“Regardless of who is elected on November 3, we are going to be very focused on stimuli to get the economy back. The difference will be how we pay for it.”
Merchant Capital, investing primarily in the Financial Services sector. Previously, he served as the Chief Executive Officer of Barclays Bank.
Bob oversaw the acquisition of Lehman Brothers during the 2008 financial crisis. After buying the business for $1.5bn and removing all problem assets, they returned ~$10bn in revenue the first year alone. How does the current crisis compare to 2008? “This is not about Financial Services. It is about what is the impact of closing down the economy.”
In terms of public policy, the COVID-19 pandemic has not fundamentally changed anything between Europe and the United States, as well as the trade war between the United States and China. However, it has accelerated and sometimes galvanized trends that were already underway.
LISTEN AND SUBSCRIBE
SPEAKER
Bob Diamond
Founding Partner & CEO
Atlas Merchant Capital
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie (00:08):
Welcome everyone back to Salt Talk, my name is John Darsie. I'm the managing director of Salt. We've been doing these since the work-from-home period started, we've been having a lot of fun with them. So, thanks for jumping on and joining the ride with us. Salt Talks are a series of digital interviews that we're doing with leading investors, innovators, and thinkers across finance, technology, and geopolitics, and just as we do it at our global conferences, we try to provide a window into the minds of subject matter experts, and also provide a platform for big important ideas that we think are changing the world.
John Darsie (00:41):
Today, we are very excited to welcome Bob Diamond to Salt Talks. Bob is the founder and CEO of Atlas Merchant Capital, which is a international financial services firm with offices in New York and London, that invest primarily in the financial service's sector. As many of you may know, Bob was also the former CEO of Barclays Bank. Today, conducting the interview will be Anthony Scaramucci, who's the founder and managing partner of SkyBridge Capital, which is a global alternative investments firm. He's also the chairmen of Salt. And I'll kick it over to Anthony and Bob for the interview. If you have any questions for Bob during the course of the interview, enter them at the Q&A box at the bottom of your screen on the Zoom link. So Anthony, go ahead.
Anthony Scaramucci (01:22):
Thanks John. And, Bob, great to be with you. For people that are not super familiar with your background, I was wondering if you could just share with us a little bit of your upbringing, and how you got to be the Barclays CEO, and then we'll talk a little bit about Atlas Merchant.
Bob Diamond (01:39):
Happy too. Although it's a funny kind of a ride, but, like you, I came from a large family, in my case, an Irish-Catholic family in Massachusetts. I was one of nine children. I think, as my mom and dad were both school teachers, I always enjoyed school. I went to Colby College in Waterville, Maine, and I've come to be a huge supporter of Colby, and have committed to their board for many years, in appreciation of the education I got there, but I will tell you the truth, Anthony, I went there because it was a small school, and I thought I could play four more years of sports in a small school as opposed to a large university, and then I learned what an advantage it was to be in a small school and small classes. I received my master's degree at the University of Connecticut and began my teaching career there, and only when I took a few years to earn enough money to get a PHD, that I find myself in financial services.
Bob Diamond (02:46):
I got a very lucky start at Morgan Stanley, when it was still a small private firm. I started there in the IT department, helping to build the technology that would allow Morgan Stanley to evolve the way those firms did at the time, from the advisory non-capital intensive firms, to sales and trading. At the time, Morgan Stanley was chasing the Goldman Sachs, Salomon Brothers entrée into sales and trading in addition to the advisory businesses. And I just must say very simply that, once I got into financial services and moved from the IT area into the financial markets, I just loved being a part of the financial services. My background was in the fixed income markets as a trader. I think the single best thing that happened to me career-wise was when Morgan Stanley asked me to move to London in the late '80s.
Bob Diamond (03:41):
Jennifer and I, one child, and the rest of our other two children were born in London, and we spent over 20 years in London and in Japan, because I worked for Morgan Stanley and Credit Suisse before we came back to the UK and I took the role at Barclays. So, love financial services, love the fact that people like you and I were there in the period of great developments, and, really, a 20, 25 year bull market for financial services.
Anthony Scaramucci (04:11):
The job offer, lets go to that, because I think it's fascinating for people as they're thinking about their own careers. You were at Credit Suisse at the time where you were offered the Barclays CEO, or ...
