david: this is, uh, my kitchen table, and it is also my filing system. over much of the past three decades, i've been an investor. [applause] the highest calling of mankind, i've often thought, was private equity. [laughter] and then i started interviewing. i watched your interviews, so i

know how to do some interviewing. [laughter] i've learned from doing my interviews how leaders make it to the top. jeff: i asked him how much he wanted. he said 250. i said fine. i didn't negotiate with him. i did no due diligence. david: i have something i would like to sell. [laughter] and how they stay there. you don't feel inadequate now because being only the second wealthiest man in the world, is that right? [laughter] ♪ a major trailblazer in the financial service system is jane fraser. two years ago she became the ceo of citi and became the first woman to head a major money center bank. today citi and other major , banks in the u.s. are facing challenges to the banking system. i sat down with jane fraser to talk about these and other challenges. anything new in the banking world? [laughter] jane: it has been a quiet week, david. david: quiet? ok. so, let's talk about what has been going on. let's start with the easy one. silicon valley bank. what went wrong there?

jane: well, before we dive into that, i have worked in financial markets all around the world. i have to say we are very lucky in america. this is the best financial system in the world. [applause] it is the envy of the world. david: ok. but despite it being the best, we have some problems from time to time. jane: yeah, but they are isolated problems. when you look at it, the financial system is broad, deep, and it's competitive. we have large banks that are well-capitalized. and a sort of strength at the moment. we have medium-sized banks, regional banks, and by and large, they are equally well capitalized, serving their communities, playing an important part in the banking system. this is quite isolated. david: ok, but people are still interested in hearing about it. [laughter] so, your bank is well-capitalized. i should've said, your bank is a bank with about 230,000

employees. jane: yep. david: and about an $85 billion market capitalization. so, your bank is in good shape. your bank is the fourth biggest bank in the u.s. jp morgan, bank of american, -- america, wells fargo and then citi. there is a bank in the west coast, where there was a bank called silicon valley bank that , was not as well-capitalized. did the regulators not understand what was going on? were people in the banking world, people like you, were you surprised? jane: you had a combination of two pieces, the macro and idiosyncratic factors around silicon valley bank and the impact accelerated by social media of what went down. the rates curve and the increasing rates have been the fastest and steepest in 40 years. so there is a bit of pain that comes from that. secondly, you did have idiosyncratic factors. i think that is the polite british way of describing them, in silicon valley bank. [laughter] so, as all of this played out, you saw serious holes in the balance sheet management.

they had a very concentrated client base. that client base ended up burning cash much faster than anticipated. and they ended up under duress capital and it went down pretty quick. david: in the great recession in 2007 or 2008 or so, the u.s. government passed tarp legislation. under it, large amounts of capital were injected into banks, including citi. and effectively, that meant that the shareholders, the creditors, and the depositors were all protected. this time around, silicon valley bank, only the depositors were protected over decision made by the biden administration and others over the weekend. do you think that was the right decision to protect only the depositors and say goodbye to the shareholders and creditors? jane: i think it's very important to protect the depositors. right now, the banking system everywhere around the world depends on confidence. and that confidence has to be in the safety and security of deposits. so, in terms of the most

important job here, they did the most important job, which is making sure the depositors were whole. david: in the old days, when there were bank runs, you used to see people lined up on the street and getting their money out. now, you just go on your iphone, or whatever phone you have, you can just take your money out. so, money moves so quickly. was that a factor in having the money get out of a bank so quickly? you don't have to wait in line, you could just do it over -- jane: it is a complete game changer from what we have seen before, david. you're absolutely right. there were a couple of tweets. then, this thing went down much faster than has happened in history. and frankly, i think the regulators did a good job in responding very quickly. because normally you have longer to respond to this. they acted with quite a lot of speed, given how quickly this happened. david: some people say you have a moral hazard and you protect -- when you protect people. by protecting the depositors at

silicon valley bank, the implication was that if somebody else has a problem, we will protect them and so forth. and so, the $250,000 limit is meaningless, more or less. or do you think the federal reserve and the secretary of treasury is saying, we are not going to protect every depositor or we are going to protect certain depositors? jane: i don't think they need to go out right now. because the banking system is pretty sound. we're talking about a few banks. we heard it from chairman powell today, you know, this is not something that is spread across the entire banking system. this isn't like it was last time. this is not a credit crisis. this is a situation where it is a few banks that have problems. and it is better to make sure that we nip that in the bud. david: not to pick on the west coast, but there is another west coast bank, first republic bank, which is around the country, but based in san francisco. and they have had some problems. and they have had gigantic decline in their market value. do you expect that somebody will

