Global Banks Just Changed Forever | Bob Diamond Interview

Is that really the smart thing to do to  be unwinding some of that regulation,   especially given the scale and the  magnitude and the damage of 2008? Regulators don't need a rule to look at the  bond market and the damage it could do. And I   look back to the UK, every single deposit-taking  institution in that country needed to be bailed   out. It wasn't because of the rules. It's an  attitudinal thing. And it was about attitude  

that allowed Royal Bank of Scotland to fail.  I'm sorry, but it was not regulatory rule. Welcome to "You're in Business". We are  joined by Bob Diamond, founding partner   and CEO at Atlas Merchant Capital. Bob is  a heavyweight in global finance and until   2012 he was the chief executive of the British  banking group Barclays. Bob, welcome to the show. Yousef, it's great to be here  and it's great to see you in   your new role. I love it. For your new business.

Thank you very much. I think we start off  with the controversy in the global debate and   specifically Elon Musk fresh out of the headlines  and the tweet or on X now saying that the one big   beautiful bill is a disgusting abomination, right?  Reflecting his dismay. How concerned are you, Bob,   about the fiscal plans? mean, there's a little bit  of truth to Elon Musk's frustrations, isn't there?

Yeah, and similar to, you know, I guess the  feeling that many people have with the current   administration is most of those initiatives do  have something that's important and something  

of solid truth. But it comes down to execution  and it comes down to focus. And I think, listen,   there is a very large you know how bullish I am on  the US economy, you know, how positive I am on the the very diverse financial services industry  in the US, how both of those things have been   so impressive in the economic recovery  since COVID, the rise in interest rates,   there wasn't a recession, inflation  came down. But there's that dark cloud,  

which is now getting more attention,  and that's the debt models. And I think,   you know, part of the issue around this  bill is what does this do in terms of, the overall debt level for the United  States. If we go back eight years and   look at the first Trump administration and  the Biden administration in those eight years,   we doubled the outstanding debt from  17 trillion roughly to over 35 trillion   roughly. And yet that was a period of a  pretty solid economy. Instead of, yeah.

Yeah, yeah, I look at the tweet from David  Rosenberg just to pick up on what you were  

talking about in terms of the debt levels. we  had this downgrade from Moody's recently, right?   Because of what they see as an unsustainable  fiscal path. And he said he was surprised by   this shrugging of shoulders that we saw in the  markets by this decision. The first time ever,   the bonds of the world's reserve currency are  no longer rated AAA by any major ratings agency.

Could we see more rating downgrades? Is this the   beginning maybe of a downward spiral or  is that a little bit too pessimistic? In my own view, what the rating agencies  do, I don't really pay attention to as   much as what the investors do. And I think  in terms of that market, they're much less   reliant on Moody's than they are on their own  analysis. And I think the debt levels as part   of that decision and the overall credit of  the United States is appropriate. I mean,  

I think it should be taken into  account. The optimist in me says that more attention around the debt bubbles are very,  very good and positive for the United States of   America. We have to deal with this. We  can't ignore it. And I think my worry,   Yousef, is the opposite, which is it's  not being addressed. And therefore,   the next president, the next president, the  next president feels that this kind of deficit  

spending and building up of the debt levels  is OK. It's not OK. We need to address this. The number is just astounding. we're $36.2  trillion as of June 1, 2025 on the total national   debt. So what are your options then realistically?  mean, either you inflate that away or you cut   spending meaningfully. And we're seeing this  battle play out in real time between politicians   and the bond market primarily. Obviously,  there are other asset classes as well in this.

Who's going come out a winner or  do think it's going to be sort   of a bit of a compromise that both can work with? So the real focus here has to be on  cutting spending and driving growth.   And if we can get spending down and  growth up, obviously those two things   are great. It begins to work down. But  that's the political challenge in the   United States is where is the political  strength to make those tough decisions?

So would you say the bill in its current  form is not the right solution then to  

the problems that we've just discussed to a  sustainable fiscal path? I clearly it isn't. You know, I think the problem is more general than  that, which is I've seen nothing from the current   administration that suggests that they have a  priority on the deficit levels or excuse me,   the debt levels, and that during this  administration, they're going to come down.  

I'm not, you know, detail knowledgeable about  the specific bill, but I can tell you the   feeling of the markets is that this bill,  but more importantly, this administration. is not as focused on the debt levels as we would  like. And I think that's what we're seeing in   terms of the dislocation in the treasury market,  the dislocation certainly around in bond yields. With all the noise that is playing  out and all the uncertainty,  

does it even make sense to buy US treasuries  today? Would you buy US treasuries today? Absolutely. Do I worry right now in the stability  of the credit of the United States? There's a lot   bigger worries than that. That doesn't mean  we don't need to start to address the debt   levels. As you said, they're over double  what they were eight years ago. So no,  

I'm not worried at all about buying US  treasuries, nor should anyone be. But the   sooner we get going on addressing this issue,  the more sound the economy in the US will be. You know, I think people talk about the  impact on the dollar. I think it's a   legitimate concern for all the reasons  we just said. But let's be honest,   there's not a legitimate alternative. So  the dollar is still the reserve currency.  

