WHEN: Today, Monday, September 23, 2024
WHERE: CNBC’s “Power Lunch”
Following is the unofficial transcript of a CNBC interview with Bank of America CEO Brian Moynihan on CNBC’s “Power Lunch” (M-F, 2PM-3PM ET) today, Monday, September 23. Following is a link to video on CNBC.com: https://www.cnbc.com/video/2024/09/23/bofa-ceo-brian-moynihan-fed-should-keep-making-sure-they-stay-ahead-to-get-soft-landing.html.
All references must be sourced to CNBC.
LESLIE PICKER: Hi, Tyler. Good morning. And thank you, Brian, so much for being here. When you were on CNBC a few weeks ago, you said you worried the Fed could be late in cutting, but you would know more after the fact. So, I’m curious. Now that we have seen that 50-basis-point cut, that move last week, are your concerns assuaged?
BRIAN MOYNIHAN: Well, that’s a good start, as the words say. And I think our team increased their rate cuts early on. At the end point, our team was 3.25. Now they’re down to 3 percent, 2.75 to 3 percent. So they moved it down a little bit, but they sped up the pace. They added 75 more basis points this year for a total of 125. So they went from basically 75 to 125, largely due to the feeling that the Fed’s ready to move faster. Interestingly enough what we’re seeing, like, really real time in consumer data in the month of September is a stabilizing of the spending rate around 4.5 percent, which is a good place for it to be, consistent with a low-growth, low-inflation environment, where it was in ’17, ’18, ’19. So we feel good about the equilibrium being there, but they have got to be mindful that they have got to — if they really want a soft landing, which we all want, they have got to keep making sure they stay ahead and get the real rate structure down. And the real beneficiary of that is business, frankly. They instantaneously change in rates to borrowing basis, borrowing basis, that it goes through small-, medium-sized businesses, will be a big benefit to them. That 50-basis point goes right through the index last week and they will get the benefit of it this week. And that helps them then feel a little bit better about the future.
PICKER: Can you help distill down this idea of 75 basis points in the fourth quarter because the Fed has the appetite to do so, not necessarily, it sounds like, because the economy demands it?
MOYNIHAN: Yes. I think there’s going to be a lot of debate. And this is as we go through this cycle and get to the other end of it. But I think the real perspective is to think start and finish, 5.25, 5.5, 3 percent. That’s a pretty big change. But it’s all about getting the rate environment to not be too restrictive. The ebbs and flows of that, you and your colleagues will get up and really get excited about it on a given day, but the reality is, you have to think about it across six quarter — five, six quarters, really moving the rate to a much more fundamental place. And the good news is, the experts think, at the end of that, we will have a real rate — a nominal rate structure in the U.S., which we didn’t have for almost 15 years. And that’s important because that’s a much healthier place for the economy to be, maybe a little more inflation, not 4 or 5 percent, but 2, 2.5 percent, maybe a higher rate structure. And then, frankly, the biggest economy in the world can continue to progress, as opposed to trying to lower rates and lower rates to shore it up. And so what’s good about what’s going on is, you feel out things. So the Fed may move and ebb and flow on a given meeting and people get really wound up with 25 — a 50 percent chance of a 50-basis-point, all that stuff. But the reality is where they’re starting and where they’re ending and what’s the impact. And that’s what they really got to make sure. They can’t tip the labor market over. They can’t tip the stock market over. They got to balance the enthusiasm for lower rates for businesses, customers being — consumers being OK, credit being fine, where, if they go too fast, they can incite inflation again. And that’s the balance they have to have. But the endpoint, they — what’s interesting is, everybody has them at a higher rate structure than we have seen for the last 15, 20 years.
PICKER: So it sounds like you think that inflation at least should not be at the forefront anymore. It should be much more on the side of cutting rates, preventing a deeper recession, make sure they kind of stick that soft landing?
MOYNIHAN: If you’re trying to average 2 percent across time, you’re going to have to run a little hotter for times. Now, we had a very unusual set of circumstances in 2021 and ’22 that may never be repeated, hopefully not from the COVID sense and the pandemic sense, but never repeated. We had expansion of the federal debt. We had all those things going on. We were fighting a war worldwide against the disease. And it appears we won the war and we’re on the other side. Now we got to bring things back to normal. And so the issues of long-term debt management by our country and others, learn to — a fiscal balance, the idea — those questions are the big questions that will ultimately determine what the interest rates structure and things look like, but the idea of running inflation, slowing — drop in the rates as inflation comes into it, as opposed to ensuring you get below it, and then you can’t get back up.