Bob Diamond (04:23):
Yes. Yes.
Anthony Scaramucci (04:24):
Take us through that if you don't want a little bit of a tick-tock. You're at Credit Suisse, you're in London, and you get called by a search firm, or what happens, Bob?
Bob Diamond (04:33):
A little bit prior to that. I think the first move was the decision to leave Morgan Stanley and join Credit Suisse, and I was with Morgan Stanley in London 13 years, incredible firm, it still is today, and then, just a great culture. The opportunity with Credit Suisse was just one of those opportunities that I needed to respond to, which was to become a member of the executive committee of CSFB, Credit Suisse First Boston, and to move to Asia and run the Asian region. And as you may recall, CSFB in those days was organized more regionally than global products where most of the US bulge bracket firms, Goldman Sachs, Salomon Brothers, Morgan Stanley were more organized around global products. Our family lived in Japan for a number of years running the Asian business. I was able to be a part of the first ever Chinese IPO on the New York Stock Exchange. It was a very fascinating time in the development of Asia as a financial center.
Bob Diamond (05:41):
So, the decision to leave there and join Barclays was really, if you put it at its most basic, it was an opportunity to join a fantastic institution in Barclays' triple A credit rating, who had not had success outside of their core UK business and retail and commercial banking business, and their efforts to build their investment bank and their asset management businesses had not been successful. So, it's an incredible platform with a very engaging CEO in Martin Taylor, and an opportunity to build the investment bank and the asset management businesses, which became, over the years, from Barclays de Zoete Wedd, which was a very UK based equity broker dealer, into Barclays Capital which was one of the top three investment banks in the world, and Barclays' global investors from the original acquisition of Wells Fargo Nikko in 1996.
Anthony Scaramucci (06:42):
You had a couple of interesting things go on at Barclays, so I want to talk about those for a second. The first one was during the 2008 crisis, at least the one I'm aware of, you had the opportunity to purchase Lehman Brothers after the September debacle. I'd love to have you address that, but didn't Barclays also sell a very large ETF business to BlackRock?
Bob Diamond (07:08):
Yes. So, in taking you through those steps, as we had talked about, the growth of Barclays Capital from 1997 and 1998, through to the financial crisis had been quite substantive. It was the leading profit generator within the Barclays frankly, as we were very focused and very selective on areas where we could be successful. So, with risk management, financing, capital markets, but we did not enter the M&A business, or the cash equities business, because quite frankly, as a UK based investment bank, with our core market, the UK and Euro market, we did not see a chance where we could compete successfully with the US bulge bracket firms who really dominated both of those spaces. We did have the opportunity in the financial crisis to acquire a franchise that had those businesses, the advisory business, and the cash equities business in Lehman Brothers, and as you can imagine, that opportunity, first, looked like a possibility, probably six months to a year prior to the crisis, and in September of 2008, when Bear Stearns first had their challenges in their asset management business, and then Bear Stearns was rescued by JP Morgan.
Bob Diamond (08:27):
And it was quite clear at that time that there could be another shoe to fall down the road. It could be other standalone investment banks which could potentially run into some of those challenges. So, one of the things that we did at Barclays is, we spent a fair amount of time, and I had had a call from the US Treasury after the Bear Stearns rescue, basically asking me if there was another shoe to fall, would Barclays be interested in a role similar to the role that JP Morgan had played in Bear Stearns situation? So, we began thinking it through with our executive committee. We took it to our board on two or three occasions, and the conclusion was pretty clear, which is that the combination of Lehman Brothers with Barclays Capital, was almost too good to be true, but the question was, would you pay a big price at the risk of employees leaving, in other words, have to pay twice, once to buy the business, and once to keep the people?
Bob Diamond (09:29):
And what we recognized is that there was a transformational opportunity for Barclays to combine the strength of Barclays Capital, Europe, UK, Asia, much more around debt capital markets, derivatives, financing, with Lehman Brothers, which was one of the top two or three franchises from a client point of view in the US, and one of the top firms in M&A, and in cash in new issue in derivative equities. So the conclusion we made was the combination would be perfect, but it would have to be at a distressed price. And of course, at that time, as you will recall as well, between the Bear Stearns' rescue by JP Morgan around Easter of 2008, and our acquisition of the US broker dealer of Lehman in September of 2008, the financial markets were actually, for a number of times, rallying quite strongly, and there was no opportunity to actually acquire Lehman or do a combination, until the near collapse of the financial system in September.