The risk free rate is still pegged to the US  Treasury market. And I don't think a lot has   actually changed there. But I think it's  a very, very, very positive development. that this is getting attention. mean, Jamie Dimon is concerned, right?  He was speaking the other day and he says   that even though he sees JP Morgan as safe  from what he described as a crack in bonds,   he does see a problem there. And it raises  a bigger question on when you have these  

kinds of cracks like we had with the 2013 taper  tantrum, we had the COVID liquidation. I mean, Even the bigger institutions like JP Morgan would   not be able to get around a proper crack  in the bond market. Can we agree to that? Well, I think what Cheney was talking about is  a crack in the bond market writ large, which is   that we've had a period of real stability,  both in equities and in bonds in the U.S.  

One of the reasons that they refer to a business  cycle as a cycle is because it's a cycle. And   we're long in the tooth in terms of both the  bond markets and the equity markets. And again,   I'll come back to it. If we get some  serious crack or serious dislocation, and investors are much more uncertain about  the bond market. I don't think it's necessarily  

negative. If it's all wrapped into the fact  that there is more attention coming from this   administration, from the population in the  US, from the focus on the next election,   that this is not sustainable and we need to begin  to deal with the debt. That's very different,   Yousef, than saying I wouldn't buy  treasuries or there's a crisis today.   I do think that Jamie's correct to say Watch for a crack in the bond market. But I don't  think he's saying we're about to see a 2008.

At the same time, I look at your comments  on tariffs in the last three to four months,  

and you've been very clear, you've been  very critical, and we've gotten more,   not less of them. And there's a huge amount  of uncertainty in the policy decisions. It   depends what day of the week it is  and what mood the administration   is in. And it's really hard to make any  decisions like that, either as a consumer or as a top executive at a large institution.  How much damage has been done from tariffs on   the reputation of the United States as  a destination for global capital bust?

Spot on. It's a very good question. I can tell  by the way you asked it what your view is,   and I would agree with you that I think there's  two very, very specific issues here at play.   One is are punitive tariffs an effective economic  tool? And you've heard me speak on this. No,   I don't think so. If you're asking Bob  Diamond, no. I think that tariffs when it's to

equalize trade. For example, if China  is subsidizing certain industries,   if they're very targeted to industries, to  certain things that are imbalancing trade,   they can be part of an overall trade package.  But we've moved into punitive tariffs and   threats. And I think that feeds into your second  point, which is our relations with our allies.   And I think the change in the relationship  between the United States and Canada.

the change in the relationship between the  United States and the United Kingdom or most   of the major European countries is an issue  and it's not helpful for us right now. So I   think when you take those two things together,  what the implementation of the tariff programs   has been very negative, both for our brand and  reputation, which leads into interest rates,  

right? And equity investment. It has been  very negative in terms of solving the issues,   which I think are really the core issue here. which is there was a serious imbalance of  trade between China and the US. And in my mind,   let's focus on that and let's stop  all the punitive tariffs with Sri   Lanka and Vietnam and the UK and  areas where it's not necessary. So, a good

for tat and tit for tat all the way out  for the remainder of this administration.   This is gonna be, I'm already exhausted  and we're barely a few months into this. Well, listen, didn't I didn't I have been  optimistic for so long. I've earned the moniker   of optimistic, so I'm going to stay optimistic.  And I think the optimism I have is that there are   real fundamental differences between China and  the US on our trade relations. I think change  

is necessary in that relationship. And I believe  strongly that it's in the best interest of China. and the best interests of the  United States that we resolve   these in a way that is supportive  and fair and works for both sides.   So I'm optimistic that we'll get there. If  you asked me, I would not suggest kind of   the public debate is the way to get there.  would expect the leaders to get on a plane,  

to get somewhere together, and to start working  on the fundamental issues. Because frankly, You know, there are so many analysts that  have put out reports on this. It's not that   hard to figure out where the imbalances are and  start focusing on those and correcting them,   which would be in the best interest of  both China and the US. So I'm going to   remain an optimist. I think we'll work  this out. I don't like the execution of  

it right now. That's my opinion. But if it  gets us to the right place, maybe it's OK. So is this going to be another taco situation  then? Is that what you're hinting at? I believe that the negotiating style is, as our  president has always talked about, is to come   hard. then and then so we have to separate what  is just backing off from kind of a negotiation.   But I think you're coming right back to what  I'm saying is we don't need to do it in public.  

