What happens now after the banking crisis that started in March 2023? How will the U.S. use AI and innovation to stay competitive? What should bankers be thinking about next? Gary Cohn has moved from banking to the White House to tech, and has a broad view on the issues facing our nation. The IBM Vice Chairman, formerly the Director of the National Economic Council and President of Goldman Sachs, discusses the 2023 banking crisis and its fallout, the state of the U.S. economy, and how the country can stay competitive in tech with Chana Schoenberger, American Banker Editor-in-Chief.
Transcript:
Chana Schoenberger:
Hello, good afternoon. I'm Chana Schoenberger. I'm the editor in chief of American Banker, and I'd like to welcome our guest, Gary Cohn. Thanks for joining me.
Gary Cohn:
Thanks for having me.
Chana Schoenberger:
So just as a quick intro, I think everyone here knows who you are and apologies for not being on camera. I'm having some technical difficulties. I can't get my webcam to turn on. So currently you are the vice chairman at IBM. Before that, you were the director of the National Economic Council, and before that you were the president of Goldman Sachs for 10 years. Originally a Wall Street trader hailing from Shaker Heights, Ohio. So you're on your third career now?
Gary Cohn:
I am. It's been an interesting journey. I actually started on the floor of the commodities exchange, which unfortunately floors of exchange don't really exist anymore. I worked on the floor, that's where I really learned how to trade and learned the Wall Street area and moved from there to Goldman Sachs, right where you're right, I spent over 26 years, 10 plus as the president and chief operating officer, as you said, left there for the White House and then left the White House and opened a family office. And I now spent two plus years as the vice chairman of IBM, which has been really interesting to couple my financial services background with a little bit of national security background with the new technology that's coming into play in the world. So it's a pretty interesting background and it been a great opportunity.
Chana Schoenberger:
That's so exciting. Okay, so there are a lot of places we could go with that, but let's start with what's going on right now, which is we have just come out of, or maybe we maybe still are in this spring's banking crisis. So what can we learn from this?
Gary Cohn:
So I think there are a lot of different ways to go with that question. The one thing I will say, and I'll say as I think it needs to be said is there is no way to prevent a run on a bank. You can put any regulation you want in place. If depositors lose confidence in a bank, it really doesn't matter how much liquidity you have or how much capital you have. Your bank is not going to survive. No bank was designed. You have the vast majority of their deposits go out in a matter of 24 hours. And with the new digital banking apps that everyone has, deposits can move out of a bank very, very quickly. So I hope that we don't enter into a new phase of regulation because Washington seems to think every time there's a problem in a bank, the way to solve it is to regulate banks to a higher degree.
There's certain things that you just can't regulate. You can't regulate consumer confidence, you can't regulate mental psychology. So we have to be very careful. I think we're actually in a place right now where one of the issues in is that banks may have too much regulation upon them. So if you take the Silicon Valley bank situation, they lost track of their interest rate hygiene or their interest rate exposure. They had gone out and we could go through the history of why they did this. They went out and bought zero risk weighted assets because of their access deposits, which were treasury bills. But those treasury bills were a far lower interest rate than the prevailing market because we'd seen a relatively dramatic move in interest rates because of fed the Fed trying to tamp down inflation. And Silicon Valley Bank wasn't monitoring their interest rate exposure.
My basic view, and I've recently written this and I've written this in a paper with Jake Clayton and Steven Scott in the Starling Compendium, which was just published, which talks about there's four basic things that a bank needs to do to regulate itself. And what we believe has happened is that the regulators have created so many other regulations that people are almost lying to themselves. And we're using that line because in 2015, the Army War College produced a paper called Lying to Yourselves where people in the military were having to choose what things they were doing well, but saying they were doing everything well because there were so many things to do that banks are basically in the same position where banks are lying to themselves because they're telling the regulators they're doing everything well and there's no way they could possibly do everything well. So I think the lesson to be learned out of the recent financial crisis is if you manage your capital, you manage your liquidity, you manage your credit rate, rate risk, and you manage the basic components, you're probably going to be okay. There are other things that need to be managed in a bank, you, you've got to do a ml, you've got to know your customer. But when you get into managing all of your suppliers, you're probably distracting management from the core neccessities of running a bank. And so those are some of my big takeaways.
