Following are excerpts from the unofficial transcript of a CNBC EXCLUSIVE interview with Bank of America CEO Brian Moynihan today, Thursday, May 18 on CNBC's "Closing Bell." Following are links to video of the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000619859 and http://video.cnbc.com/gallery/?video=3000619894.
All references must be sourced to CNBC.
MOYNIHAN PART 1
KELLY EVANS: I did catch up with Bank of America CEO Brian Moynihan in the last hour i asked him what he thought of the Trump administration's reference to a 21st century Glass-Steagall. Here's what the Bank of America CEO had to say.
BRIAN MOYNIHAN: Well-- I think they mean what you hear is that-- they have a differentiated set of rules and regulations for smaller, less complex institutions and bigger, more complex institutions. And we agree with that. No, we-- the large banks especially have been saying, you know, this is-- interesting enough for us to have to do all this work-- let's not take it to places where it's not as relevant, not as important.
KELLY EVANS: Right.
BRIAN MOYNIHAN: And so the goal would be to have a more differentiated scheme, as-- much as you can hear about it.
KELLY EVANS: So you see it as a small-versus-large issue. 'Cause the other-- thing that I-- in terms of reports that I've seen thrown out there, was it that might be a U.K. style issue where they ring fence the retail banks from the investment banks, which would affect you guys. But you're-- so-- but do you think that's on the table?
BRIAN MOYNIHAN: But if you back up more to what-- people are worried about, and they're worried about, you know, depositers' money being used to do trading and stuff. And that really doesn't happen in the U.S. scheme. Everybody has a bank holding company and a bank and a securities firm-- broker dealer. And the activities are already regulated, always have been regulated about what you can do in each and how they can relate to each other, and how they can-- transact with each other. So there's a series of rules that actually protect that. So that's sort of one debate. The others-- is just about size. Big institutions--
KELLY EVANS: Right.
BRIAN MOYNIHAN: --and complexity and-- things like that. And I-- that, to me, is a bad policy decision, because you need large institutions to support your large companies and your large economies. The reason why the U.S. banks are larger is because our economy is 30-40% bigger than the next biggest. And by the way, the banks are bigger than the U.S. banks in the world are the Chinese banks, 'cause their economy's big.
KELLY EVANS: So that would be your response to Senator Elizabeth Warren, who pressed Mnuchin today, effectively saying, "Breaking 'em up is the only option that she sees viable."
BRIAN MOYNIHAN: Well, I think-- the question is, "So what do-- what do you accomplish out of it?" And I think if you think about what was accomplished--when the institutions were in different pieces, would you rather have Merrill Lynch or Bear Stearns or Lehman Brothers out on-- own or would you rather have-- Lehman with Barclay's and Bear Stearns with JP Morgan or Merrill Lynch with us, with a-- $200 billion capital base-- you know, $500 billion liquidity behind it, and only have about $30 billion dedicated to the trading businesses that are-- what-- people are most concerned about? I'd rather have that structure, especially as a person, in the end of the day, that has to pay for the cleanup.
KELLY EVANS: If this administration does do something where it separates the big banks from the small and lightens the regulatory burden on the smaller banks, does that put you at a disadvantage?
BRIAN MOYNIHAN: I don't think----it puts us at a disadvantage. 'Cause different business models. There's always-- when I went into the business and the business side 20 years-plus ago, everybody said, "Oh, don't worry, you know, all the banks will be like five banks in 20 years." Didn't happen. There's still five, 6,000 banks-plus. So there will always be different models.
KELLY EVANS: --could a small bank now lend to a small business at a cheaper rate than you guys could, for example? Or make a mortgage a little bit-- at a better rate than you guys could?