We should have serious, serious meetings going on  between the operatives in China and the operatives   in the US. And let's get to the fundamentals  and get out of the front page of the newspaper. Yeah, I hear what you're saying and it makes  a lot of sense. And maybe they should give   that a try if sort of the outright force  of forcing everything through posts on   truth social and X hasn't been working. I  want to get to something you were talking  

about. It's really important. So I need  to flesh it out with you. And it's this   concept of because you were saying, you know  what, you're not afraid to buy US treasuries,   which is fine. It's not about whether  you're going to get your money back. is like, what is your money going to be  worth the moment you get those treasuries   back? Because at the trajectory we were  going at, it's not going to be worth much  

in 10 years or 30 years or whatever the 10  years of the paper you're buying. We've had   previous cycles of US dollar weakness. Sure.  I'm thinking 2002 to 2008. The dollar index   went from 120 in 2002 to about 70. So we're  talking about a 40 % decline. Have you moved?

out of the US dollar into other currencies because   you're expecting another big  drop at least in the short term. Listen, we don't make our investments. We're  investing in financial services and we look at   the US, the UK and Europe. So we really deal in  three currencies, the dollar, sterling and euro.   And we've never made an investment  decision, nor do I think we will   because of the currency alone. Or even as  that is a major issue. We don't ignore it.

And then once we made an investment, we're very  cautious on whether or not we hedge the currency   because our investors are investing, even those  that are international. They think of us as a   dollar based fund. So we can't ignore that we have  exposure to the euro and the sterling. But let's   be honest, these are hugely volatile currencies  relative to the dollar. What happens actually is   somewhat different than that. And this has been  very interesting. Two of our portfolio companies.

We're a large investor in Kepler Cheuvreux, which  is a Paris-based European equity sales trading   research, outstanding, very high volumes, right  below the bulge bracket, tremendous business.   record flows in the first quarter of this year  from US investors into UK and European equity.   They've ever seen, and certainly since 2008,  we've seen nothing like this. We've seen more Interesting. More of our Middle Eastern investors in Atlas  Merchant Capital have been risk off on Europe  

for the last five or six years, almost from  since before COVID. So they haven't seen it   as a great area to be investing. They haven't  said no, but the barrier is much higher. That's   changing. And I think, you know, one of the  benefits of some of the things that we have   been talking about that have been negatives is  that it's put a little bit of a boot in the butt.

of Germany and France and some of in the UK  and some of the some of the large economies   in the UK and Europe that, quite frankly,  have to focus more on business, on success,   a little bit less on social issues and a  little bit more on business issues. I'm not   saying the social issues aren't important,  but my goodness, they have been so lagging   the US in terms of productivity, in terms of  profitability, and we've seen it more than ever.

in the large banks in Europe since  2008 and the UK versus the US banks. want to wrap up the US angle with the Fed  chair, Jay Powell, the last leg of that  

stool. And he put out a statement that's been  interpreted as a rare, explicit commitment to   its independence from the executive branch. What  did you make of it? Were you surprised? The market   seemed to be a bit surprised by how candid this  statement was. Or did you not make as much of it? One, didn't make as much of it. And second, thank  goodness, the independence of the Federal Reserve   Bank is a underpinning of the strength of the  U.S. financial system and the U.S. economy.  

And if it starts being dictated by the executive,  we're in trouble. So hats off to Chairman Powell.   I think he did the right thing. I think he's  been steadfast in his independence. I think,   frankly, he took a little bit too  long post-COVID to raise rates. But I think he's played a blinder since  then, Yousef, and getting late rates up to   five and a half percent, getting inflation down,  keeping the economy strong. And I think they'll  

be very, very cautious about reducing rates from  here. That's probably the direction of trade is   another one or two small cuts this year. But  he's not going to do anything crazy because,   you know, we need to save, you know, the  power of those cuts for when it's required. by the numbers, by the inflation  numbers, by the economy numbers,   by the labor numbers. But right now, inflation  remains under control. The labor market is really,  

really strong on a historic basis. There are  some concerns and some cracks for all the   reasons you and I had talked about earlier,  but the Fed is going to be very thoughtful,   very cautious about cutting rates over the  balance of this year or next year. And I   think that independence is critical to our  economy, to our brand, and into the dollar. economic indicator does Bob Diamond  watch more than anything else?

That's a great question. I think over the last  few years, inflation has been the one that has   been most important. And I don't think of this as  so I would say the inflation and the unemployment   rates. And I've looked at the unemployment rates  in terms of the jolts, which is job openings and   things like that. think if you keep an eye on  inflation and you keep an eye on job openings, I would say- Bob Diamond indicator. You're you're really right there focused on the  

Fed. That's a long winded way of  saying keep an eye on the Fed. Yeah, mean, employment and obviously the cost  pressures are sort of two necessary sort of   data points to navigate the financial landscape.  So in that sense, you know, you're mainstream,   but you're, of course, unique in many other ways.  I want to speak to some of the alternatives and   specifically about major banks letting their  clients buy Bitcoin. I appreciate that.