Chana Schoenberger:
Lying to ourselves, that's kind of scary. I mean, I had Tim Mayopoulos on last week or the week before, and he is of course the executive who was brought in to run Silicon Valley Bridge Bank for two weeks before it was finally sold after it was put into failure by the FDIC. And he said something about hope being a strategy and that he sees that a lot in mortgages where he's, he's been doing some work in mortgages, of course he was with Fannie for a long time. And this idea of hope is a strategy. You think that the Fed isn't going to raise rates, you think they're going to stop raising rates, maybe they're going to lower rates. Well maybe they will, but you have to think about your balance sheet right now as it is and where it's going.
Gary Cohn:
Yep. Look, hope, hope, hope and pray Hope. Hope and prayer is not a strategy and anyone is hoping and praying they have a real problem. And if you're hoping and praying, you need to take a really proactive stance on what you're hoping and praying for. Because if you're hoping and praying for it, probably other people are hoping and praying and it's not going to work out.
Chana Schoenberger:
They may be hoping and praying for the opposite of what you want.
Gary Cohn:
Yes. Well, what you're hoping and praying for is probably the exact same thing. What other people are hoping and praying for. And it's probably has a very low probability of happening because so many people need it to happen. So what we were seeing is interest rates going up, which was causing huge mark market losses in the treasury portfolios or the fixed rate portfolio. Banks as banks were needing more and more liquidity and so they were having to absorb the mark to market losses hoping that rates would go down so they wouldn't have to absorb the losses was not a very good strategy coming out, maybe absorbing the losses or at least at a minimum, putting interest rate hedges on so you could could know what the worst case scenario would be, would've been a much better strategy.
Chana Schoenberger:
So a problem that we saw maybe for the first time during this latest round of bank runs was that if a bank CEO came out and said, Hey, everything's fine. We've got some issues, but we have a plan to fix them, people shorted the stock and pulled out their deposits and if the bank CEO said nothing at all, the same thing happened. So what should a bank CEO actually do?
Gary Cohn:
Look, I think we saw this in '08 as well. We've seen this scenario where the market gets an idea that a bank may have a problem and in the bigger banks they go out, they buy CDs, they short the stock and they spread as many rumors as they can into the trading blogosphere that bank, that a bank has a problem or they'll spread a falsity that I try to get my money out and the bank wouldn't send it to me. Which is, these are sort of ridiculous things because bank regulators regulate and everyone knows that bank regulates liquidity withdrawals and if you can't get your money out of a bank, it is a real problem. So I think it's very hard to change behaviors of bank CEOs. Bank CEOs always believe that they're running a very prudent bank, that they are really taking care of the assets of the bank, that they're managing it well.
They're protecting shareholders at all time, but they're protecting depositors at all time and they're helping drive economic growth in the community, which is also very important. So they don't really want to, and I'm not sure they need to be put in a position where they need to defend what they're doing. The question to me is more about the system we have that allows people to go out and spread falsities about banks and spread rumors. The old adage, are you allowed to go into the movie theater and yell fire? It's the same adage to me, are you allowed to falsely accuse a bank or any company to that matter of something that is false when you have a position on that you would take advantage of? To me, that is market manipulation. Unfortunately, it, it's pretty hard to prove. And I think the SEC would love to take on some of these cases, but there's so many of 'em and they're so hard for them to go out and get all the data. And social media has only made this much more difficult for people to find. I mean, look at what happened in the meme stocks earlier in this whole cycle.
Chana Schoenberger:
Yes, no, definitely. I had an interview with a CEO of a bank that was being called troubled, whether or not it was actually troubled, and that's what he said. He said that of course he blamed short sellers, which is what you would expect him to do.
Gary Cohn:
I would never blame short sellers by the way. But that's a whole nother discussion.
Chana Schoenberger:
So is there a way to regulate what people can say on social media?