Anthony Scaramucci (10:33):
It was disclosed, basically, what did you end up paying for it in its descent prior to its dissolution?
Bob Diamond (10:40):
So, the price paid ... I haven't got all the exact, but it was about one and a half billion for the US broker dealer, and all of the problem assets were taken out of the business, because they weren't in the US broker dealer, so the balance sheet was quite clean. It was basically US Mortgages, US Treasuries, some investment grade debt. One of the things that we recognized at the time was that the value of the headquarters building in New York was probably worth one and a half to two billion at the time. So, from a Barclays point of view, it was both a good price, in that we're getting the headquarters, but it was also a good opportunity to get just the US broker dealer where, if we had acquired the full firm, we would have had a lot of overlap in Europe and Asia.
Anthony Scaramucci (11:37):
And it worked out. So, pursuant to what your original plan was, the synthesis of the two businesses has gone remarkably well, when you say it's a decade plus later, but it's gone remarkably well done. Right?
Bob Diamond (11:50):
It's been phenomenally successful. I think the revenue in the first year from the acquisition of the Lehman's business was somewhere on the order of $10 billion.
Anthony Scaramucci (11:59):
So, I mean, it's a good segue to where we are now, in that crisis, there was a tremendous opportunity, you as a CEO of Barclays, to see the opportunity to shed some assets, buy some others, put Barclays in a premier position here in the United States, as well as around the world. So, how does that compare and contrast now to the global pandemic that we're facing, both ... Bob, I want you to analyze it from a economic perspective, and then from an opportunistic perspective.
Bob Diamond (12:31):
Going back just a second to that. That was a financial crisis, which was very different than today, and it was as treacherous at the moment to spend one and a half billion dollars, even if the building was worth more. And, as I go back, one of the lessons that I learned from that is, it was the early preparation and talk with the board that, we recognized that the only way that that transaction would work is if Lehman were in distress. And that if Lehman were in distress, it would likely mean that there's bigger issues surrounding it in terms the economy, so that, we had already thought through the fact that, no matter how bad the situation looks, this would be good at a certain price. And I think that helped us during the most difficult couple of weeks, because, as you will recall, within days, we had the Merrill Lynch, B of A merger, and within days, we had the AIG rescue.
Bob Diamond (13:32):
I think looking today, this is not about financial services, this is really about, what is the impact of closing down an economy, for what's turned out to be four months now, for all the right medical reasons, but what are the things that we can do to make sure that that has as little impact for us over time as possible? And I think, the first thing I would say about today, is that, while the actions of the Fed during the 2008 crisis, as we look back, were very positive and very strong, and the fiscal actions taken by the Treasury for the TARP program, gave the US financial services industry and the US economy, a big advantage versus Europe, who didn't take that kind of action. Notwithstanding all of that, what the Fed and the Treasury have done in 2020, during the pandemic, I think is just phenomenal.
Bob Diamond (14:40):
I think the speed with which they acted was much faster than they had acted in 2008. I think the scale which they have acted, which is basically is as soon as late March, made a commitment that size was not an issue, that they'll be there for as much as they need to be there for. And then lastly, the breadth of the activities, not just treasuries and agency mortgages, but investment grade corporates, unis, exchange traded funds, it's been an incredible program.
Anthony Scaramucci (15:17):
One of the detractors, or one of the criticisms of the program ... And I agree with you, by the way, I think they literally took the 2008 playbook, Bob, and it was almost like a dress rehearsal for the 2020 pandemic, but one of the deleterious side effects, or at least the critics would say, is that, it's going to further widen the income gap in the United States, and by accident, because we only have one leg of the stool, we don't have a infrastructure leg, or a fiscal reinvestment leg of the stool, that it's helping people that have assets. And so, if you own the assets, and you're injecting this amount of liquidity, the assets are going up, but the people that don't have assets, the middle class workers, the wage earners, lower middle class workers, are suffering, and critics have suggested that the Federal Reserve is by accident created populist movements like President Trump's movement, or Bernie Sanders's movement. What's your reaction to that?