this doesn't necessarily fold into  what you do day to day, you personally,   have you or are you buying or adding  exposure to Bitcoin? Do you own any crypto? So crypto is a word that covers a lot of areas. We  have been an investor. I'm proud to say we've been   public on this in circle through a private round  in circle. We tried to take them public through  

a SPAC. The SEC was absurdly ineffective, I think,  in understanding stablecoins and understanding the   difference between a stablecoin and a Bitcoin.  I think under the Gensler administration, Most people who are investors would say it was a  very, very difficult period for any sophisticated   investor because of the unwillingness to  engage around so many topics and in so many   strong economic opportunities that just went  by the wayside because of the benign neglect  

from the SEC under Gary Gensler. We're in a much  better position today. I think the attitude of the Secretary of the Treasury, the attitude  of the administration toward consolidation,   such as in US banks. But also we will see  the pricing of Circle today or tomorrow   in there going public. And I think  that's very, very positive. Now,   I think when you talk about crypto, Yousef,  there's kind of three buckets I look at. There's  

the technology and the infrastructure.  And I'm a big proponent of blockchain. I think, frankly, 10, 15 years from today,  it will be the underlying technology in   most financial institutions. I'm also very, very  positive as an investor in stablecoins. I think   the wonder and the strength of Circle is they  want to be the most regulated, the most clean.   All of their reserves are held at BlackRock or  95 % in a fund of one, so a dollar is a dollar.

But you would have a hard time convincing me that  we're not going to have an institutional awareness   and usage of a digital version of the dollar. And  it's the job of the Fed to regulate this area, not   to approve it or disapprove it, but to regulate  it hard. And if you look back to something as   simple as the Fed wire, how we transfer money for  the last four, five, six, seven, eight decades. that wasn't invented or developed by the Fed,  it was developed by the private sector and then  

regulated heavily by the Federal Reserve Bank. I  think that's where we're going with stable coins,   is let the private sector develop  and let the regulators regulate. I that was a true transformation for sure. I from  the financial from the financial stability board,   I was catching up with the president and he was  making the point that they're trying to unify   regulation globally, even beyond the United  States, you know, to make sure that you close  

up any opportunity for arbitrage. The other  alternative I want to talk about is private   equity. And there was a fascinating conversation  between the Egyptian billionaire Nassef Sawiris. speaking to the FT and he said, the private  equity industry is past its peak and they're   facing massive challenges in selling trillions of  dollars in assets. Firms have struggled with exits   and a slowdown in deal making and IPOs. I mean,  that's not radically new per se, but just to hear  

that frustration from somebody like him definitely  caught the attention of quite a few people. you,   to what extent do you agree with that? mean,  obviously you're on the other side of that. So I expect you not to agree, but if you  still have an opinion, I'd love to hear. It's a yes and no. And I have tremendous respect  for Nassef. He's someone that I've known well over   the years and he's very knowledgeable about  the markets. But I think on the one hand,  

you have the very large 10, 20, 30, 40  billion type funds in private equity,   which is really institutionalized over  the last couple of decades. They use   leverage as their primary tool. So the  interest rates have a lot to do with it. And the downside is very real when that much  leverage is put. What we're doing in Atlas   is our funds are a billion or a little bit  less. They're very, very focused. Like our  

current fund is on U.S. regional and community  banks. We recognize that our investors like   opportunities for co-investment, so we don't  need a mega fund. We have a fund that is real,   but gives opportunity for investors to  have co-investment. Mostly, I would say. We're focused on financial services. We rarely  use any leverage, nevermind two or three or four   turns of leverage, because the institutions that  we're investing in already have the leverage in  

them in financial services. So higher rates are  typically good for financial services. And we're   seeing a lot of interest. As I said to you, we're  able to do, you know, a first close in our U.S. in our fund for US banks, community of regional  banks. And literally tomorrow we'll have one of   a couple of realizations this year in our  previous fund when Circle goes public. So   we're seeing it differently, but I think part  of that is we're a boutique. We're not a mega  

and we're financial services just in the  developed economies. And while there are   select instances where leverage makes  sense, such as in acquisitions, it's not It's not a normal tool when you're in  financial services because the leverage   is in the institution. So I think like everything,   it's a different story depending on what sector.  But we think we think the opportunities in   financial services for a fund like Atlas  Merchant Capital have never been better.

Quick reminder for our global  audience to get involved,   please share your questions and thoughts  in the comments section below. We'd love   to hear from you. I want to pick up then on  the new opportunity set for Atlas Merchant   Capital. You articulated this conviction  call on US banks, and this is specifically   regional banks. How has that worked out so  far? Is it too late to get into that today?

You know, it's interesting, since SVB and First  Republic were rescued a couple of years ago,   there has been a acceleration  in consolidation, thoughtful,   cautious, 10 or 20 transactions, not 500.  Regional and community banks are incredibly   important to our economy. Over half of  the lending, as Secretary Besson said, Half the lending to small businesses and  family offices comes from these banks,  

not the big four. And right now, there's  an opportunity to put new capital in this   sector and to encourage and support the strong  regionals from acquiring some of the smaller,   more private community banks that  are outstanding institutions,   but are frankly just too small to succeed given  the incredible increase of costs of technology. and costs of regulatory compliance and costs  of KYC. Now, as important as these banks are,  

four and a half thousand is probably the  wrong number. Not many Americans knew we   had four and a half thousand banks until SVB  collapse. Yeah, and I think it'll it'll we   believe in two to three years it'll be at  a thousand or fifteen hundred. And we are   investing in the stronger regional banks to  give them the capital to be able to acquire I thought that number, we're at four and a half. one or multiple community banks.  And obviously we'll always be below  

24.9%. So we'll be a minority. We'll take  board positions and advisory positions,   but the actual consolidation will be  done by the institution. And we will   be a support from an advisory point of view  and an equity point of view. Eric Rosengren,   the former president of the Boston Fed has joined  our team. My partner, David Seamus, who you know.

