Big bank CEO says THIS could change banking forever

[00:00:01] Speaker 1: Welcome back. Bank of America celebrating America 250 by giving cardholders free access to 250 non-profit museums over the holiday weekend. The Museums on Us program supports institutions and experiences which allow citizens to reflect on our nation's history. The bank also granting a $5 million gift to the Theodore Roosevelt Presidential Library in a preservation effort ahead of the nation's historic anniversary. Join me right now live on the floor of the New York Stock Exchange in this Fox Business exclusive is the chairman and CEO of Bank of America, Brian Moynihan, back with us. Brian, great to see you. That's great to be here again with you. [00:00:38] Brian Moynihan: It's been a while, but congratulations. I think this is 30 plus years since the first time you did a [00:00:44] Speaker 1: show here. I know. Oh my goodness. Thank you so much. So you're doing a lot of initiatives for America 250. You're one of the earlier financial services companies that this nation celebrates. Tell us more about the initiatives and how you're thinking about America 250. [00:00:59] Brian Moynihan: these days. So our company, the oldest part of our company started in 1784. So everybody thinks the revolution started in 1776 and we were a country. It took seven years of war and then the treaty was signed and we were recognized as a country. Then a bank formed and a bank formed for the simple purpose of taking deposits from people had more money to help them transact and conduct commerce. And then secondly, lend money out because we were cut off from the mother country. We had to have our own capital markets and sooner or later, this great New York stock exchange forms in the capital markets form. So what are we doing? We're, we're helping people recognize the history of this great company and also that this great country and our company's fitting with it with all these communities around the country. We've helped them develop. So on the Teddy Roosevelt Museum, for example, you know, we gave it started to contribute that a decade, five, seven years ago. And then with Secretary Burgum, we doubled down on the theory and I'm going out there tomorrow to do a panel. But it's an interesting part of American history. Think about the national park system and what Teddy Roosevelt, as well as being present, created this idea that conservation ecology are critically important. And that's an interesting thing. And then with the museums, it's to expose people, more people to museums. And so we're doing a lot of work. We're taking our history around and things like that. But at the end of the day, we're here to help America be successful. And we've been doing it since America started being [00:02:16] Speaker 1: successful. Yes, I know you have. Congratulations, Brian. And particularly under your watch and your supervision, this bank has grown tremendously. So you've done an incredible job. The team does all the work. I just watch it. That's wonderful. So you mentioned deposits. You've been able to grow deposit market share. You had 2.02 trillion in total deposits and 951 billion in total consumer banking deposits at the end of the first quarter with an average cost of 51 basis points. What do you want to say about deposit growth and where that's going, given the fact that now, you know, the clarity act has the crypto companies potentially getting a stake in deposits if, in fact, they're going to start [00:02:55] Brian Moynihan: paying rewards to customers. Well, for from the consumer side of the business, the core reason why consumers need to have account is to engage in commerce and live their daily lives. And we provide a great backbone of core checking accounts and the capabilities behind that, including the digital capabilities and Erica and the digital apps and all the things we do in Zelle and to help people make payments and Merrill Edge to help them start investing. So we do that. The reason why the focus on that produces a lot of value for the company, that $2 trillion deposit and we can turn around and lend out to the business side customers and the consumers to help them grow their businesses. And the team's done a great job there. Now, we also have about $300 billion in our wealth management business in deposits and $600 billion in commercial deposits. And so it's a great franchise. And the reason why we focus on deposits because any day that's the asset test. If somebody gives you their money to transact and hold for them so that they can conduct their lives, that means they really believe that you're that you are [00:03:47] Speaker 1: their bank. And that's important. But do you agree with some of your colleagues, like, for example, Jamie Dimon, who I was with recently from JP Morgan, who's very upset about the Clarity Act? Here's what he said to me when I spoke with him at the Reagan Economic Forum recently, watch. So are you happy with the way the Clarity Act is turning out? [00:04:05] Speaker 3: No. No, because it allows them to effectively pay interest on deposits, stable coins or something like that, without the protection that they should have. And it doesn't do anything for AMLBSA. It has almost no legal protections. So no, the banks will not accept it that way. And the ABA, the small banks, the credit unions, it's not just the big guys. I'm not worried about stable coin. But if it happened, I'm telling you, I would have nothing to do with it and it would eventually blow up on its own. Okay. But that's my personal thing. But I do understand the concern of all the other banks. So. [00:04:38] Speaker 1: Well, the markup is coming. I mean, what are you going to do about it? [00:04:40] Speaker 3: It is. We'll fight it. If we lose, we lose and we'll live. Yeah. Okay. But it will be fought. This will not be, no one's going to bow down to this guy, okay, or that company. Coinbase. And he's the only one. Yeah. And he's spending hundreds of millions of dollars in Washington, this thing. [00:04:54] Speaker 1: He said he's, he's representing the whole industry. [00:04:56] Speaker 3: He's full of s**t. [00:04:57] Speaker ?: Three. [00:05:00] Speaker 1: He's not happy with Brian Moynihan or Coinbase. Do you agree with that? [00:05:03] Brian Moynihan: Oh, it's not Brian Moynihan. I'm sorry. [00:05:06] Speaker 1: Brian Armstrong. My apologies. So, just backing. He's not happy with Brian Armstrong, who's the CEO of Coinbase. [00:05:12] Brian Moynihan: Jamie, myself, our other CEOs are all looking at this and thinking about, here's a simple question. If you take the deposits out of the banking system, which uses them to make loans to people in small, medium-sized business, we're the largest small business lender in the country. You then shrink the lending base. Because when they go into stable coins, they can only hold treasuries or be deposited back in a bank. And a nature deposit that comes back to the bank can't be lent out because it's considered an overnight deposit. Now, I know that's complex. But think about it as lowering the ability for the banks to lend money to America. You know, the capital markets, people use this stuff, go to the markets, but it's the small and medium-sized businesses. And that's a great concern, and that's the concern we kept establishing. The second basic principle is, if you're going to hold the public's money, like we have since 1784, and, you know, if you're going to hold the public's money, you have to be subject to the same rules that we are, because you need a charter that requires you to have capital, liquidity tests, stress testing, and all those things to ensure that you have the right to hold the public's money. And, you know, that's important. Now, the idea is they'll deposit back in banks, but the problem is, as we saw with some of the regional banks, that money can disappear quickly and cause more damage to the industry. So what we're saying is build a level playing field. And secondly, be mindful of the policy question of what happens if those deposits leave the system and what will come back, not for large companies, but for small, medium-sized businesses. And that, we still think, is not well thought through in the statute. [00:06:32] Speaker 1: This is a great analysis that you're making, and that's exactly what some of the lawmakers have told me, that they're worried about the community banks, that, in fact, lending will get impacted as a result, because those crypto companies are not FDIC-insured. [00:06:46] Brian Moynihan: America is wild. We have 4,000 banks. When I was in Europe, Rome, last week, and talked to the banks there, it's so much more concentrated in other countries. This country still has a very—so there's large banks because our economy is huge. You know, therefore, JP, ourselves, you know, Wells Fargo, Bank of New York, State Street, etc., are large because a country is large. Right. On a relative scale, we're actually smaller than the name brand banks in the other countries. And so—but the beauty of the American system, it's a system that has all kinds of participants. And so local community banks, large banks, mid-sized banks, regional banks, etc. And so that has served pretty well, and we ought to always take care before we disrupt it. So our concerns—and this is largely about the small and medium-sized banks, because at the end of the day, they need these funds to make the loans. We'll be okay, but they need the funds. [00:07:36] Speaker 1: Brian, let me switch gears and ask you about the macro story. You've got an incredible window into what's going on. You also, by the way, not only are the leading bank for small and mid-cap bigs, but you've got relationships with 78 percent of the global Fortune 500. So give us a sense of how you see the economy right now. What's your sense? [00:07:52] Brian Moynihan: So we have a great research team, and Candace Brown and Platt leads, and they're number one in the business, number two, depending on which segment, etc. They basically have increased their growth rate in the second half of the year. They've also put three Fed raises on the table, meaning that the inflation is going to be stickier, go all the way through 27 into 28, largely just to deal with the aftermath of the oil price shock. But in the end of the day, the economy's growing a little faster now than they thought it was going to grow a few months ago, and after the sort of the start of the oil coming out, they feel that that will help ease inflation over time, ease the price pressure to consumers. So they believe the economy's going to grow 2.2, 2.3 percent. They believe unemployment's going to come down a little bit this year. Inflation will take a while. Rates will be higher. But that's, you know, everybody argues for rates will be higher or lower. At the end of the day, rates are an outgrowth of a very strong economy in the United States and a need to keep inflation in check. When you look at what we've seen of consumers, in June, they're spending 7% more on their debit, 7% more out of their accounts than they did last June. That's higher than it was in May, higher than it was in April, higher than it was in the first quarter. So they're actually accelerating their spending as they head into the summer. They're spending on travel, traveling as much. The cost of the airplane tickets is up, but they're still traveling as many times. They're buying more tickets. Cruises are up. You'll see the out-of-home entertainment, partly the World Cup, the U.S. economy, not the biggest in the world, but it helps a little bit the margin. Spending at bars and restaurants is strong. So the American consumer is spending money, which bodes well for the U.S. economy. Now, there's affordability an issue. You hear a lot about that. The consumer is worried about what happens. But if they're employed and there's wage growth, they are spending money. And when they spend money, the U.S. economy is growing. And we look at small, medium-sized businesses, great credits in great shape. They have access to capital. The loan growth has been moving up a little stronger. You can see them using their lines. The clarity, they had to let the war sort of settle through because that threw another question mark on their business plans. But as that happens, I think you'll think it'll get friskier. The AI build-outs is what it is, but we need the small, medium-sized businesses to feel really good about the economy to create that job creation, which you're starting to see. [00:09:55] Speaker 1: Well, you just mentioned your analysts expecting three Fed rises. You're right. I mean, this is the most aggressive call on Wall Street right now, your firm, predicting three rate hikes. Meanwhile, going into this new Kevin Warsh Fed, the president thought it was going to be rate cuts. Now we're talking about rate hikes. Will that lead us into a recession? [00:10:15] Brian Moynihan: No, because in the end of the day, that's the balance the Fed has to have is they're trying to keep the inflation from getting out of control, price stability. And Chair Warsh, Kevin, made it clear that's what he stands for. And by the way, he's an institutionalist. He believes that institution. He served in a long time ago. It's not like he's going to walk in and say, he'll make reforms and do things, but he's focused on that. That's their job. But you also have to be mindful of the other side, which is recession means unemployment goes up and you have to stabilize unemployment. So they've got to mind that. Now, when you travel around the world, the U.S. economy is growing better than most. The inflation is higher than people want it to be. But we shouldn't do, you know, if you talk to the people who are in the positions, Kevin's in 10, 11, 12, 13, 14, 15, they could never get inflation back. They're sort of saying, wait a second, we can never get the economies to recover fast enough. I think it's easier to bring it down carefully than it is to get it going. And so you want to err a little bit to the upside. [00:11:10] Speaker 1: And how does Bank of America get impacted when he cuts the balance sheet? Are you going to be there in terms of buying some of those securities? [00:11:17] Brian Moynihan: The balance sheet's big. We hold almost a trillion dollars of treasuries. I know. Mortgage backs today. The balance sheet's big because the cash and the circulation's twice as big as it was before the pandemic or last time when the Fed balance sheet was in discussion. You can bring it down. But there's a lot of liquidity to pick it up. But they have to do it carefully so they don't create spikes in mortgage rates and things that they don't want to create. [00:11:37] Speaker 1: Real quick before you go, Brian, you've had such an incredibly successful capital markets business. I want to get your take on Merrill Lynch and your wealth management business. What'd you have, like 14 straight quarters of growth or something? [00:11:47] Brian Moynihan: Yeah, capital markets. [00:11:48] Speaker 1: How does the capital markets and the M&A and IPO outlook look to you, second half and into 27? [00:11:55] Brian Moynihan: It's all good. The pipelines are full. The activity is high. The equity markets, there's some apocryphal IPOs, but there's also a lot of other IPOs going through the system. And again, that's good because that means capital's being formed and being spent. A lot for the AI buildup. But for other things, drug development, things like that. And so we feel very good about all that. Now, the worries of the escalation of the war in Russia, Ukraine, the escalation of war in the Middle East, back at that, those are all worries, trade tariffs, all that stuff. But the business community has kind of figured out a pattern to get through that. And you're seeing that come out. Deals are getting done. People are making bids for companies and strong. [00:12:32] Speaker 1: Brian, it's great to get your take on all of this. Thank you. [00:12:34] Brian Moynihan: I'll give you my fan band for you so you can be one of our World Cup advocates. [00:12:38] Speaker 1: This is the World Cup fan band, and it says USC. Thank you very much. You're welcome. And you've been a great supporter of the World Cup. And I've got a fan band from Brian Moynihan. Thank you, sir. [00:12:48] Brian Moynihan: Thank you, Maria. [00:12:49] Speaker 1: Brian Moynihan, CEO at Bank of America. You're watching Mornings with Maria live from the floor of the New York Stock Exchange. WE CELEBRATE AMERICA 250. WE'LL BE RIGHT BACK.