Bob Diamond (16:21):
I think in the fullness of time, we can grade the Fed and the Treasury with actions down the road as well. In other words, how does this play out over a number of years, in terms of the economic recovery, in terms of how we get back to more normalized level of interest rates, income inequality, all the things that you talked about? But if we're going to grade the Fed and the Treasury today, I think it has to be a quite impressive, at least, an A minus, based on the actions that they took. And why do I say that? If we look at 20 million people in the US States who were employed in March, are not employed in April, that's not going to turn around quickly, and I think the actions that the Fed and the Treasury have taken, have been very positive, in terms of almost every metric we can look at.
Bob Diamond (17:18):
Everyone would have their issues around specifics, and I do believe that the focus has to be on jobs, and will be on jobs going forward, but 20 million fewer people working, is a lot of people. It was up to 22 million, came back down to 20, but if we think for a second, all of those people are going to be back in good jobs in 2020, that's just unrealistic. So we have a long road to hoe ahead of us, and I think the actions that they have taken have been very positive in that regard.
Anthony Scaramucci (17:49):
I agree. I just wondering if there could be other actions that could potentially help away from the monetary policy. Let's talk about Atlas Merchant for a second. So, you leave Barclays, and you set up this fund, tell people about the fund, tell us what you're doing and where the opportunities are.
Bob Diamond (18:10):
So Atlas Merchant capital, we think of as a merchant bank, and our focus is primarily US, UK, Europe. So, if you can invest in the dollar, Sterling, or Euros, we're interested in those areas. We're focused on financial services. We think that the impact of 2008, from a regulatory point of view, created a bit of an oligopoly around the larger interconnected banks, and we believe that, that three decades of financial services organizations, particularly in insurance, in banking, in asset management, of becoming more global, and more universal, is really stabilized and somewhat reversed. And the opportunities we're seeing in financial services below the level of the oligopoly of the large interconnected banks, which have much higher buffer upon buffer of capital, far more restrictions in terms of the regulators of their growth, is creating opportunities for models that are more around one country or one region, and models that are much more around focus and selectivity, meaning, maybe it's one product, maybe it's like Panmure Gordon, one of our investments in the UK, which is focused on UK, middle market businesses.
Bob Diamond (19:39):
Or maybe it's like Kepler Cheuvreux, a business we invested in, which is a Paris based equity sales, trading research, that's all they focus on, is just that product. And I think the business models have changed from global, global, global, universal, universal, universal, so much more national and regional, and oftentimes, much more around a single product or a single technology. And that competition has been interesting. We've had quite ... We've done four investments in the UK and Europe, four in the US, two in insurance, three in broker dealers, one in asset management, one a technology driven bank, and we see significant opportunity in these kinds of areas for investors.
Anthony Scaramucci (20:26):
So, you're buying out the whole stake, you're taking a small stake in a business, becoming a board seat member, what's the plan?
Bob Diamond (20:37):
Not always a majority, and often it's a minority, but always some modicum of control. So, we'll always have multiple board positions, and I think the way we talk about it, Anthony, is, we like to be thought of as not just great investors, we like to be thought of as great operators, and we're being invited more and more to take part in investing in companies such as Kepler Cheuvreux, which was quite competitive, and there were a number of higher prices, but our ability to work with them to truly impact growth, and impact the business going forward, in many of our businesses, in all of our businesses, we're very active, but we're always active and supportive management. And I think in a highly regulated business like financial services, you're either supporting management, or it's not worth being an investor.
Bob Diamond (21:30):
So, in some cases, we are a majority; Panmure Gordon in the UK, we are a majority with a partner from the Middle East, and in many cases, South Street Securities in the US, or Ascensus, the asset management platform, we're a minority, but very active participant on the board.
Anthony Scaramucci (21:50):
And your business has changed, or not changed, or become better or worse as a result of the pandemic.