BRIAN MOYNIHAN: I'm not sure that the--you know, you gotta balanced that against the scale economies and stuff. But the real question's how the banking system help economies grow? And-- the idea of a lot of discussion about regulatory movement and change and thinking about resetting the regulations and balancing is about how we could help the economy grow. 'Cause the end of the day, the banks have one purpose, which is to intermediate between their customers and other customers-- or their economy or the markets. We-- are in the business of helping people accomplish their business plans and growth plans. And so the goal has to be how do you help that happen. And if you have too stringent rules around capital and liquidity that--requires to hold too much in reserve versus the risk, then you can slow down growth. And that's the discussion that's going on.
KELLY EVANS: Absolutely. So it sounds like you guys would support, then, what sounds like the 21st century Glass-Steagall Act, if the details are what they sound like-- if it's big versus small. But what about the Choice Act, which is separately working its way through Congress, and would kind of provide an off-ramp from Dodd-Frank? Is--that a piece of legislation and a move that Bank of America supports, as well?
BRIAN MOYNIHAN: Well, I think-- I would-- instead of "this legislation, that legislation," I'd back up to the principles. 'Cause I-- I'm not sure. No-- there's no-- you know, nobody knows exactly what they're saying. And all this is just by your description of all the different views of what the words mean. So-- but what-- are we for? We're for a safe and sound banking system. We're for-- a balancing and looking at regulation to think about getting the risk/reward right and helping. But-- you're doing that to help promote the growth that we need in the economy. We're growing at 2%? We've been sort of stuck in a 2% level growth. The growth we see-- today is consistent with that. If we wanna move that a little further, how can we help do that through-- smarter regulation, more balanced regulation?
KELLY EVANS: And I'm sure that Chair Hensarling would say, "That's what I'm trying to do with this legislation, too, ultimately, is boost growth and, you know, lighten the burden on the banking industry. Maybe he wouldn't put it quite that way.
BRIAN MOYNIHAN: Well, I think-- I think whether he put it that way or not, I'll let him say. But I think they're trying to-- have risk/cost benefit analysis and things like that thought throughout. But-- what is in these acts is a series of things that ail 'ya, so to speak, the series of things that-- people have pointed out that need to be changed. And they're effectively laundry lists of items that could be changed that would be beneficial to helping the economy grow faster. Then there are fundamental questions about, if you have this much capital, you're not subject to this regulation. That-- really is probably the best that-- you see in the act-- appropriate for large banks or gonna be dealt with. But the idea of- potentially operating risk capital as being redesigned or-- the frequency of-- the C-CAR (PH) process, stress test process, since we've been doing it every year, and the answers are relatively similar-- you know, those types of things are on the table. And that's all about getting the balance right.
MOYNIHAN PART 2
KELLY EVANS: Just hours ago, I sat down with Bank of America CEO Brian Moynihan. We discussed his thoughts on how to get more millennials into the housing market and his thoughts on the U.S. consumer, broadly speaking, right now. Take a listen.
BRIAN MOYNIHAN: Well, if you look through the first week of May for the year, consumers are spending about 5% more money than they did last year for the first – you know, four and a half, four months of the year. And so the consumer's healthy.
KELLY EVANS: 5.5% more?
BRIAN MOYNIHAN: Yeah, 5% more than last year, 5, 5.5 on debit and credit cards. And overall, 3%, that means cash out the system, so writing checks and everything. And this is not small. It's almost a trillion dollars of spending. And it's, you know, billions of transactions.
KELLY EVANS: That's a pretty good sign for the consumers.
BRIAN MOYNIHAN: And it's been consistent. That level of spending has been consistent with, you know, 2% growth rate, more or less, that we've seen. And it's actually a little bit stronger this year so far than it was last year in a comparative period to '15 and beyond. So it's picked back up. And that's good. And so the borrowing, you saw the statistics about loans and stuff. They're back to their levels. The reality is that, as a percentage of income, the borrowing levels are actually down – continuing to fall.
KELLY EVANS: You mean the fact that in terms of the headline, we're now back at pre-crisis, you know, consumer indebtedness, let's call it.
BRIAN MOYNIHAN: Right.
KELLY EVANS: But you're saying, you know, that we shouldn't be as worried as we were ten years ago?