Did the IndyMac deal during 2008. So we  have such experience. We are so excited   because these are strong and important  institutions putting capital in the market   after the interest rate increase from zero  to five and a half percent is important.   And they're coming out as stronger  institutions through consolidation.   So this is just a win, win, win. you know,  being in a being in an investment area.

which is very strategic as opposed  to opportunistic, means that we   can be doing this for the next couple of  years and really enjoy this opportunity. What about the Gulf? mean, the first time we met,  I think it was almost 10 years ago and it was in   Riyadh. And it was at a big investment conference.  And obviously you've been back many times soon.  

Are you planning to move permanently? Maybe the  opportunity set there becomes so appealing that,   you either create a new office  or you sort of shift more. Don't tell me that. of your focus there. Tell me about the golf. So it's a very good question. And I have not  talked about this publicly, but there's two  

pieces of this. So we're very excited about both.  The first piece is, every private equity firm   like Atlas Merchant Capital has benefited  from the huge reserves in the Middle East,   whether it's in Abu Dhabi or Qatar or the  Kingdom of Saudi Arabia or Kuwait. So, so far, I'm all here. It's been the investment into Atlas Merchant  Capital that has allowed the Gulf to be investing  

in the US, UK and Europe. What we're working on  more now and has always been, I remember our first   conversation at the at the first FII conference  when MBS really announced Vision 2030 was that we   would also like for Atlas Merchant Capital to  work in the Gulf. They don't need our equity. but they do need our expertise. We built  global banks, we built private banks,  

we built asset management platforms. And the  experience we have can help them in the domestic   banking business and frankly, the domestic asset  management and investment banking business and   capital markets business. And we think in places  like Qatar and like the kingdom of Saudi Arabia,   there's an opportunity to develop local  businesses in banking, whether it's... digital banking, investment banking,  asset management, wealth management,  

domestically with domestic teams with the advice  of people like Atlas Merchant Capital. And then   our opportunity isn't to be global right now,  but there is an opportunity to become GCC wide.   In other words, to look at the region as  an opportunity for expansion. So we're   in a number of discussions there. I won't tell  you the country because it would give it away,   but I'm spending a lot of time in  the Middle East. Is it Saudi Arabia? Yeah. Hey, could be. Or maybe it's all of them.

I mean if I had to bet I'd say it's more than one. You're right. And the opportunities are in more  than one. But I will say that since since you   and I met, I think it was exactly nine years ago  at the first FII conference where MBS announced   Vision 2030, the changes in the Kingdom of  Saudi Arabia from a cultural point of view,   a social point of view, the beauty of the  hotels, the restaurants, the quality of living.

has been dramatic. I was there just a couple  of months ago. And I think anyone who has not   spent time in the Kingdom of Saudi Arabia, in  Qatar, in the UAE, really owes it to themselves   to get on a plane, get out there and see  what's really happening on the ground.   It's phenomenal. Phenomenal development, not  just in terms of the wealth of the countries. but in terms of the culture, the quality  of living, it's really, really impressive.

Bob, I want to go to the wider point on the  outperformance of US banks versus the rest of  

the world versus Europe, maybe specifically  since the global financial crisis. There's   a quote from you recently saying that the US  government invested in banks, but in Europe,   was biblical justice. Let's get these and I'm  just going to bleep it out there. Looking back at sort of the European story, which countries have  done better than others? Because when we talk  

about Europe, it's a very wide brush, right? So  we need to get a little bit more specific because   you can't say that Switzerland is in the same  boat as, you know, United Kingdom, for example. Well, I would say who's done the worst. I would  say right at the front of that is the UK and   Germany. It's been sure biblical justice,  which is after 2008, let's get those   guys. The bankers are bad. The banks are bad.  Let's penalize them. Where Hank Paulson in  

the U.S. Secretary of the Treasury and Tim  Geithner said, the most important thing is,   of course, if individuals did something  wrong, they're in trouble. They should be. But what's important here is that we have a  healthy financial services industry because   that's important to our economy. And so what  do they do in the US? They force the 10 biggest   banks to take 25 to 50 billion in equity.  They charge them an incredible expensive  

rate to pay it back. They said you can't pay  it back until we approve the stress test,   meaning you've cleaned up your  balance sheet. And by the way,   until you pay it back, which means  you've cleaned up your balance sheet, You can't pay bonuses or you can't  pay dividends. And at that moment,   both B of A and Citibank were insolvent, no  different than Deutsche being insolvent or   Royal Bank of Scotland being insolvent. But what  happened is now today, B of A and Credit Suisse  