bail them out or buy them? jane: well, i am not going to comment on debt from first republic. because they are actively working through the challenges they are facing right now. what you saw last week was a number of the large banks, 11 of us, got together to put large capital, a deposit injection into them, to help buy them time to make sure they could come up with the right solution for the restructuring that is needed. david: so the large banks and others put in roughly $30 billion in deposit. jane: yeah. david: you put in roughly 5 billion or something like that? jane: yeah. david: so, how did that happen? did jamie dimon call you up and say, do you have $5 billion you don't mean and you can put -- don't need and put it in first republic? do you have to go to your board and say i need $5 billion? how do you make that decision? and did you say to jamie, i will call you back, i will think about it? [laughter] how does that work? jane: so, one of the great things about this was the banks

did all come back together. because when you think of it, we usually try to kill each other in different deals we are trying to do. so, there is a lot of competition between us. but in this instance, this is one way or -- one where we are in a strong position, we want to stop what could have been a problem. we all know when there is a confidence crisis, the logic that takes over is not necessarily rational. so we wanted to go and help protect the system. it's in the interest to do so. so despite this being a divisive environment we are operating in, this is an instance of the banks coming together and saying what can we do here to support a system that we have confidence in? you don't put $5 billion into the system through the generosity of your own heart, you do it because you have confidence in the system itself. david: you expect to get that money back eventually? jane: yes. david: ok. jamie dimon is a great banker. i think he has been the head of jp morgan for 17 years. something like that. jane: who? david: jamie dimon. [laughter] well regarded.

[applause] but, why do you think it is the case that he is calling around and doing this and not the secretary of treasury, the chairman of the federal reserve, the head of the fdic? why is it a nongovernment person doing this? i would've thought a government person would do this. jane: why do you think janet was not calling around? do you believe everything you read in the newspapers? david: because when people in washington do something good they usually have the press know about it. [laughter] maybe she was calling around. i am sure she was. but jamie seems to be getting all the credit, if credit is the right word. or is it not fair to give him the credit? jane: jamie played a role. i think we all played a role. there was a very active discussion over that weekend. david: would citi consider buying first republic? where are you not interested? -- or are you not interested? jane: no. [laughter] david: another bank called credit suisse. credit suisse seemed to dissolve very, very quickly. were you surprised at how quickly that bank went away after about 100 years of being around? jane: we are talking about three

or four banks out of the thousands that are here in the states, and the rest of it, so let's put that into perspective. credit suisse, i do not think anyone was falling off their chair that credit suisse ended ultimately where it did. it was a question of time. it has been a troubled institution for a long time. for those of you who don't know it, it's a very global bank, it's got a strong operation in switzerland. good wealth management in asia. an investment bank in the states and around the world. but it has had a lot of issues. it's had a lot of management instability. it has had a number of different crises and things that have hit it. david: credit suisse has great private bankers and they have some great clients. are the citi bankers calling up the credit suisse former employees and saying, you should come here now? or something like that? jane: no, i think they are calling us. [laughter] david: ok. when you went to harvard business school, you entered in 1992? something like that? jane: that's right. david: were there a lot of women in your class?

jane: probably about 24%, 25%. something like that. yes. there were enough of us to cause trouble. ♪ - [mo] if you're thinking about going back to school, this is for you. ♪ - i ended up spending less money my entire time at snhu than i did in just one year at my other university. - [juan] my time at snhu has given me more confidence. now i can go for that promotion. - if you're ready to go back to school... you can do it. southern new hampshire university has changed my life. and it can change yours too. ♪ - [announcer] visit snhu.edu. david: growing up what did you say wanted to be? the ceo of citi?

