be. I think I would love it. We don't have one.
Here, so like this is all like very you know, nostalgic for me because I worked at Goldman when they opened their new office on jenderbut Street, and it did have an office gym. It's been so long as an office gym where people would you know, like you run into like your boss's boss's boss in like you know, a.
State of I would love Well, no, not that specifically that specifically. No, I thought you were going to say, like doing doing a chest press, and like, I feel like I would be very good at having a conversation in that scenario.
I think you would. Yeah, I think that's why you're a TV anchor. I would be very bad at having a conversation in that scenario. But like there's also the more specific like locker room scenario. And so the other thing that I remember about the Goldman office is that it was very very nice. It's like, yeah, I knew it's shiny, but everyone got a little bit less space
than they had in their own office. And I have read that something similar is true at JP Morgan where they have this new big office building, but because the ceilings are so hot, there's less room for desks.
Well that's the thing. You have fewer floors, just sixty stories, which is you know, the stories for.
All those bankers who did you see.
Did you see the things circulating on social media? It's like a photo of one of their trading floors and it's like just stocked with Dell computers, which have four monitors a piece.
I think I did see it, and they're all, well.
It's exactly as I described.
There's there right, because it's they haven't moved into the trading floor yet.
It's like, yeah, they've been moving people in gradually, is what I understand. I think the floor is yeah yet Yeah. Shall I tell you about some of their other buildings in their campus. I need somewhere to record this, you know, when I when I podcast, when I sort back through the rubble of my life, I want to remember this. Okay, So we already talked about three eighty three Medison Avenue.
Well get this, Matt. They bought two fifty Park Avenue in twenty twenty four for more than three hundred million dollars. Not sure what they're going to do with it right now. The plans are still in flux. They collection kind of They could keep it as is, They could knock it down and build a new office tower, which they now have some experiences, or they could turn it into a hotel for visiting employees. That's not all four to ten
Madison Avenue. They're not sure, JP Morgan, according to Bloomberg Reporting, not sure if they're going to keep or sell for ten Madison. They bought that during the worst days of the pandemic in twenty twenty. They've been using it basically as a project office for the headquarters construction. But all told, in these blocks that we're talking about, JP Morgan has nearly six million square feet of office space, which is almost as much as Goldman Sachs has in all of
North and South America. So the physical footprint of JP Morgan is pretty stunning. Yeah, yeah, I.
Do appreciate that there's a JPA Morgan district in Mindow, Manhattan.
Yeah. I think Bloomberg News called it a neighborhood, which I think is cute. Yeah, city within a city to so many Park Avenue. I'm almost done. It's going to house about ten thousand workers all told. In terms of corporate employees, they have more than seventeen thousand. So this is why they need all these buildings. Yeah yeah, all right, big bank walk past it, you know, if you find
yourself in your grand center. I do see it from I live in Hoboken now and I run a lot, so you can see it from the waterfront and it lights up in different colors and you know, it's a nice addition to the skyline. Good on you.
Okay your architecture criticism, your own record is liking it.
I like the building, doesn't it not?
I really like it?
Yeah? Who doesn't like it? What are their criticisms? I want to know, because I mean, I think it's cool to get new skyscrapers. Sorry, and this one.
I see it from street level and it feels threatening to it from the street level.
Yeah, it doesn't.
Strike me as having to make a sense of lightness or no rightness. It's kind of like a massive, ominous building.
I will say that part of my brain that doesn't really understand how airplanes stay in the sky gets nervous about the way.
Yeah, it's going in every direction.
Yeah, Yeah, it's cool.
It is cool, But like, is it cool enough? Like you want to go there every day?
I don't know.
Actually, I have no basis for architectural criticism. It's fine, it's great. It's a big building. It's cool. It's got a pub.
Yeah Morgan for theory, statue beautiful, a waving flag.
I mean, he's like got on record second he had some funny CREDI was like, it's a monument to it's something permanent. You know, what do we do? We push paper all day?
Yeah, it's really good. You could ask the question, does JP Morgan need all that space because AI is just going to wipe out an entire generation of junior bankers.
Well that's why they don't have enough space for all the bankers, right, they need to replace the junior bankers with AI and a monument to yeah, the last to the bankers. Yeah, but yeah, there's a great story this week about open AI as a thing called Project Mercury. Yes, Sydney step back. Like the AI companies, like the first thing they did was sort of train their models on all of the Internet to like understand at some superficial level all of human knowledge.