BRIAN MOYNIHAN: Because it was ten years ago.
KELLY EVANS: Yeah.
BRIAN MOYNIHAN: Yeah, the economy's a lot –
KELLY EVANS: Economies are supposed to grow, yeah.
BRIAN MOYNIHAN: Economy's bigger. The households – the numbers of households are larger. The outstanding debt. So you got to be – we always are worried about credit, as a company that has a lot of credit risk, that we worry about a lot. That's why we stick to what we do. If you think about it and you look back, the debt – if you take out the bubble through the mid-2000s, it's actually on a fairly straight increase going back 15, 20 years, that is a relatively modest CAGR.
KELLY EVANS: So you're bullish on the U.S. economy.
BRIAN MOYNIHAN: It's solid. It's 2%. I mean and the question is, "Can we get it to grow faster?" And then so—
KELLY EVANS: Can we? I mean when you listen to stuff coming out of Washington, is that material to that answer?
BRIAN MOYNIHAN: Well, there's some good things to that. One is the other economies in the world are we're sorting out. Because we were growing 2% when Europe was not growing. Now they're growing, which is good, because, inter-relationship between the worldwide economies is key. The other thing is, if we can do some key reforms, I think it will help. I think the idea of tax reform I think would help boost growth. I think the idea of some infrastructure work would help boost growth. But the idea of a tax reform, infrastructure, and not only for the banking system, because whenever I talk about a regulatory reform, people think I'm talking about our own trade. In the broadest context, our midsize companies are very intent upon getting some regulatory rebalancing in everything they do: permitting to build a building-- you know, rules about what they can sell. So we feel pretty good about the economy.
KELLY EVANS: So do you think millennials are spending too much on avocado toast instead of taking out mortgages?
BRIAN MOYNIHAN: I sent that story to my son.
KELLY EVANS: Did it ring a little true?
BRIAN MOYNIHAN: Oh, no, I don't think so. But he's pretty conservative. But, you know, I think at the end of the day is people forget that, at different points in your life and different points on what you're doing in life requires you to think about housing differently as a place for you and your friends, as a place for you and maybe your significant other, and then ultimately, a place for family. That drives change. And so yes, it's taken more time. And we talked a lot about this, you know, four or five years ago, that if you require a 20% down payment, it takes just a little more time to accumulate 20% than it would 3% or none, which is what the rules were for a short period of time.
KELLY EVANS: Right.
BRIAN MOYNIHAN: So our goal, going back to regulatory reform, is should you move the down payment requirement from 20% to 10%? Wouldn't introduce that much risk.
KELLY EVANS: So you'd like to see it at ten.
BRIAN MOYNIHAN: But would actually help a lot of mortgage to get done. And if you look at the statistics, the difference between 80 and 90 LTV –loan-to-value – isn't much different as it is between 95 and 90. That's when you start to see real differences in performance statistics. And so we don't want to wish people into borrowing money that then they have trouble repaying.
KELLY EVANS: Want to ask you real quickly, as well, when we're talking about millennials, innovation is going to be a big theme for getting that next generation of clients. Zelle is coming out. If people haven't heard of it yet, the banking industry wants you to. And is this a Venmo killer?
BRIAN MOYNIHAN: We've had P-to-P payment for a while. Zelle has two core aspects. One, it's a better feature functionality, a little more interesting, a little more easy to use. But more importantly, it networks together the banking systems so that the transfers can be made more easily, less costly, less delayed.
KELLY EVANS: To other banks, which is the trick right now.
BRIAN MOYNIHAN: Right. And so you have all the banks. And we'll end up all the banks in here. We got eight or nine banks that cover a lot of the accounts. And then we'll get more. And so those two things will make it much more, you know, feature functionality plus instant settlement among all these banks, speeding up the safety, security and soundness of it, as well as the fun stuff in terms of sharing a bill or something like that. We already have, you know, billions of dollars a month that go through on P-to-P payments today. It is growing 15-20-30% year over year. It is even faster. And it'll continue to grow.
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