Bob Diamond (21:57):
So, two things have happened; my partner, David Schamis, and I began thinking about two years ago of, as it was going ... Our investing and financial services was going well. We still had about half of our first fund to invest, what would be the next great opportunity for Atlas Merchant Capital? And we decided at that time that the credit markets, 10 years after the 2008 crisis, zero interest rates, QE1, QE2, QE3, there was a proliferation of credit, covenants were becoming very light, and we thought that there'd be a great opportunity in the below investment grade corporate sector, both, again, US UK, Europe. We didn't know what would trigger that, but we felt it was better to put the team together, and to raise the capital ahead of that opportunity. We hired Ty Wallach, who is with Oak Hill, and then Paulson for many, many years, about nine months ago. Ty has built a team, we have the anchor investors in, and we launched this strategy three or four weeks ago, and I must say, to have completely dry powder, and a whole new team with great success in the past together, the timing turned out to be perfect, but we would not have known that this disruption in the markets would have triggered this.
Bob Diamond (23:23):
Now, the Fed activity is certainly slowed some of the price adjustments that we expect to see in the fullness of time in the US, and the below investment grade market, but we are seeing those kinds of opportunities already in Europe and the UK.
Anthony Scaramucci (23:41):
You manage Barclays, you've been in the financial services for multiple decades. The structured credit markets have been hammered by this crisis. Is that an opportunity, Bob?
Bob Diamond (23:58):
The simplistic way to say it, Anthony, is that, since the financial crisis in 2008, because of the behavior of the Fed here, but also in Europe, to some extent ... And keep in mind, in Europe, it got a tough start, most people forget this, but president Trichet, president of the ECB, raised rates during the crisis in 2008, which really put the European financial institutions on razor's edge. I mean, we would wake up from day to day and wonder who would be insolvent today. When Draghi came in, I think he was truly a hero and a savior, and we all remember in 2011 when he said, "I'll do what I need to do," or words similar to that, "I'll be here until I don't need to be here anymore," insolvency was taken off the table. And so, Europe went through a similar period of zero to negative interest rates, QE, after QE, after QE, and it's natural that that bull market of 10, 11, 12 years in credit is going to create some bad habits.
Bob Diamond (25:05):
And so, I would agree with you that we think patient capital, looking for opportunities in the distressed end of credit, is going to be one of the best investing opportunities over the next two, three, four, or five years, and it will end up in a place where you can potentially be the owner of some good businesses that have gotten into some real problems around the capital structure.
Anthony Scaramucci (25:32):
I want to address this with you, because I think it's tied into everything, because there's a political climate now that is sensitized to things like pay. You experienced that in the United Kingdom. I can remember vividly, and I think I told you this, I was on a JetBlue flight back from the Bahamas on the fourth of July in 2012, and I saw you on CNBC, I guess you were testifying somewhere in Westminster, maybe it was one of the houses, or something, about issues related to pay, and issues related to the financial services industry, and people were putting pressure, the PPP is an example, many people [inaudible 00:26:17]say you didn't take it, of course, we didn't take it, others did not take it. Do you think any of that stuff that happened in Europe, five or 10 years ago, is spilling over into the United States?
Bob Diamond (26:31):
Yes, I think it's spilled over somewhat at the time, but I think the approach, Anthony, that the US took versus the approach that Europe and the UK took, are very, very instructive. So, secretary of the Treasury, Paulson, if we recall, failed in his first attempt to get a TARP, and that first TARP was more around guaranteeing some of the assets. The TARP that was eventually approved forced equity into the biggest US banks, and it was 25 to 50 million of equity put into the banks with no stigma, and Paulson and Congress were very clear, "Strong banks will take it, weak banks will take it, we want every bank to take the equity." Now, in order to pay that back to the government, and not have the government as one of your shareholders, you first have to pass the Fed stress test. So, what the treasurer was able to do, is to force equity into the troubled financial services industry, without stigma, and until they paid that money back, there were no dividends and no bonuses, which solved some of the public furor, and it was fair enough, and they could not pay it back until they cleaned up the balance sheet, in other words, pass the Fed stress test.