And then you had a Reddit chatbot.
Yeah, and now they're like the next step is to get specialist humans to train the models to be really good at specialist things. And so they've had they have a lot of them. They have like you know, astrophysicists and you know, like lawyers and everyone like training out the models. But the story this week was that they also have an army of former investment bankers getting paid on hundred and fifty dollars an hour to build LBO models for open AI, so that chat GPT can build
a really good LBO model. And by really good LBO model, I mean not only that it as it's formula is linked correctly and gets it correct result, but also that it has all of the percentages I talicized in the right way. And generally will not make an investment banking VP angry because you don't want when you like, fire all the analysts and replace them with AI, what you don't want is to be annoyed at the formatting of
the output. Because if you're an investment banking VP, you've spent your life getting annoyed at the formatting done by investment banking analysts, and like you want the AI to be a strict improvement over that.
So I will say I enjoy all the police fix memes as an outsider. I've never worked in banking. I'm a pure play journalist.
We have been a banking analyst, yeah, but I've been the recipient of please fix that's yeah.
Do people really care that much about formatting?
Well, it's like it's a signaling thing, right, It's like your analysts come in and they're humans with hopes and dreams, and you want them to immediately become automative. You can tell to produce a pitch book, and they will produce a perfect pitch book. And if they produce an imperfect pitchbook, you want them to charge. It's reinforcement learning, but it's you know, you want them to quickly be trained out of that so that they produce perfect pitch books for
you so you don't have to worry about it anymore. Right, You want the analyst to take the work off your plate, and if they give you bad formatting, then you worry about what else is in the pitch book that's wrong because you can't you want to get to check the numbers necessarily, right, I mean the depends like like you'd like to be at a point where you can trust the analyst and not have to check the numbers, and formatting is a visible sign of something else might be wrong.
And it's also like, you know, the people who get to these positions are perfectionists and they get troubled by bad formatting.
Yeah, okay, fair enough. It sounds almost am I going to get this wrong? That sounds like broken window theory.
It is like recommended theory.
Okay, that makes sense. I really want to interview actually the one hundred x investment bankers working on this project in the pub at JP Morgan.
Not one hundred, not all at I have a guess.
You don't want to interview all one hundred of them, not at once, No, just the funniest ones.
I have a guess about what the vibe is. Like, it's interesting to me like these people are clearly putting their successors out of work. Maybe they're not, but like, yeah, that's what it's the vision, right, And you might think that if you went to people in some industry and said, hey, would you like to get paid one hundred fifty dollars an hour for like three months? One month? I don't know how long this project is, but I don't I
don't think they envision a decade's kind of thing. Would you like to get paid one hundred and fifty dollars an hour for a month to put everyone in your industry out of work? I think a lot of people in a lot of industries would say no. Like I think if you went to a lot of journalists, they'd be like, no, I don't want to put journalists out of work. I think if you went to a lot of investmentanking analysts. You'd get a pretty good hit rate.
You know, you'd be like I hated it, or they'd be like, yeah, I'm out of it now they can move on. Yeah.
I do you feel like journalists have a certain affection for the craft of journalism, whereas a burnt out banker might not.
I think a lot of bankers do have an appreciation for the craft of building LBO models, and I think that the opportunity to have their LBO model enshrined perpetually as the official CHATCHPT, like the best practice is that chat GPT perpetuates forever. I think that would be kind of cool.
Yeah, I could see that, you know, you know, it sounds like, you know, you're raising your hand a little bit.
I take it back. I would put journalism out of work now. I think it's like if open A came to me and Zeid, we want whenever people ask a question about a financial topic, we want chat GPT to explain it the way you would. So I spend three months training chat GPT to do that. I'd be a little flattered.
You're speaking that into the universe. It could happen anything.
Could I feel like they're already trained onized Like that's the thing. They're already just.
Like you do, have a public body.
Training themselves on my work, whereas the LBO models are not the model of like the best analyst that JP Morgan is not public, right, so they got to hire that guy and type it in.
Let's get into some of the details of this article. In terms of the application process, according to a person familiar with the matter, it involves almost no human interaction. The first step is a roughly twenty minute interview with an AI chatbot who asks questions based on the resume, and then the second phase test candidates on their knowledge of financial statements. The final stage is a modeling test, so it's fairly involved.