Gary Cohn:
That's a bigger question. I think it would be interesting if the regulators, regulators love the regulate banks. It would be interesting to some extent if the regulatory community would take some stance, and I know this goes against freedom of speech, would take some stance on publicly listed companies. It's saying, look, you can have freedom of speech, but if you are trying to manipulate a stock price, that's a manipulative activity, which we do have rules and regulations against. So to me that is an interesting potential place that the regulatory community could go and it would be interesting to see them go there. And as we all know, if they would actually find one or two cases and prosecute those cases, it would change human behavior.
Chana Schoenberger:
Very possibly. So you're not in favor of more bank regulation. What should be regulated differently to make sure this doesn't happen again soon? Or what regulation should we be enforcing differently that we already have in the books?
Gary Cohn:
So I'm not anti-regulation. Don't read into this that, look, I think what we've done with the GSIBs, we've put so much regulation and I'm not against them. These are systemically important financial institutions. They're highly, highly regulated. But remember, they have global presence, they trade derivatives, they trade every market in the world. They're systemically important. So I think what we've done though the GSIBs and the GSIB regulation is important. What I think is happening though is we take this regulation and we push it farther and farther down into the lower capitalized banks. We say if it works for the largest capitalized banks in the world, it must work for the smaller banks. And look, it would work, it would just put small and medium-sized banks out of business. If they had the same regulatory cost that a JP Morgan and a Morgan Stanley and a Citigroup and a Goldman Sachs had, they would not be able to survive.
And small, medium sized banks are so important for our economic growth and prosperity in this country that we want them to use their capital to loan into the economic growth engine in the United States, not use their capital to build out a big regulatory force. So when you're in the business of basic banking, which the vast majority of banks in the United States are, which is in taking in deposits and making loans, I think that a lot of the rules that are on the books right now are hindering the banks and again, forcing banks to lie to themselves because they're having to tick the box on hundreds if not thousands of regulations when at the end of the day they need to make sure they've got liquidity, they need to make sure they've monitor their interest rate exposure. They need to make sure that their credit exposure is in good shape. They need to make sure they have enough capital, they need to make sure they've got good AML, they need to make sure that they've got good KYC. Those are the basics. And I think that we got to over stress the basics in the banking community in this country.
Chana Schoenberger:
Okay. So those are questions from your first career. Let's move on to your second. How is the US doing in terms of staying competitive economically?
Gary Cohn:
I think we're doing well. I don't want to go too far down the tangent, but we've put ourselves in a very precarious position with China. I strongly believe that our economic success and our economic wellbeing is highly correlated to China. We import enormous amount of goods from China that if we had to find in another part of the world, many of which we could not find in another part of the world would be highly inflationary to the US economy. And like I said, many of those things we could not find in other parts of the world. So we need to figure out the US-China relationship, and I think it's important to figure that out and all of us as American citizens actually benefit from this relationship on a daily basis. We are buying goods that are manufactured in China that if we were buying them, if available manufacturing other parts of the world would be substantially more expensive.
So I think we continue to do a relatively good job as a domestic economy. If you look at our ourselves right now, we're basically at full employment. We continue to have GDP growth that surprises people to the upside. We continue to have wage growth and we continue to see the economy outperformed people's expectations. I think the most interesting part of this economic cycle over the last year is if you turn on any business talk show for the last year plus and it's sort of stopping now. Interestingly, people were obsessed about the inverted yield curve in the United States and the predictive nature of the inverted yield curve and how it always predicts a recession in the United States. Well, it seems like a year later people have stopped saying that the inverted yield curve is going to predict a recession in the United States. It feels like that we have weathered a, I would say a volatile economic cycle in the United States over the last year there.
There's clearly been some volatility in the economic cycle. We we've seen almost every extreme in the last two or three years. If you go to the COVID bottom of no economic growth and massive unemployment to where we were about I guess 15 months ago right now to where we were with massive inflation, no control of the supply chain, but full employment, we've seen the full part of the economic cycle in a relatively short period of time. So I think that knowing what we know and seeing what's happened, we've done a fairly good job of getting ourselves to where we are today. We're probably now at a more crucial point than we have been in any part of the cycle. And I say that because what's gotten us to this point is the US government poured enormous amount, and by the way, other governments did too, poured enormous amount of stimulus into their economies to keep their economies alive.