and Wells Fargo and JP Morgan are absolutely  killing it. They're much stronger banks than   they were. They've been hugely important to the US  economy and to their investors and to dividends. where the UK banks have just faded and faded  and faded. And literally last week, 15 years on,   the government money was taken out of Royal  Bank of Scotland. So I think it's been very,   very clear that the focus should be on what's  best for the economy and for the people,  

not kind of let's get even and let's penalize  the banks. now to finish it, two things. It's beginning to turn around and we're seeing  much more aggressive recognition of the importance   of banks in two, Italy, Spain, France. I  think they're large banks are doing much,   much better because the regulators have been  more focused on it, on allowing those banks  

to invest and to expand their businesses.  And I do think we're coming into a very   good period where cross-border acquisitions  will be will be something that we'll see. Yeah, I mean, that's been  a bit of a dream for many,   and it seems very far away most of the  time. But I take your point on making   small incremental progress. I was catching  up with the CEO of Federated Hermes Limited,  

and you may know him, Saker Nusseibeh. He's  based out of London. They've got about 800   billion dollars in assets under management. He  said he was impressed with the reforms taken by   the British government. And he also said that  London is making a comeback to sort of reclaim the center of the podium when  it comes to financial centers,   especially with the trade deals  with the U.S., India and the EU,  

maybe the Gulf and touching distance. Your  reaction, you've spent a lot of time in London,   you still go back regularly, you do business  there as well. Is he onto something? Yes. And I literally flew back yesterday  from London. Listen, starts with it's the   best financial center in the world, given the  language, the culture. Everyone wants to live   in London. I often tell the story that if when  Morgan Stanley asked me if I'd moved to London,  

if I went home and said to my wife, what  do you think about moving to Frankfurt? It   would have been a different answer if it was  what do you think about moving to London? So. 20 plus years, our children were born  there, they went through high school there,   wonderful place to live. But it has been in demise  relative not to Frankfurt or Paris or Dublin.   I think they've lost out market share to the  Middle East, to UAE, to Kingdom of Saudi Arabia,  

to Doha. And I think they're coming back.  And part of that is a recognition that the   banks are a key part, the domestic banks  are a key part of the domestic economy. I wrote an op-ed in the FT a few weeks ago on  ring fencing. Their reaction to 2008 actually hurt   retail banks, hurt consumers, and made the system  less stable rather than more stable. Undo it.  

It's OK. You made a mistake. Let's undo it. The  bottom line is that I think the prime minister and   the chancellor of the exchequer from the Labour  Party have a better chance to change the attitude

than the conservatives because who would have  expected it if you know what I mean. So I think   the opportunity for the prime minister and the  chancellor to continue doing what they're doing,   which is to celebrate the opportunity that London  has as a financial center to make the economy   of all of the United Kingdom stronger, to make  the UK a magnet for expatriates to live there,   to undo some of the damage about the non-DOM  legislation and some of the other things.

I do think they're making progress and we  certainly saw it. We're seeing really strong   performance in our Panmure Liberum business  there. So there's definitely a turn around. Here's what worries me about this push towards  deregulation, which is being led by the United  

States. They want to further cut the regulatory  burden. mean, it sounds like a marketing term,   but there is a reality that the regulation  was put in place after the financial crisis   because of learnings and conclusions and sort  of a level of maturity that comes from it. So not every rule or regulation is necessarily  bad. And there's the risk that you remove a   lot of the learnings and you create new risks  that could ultimately lead to similar outcomes.  

Is that really the smart thing to do to  be unwinding some of that regulation,   especially given the scale and the  magnitude and the damage of 2008? There's no one good answer to that, Yusuf,  as you know, but let me bring up two things.   You had mentioned the interview with Jamie Dimon  last week, and as he said about the crack in the   market, that there were many regulators right  in that room with him and they weren't paying  

attention to it. If he's correct, regulators  don't need a rule to look at the bond market and   the damage it could do. It's the quality of the  people. And I look back to the UK, you know, under know, Mervyn King as the head of the central  bank, every single deposit taking institution   in that country needed to be bailed  out other than HSBC and Barclays by  

the government. It wasn't because of the  rules. And if you look at if you look at   the approval of Royal Bank of Scotland to  acquire ABN Amro in cash, not in equity. and the regulators allowed them to take  their capital from 5 % to 3.5 % in order   to do that deal, it was the execution.  Now, rules matter, culture matters,   but also the quality of the regulators in terms of  how they enforce the rules. And I think that's the  

more important thing. Do we have an attitude  that banks are good, that banks are smart,   that if there are bad actors, they'll  be weeded out? What we really want? investment, want growth, we want strong economy,  we want successful people. It's an attitudinal   thing. And it was about attitude that allowed  Royal Bank of Scotland to fail. I'm sorry,  

but it was not regulatory rules. It was the lack  of focus and the lack of execution on the side of   the regulators that allowed Royal Bank of Scotland  to, frankly, cost the government over $10 billion.