For like three months ago, they hired some major R people to train chat GPT to hire the investment banks. Yeah, get and everything so automated.
Apparently, the job expects contractors to submit one model per week. Instructions include writing prompts in simple terms, then executing the models. Receive feedback from a reviewer and are expected to fix any issues before their work is ultimately plugged into opening as systems.
Open feedback is a pencil, please fix a fix.
Please fix for a job that isn't going to last that long. I mean, I wonder if you could do this as just a side hustle.
I am sure that everyone doing it is doing it.
You don't think anyone is just I'm just going to devote to some people.
I shouldn't say ever. I feel like some of them are like current NBA students who are like, yeah, I'm used to working one hundred hours a week and banking, and now I'm doing two to fifteen minutes of homework a week in my MBA program, and so I could use some free cash, and it's interesting to do.
It's funny you bring that up because some current NBA candidates at Harvard and MIT are participating for sure.
And then I think probably there are some people who like were burned out and are like, I could do it twenty hour a week job from.
Yeah, why not. One of the perks here, in addition to the one hundred and fifty dollars per hour, is that contractors get early act access to the AI that is being created that aims to replace these entry level tasks at investment banks. So that's pretty cool.
Too, right, Like I shouldn't be too cynical about this because I think a lot of investment banking analysts do think a lot about how can I automate this work so that it's just, you know, it is button pushing, and like, maybe in the long run that is bad for employment at investment banks, but it's not clear that it is. Right. Yeah, it's like very possible that if you had the ability to push a button and produce a perfect model, you would keep the same number of
analysts and they would run more hypothetical scenarios. And the thing people always say is like, move up the value chain and think more creatively and not have to just spend all their time modeling. I'm not sure that's true, but you know they certainly you know, throw more spaghetti against the wall.
Yeah, maybe AI could compliment the human experience rather than destroying.
But I think it is hard for me to imagine investment banking becoming purely automated. It feels like it's a high dollar, high touch sales business, and so you always need some people to shake the client's hands, and so it is very possible that AI can be complementary to that experience. Now that people do worry about, you know, if the junior bankers don't ever build the models and they just push a button. Do they learn less? And they are they less intuitive about you know, financial analysis
when they become senior bankers. And I think that is a hard problem.
Yeah, the idea that you're just hollowing out the bench. One of the people who has voiced a concern similar to that is actually the CEO of Bridgewater near Bardea. He said in March, we are well positioned to replace a lot of the basic tasks with machines, but what does that then mean to talent development over the long period of time? And then he continued, you do the tough work, then that leads you to be able to
do the higher level, more conceptual things. So I think that's like a nice summary of the concerned there.
Yeah, and I tend to believe that, Yeah.
You have to cut your teeth.
Yeah, there's a you know, just a period of learning that gives you the sort of foundation to think creatively later on. And if you just cut that out, it's hard. By the way, that's not an investment anything, that's a that's a life thing, right, like you see that in school now, right, Yeah, you use AI to de Allier homework.
You never learned how the kids can't read.
Kids can't read?
Yeah, I mean, I just relate everything back to myself as the center of my own universe. I remember being a baby reporter and just doing these bullet point fixtures on the Bloomberg terminal that like twelve people read. But it taught me a lot and it really serviced those twelve people.
Now AI does a lot of those blood Well.
That's true though.
Okay, if credit cockroaches for like five minutes.
Okay, you talk about it in the same way that I told you everything I know about JP Morgan's new building a two seventy Park Avenue, Tell me everything you know about cockroaches. At this moment, part.
Of me hates that we just decided that they're called cockroaches. Part of me is like I keep leaning into it in the columns or whatever.
That's the thing. It's already it's interesting, it's a useful shorthand.
But right there's been a number of, you know, credit blow ups, and they all kind of have the same flavor, which is that someone is or maybe it was, or looks like they might have been double pledging collateral, or it happens its collateral they didn't have come on, you know, all these things, and I think we talked about Tracolor and first Browns.
I'm not even sure we've definitely named dropped them.
And then I think last week the Zions and Western Alliance news had just come out and you mentioned it on this podcast.
Thank god I did well.
Then I had it cut out because we didn't really talk about it.