Yes, US consumers were able to get themselves into really good financial position. They paid down a lot of debt savings rate in the United States, rose to really, really very good levels. And so the consumer came out of COVID in the best financial position. They had been in a very, very long time. Now, at the end of that cycle, we've now seen the consumer's financial position. I would say renormalize seen consumer debt go back to sort of record highs. We've seen savings go back towards more normalized rates and we're starting to see some cracks in the employment picture. So to me, the work or the real questions in the US economy are upon us now. And what the Federal Reserve does from here going forward is probably A, less predictable, and B, more important than what they've done for the period going into this. I think up to now it's been pretty predictable what they were going to do and how they were going to do it. I think now we get to the point where you can pick your economic data and justify any actions, but I think there's probably bigger consequences that this point from getting actions wrong than there have been at prior points in the cycle
Chana Schoenberger:
The choose your own adventure economy. Exactly. So what do we do about inflation? There was a period where people use the word transitory a lot. I think it's clear that it's not transitory at this point, but it is pretty bad and it's been a big shock to consumers, especially to people who have never lived through high inflation before. Anybody who wasn't around in say the seventies or early eighties will not really understand this and they feel almost betrayed by this economy. What is going on? Is there anything we can do about it that would work?
Gary Cohn:
Yeah, so it's very funny, and I always have to start this conversation reminding people where we were three years ago, three years ago, sure. The Federal Reserve, we
Chana Schoenberger:
We were all in our houses.
Gary Cohn:
Zero interest, zero interest rates, QE, and the debate in the world was will there ever be inflation again, not just in the United States but all over the world. So we were having this global debate, will there ever be inflation again? I guess we all know the answer is yes, there will be inflation again, economies go through cycles, they can be very long cycles, but economies go through cycles. I think where we are today in the inflation cycle is the base is moving up. So inflation is one of these funny numbers because you measure inflation either month over month or year over year. So a price of something went up a lot two years ago to a year ago, but didn't go up a lot this year. Two year inflation could be high, but one year inflation could be zero. So the base effect is starting to kick in where the comparable numbers year over year are playing to the favor of the Fed.
But also we're starting to see all of the supply chains normalized. We're starting to see the excess pent up demand that was in the system from COVID normalized, and those things are having the cumulative effect of dropping demand in the system and supply and demand meeting equilibrium. The other effect is we talked about all the COVID stimulus that was put in all of the dollars that were put into the money supply and the huge expansionary money supply, we're starting to see a lot of the contraction come out of the money supply. So we have less dollars in the system chasing goods. So there's some natural evolution of the system that is disinflationary, and I think we are on this more normalized disinflationary system. That said, that means that we're going to start having to talk about the other mandate in the Fed's dual mandate. They've got 2% growth, I'm sorry, they've got 2% growth at full employment so far we've got that.
But if you're really slowing down the economy by raising rates, which I think the Fed is doing, and there's a lag and there's a cumulative effect to what they've done, and I think we're starting to feel that we are going to start seeing higher and higher unemployment rates. So the Fed by curing one of their problems, which is the inflation issue, is creating another problem. So we're going to see the effects in the unemployment rate. So how do you get employment growing? Well, you get employment growth by growing your economy by lowering interest rates. So that's why I think we're at one of these bulker moments here where the Fed's decisions are more impactful today than they've been for a long time because they've got the inflation issue versus the full employment issue versus the reality of the renormalization of money supply, savings rate, consumer debt, contraction of credit in the system from the banking community. All these things are sort of coming home as we speak.
Chana Schoenberger:
It's interesting because there were a lot of papers and sort of pontificating done during the COVID period where one of the things that you've heard a lot was Americans are saving more because they're receiving the stimulus money and they don't have anywhere to spend it because they can't leave their houses. And wouldn't it be great if we could permanently be a country that saves more like China for instance? Is there any evidence that might happen or we've just all gone out and bought a car and a gas grill?