Bob Diamond (27:52):
And what secretary Paulson did is, he fixed the system, and today, where you would have seen, in 2008, Citi and B of A, close to insolvency, they're both strong, confident banks here in the US, and in operations around the world. And I think most people outside of the US would say that the US banks dominate businesses such as the investment banking business, whether it's in Europe and Asia, or in the US, relative to the European and UK banks. In fact, I say with great pride, the only non-Us bank competing is Barclays Capital, and that was really down to Lehman Brothers acquisition, which gave them a strong business in the US, stronger than any other non-US firm. But most of the Europeans faced, I would say, almost biblical justice, which is the approach of the regulators and the politicians in Europe, was, "The bank's caused this problem," which was true, "and rather than fix the system, let's penalize the banks, and penalize the bankers." And so, no equity was put into the system, and even today ... I mean, how many capital calls have we seen Deutsche have over the years, six, seven, eight?
Bob Diamond (29:06):
We see Royal Bank of Scotland still majority owned by the UK Government, still with a lot of the challenges on the balance sheet that they had 10, 11, 12 years ago. No development of the capital market. So, since the Coronavirus, the capital markets in the US have flourished. Notwithstanding the government interventions, we've seen a huge amount of private capital go into companies in the US, we have not seen that kind of reaction in Europe. So I think the benefit to the US system of fixing the system, was positive. Now, do I expect to see more of these issues around income inequality in financial services industry as well as others? Absolutely.
Anthony Scaramucci (29:47):
Well, I mean, I didn't mean to interrupt, but I just ... Talking about there being a villain last time, slowed down some of the economic opportunity, and so, secretary Paulson's take in trying to not make any one individual or one bank a villain was a very smart idea. The fact that there's no villain here, Bob, the fact that it's a pandemic, and it's a healthcare scare, and these businesses are not doing well as a result of forced closure, do you think that will help them from a governmental assistance perspective? Do you think that that's a net positive?
Bob Diamond (30:26):
Yes, without question. I think the fact that everyone wants the economy to be coming back, and I don't think you can find anyone that doesn't believe that small businesses really need more help than maybe some of the big businesses. My personal view is, if I could tweak something that would be a bit more around the main street lending and getting that out there ... I think, you know this better than I, Anthony, this is your business, but over 50% of the employment in the US is in small businesses, and I think like 60% of the expected growth in employment would come from small businesses. And, one of the unintended consequences of leaving many of the large scale retailers open is essential during Coronavirus, and closing down many of the small businesses has given size and scale, a further competitive edge, versus the small businesses. And I think, as a public policy issue in the United States, we need to take care of small businesses. And as a public policy issue, we need to take care of jobs. And yet there will be sectors of the economy that are very different.
Bob Diamond (31:36):
I mean, we don't have to do a lot for technology, they're doing just fine, but what are we going to do for restaurants where most people think, maybe 25% of them will never open again. What are we doing in the travel industry? What are we doing the hotel and leisure industry? So, I think we have a multi-year recovery ahead of us based on this coronavirus, and to your point, Anthony, I think people's willingness to recognize that the government needs to help small businesses is a positive.
Anthony Scaramucci (32:10):
I'm going to flip it over to John Darsie now. Bob, we've got questions from our audience, and we always want to have some participation as we get towards the end of this. So, John, fire away. And, by the way, Bob, your first question back to John can't be about the fake duck that he has behind him, because we've already called him out on that.
John Darsie (32:29):
Every show.
Anthony Scaramucci (32:30):
So, still trying to figure out what that is, but go ahead, Darsie.
John Darsie (32:35):
Bob, we have a question about, what impact do you think the pandemic is going to have on globalization, the distribution of commerce and trade around the world? You could talk a little bit about how you think it'll affect financial services as well, whether you think places like New York and London might become slightly diminished in terms of their importance to the global financial system, and you might see other regional financial services hubs emerge, and just generally talk about globalization, nationalism, how you think the pandemic and the aftermath of it will affect all of that.