Something that's happening today on Thursday is what's going down with Western Alliance and Zions. These are two regional banks and apparently they disclosed problems with loans involving allegations of fraud and currently, at like two twenty three pm last sight check, the stock market was kind of freaking out about that.
Who's wrong?
Let me tell you? Okay, So Zions apparently it disclosed a fifty million dollar charge off for a loan underwritten by its wholly owned subsidiary, California Bank in Trust Western. Their problem is is that it said that it's dealing with a borrower that failed quote to provide collateral loans in first position.
Yeah, you know, topy market toppy mark, don't know, let's check your collateral.
Yeah, why would you?
Yeah, they compete to make the loans. So like Zions and Western Alliance both announced that they sort of were exposed to what they characterized as fraud, although the people who allegedly defront of them said they didn't defrove them.
But basically they like made some loans to this like real estate lending firm, and the real estate lending firm they say did not actually own the mortgages that they were boring against or like they did and then they sold them or they did and the properties were for clothes on or they made the loans with they were second leans. Like there's all this like stuff where there's
like sort of sloppiness around collateral. And then the other story that came out I think last week was on seven seven seven Partners, which is a fascinating company that both buys your lottery payments few in the lottery and you get twenty years of payments like they'll buy them from you and so you get cash upfront. And they also buy sports teams like they own a lot of
like European soccer teams. They own the London Lions, the basketball team, and they tried to buy Everton, the big Premier League team, and there are some allegations that they were at least sloppy with the collateral that they were selling on to investors, where they basically were borring against these future cash flows of lotteries or structured settlements, and they would maybe double pledge them and maybe didn't have
all the assets that they claimed to have. Think the founder was charged criminally last week in part because one of the lenders got i think an anonymous whistleblower tip saying that they were double pledging assets, and the lender called them to be like, what's all this then, and the founder, on a recorded line, was like, yeah, we did do that, but like it's because our computer systems are stoppy and we'll fix it.
Oh my gosh.
After I read about this, I got a number of emails from readers with anecdotes about their own dealings with seven seven seven partners that I think are largely supportive of the theory that they might have actually screwed up their computer systems. Like there's a lot of like, yeah, they were kind of unprofessional, so you never know, but uh, it doesn't look good to me. We may have barred against our collateral from.
Two different lenders, So are you holding this up as an example of a cockroach potentially.
This is a reference to Jamie diamond saying when you see one cockroach, there will be more. And it's definitely since he has said that, there have been a lot of like these credit problems that all you know, have similar features.
It's like if you see a missile margin, yeah, in a deck, there might be other issues, right, It's.
Like an indicator of sloppiness. And all of these are kind of small. I mean, you know in the scheme of like the banking system, right, but like you see one cockroache, you.
See more they can pound potentially potentially.
The other thing that I think is interesting, and they wrote this week, is that another thing that a lot of these cases have in common is that the problem company is essentially a lender. It's like a financing company, it's a trade finance company, or a structed settlement company, or a real estate lending firm or something. It's a lender, right, And then the people who complain about it, the people
who take losses are lenders to that lender, right. So it's like second order or sometimes third or fourth degree lending, where like a bank lends to someone who lends the someone who lends to someone and somewhere in that chain
problems happen. And I think we've talked about on this podcast, and I certainly write a lot about like there's been this move to banks reach launching where instead of like banks making loans, private credit firms make loans, and then banks make loans to the private credit firms to make the loans. And the upside of that is that the banks have more seniority, right, they're cushioned by like the private credit firm takes the first loss or the you know,
the factoring firm, whoever takes the first loss. But the downside is like they don't get to see perrectly into the loan, Like there are several steps removed from the actual car loan or the actual structured settlement or whatever, and there's just more opportunity to get this sort of cockroage situation where like you were lending against collateral, it doesn't exist. Yeah, it's like can you make a mortgage
lane directly? You're like you see the house, you know, Yeah, so this is all sort of indirect And I do think it's like, you know, it is both like these stories seem symptomatic of like late cycle exuberants, specifically like indirect lending, where because it is indirect, it is a little bit easier to get hoodwinked out of collateral.
So let's not cut this out of the podcast in case we need to reference back to it a couple of weeks.
Yeah, yeah, sorry, I cut out your crush reference to week and that was the Money Stuff Podcast.
I'm Matt Levine and I'm Katie Greifeld.
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Bob