Gary Cohn:
I think there's no evidence that we've changed psychology to be a saving economy. I think there was evidence that when people had nothing to buy except what they could buy at the grocery store, United States Postal Service, FedEx or UPS could to deliver to them, they were still willing to spend money, but the supply chain broke down so much that it did stop slow them down from spending money. And we've now worked through all that and now that we've got normal sort of supply demand equations of fundamentals, we've seen consumer credit, literally, I think last week it hit all time record highs, consumer debt levels. So we're back to our normal behavior of not saving and spending. And look, we're an economy that's driven off of credit and we've got some unique features. To our credit, we're one of very few places in the world where you can go out and get a 30 year fixed mortgage.
We do that because our government tries to incentivize home ownership and 30 year fixed rate mortgages are a way to make homes more affordable. But we do that knowing that we're putting more borrowing power into people's pockets. We send people to college and the vast majority of people borrow money to go to college. So these everyday things that we encourage at the federal government level, we encourage 'em at the state government level, you're encouraged to go do them. You're encouraged to buy a home, you're encouraged to go to college, you're encouraged to get an education. You're also being encouraged to encourage debt. So the American public, they get encouraged by this every day and they're pretty good at it.
Chana Schoenberger:
Yes, we are excellent as a country in taking out loans. We're great at that. So it's 2023, about halfway through. What comes up next is the presidential election. What do you expect is going to happen to our economic policy in the next year and a half? Which way are we going?
Gary Cohn:
Well, I think that there will be lots of discussion in the presidential election on both sides about what's going on. I mean, I'll give you the 30-second high level. The Democrat administration will talk about their amazing accomplishments. They will talk about GDP growth, they will talk about all the jobs that they created, you know, you can make your own analogy on that. We came from a base of COVID with no one working. And yes, we created lots of jobs from a low base so they can talk about the jobs they've created, they can talk about the economic growth, they will not talk about the inflation. And at the same time, the Republicans will spend all of their time talking about the inflation that was created and the over stimulus of the economy and how inflation is regressive and how it hurts lower income people substantially more than hurts wealthy people.
And the Democrats were hurting the poor people because they were making everyday necessity purchases more expensive, especially food and energy. So I think that will be the big economic discussion going forward. There will, within that the Republicans will call for lower interest rates. They will call for the Fed to ease monetary policy. I think the Democrats will choose to stay out of it, which they should because they should not as the party occupying the White House, they should not be interfering in Federal interest rate policy. So they have the ability to not have to an opinion on interest rates.
Chana Schoenberger:
Great. Okay. Any other thoughts on the economy before I start asking you about AI and other cool tech things?
Gary Cohn:
No, I think we, we've covered it at a high level. I really do think that we're at a pretty interesting inflection point here in the next three months are going to be very telling for where we go. We've got some data this week, we've got Fed this week. I hope that we're taking a long-term view and that, look, I'll say it right here. I hope that the Fed pauses or maybe even stops and allows for the cumulative effect of interest rates to take hold of the economy. There's enough data that it feels like we're starting to get inflation under control that employment, unemployment is starting to creep back in the system and that the consumer is slowing down and slowing down pretty dramatically once you get through this summer travel season.
Chana Schoenberger:
Interesting. Okay. So here at American Banker, we find ourselves increasingly covering banks and AI. This is probably the biggest thing we get asked about all the time, is what's going to be the impact of AI on banks. Every bank will tell you that they're using AI right now. Some of them are even starting to use generative AI, they're terrified of it, they don't really know what to do. What cool things are you seeing over there in terms of AI and what it will do to or for financial services?
Gary Cohn:
Well, I think where AI is going to have the biggest impact, not just in banks but in organizations, in larger organizations for sure, is artificial intelligence is going to be able to replace a lot of the mundane functions and functions that people don't want to do in organizations. And I'll give you a really good example, and I'll use an IBM example. It's one we talk about, but it's one that other companies are starting to use. We've got an HR department, which is dramatically, dramatically smaller than it was a year or two ago because our HR department is more or less a chatbot at this point. But if you think about what the vast majority of your HR department is doing from an employee perspective, the chatbot is so much more efficient from an employee. So if you're an employee and you just went and got a mortgage or rented an apartment and you need an employment verification letter and an income verification letter, instead of calling someone in HR and them picking up the phone, taking the notes saying, okay, I'll get it.