jane: i wanted to be a doctor, but i was really lousy at biology. so that one ended quickly. david: that happens a lot to people who want to go to medical school. so, ok. you grew up in the edinburgh area? jane: i did. david: were your parents bankers? jane: no, definitely not. my father was a scottish accountant, which meant you are not really relying on parental generosity and extra pocket money from a scottish accountant as a father. so i used to earn my pocket money on the golf course at st. andrews caddying, but you would not know it from my golf game. david: i'm sure it is better than mine. so you went to cambridge. , after you graduated, what did you do? jane: after i graduated, i joined goldman as an analyst. david: that is an easy job to get. an easy job when you have it. you don't work more than 30, 40 hours a week. jane: yes. yes. david: so, how many years did you do that? jane: i worked at goldman for a couple of years. i was young when i started. i was the boring girl from scotland. everyone else was european,

spoke multiple languages, and was a lot more exotic and interesting than me. so after i finished the analyst program, i thought, i better make myself a bit more interesting. so i moved to spain. david: did you speak spanish before? jane: i didn't. david: so now you speak spanish? jane: [speaking spanish] david: well, i know one word. si, or something. jane: i thought it was "beer". david my language skills are : very limited. jane: luckily, you have other talents, which is a fortunate thing. david: spanish is not one of them. so, you do that for a couple years and then you decide to go to where? jane: to america. i did the same. talked my way into harvard business school. i was fascinated by the american machine. i don't know if you have spent a bit of time in europe, grew up in the 1970's and 1980's, it's fascinating. america is something you want to

try to understand, the american economy and the american entrepreneurs are not someone you ever want to bet against. david: when you went into harvard business, you entered in 1992? jane: yes, that is right. david: were there a lot of women in your class? jane: probably 24%, 25%. something like that. there were enough of us to cause trouble. david: you graduate from harvard business school. and then you decide to go to mckinsey? jane: yes. david: why did you want to be a consultant? jane: first of all, why didn't i go back into banking at that time? i've been in banking in the 1980's where there were not many women in banking, unlike in the business school. they wore suits with big shoulder pads. they were more scary than the men. [laughter] you remember the era. so when i looked at the consulting, particularly mckinsey, i liked partnerships. i think partnerships are great places to grow up. the apprenticeship model is wonderful. global institution and firm.

and also, you know, it was quite strategic in what they were looking at. it was similar issues to m&a and -- at goldman. i thought i would have the chance of having a family, a bit more predictability in to work schedule. david: you did it for 10 years? jane: 10 years. david: and you had two children during that time? jane: yes. david: you go to mckinsey and work your way up and become a partner there. and being a partner at mckinsey is a great job, so why did you decide to leave to go to citi? jane: i became a mom at the same time as i became a partner. i worked part-time through my partnership. [applause] yes. um, and mckinsey was fantastic about that. because i was able to spend time with the kids before they went into school. but then, when they were then at school, i felt like ok, i can go back full time working again. and i, you know, i honestly felt like it was time that i could prove that i could do it, rather

than just advise. david: all right, so you went to citi. at the time, did you think a woman could become or would ever become the head of citi? jane: i honestly never thought about it. at that point, it is a firm, there were quite a few women around. i had been in an environment that was always very supportive about it. fantastic male mentors. it was never something i thought about. this was 20 years ago. david: so? jane: i was just enjoying the day job. david: you had a series of jobs. you were the ceo of this division or that division. one time, they asked you to move to latin america to be the ceo of latin america. did you think that was going to be a dead-end? you were going to move to latin america and get out of the way of the succession or did you , think that was a way to get promoted? jane: it was a big turnaround role. it is one of those ones you say if i did a good job, then that was going to put me in a good position for bigger opportunities ahead. if i did a bad job, so be it. david: you were not afraid they would forget you? you are down in brazil or something and you were not afraid they would forget you?

anything like that? jane: no. [laughter] david: so, you did a good job. you come back and you are the head of the global consumer bank. what is the head of the global consumer bank at citi? jane: that is retail banking, a credit card, which i believe you are a proud owner of a citi credit card. david: i am. i have that here. well, i don't have enough frequent flyer miles on it. you told me i'm not qualified for my frequent flyer miles. jane: you have the wrong card. david: is this the best credit card you can get? jane: the -- david: here it is. [laughter] jane: so, david, you have the one with our wonderful partner american airlines. david: yours is black. how come mine is gold? which is better? jane: you have to ask for it, david. although i suspect you may not be flying quite as much on the commercial airlines. [laughter] ♪

david: when did you realize for the first time that you could be the ceo of the bank? you have 230 thousand employees. a lot want to be ceo. when did you realize for the first time that you had the chance to get that? jane: when i was made president of the bank because up until then, you do not have a sense that that was the point when mike and john had a conversation about being a likely successor but no guarantees in life, and i better do a good job. david: ok. so your predecessor was michael