When you think back to 2008, Bob, at what point or  what time did you know this is going to be really   bad and really painful? Do you remember sort of  an exact day in time where you're like, okay,   where it really sunk in that again,  because obviously it was a process,   right? It didn't happen overnight. But  when was maybe a moment where like,   wow, okay, this, this is bigger than  anything I could have even imagined.

Again, I'm an optimist. So until Lehman  weekend, I would not have seen a failure as   systemic and as large both. I didn't see how  deep the problems were at AIG, for example,   and at Lehman. But there were signs going through.  And I think if I go through three or four really,   really three or four times leading up to  that, that I had to go as you said, whoa.

I think in the summer of 2007, there was the  failure of the UBS money market fund in the US,   which I think had grown to something  like 30 billion in subprime mortgages   leveraged up. There was the failure of the  Bear Stearns asset management business,   where you have to say to yourself, how  can an asset management business fail?   What are they doing in terms of risk?  And obviously that led at Easter time   to the collapse of Bear and JP Morgan  taking them over. And that had to be

You know, just very, very important. And then  lastly, the BNP Paribas, the first time a money   market fund had, quote unquote, broken the buck,  where they clearly had securities in there that   were not money good. think that was toward the  end of 2007 or very early in 2008, but before   Lehman. So there were a number of things happening  that I don't think anyone could say they were  

unprepared or should say it. But at the same  time, I think the significance of that weekend with the collapse of Lehman Brothers, the  rescue of AIG, which I think the economics   of AIG were worse than anyone could have  realized. And then making a decision for   both Goldman Sachs and Morgan Stanley to  become bank holding companies and have   access to the window at the Fed stabilized  things. But before AIG was rescued and before

Goldman and Morgan Standard were made bank  holding companies. There were a few days   there where I thought the world was going to  end. And you'll look back and recall that in   the first quarter of 2009, the economy  absolutely collapsed. And we forget it   because it was so short. But that first  quarter of 2009, that recession was so   deep and so dark. And the equity prices of  all financial institutions just plummeted.

It was absolutely, I think the most  scared I was in the first quarter of 2009. Looking back, was it the right thing  to do to let Lehman fail? I mean,  

if you could go back and if you were in charge,  would you have handled it differently? I obviously   it's easier hindsight. We get that. But let's  just do a counterfactual here. Let's assume   those conditions were in place. How would you  have done it? Was it the right thing to do? very hard to line up all the chess pieces.  Like if you'd saved Lehman and didn't save AIG,   would it have been better? No. So, you  know, there's so many pieces to move,  

Yousef, but what I would say is there was  a path to save Lehman. I'm not sure it was   right or wrong. It will never know. I  think everyone knew there was a path,   but the Secretary of the Treasury had made so  many strong decisions leading up into that. You know, he played a blinder. And I think  the action of Tim Geithner and Secretary   of the Treasury Geithner and some of the  other regulators around the world. mean,  

there was no playbook and it was a  whack-a-mole. And there was one problem   coming up after another from Bear Stearns  collapse to Fannie and Freddie to AIG,   which was probably worse than all of those.  So I would never go back with 2020 hindsight. to anyone about how many decisions like,  like what would have changed if any one  

of those pieces was different. I think  it's too hard. And I think the key thing   there was the confluence of events in a  very short period of time with Lehman,   with AIG and the realization that  once Lehman had failed, it put both   Morgan Stanley and Goldman Sachs at risk of  having the same happen. So the rescue of AIG And the creating of those two  institutions becoming back   holding companies were so strong.  That's what kept things together.

The other story that you probably awake for  many, many nights was the Libor scandal.   This was massive and Barclays, the bank  you ran during that time was involved.   When you think back and sort of reflect,  what do think people misunderstand about what happened with LIBOR and how you  navigated that crisis. Because again,   this was the subject of a court investigation and  

they've made their judgments and they've  put this to history. But again, today,   with full knowledge of what happened and all  the points of view, what would you say about it? No, I think it was very pervasive across banks.  And I think it was allowed. It was known by the   regulators. mean, the Bank of England was well  aware of it. We'd had discussions that the core   problem, Yousef, was very, very simple,  which is the setting of LIBOR was setting  

the rate at which banks lend to each other.  Right. So where does Barclays lend to RBS? Where does RBS lend a commerce bank? And  you take those banks and you take, I know,   12 of 16 rates or whatever it was. Here's  the fundamental issue. When the crisis hit,   there was no trading between banks. No one had any  transactions. The regulators knew that 100 % were  

calling them every day saying, what do we put  in for a rate? The other thing I would say, and   we went to the regulators many times on this World  Bank of Scotland, which we now know was insolvent, because they had had an infusion from the Bank  of England during, I think it was kind of July,   August, September, because of all  their problems, they'd run out of   deposits and run out of cash. They  were being subsidized by the bank,  

but they were still posting LIBOR rates at the  lowest level. So the regulators were completely   aware of the situation. And I think this was a  little bit of, and by the way, on the other side, There were some bad actors at banks  in foreign exchange and LIBOR and   derivatives and setting the rates. And there  were certainly some traders that were purred,   you know, their derivative book was going to  get marked here. So they're encouraging someone  

