Brian Moynihan

One of the largest and most respective banks in the world is Bank of America. For the past fifteen years, it's been led by its CEO, Brian and Mornihan. I had a chance to sit down with him recently to talk about the new environment in Washington, lower interest rates and the impact on the banking community and.

Davos, you were asking.

A question of President Trump and he didn't quite answer the question that he asked you a question. So the question he asked you was something like, why are you not banking certain groups? What is the answer? I don't think he gave you a chance to really answer that question. But what is the answer to that question?

Well, first off, the Bank of America has seventy million consumer customers and millions of small businesses all over the country, all over the world, and so we bank everybody. But the real question was about over regulation, frankly, and so as you look at what's happened is because the interpretations aml any money laundering BSA, Bank Secrecy Act KYC, Know

That creates confusion.

Another area comes up in this discussions in a crypto area, where the regulator said you can't bank crypto operating companies, employees of crypto companies, et cetera. We bank everybody. 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 the people thought that the banking regulation had been too tough under President Biden, and some people thought that regulation be more amenable to banks. Has that turned out to be the case, shed or is it 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.

If you think about the Great Financial Crisis, and Dodd Frank and a lot of capital rules and quity rules and all that stafe came in. There was a reason for the world ri at large to be really not happy with banks and non banks that became banks, Golden Sacks, Morgan, Stanley, Maryland, et 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 liquidier, sort of saying, wait a second, we are a source of strength. And by the way, the Berican bank industry is really a source of strength. So the Penland 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 we did during the pandemic.

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? 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.

The rules kept changing.

The test, so you if you think of the last four or five years, you had volatility and capital requirements that were you went from fifty to seventy five basis points up and down a year with basically tests said ten percent employment, fifty downturn in the equity markets, thirty percent drop in housing, thirty to forty percent drop in commercial real estate, highield spreads blown out by a thousand, two thousand basis points, whatever it was. You look at

Is stressed every day.

So if you think about it's a good thing, it's just that behind the scenes, what was happening is that dials are 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, the ind of the day is, I think he had a year left on his term, and the new administrative president would point someone for that BASI.

We'll get it today.

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 as president. So if we geared ourselves up for this president, not that presdent.

We'd have to change forty five times whatever it is.

And if you think even in the foreign 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 rational.

Gatory structure that and have it stick to the ribs.

If you keep swinging like this, our clients can't be as it can't depend on us when adias.

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 just take Consumer Bureau.

In twenty ten 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 start of the federal regulars consumer activity stud the FTC will hit consumer activity on occasion, and you have the Consumer Bureau.

And if you have the FDIC as regular you have the FDIC.

You're regulated by the Federal Reserve. The FDIC the comptrol of the currency. 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. We all spend a lot of time on I have great chief risk officer and Jeff green Or who organized that for the company. All my senior executives spend time with them and look the day to day regulators are help trying to help us be better. And we understand that we are on the road to perfection as a company. And as vincelent Party said, you strive for perfection next since we found that's what we're

Uh 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 have 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 at the end the day, you have a floor on interest rates. And so when interest rates came down, you started 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 interest checking accounts all and stuff become worth more, and the loan rates go.

Up because interest rates come down. Though you're not it's not going to affect.

Your profitability, not not a lot, because you have right So you don't want Jaypale'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 it would be no further rate cuts through their forecast period, which is this year next year. 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 some way down. It takes multiple years of squeeze inflation out and there's a drag on economy today. And so you're seeing economic growth from three percent in

They won't cut rates.

So let me ask you. The business that my firm has been in is private equity. But now private equity 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.

You know, I think I care about your firm.

But look in a day, 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, then it was taken back then it was a guidance, and then it was like wait till 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.

In the equity business.

But on top of that, you know, 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 the world should be concerned to make sure that those enterprises making loans to you know, billion dollar operating company, have the ability to work with him 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.

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 a family, wasn't that crowd at a time.

So I was set up to get my own bedroom for the first time in my life from my younger brother decided he wanted to move into the bedroom because he was scared to sleep alone. Probably when I was in college, his first time I ever had a bedroom to myself.

So, yes, it was grod.

What did your father do to support eight children? See him private equity or something.

That 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 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?

I played rugby at Brown, I played rugby at law school, and I played rugby after. It's a great sport. It is, in a way the most intense. It looks like this organization out there is extreme, ill organized, but it's unique in 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 the board, Chris Packson runs university, doesn't spect calcular job.

