Transcript: Gary Cohn on

The following is a transcript of an interview with former Trump White House top economic adviser and now IBM vice chairman Gary Cohn, which aired on “Face the Nation” on Sunday, March 19, 2023.

MARGARET BRENNAN: And now we’re back with Gary Cohn, former top economic adviser to the Trump administration and currently vice chairman of IBM. Good morning to you.

Gary Cohen: Good morning, Margaret.

MARGARET BRENNAN: We should also mention that you also ran Goldman Sachs many years ago. So I want to talk to you about banking. But first, I want to ask you about the gentleman you used to work for, the 45th president who may be indicted in the coming days. It has called for protests and raised fears of violence. Are you concerned about security and what’s next?

Gary Cohen: Well, I’m against protest, so I don’t think we should protest anything. I- I hope America learns from what happened in the past, and I hope that whatever happens next week, we have a very peaceful set of events. You know no one is above the law when it comes to this. But there is probably some politics involved. So both these things can be true.

Margaret Brennan: Your own security. Are you worried?

Gary Cohen: No, I’m not.

Margaret Brennan. Live in Manhattan. So on the banking front, a week ago, you said it looks like a simple run on the bank. It continues, however, to put pressure on other banks. Why should we assume that other banks are better at managing risk than Silicon Valley Bank?

Gary Cohen: Well, Margaret Bank’s runs are Bank’s runs. When people lose confidence in a bank, deposits flow out very quickly. Banks are not designed so that deposits go out on a large scale. In fact, banks are designed to take your deposits and reinvest them in the economy. They give mortgages, they give car loans. They provide student loans. They allow you to keep your credit cards. So the bank does not have enough liquidity to allow this to happen. When the trust is gone, people say, look, I’ll take my money somewhere else where I have more trust and we’re starting to see it move through the system. And there is a contagious effect. You say, well, one bank has a problem, well, another bank has a problem. The problem is, is the bank I’m in safe? And I have no doubt that it is not safe. I’m going the safest place I can because when it’s your own hard earned dollars it’s better to be sorry than sorry.

Margaret Brennan: Let’s talk about the contagion risk on the other side of this trade break. Gary, stay with us. We’ll be right back.


Margaret Brennan: Welcome back to Face the Nation. And we now continue our conversation with former Trump economic adviser Gary Cohn. Gary, I want to pick up where we just left off in terms of stopping the bleeding that’s happening for some of the mid-sized banks like First Republic. Is there a white knight? Does it end when a big bank buys it?

Gary Cohen: Margaret, that would probably be the scenario. At the end of the day the banks that are the most qualified and have the safest and best balance sheets that they can afford to absorb some of these big regional banks are the biggest banks in America. , which ironically is the last thing the regulatory community and Congress want to see. But that would probably be a possible outcome.

MARGARET BRENNAN: There were reports that famous investor Warren Buffett was talking to the Biden administration. Is there a way around it?

Gary Cohen: You know, it could. But then Warren Buffett would become a bank holding company, and the restrictions on bank holding companies are quite dramatic. And it has to understand what its core day-to-day business means, what it can do, what it can’t do, and all the regulations and restrictions it will impose on itself after becoming a bank holding company. This is not a simple decision.

MARGARET BRENNAN: Well, part of that decision has to be, you know, is it going to hurt me in the long run? Larry Fink, who, you know, runs the world’s largest asset manager, told investors a few days ago that we could see more foreclosures and shutdowns coming. “You can see something like the savings and loan crisis in the ’80s and ’90s where thousands of borrowers just disappeared,” he said. Is he overstepping it?

Gary Cohen: No, I think, Larry, Larry is not exaggerating. It’s a crisis of confidence right now. To some extent, bank runs are a crisis of confidence. The government has put backstops in place for two banks that we know are in trouble. The banking industry itself is trying to help the third bank by putting deposits into that bank. So we know what the treatment of the three banks is. But there are thousands of small and regional banks in America. It usually doesn’t stop after just two. We will continue to go and investors and depositors will examine each bank and one by one they will begin to say which bank is the next least safe to not put their deposits in. I want

MARGARET BRENNAN: And you know, the business world, which operates the way it does and moves so fast, it takes a very long time for Congress to do or do anything.

Gary Cohen: Look, these banks run because of the way they’ve been digitized and the fact that everybody has online banking or telephone banking, these banks can now run in minutes. You know, it’s not like you’re going to the bank anymore and you’re standing in line at the front door and you can slow it down. You cannot slow down digital banking.

MARGARET BRENNAN: So you’ve called for an option for common sense regulation. You want Congress to act, you say, with small bank oversight. You say that the role of the board of directors should be reviewed because of what happened at SVB. Apparently, they didn’t have much experience with that, raising the $250,000 limit on deposit insurance. Elizabeth Warren hit the same numbers you did at two, five and 10 million dollars.

Gary Cohen: Yes.

Margaret Brennan: If this type of insurance extension happens, doesn’t it cause problems for consumers and increase their costs?

Gary Cohen: Well, you’re right. Former SEC Chairman Jay Clayton himself wrote an op-ed where we talked about, look, you’ve got to have a board that’s competent. They have to understand banking. How can a board oversee a bank that they don’t have the ability to and, yes, extend deposit insurance, but you can set prices. This may be a cost for deposits under $250,000. And then you could set prices as your deposits grow and you want them insured, it will cost you more to insure those deposits. But here’s the key, Margaret, and this is very important, we need to keep deposits in the American banking system. It is important that we keep deposits in the American banking system because that is how we grow our economy by allowing the banks to use those deposits for consumers, to buy houses, to buy cars, to go to college. There is an alternative. There is a very important alternative that we have discussed in our own ed. Alternatives are US Treasury bonds or US Treasury bills. They pay higher rates and have a tax advantage. This would have a terrible consequence if people took their money out of banks in the United States and put it into US Treasury obligations. This will have a dramatic effect on reducing the pace of economic growth and slowing down the economy.

MARGARET BRENNAN: The Federal Reserve is meeting this week. They control the interest rate, given the trouble that is going on. Kane, Jerome Powell, chairman of the Federal Reserve, went ahead with the hike he planned. Or are things so bad that he can’t do what the market expects?

Gary Cohen: He’s in a tough spot. We still have inflation. We are starting to see some positive signs that inflation is easing. Inflation also hurt consumers. I think Jerome Powell will need to raise rates by 25 basis points this week. And then I think that in his statement, in his press conference, he’ll need to talk about how the Fed understands the overall effect, the effect behind interest rates, and that they look at the overall effect. will be well aware of. Effects, lag effects, and they will depend on a lot of data going forward. And I think he’s going to leave himself a lot of room in the forward meetings – to do whatever has to be done, which can be stopped, maybe cut or increased. Depends on how inflation is going in the United States. .

MARGARET BRENNAN: Because they will all have an impact on the wider economy.

Gary Cohen: All of it. Both on the banking side as well as what the Fed does in policy.

MARGARET BRENNAN: And we know it has political implications as well. So we pull all the threads together here. Gary, thank you for your analysis. We’ll be right back.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *