The risks You’ve got the Middle East conflict, the Hamas attack in Israel. You’ve got the near-term economic ramifications of that, questions of the shipping having to go all the way around. That raises prices for goods. You have the amount of money that’s being dedicated to the various sectors of conflict out of these economies. There’s an economic impact of that if they escalate in any direction. We worry about all those geopolitical risks. The China-U.S. relationship, making sure that gets back on solid ground. The India-U.S. relationship, making sure that stays on solid ground. At the end of the day, capitalists and entrepreneurs don’t like uncertainty. When uncertainty comes, they slow down, behavior slows down. Also, you don’t like things outside of your control. There’s nothing more outside of control than these types of geopolitical events. Both of those cause businesses and everybody to be a little bit more conservative. On how fragile things really are There’s a lot of absorption of stuff so long as people are working and they’re getting paid and they’re spending in the two biggest pockets – that’s the U.S. economy and the EU economy. On inflation stickiness There’ll be some bumps. The drag on the economy from higher interest rates, from higher prices, from all that stuff, is bigger than people think. So the Fed’s got to be careful that doesn’t get ahead of them because that will take us into recession. On whether big banks will sue the Fed and other U.S. regulators to fight a proposed hike in capital requirements This all will play out by what happens. [The proposed rule] could be withdrawn. It could be re-proposed. It could be changed dramatically. There’s a thousand things that could happen. On the big bank versus small bank regulatory divide If you think this is the right answer, it has to apply to everybody – large, big, medium or small. What happens is people have a different set of rules, then they go belly up, and then we have to pay for it. It’s never good for the institution. You start to say, well, the smaller banks aren’t systemic. But that doesn’t make any difference. If they fail, it’s not good. On the U.S. election People say, who are you for, who are you against. That’s not our job. Our company has been around since 1784, the oldest part of it. There have been some interesting elections in that time. We just have to be ready. I get asked by somebody, do you have a drawer that says what happens if the president wins? What happens if the Republican nominee [wins]? No. By the way, there’s an election going on all over the world that could affect economies and banks. It’s a factor, but it’s not something that you chase, saying it would be good here and not there. Companies are way past the life of political participants by term limits and everything else. We try to help every administration through good advice. On whether he’s talking about ESG and sustainability any differently amid a political backlash Why do we do clean finance? We’ve done $350 billion in environmental finance over the last few years. It’s good business, and we believe it’s good for the world to make a transition, which has to involve the oil companies, has to involve the gas companies, has to involve the pipeline makers, has to involve the solar power experts, the wind power experts, the nuclear fusion experts. It’s got to have everything. If things are going to happen that you want to happen, the private sector has to get them done because no governments have money to spend. They’re all running big deficits. The talent’s in the private sector. So we always believe, you know, profits and purpose. That’s not a new concept. Happy Monday — It’s good to be back after a mild case of Covid extended your MM host’s Davos detour. A huge thanks to the teammates who kept the newsletter chugging along. What’s going on? Send tips to zwarmbrodt@politico.com.
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