Bob Diamond (33:09):
So, I think, one of the things I find interesting, John, is I think, from a public policy point of view, I don't think Coronavirus has changed anything in terms of Europe versus US, China trade war. What it's done is its accelerated, and in some cases, galvanized trends that were already in place before 2020, and before Coronavirus. One of those trends was the trade tensions between the US and China, and I think the rest of the world is now recognizing that the China of 10, 20, 30 years ago, which was an emerging economy, which is investing throughout places like Africa and the Middle East, China is no longer an emerging company, it's now an economic power, and increasingly, a political power. And so, the relationship between nations and China is not just the US/China around trade, it's also coming from Asia, it's coming from the Middle East, it's coming from Europe, and it's coming from Africa. So I do think we're going to see that have a diminishing impact on some of the trade flows that we've seen.
Bob Diamond (34:25):
And I don't mean for a second that globalization is over, and I don't mean for a second that trade channels are going to be destroyed, but I think the momentum has certainly slowed down. And I think within Europe, we've seen an acceleration of the frustrations of 21 years ago, the single currency was a great success, and it was going to create a capital market and an ability for companies to raise money in the single currency, in a way similar to the way US companies were able to do it in the dollar. And only now are we seeing a move toward more fiscal integration with the potential recovery plan across Europe as a result of coronavirus, but we do see some of the same North/South divide debates around whether or not programs like that will be supported by Euro wide bonds, or by individual nations. And I actually think the most recent decision to have a recovery bond funded by Euro wide bonds is extremely positive for Europe.
John Darsie (35:34):
Thanks for that, Bob. The next question is about banks, big banks in particular, about whether you think they're increasingly going to become utilities or agents of government policy, and what effect that has on the sector.
Bob Diamond (35:48):
So, it is interesting that the larger interconnected banks and insurance companies in the US, whether we think it's good or bad, doesn't matter. It's just a fact. The big banks in the US have become more interconnected, and more intertwined with our government in the US, than I think anytime before. Whether it's the ability of the regulator, the Fed, to raise capital requirements when times are good, reduce capital requirements to foster lending when they need it from a public policy point of view, whether it's implementing PPP programs, or implementing so many of the programs, we're seeing large asset management firms and large banks working with the Fed around the implementation of so many of their programs around QE. And, the larger banks are becoming ... It's ironic, John, that in 2008/2009, politicians and regulators were determined that we would never again see "too big to fail".
Bob Diamond (36:52):
Well, if anything, the banks are too bigger and unlikely to fail even more than ever before, and that's why maybe a word like utility makes some sense, is that they're extremely safe, extremely steady, but are they the places that are nimble and agile in terms of innovation that they were in the past? And it's a little bit more like the model we've seen over the years in Europe, where the largest financial institutions become more and more connected with the national governments.
John Darsie (37:28):
Last question from me, we've had several questions about, you've been a big investor in Africa, what do you think the challenges and opportunities are in Africa moving forward, specifically in South Africa, we've had several questions?
Bob Diamond (37:40):
So, I'm more positive on South Africa. They have been through an incredible, incredible period. And when I was at Barclays, we acquired Absa, which was, I believe, the number one retail banking franchise in South Africa. And we had an opportunity to integrate that with Barclays businesses throughout Africa, and I think it was positive for South Africa, and positive for the connection with the rest of Africa> Because of some of the political issues, and now the economic issue, South Africa has been through just a very, very challenging couple of years. I definitely see them coming out of it now. I'm very positive on that.
Anthony Scaramucci (38:26):
Bob, before we let you go, let's talk a little bit about UK politics, and one of my favorite subjects, presidential politics. Well, let's start with the UK. What do you think is going on the there? How do you think Prime Minister Johnson is doing?
Bob Diamond (38:40):
So, I'm a big fan of prime minister Johnson. I, as you know, Anthony, we've talked about this before, I thought he was a amazing mayor of London, and did a tremendous job. I was part of his mayor's fund for London, and his initiative, which he never publicized, but was very focused on making sure that immigrant kids in London were able to get meals before school, and he was very focused on the youngest ages, knowing that if some of the kids coming into London, living in some of the poor hamlets, didn't get a good start, they were falling behind forever. And I think his leadership through this unbelievably challenging time of, no one had a good solution on Brexit, and he led the UK to a good position, I think, over the last months, and now running head into Coronavirus, just as the UK was coming out of it. I do know, when I talk to my colleagues in Panmure Gordon, that's a UK investment bank that serves just UK middle market companies, the private capital in the UK is mobilizing very quickly, and we're doing a lot of equity raising for the small and middle sized businesses.