Where do you want it sent? Who do you want it sent to? The HR chatbot says, okay, you need employment verification letter, you need income verification letter. Where do you want it sent to? And literally as you're ending the conversation, the letter is being manufactured and sent real time and no human had to go look in the file, look up the data and spend the time and remember to get to it. So A, it's done. The employee's very happy, it's done precisely. It's done very, very quickly. So there are things like that that are sort of nuisance work for people that has to be done all day long where AI can just take over it out of the hands of people. It makes the organization more efficient, it makes the people that work in the organization much more efficient. It can be used for promotion processes.
We use it for promotion processes where we've got large amounts of data on performance of individuals, where you've got customer reviews, you've got 360 reviews, you've got billing data, you've got all this information. You can allow AI to take over and create data files on people's performance and rank your people who should be promoted and who shouldn't be promoted. And it has no bias. It doesn't know who the people are, it only knows what the data says. So you end up getting a lot of really good information on who your people are, who should be promoted, why they should be promoted, and you can get 'em ranked. Therefore, the HR people that used to spend countless hours trying to accumulate all that data can now work on going out and recruiting better and better talent for your organization. It may not be that you end up with less people in your organization, you end up with your people doing jobs for the organization that make your organization much more stronger and a better organization, a place where people want to work and you're more productive. It, it's really a productivity enhancing tool. And I think people are missing that. A lot of the jobs that AI is taking over are the pieces of work that people didn't want to do. They were leading to high job dissatisfaction and they were leading to high turnover. So I think you're going to see AI take over a lot of the back office functions and I think in banking and other organizations as well.
Chana Schoenberger:
Interesting. I mean, as a society, we're going to have to figure out how we can change the sort of work that people go into. So as they're coming out of school, the things that people are aiming towards. Because a lot of the jobs that you're describing are sort of solid middle class jobs that people want because they have good paychecks and they're steady work. So if folks are not going to do those, they're going to have to do something else. I guess the question then is going to be for them, what are you going to do instead of that? For banks, it's so interesting also because a lot of the customer service being automated, virtually every bank we talk to is doing some sort of a chatbot on their site, their mobile app to deal with customers.
Gary Cohn:
No, absolutely. The vast majority of basic call centers, chatbot, chatbots on the apps, it can handle the vast majority of information that clients need faster with higher client satisfaction scores. Because most of the things that clients need are very easily done. And the quicker you can do 'em for the client, the happier the client's going to be.
Chana Schoenberger:
Right. And if you can't do them quickly, the quicker you can send them to a human who can solve a more complicated problem.
Gary Cohn:
Exactly. And what you've done is the human now is not dealing with the mundane stuff that says, oh, you know, just need to click on box two, not box one and fill in this number. The human is now dealing with the client on things that they can actually be very, very helpful. And so the client satisfaction keeps going up, the productivity of the organization keeps going up, and it's both for the employee as the client and the organization. Everyone wins in this. And look, there is always this debate on learning and skilling people. I've lived through a couple of these revolutions. I've lived through the whole email cycle going from writing memos in the office to going to email, and that was a huge productivity gain. Then we went through the internet and a huge productivity gain there. I can remember when bank analysts and bank associates were spending their whole time literally writing out presentations without Microsoft Office and Microsoft Word, it was arduous tasks in now, you know, can do these things relatively quickly.
It hasn't cut down the amount of analysts and associates that you need. You've just got your analysts, associates able to work on more and interesting things. Then you see the internet proliferation, then you see the cellular smartphone. We've lived through a lot of these moments in time and there's probably not an organization that's probably not a bank today that's smaller because of these technology tools. In fact, I would almost be willing to bet everyone is bigger and has more headcount today than they did prior to all these technology tools. I think AI is going to be similar. They will move people out of some of the ordained functions, but I'm not sure it's going to mean headcount savings. It's just going to need to attract different people or train people for different skill sets.