corbin. jane: yep. david: he retired two years ago. you seceded him. jane: yep. david: what was the biggest challenge in becoming the ceo right away? jane: it was covid. so, this was becoming ceo during covid, it's not the easiest. because you know, you are used to going around, visiting different sites and clients in person. a while you do an amazing job, it is not the same. you have to learn how to lead in a different way. david: today, citi is a bank that announced it is changing its strategy. jane: yes. david: you now want to be a consumer and institutional bank in the united states, is that right? jane: uh yup. david: you are getting out of the consumer business outside of the united states. jane: so what we have said we are, rather than what we are not, is an extraordinary bank in its history, and in its presence globally. it is uniquely -- it opens the door as a bank in 100 different countries. so citi is to be the preeminent

banking partner for companies, investors and individuals across border needs. and that is the vision of the bank. we'll serve that client base as they are an absolutely critical partner. david: so you have sold a number of your international consumer businesses. you announced you're trying to sell your business in mexico. jane: the consumer business, yes. david: who are you going to sell that too? [laughter] jane: we have been fortunate to have a lot of interest. we looked at consumer banking, and we could see, originally, the view had been that you would get a lot of global scale in consumer banking. we were very strong in a number of different geographies. but the reality is you don't get as much scale globally. it's much more about local scale in those businesses. so we decided, let's focus, we want the bank to be simple, we want to be truly excellent at what we do. and that is better if you are a more focused bank on fewer -- around fewer business lines. that's the path we are on.

david: so the bank's stock under your predecessors, and to some extent under you, has not moved much in 10 years. is that a concern? jane: we are transforming the bank to make sure we are in a very different position. we're changing the strategy of the bank, as we talked about. and that entails, selling 65,000 employees. it is 25% of our employee base, so we can focus and double down on the businesses that make sense. david: of the 230,000 you have, you're selling 65,000? jane: yes. david: wow. jane: it is a lot. it is under the belief that where we truly excel, we will move every single day $4 trillion of volume for 5000 multinational firms. there is no other bank that can -- in the world that can do that. that's an incredible asset for america. it is a strategic asset for the states, because you would much rather have american companies operating on american banking rails and not foreign banking rails, particularly these days.

so that is what we are focusing the bank around, it is that client base. and it is a big transformation, david. this is bold. this takes some courage to do. we are making really good progress on it. and we are putting a lot of investment into modernizing the bank, because we have had some regulatory orders against us as well, to make sure we make the investments we need to. and making sure the culture is there, of real excellence, but also to be a human bank. we've talked about that being important. put all that together, that is a lot of transformation. that is a lot of work. but we are determined around it. and we are completely convinced that that puts the bank into a different profitability, different return profile, and ultimately to the benefit of our shareholders. david: suppose i am listening to what you say and i say, she is obviously articulate, committed, maybe i will buy your stock. do you think your stock is a good buy right now? jane: yes. [laughter] very. david: if i buy it, i can get an

appreciation of some percent i am happy with? -- i can be happy with, you think? not as good as private equity returns but good, right? [laughter] for young professionals, why should they want to work at a large commercial bank? what is the appeal of it? why, if someone goes to harvard business school, why not go to a private equity firm, a hedge firm, one of these important organizations? [laughter] how do you recruit people to a place like citi? what is it that you say is so great about being a commercial banker? jane: america's global banks are right at the center of some of the biggest challenges going on in the world. geopolitically, we get pulled into the conversations. we're playing a critical role in supporting clients in countries. you get an opportunity to come and work, and learn in a team environment, in an apprenticeship model on how to tackle and solve some of these pieces. david: what do you do for relaxation to get away from the office from time to time?

are you a golfer or something? jane: yeah. i love spending time with my kids. so, being able to spend some time with them. they are less enthusiastic now than they used to be. i will take what i can get. david: do they tell their friends who you are? or they don't want to tell? jane: so, when i was announced as ceo, i knew it was going to happen and i called up my son. i said -- he did not pick up, as usual. i said, "please call me." david: you called your son and he did not pick up? jane: no. he did not pick up. he sent a message saying, "i am busy". i said, "please, i have news, could you pick up?" he's like, "mom i mean it, i'm on zoom calls. i am really busy." he did not pick up. he did not pick up. i ended up having to text him, the next morning, that it was going to be announced.

then, he came back to me at the end of the day and said, mom -- it was a text message, not a call. it said, 'mom, you are all over the news today. are you important or something'' dot. dot. dot. [laughter] ♪

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