Bob Diamond (40:03):
That wasn't happening in 2019, that wasn't happening in 2018. So, I think, below the surface of ... It's hard to read all the negatives around Coronavirus, and listen, it's very, very serious, I don't mean to minimize it, but below that, and not getting the headlines, the small businesses and small companies in the UK are becoming better capitalized and more competitive. So, I'm pretty positive on the UK going forward.
Anthony Scaramucci (40:34):
I'm not going to put you on the spot in presidential politics, but I'm going to ask the question in the following way; do you think it matters, from an economic perspective, who the next president is, or do you think that the overarching moves of the Fed are going to be the deciding factor directionally on the economy?
Bob Diamond (40:53):
I think it matters a lot, and I think there's an argument that starts with a dozen, which I understand, Anthony, because, I think, no matter who is elected, the Democrats, Republican, we're going to have very low interest rates. We're going to be very focused on stimulus to get the economy back. So, a lot of the actions that have taken place already are not going to be reversed. Whether it's Democrats or Republicans, are going to be very, very focused on making sure this economy recovers. I think the difference will be significant in down the road of how we pay for it. And, as we know, I mean, simplistically, the Democrats would typically be more prone to look at taxes, and the Republicans would be more prone to look at spending. This is not a normal Republican presidency right now, so I don't know how that would exactly play out, but I think to say that there's no difference in terms of who's elected, is looking way too much at the short term, and not enough at the medium to long term.
Anthony Scaramucci (41:55):
Okay. So what do you think happens?
Bob Diamond (41:58):
If I look at the polls, I would tell you two things; from past history, we're only in June, so we've seen a lot of things change between June and election day in November, so I'll give that caveat, but it's quite clear that the trend in the last few weeks has been for Biden's lead to increase significantly.
Anthony Scaramucci (42:23):
Well, I mean, I think, one of the problems the president is having is, if you look at the demographics, women over the age of 50, he has the widest gap there of any president in 50 years. But it is 150 days out, and what I know, based on my life experience, Bob, 150 days is like 500 years in Trump world, so I'm not going to make a prediction, but ...
Bob Diamond (42:46):
We both know that.
Anthony Scaramucci (42:47):
...the data is underwhelming and has to be concerning to the Trump campaign. I have one last question for you, and then we're going to turn it back over to John to sign off, but I will Want you to address the younger people that are in financial services right now, that maybe they missed the 2008 crisis, maybe they caught that, if they're in their early 30s, but talk to the guys on this webinar with us that are in their early 20s, and they're going through the pandemic, they're working remotely, what's your advice for them?
Bob Diamond (43:25):
Oh, Anthony, that is a great question. One of the things I've been doing ... Atlas Merchant Capital is not a big firm, we have an office in New York, and an office in London, but one of the things I've been doing during this period is trying to have Zooms, or we use Google Hangout, but in our case, Google Hangouts, with as many of the young professionals as possible, just to have a one on one and connect. And as challenging as it's been for you, you've been with your family, as challenging as it's been for me, I've been with my family, a lot of these young professionals are maybe in a studio apartment in New York without a lot of places to go, and I think it's been incredibly challenging. So, my advice is, hang in, and you just don't know this today, but everyone's going to be looking back at this period and how it plays out over the next year, as so instrumental in terms of the future of our economy, and the experience that you're going to get over the next year or two is going to be extraordinary.
Bob Diamond (44:33):
I also think that in terms of financial services, looking only at the big platforms, the big banks, the big insurance companies, the big asset management firms, miss the phenomenal opportunity at some of the smaller firms, and I think financial services is still a great place to be for young professionals.
Anthony Scaramucci (44:50):
I greatly appreciate your time today, Mr. Diamond, thank you. I hope we can get you back on as things start to unfold in the economy. And to turn it back over to John Darsie, but we really appreciate you being on today, Bob, and I look forward to hopefully seeing you face to face at some point.
Bob Diamond (45:08):
I hope we catch up, and Anthony, thank you for doing this for all of us. It's great to have this program going during the Coronavirus. Thank you, man.
Anthony Scaramucci (45:14):
Appreciate it.