Chana Schoenberger:
And the other big thing we get asked about a lot and our Digital Banking conference is actually going on right now where we're sort of dealing with all these issues is quantum computing as it applies to banks. What are you folks doing in that area?
Gary Cohn:
So look, first of all, I think that quantum is more real than people understand. I'm not saying it's solving the problems of the world today, but we know where the issues are. So new mainframes are quantum safe. We know that know on the negative side that quantum deen encryption is going to happen sooner than later. So anyone that isn't thinking about quantum de-encryption is making a mistake because you can anyone that gets a hold of a file today, they may not be able to de-encrypt it today, but they're still going to have the file. They're still going to have the data and someday it will be able to be de-encrypted. So you have to think about going forward, are you continuing to build data files that are not quantum safe and people should be thinking about quantum safe and that that's a first place I would start. There is enormous amount of time, effort, money being spent in quantum. There are some of the larger big trading banks looking at quantum in the risk management space. In the scenario analysis space, there is some quantum availability in the cloud. And so there are some of the bigger banks that are using Quantum right now to look at pricing models to look at scenario analysis. And it is going to be a change to the way we think about the world as quantum gets bigger and more available to the banking community.
Chana Schoenberger:
Interesting. Okay, so you were talking about the encryption. Another thing we think about a ton is cybersecurity. So I have a reporter who covers nothing but cybersecurity and he has a great job because it's just hack after hack, data breach after data breach to the point where I think consumers are not even so worried anymore when they get an email from some company they've done business with saying, Hey, your personal information is out on the internet. And they think, gee, it was already there. I knew that. What should banks be doing about this? What should regulators be doing about this?
Gary Cohn:
I don't want to be overly dramatic, but I think the vast of banks are completely under invested in cybersecurity and the investment upfront is going to be relatively small to the later investment. And if we end up with some major cyber breach breaches in the banking world, the regulatory community is going to put the requirements so high that everyone will have regret, will have regretted not having spent more money in their cyber systems and investing in their cybersecurity. There is really, really good cybersecurity technology that's available today. Look, it's expensive to implement. It takes time, it takes effort. You've got to think about it as a wholly integrated system from server to server to location, the location to file to file. But if you look at an integrated plan and hire one of the big companies to come in and integrate a plan for you, you can be fairly secure and you can sleep pretty well at night.
There's nothing that's totally foolproof in the world, but you can get to a very, very high level of security with what looks like today, may be a large investment, but will look like a very small investment if you have a cyber event and you can go back and we may have forgotten about some of the cyber events, but shutting down Colonial pipeline and some of the big corporate events that people have had to go through, what would they have paid to not have to go through those events when they were going through those events? And I think those events can happen to anyone almost any day.
Chana Schoenberger:
So we're nearly out of time here. One more question, which is sort of brought up by what you were just saying and what you were saying before about your start in the training world. How can we get the smartest young people to want to go into financial services again? I feel like if you look at the best graduates right now, they all want to be a product manager at Google. How do we get them to come work for banks?
Gary Cohn:
Look, I still think there's plenty of the smartest graduates from schools around the country that do want to go into banking. I think it's one of the best, if not the best training grounds for people graduate schools today is to go into a bank and understand companies, understand lending, understand capital markets, understanding what banks do, understanding how important banks are to the economic foundation of this country, understanding how small and medium banks serve, serve communities, they can't possibly serve by bigger banks and how our economy grows because the banking community grows in this country. And I do think there are plenty of people that want to go out into the banking system and look, the reputation is still very strong on campus. When the largest banks go on campus, they still have sellout crowds of overflow, auditoriums full of people trying to work in large banks today. So I don't really think the banks have a reputation around, yes, it's, it's sexy and it's glamorous to go say, look, I'm a artificial intelligence manager at Google, or I'm going to Microsoft or I'm going to Apple. But there's still many, many people graduating from school today that really do want to go into banking. I see it every day. I get phone calls every day from people trying to figure out how to get into the banking world.
Chana Schoenberger:
Well that's a good sign. All right, well thank you so much. I really appreciate you joining me here today and thanks everyone for watching this.
Gary Cohn:
Thanks for having me.