After you graduated from Brown, you went to law schoo at Notre Dame, Yes, sir. Then you went to practice law back in 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 Notre Dame in law school, so I had. So I ended up in a great law firm and had a great short.

Legal career there.

How did you escape from being a corporate lawyer? What did you do?

One of my mentors is named Terry Murray, who ran Fleet and I was.

I did corporate law.

A lot of work I did for Fleet and then Terry after we did a transaction called the bank Canoeing, a transaction with KKR put money into the bank industry, and we bought the Banknoeing and I mean you. Fleet bought the Banknoeing 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 eels for our bank private equity firm, which was a thing called dual convertible per hered stock. It converted into 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.

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 I went a special project to re engineer the company and came.

And Fleet ultimately merged with Bank Boston.

That was the last deal I did is I was a head of M and A and strategy, and Terry Murray and Chad Gifford put together that deal. 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 we ran the wealth manager business for the combined Bank Boston Fleet, and then Bank Boston Fleet combined company was sold to Bank of America.

But then you became the general counsel.

For forty days for.

How long?

Forty days and forty nights.

All right, So we became the general counsel of the combined Bank of America.

Yeah, and then well then, so what happened was in December of two thousand and eight, Remember we bought Marylyn the Lehman Weekend and everything. So we were originally trying to buy it Lehman. We said we couldn't do it as a company. I was running 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 Merrill. And then around the time Merrill showed up without with a seven billion dollar loss in the quarter, and with a lot less capitainer'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 from December ninth to.

Came 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.

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.

Let's talk about the beginning of Bank of America. So Bank America started as 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 he became famous in the San Francisco earthquakes and fires in the early nineteen hundreds by setting up a barrel and starting lend money. And then fast forward to nineteen ninety nine when Nations Bank, which was the North Carolina Bank which is the bank the

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, 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 and investment b anchor for a different firm. Obviously, in my uh, my middle child is a risk manager for another for in financial services, and my youngers and communications and other stuff. But they look, being a CEO's child is not the easiest thing being a CEO's spouse.

And they saw me work in different ways across the years.

And ye, so it's their decision with their careers and and it's it's nice.

My son, he's a deal doer, he's an m and a type of guy. So it's it's fun. Because I used to do that, I haven't done that long time.

So let's say ask i't 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 do you actually have a lot of buildings? You really need all those buildings you have where you have your bank.

This is 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 a branch. So this idea nobody goes to bank branch just is not true. The idea nobody uses cash. We'll have 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 hundred millions.

How many How many banks do you have around the country an hour?

You have three thy seven hundred.

What about ATMs? You have a lot of them, We.

Have about fourteen thousand of them.

At the high point, you had eighteen thousand, and that's technology.

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 another eight or nine billion dollars that is just new activity.

So the impacts have been unbelievable.

So in the mid nineties, when I was the head of strategy to 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. And the reality is people wanted 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. You now have forty million consumers who bank digitally with us all the time.

Last year we had about you know, about ninety.

Plus percent of our interactions with consumers are digital.

So if I want to go to using ATM and I have a Bank of America ATM CAR, but I don't see any Bank of America ATMs. I go to some other bank ATM, I pay a fee.

Is that you wouldn't, David, Because you're right, you wouldn't that other people might.

I thought that to pay a fee pray fee? 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 or one hundred million dollars of revenue last year, fifty five percent came from interest five percent fees. The dominant part of those fees are trading revenue and asset management fees and things like that.

And do you think we will have in our collective lifetime no more currency, Everything will be digital or you think that's.

Not likely, not in our lifetime?

What about a.

Digital currency which doesn't preclude other things, but a digital currency.

It's pretty clear there's going to be a stable coin, which is going to be a full of 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 a 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

So if I wanted to buy and make an investment in a bank stock, would you say it's a good idea to invest in bank stocks?

Now our valuation difference to the SMP is lower than it's been, and I think our company is a great value and US the banks are pretty good value.

Hey.

So 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'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 into our companies.

So we go to four hundred different schools to recruit kids. We go. We have a path 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. So once we have a very diverse company in terms of representation from all economic status, all races as, once they get in, the opportunity is.

There of a lifetime.

We equal pay for equal work, the ability to promote, and so the idea is just great opportunity. So we have a diverse team. We stress inclusion, so 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.

A young professional, 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.

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, whether it'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 the purpose around it.

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