PICKER: So, speaking of the deficit, you recently told Axios that we, quote, “need our eyes and stomach aligned as a country in getting the deficit under control.” What happens if we don’t, given that both presidential candidates have presented plans that would add trillions to the deficit if they were passed?
MOYNIHAN: You know, I don’t want to contemplate that. We have to be ready for it. We worry about it, but we don’t want to contemplate that. This country is so critical to the world to be fiscally responsible because it sets a benchmark for the whole world to react to. And so getting ourselves aligned, we have one of the — we have a wonderful economy. It’s grown from the pre-financial crisis to now almost to twice the size. It’s outgrown its issues. It’s restructured its issues. It deals with capitalism at its best, with pluses and some minuses and all that stuff. If we forget that in the strength that we have to show the world, that’s the problem. And so we have to show the world how to have a glide path to bring the debt — keep the debt where it should be and not let it get out of control because if it does, the whole benchmark for the world starts to go completely out of sorts, right? I mean, everybody looks to the U.S. Treasury yield bonds and notes as being the benchmark for the world and we have got to keep that in check. And, ultimately, that’s going to come down to a fiscal management practice that has to be resonant in any government. I think the reality is, when you get in there, always bringing more to the, I have got to figure out how to balance this thing. So I wouldn’t take the political process today to what happens afterwards. But we need better tax policy, better spending. All the things that are on the table. But if we don’t get in control, that is a real pressure point, and, ultimately, the leadership of the United States can be called into question.
PICKER: One thing that’s on the table, former President Trump said he wants to create a 10 percent cap on credit card interest rates. He said that last week. The average rate is currently around 21.5 percent. And it hasn’t been sub-10 percent in at least 30 years. What would that mean for you? What would that mean for your customers if such a cap were enacted?
MOYNIHAN: I think let’s broaden it out to the caps on pricing and stuff like that. That tends not to work out in the long run. And there’s been proposed to cap food prices, pharmaceutical prices. So, if you go back, Richard Nixon capped prices in wage and price controls. It’s hard to control this wonderful, dynamic economy the U.S. has. So, we will — if something happens, we will deal with it in the future. But the reality is, from a policy standpoint across all this is let capitalism have it. What you’re seeing today is, you know, prices are coming down because businesses need to keep generating revenue and they’re cutting price to generate revenue. And so you’re seeing restaurant prices and the month to month spend there — the numbers of times people are spending is up for travel, but the dollar amount in total is up 4 percent. Dollar amount is flat. What does that mean? Prices came down 4 percent. And so you’re starting to see the impacts of a slower inflation rate through spending. And so prices will take care of themselves because it’s a big open market, lots of competition, lots of products and services almost in any industry, and you just have to let it run. It will just take — it ebbs and flows, and there will be periods where it feels like it’s high and low. But the reality is, is, we will deal with it whatever comes up. But the reality is, is that good policy is, let capitalism work, let pricing work, let the market work, and it’ll drive you towards a good outcome for all customers.
PICKER: Warren Buffett’s Berkshire Hathaway has been selling a lot of Bank of America stock. A lot of headlines surrounding this. I know you said at the Barclays conference last week that you can’t ask him why he’s selling, and he’s not going to likely answer you on that. And the firm is still your largest shareholder, with about $34 billion worth of stock. But do you see any reason? Because the market is wondering, does Berkshire maybe see Bank of America as being overvalued from here?
MOYNIHAN: Well, I don’t think we’re overvalued. But I think — and I don’t know why. It’s securities rules and — stop me from asking the question. And he made an original investment and then made another investment, and so — which totaled basically 900-odd-million shares of stock. And he’s sold down. And he’s — and so I don’t know what — he should tell you. You should ask him, have one of your colleagues ask him the question. But if you look at it more broadly, I think the market speculates on what he does. He has an investment strategy, investment theory, and he has sold a lot of different companies and a lot of talk about it. But, at the same time, he’s buying companies. And I will let the market decide it. From our standpoint, our stock is a great buy, and we’re buying it every day.
PICKER: Alright, Brian Moynihan, we will leave it there. Thank you very much for joining us from the World Medical Innovation Forum, partnering with Mass General Brigham here in Boston. Really appreciate your time today.
MOYNIHAN: Thank you.
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