else to do a lower rate. So it was a bit of  both. But I come back to the to the issue,   which is the fundamental issue in LIBOR  was you were setting rates of how banks   lend to banks. And there was no lending of  banks to banks in the crisis. It stopped. So the regulators were well aware of that.  And that's why there were so many calls from  

the regulators asking us how we were setting  our rates. And I think most of the bags were   given pretty honest answers, which is there's  no lending, so we're doing the best we can. The whole system froze up and it probably  means that this was one of the toughest,   if not the toughest moment of your career. I think, you know, the whole setting of  LIBOR and things like that was something   that I would not have seen from my position  either as head of the investment bank. And  

that I would not have seen from my position  either as head of the investment bank. And   so I feel very comfortable because like  all of us in the bank, the Department of   Justice in the U.S. looked at it and the FSA  looked at it. There was never any question of   an individual such as me being involved. I  think the issue was, was this something that

cast the banks as kind of bad actors altogether.  And I think that's the trigger to some of the   emotional reaction within the UK and Germany  and other countries of let's get those guys and   provide biblical justice. In other words, are all  banks bad or are some good and some bad? But this   was something that was going on at a lower level  and at most of the banks that we would have known. Looking back Bob, who had the most profound impact  

on your career trajectory?  Zoom out for a moment. Wow. There's no question in my mind that a  gentleman named Bill Cook who passed away   just before the financial crisis  in 2007, it was my first boss   at a company called US Surgical in Stamford,  Connecticut, and was hired and recruited by   Morgan Stanley and asked me to join him there.  I started in the IT department programming and Bill worked there for many years and to go full  circle. When I became head of the investment  

bank and head of the asset management business at  Barclays, he had retired. And I convinced him to   come back and be kind of a work with the executive  team, work with me in terms of how could we build   from that little small, unprofitable BZW?  How could we build a global investment bank? and do it slowly, profitably, never  miss a quarter of earnings, know,   Bill Sully. And he was so helpful in terms of  recruiting top people. And for me, in terms of  

identifying and motivating the senior team, and  it was an incredible success. And in the years   of Barclays Capital, we had 12 straight years  of 20% compound growth in revenues and profits. never missed a quarter of profitability,  which is why we were so. So confident and so   supported by our board and the regulators when we  acquired Lehman during 2008. But Bill was a boss,   a friend, a mentor, and the kind of person, as  you know, that that will tell me what I don't  

want to hear. And I think that's most important  thing. Really need a person like that. Yeah. in their life. Okay. How do you manage stress then,  especially in high pressure moments,   any routines or philosophies that you've  come to live by and that you'd like to share? I work out every day. Workout sounds more dramatic  than I meant that. I get some exercise every day.  

So yesterday when I landed back from London,  the first thing I did is go to a gym. And I   think being physically fit and paying attention  to your sleep and what you eat and your health   is probably the most important. I love my  family and we're very, very close, I think. I would hope we would be as close as we are, no  matter how we all kind of grew up. But the fact   that we grew up for over 20 years with our kids  and Jennifer and I living outside of the U.S. in  

Tokyo and in London and kind of being on our own,  we're even closer today. And I think loving what I   do, I think those are the three things that do it.  So I don't think as stress is a negative stress, gets you focused and gets you intense. But  I love what I do. I count on the fact that   outside of work, I have a great family  and I try and I try and pay attention   as much as I can to what I eat and  how I sleep and in getting exercise. Are you an early riser then? I used to be when I  

had my CNBC and sort Bloomberg career.  So that was, you know, a good 20 years.   And now more recently, now that I've  had the privilege of this podcast,   I don't have to get up at, you know, at 4:30 AM in  the morning anymore. How does it look on your end? So what time do you get up? I'm not going to say. I am maniacally early. And the  history of that is when I had   my first big break at Morgan Stanley  and I joined the fixed income group  

and I was actually trading. I was in the  1980s. There were no cell phones. There was no   PC on your desk. There was no Bloomberg. So  the competitive edge was getting an early. calling Japan to find out what was  happening there as their day was closing,   calling London to find out what's happening  in Europe and trying to get a step ahead of   everyone else. So I would be the first one on the  trading desk every morning. I'd get up very early,  

try and get to the desk by six or  630. This isn't a day, of course,   when equity markets were opening at 10  a.m. and bond markets weren't as regulated   as they been earlier, but I was a good hour  ahead of most people coming into the office. And it was all to kind of find a  way to get a bit of an edge because   trading financial markets is kind of a zero  sum game. know, for every winner, there's a   loser on every trade. So very competitive.  And unsurprisingly, that fit me very well.

Yeah, I definitely don't want to play golf  against you. it sounds like I'm going to be   on the losing end of the bet for sure. Bob,  this has been incredible. Thank you so much   for your time and your insights and look  forward to catching up again very, soon. Yousef. enjoyed it. Congratulations  on having the courage to go off on   your own and build your own business. Thanks Bob. Thank you. Thank you for listening to You're In  Business. If you've enjoyed the conversation,  

like, share and subscribe. See you next time.