Transcripts For CSPAN2 Deputy 20240705 : vimarsana.com

Your time. Excellent points, we will be talking about technology in the next panel and the interagency process and telling whats going on is really important. Your range of expertise on this matter is is super impressive and your range of knowledge a lot of people dont know all these Little Things about you like your 1990s and all the hiphop aaits a great to check on these issues and on the substantive issues as well. I really appreciate your help this was a fantastic conversation. Thank you. We are happy to be here, thanks for having me and look forward to coming back another time. And brings us no greater pleasure than to continue this conversation with Wally Adeyemo the deputy secretary of the Treasury Department whose land his voice on issues from everything from ndis to the National Security and ai, thank you so much deputy secretary for joining us. We know this is an extremely busy period here for you and we are really honored to have you. We are here to talk about obviously ndis in the wake of Silicon Valley bank and ndis maybe just for context, can you give us a brief sense of the range of programs up to this point that have focused on ndis at the Treasury Department just to set the stage. I think we are losing aa okay. Let me start by saying thank you to chris and nicole for your leadership and pulling this together and to the mba for being such a great partner with the Treasury Department over the last several years of the Biden Harris Administration. I will start by saying ndis and cdfis have never been better aalso to be ready for the challenges that happen in any economic cycle. In addition to the leaders and the work theyve done the federal government has stepped up by providing more than 12 billion to ndis and cdfis over the course of the Biden Harris Administration. In addition to that, several grants have been provided to the institutions that help them do the thing they want to do most, be well to the communities that often lack capital Going Forward and because of those things my view is that today our ecosystem of ndis and cdfis are well prepared to face the headwinds the economy faces while continuing to lend to the community. Deputy secretary its so good to see you. Ndis like so many other customers have had a tough time in todays economy they faced greater credit risk a higher buying cost and even deposit place. Started to touch on this of the 12 billion that came down from a Biden Harris Administration but how important were the Biden Administration capitalization efforts like aa and other programs in terms of preparing them for this very kind of stress. The second question is, as they are a sense that recapitalization might be an issue worth revisiting if the economy deteriorates . You know the answer to this better than i do because you are members are telling you this but fundamentally i think the money that was contributed by congress to ndis and cdfis are real game changer in terms of providing capital but not just for capital for capital sake but capital thats going to allow them to help the communities that are being hurt the most who are hurt the most whenever you have economic headwinds. The most important thing for us to remind people of the reason we care deeply in the biden a the reason we care about cdfis as we know these institutions serve communities where the economy can be helped by helping to get access to credit to help do what i think is the most important thing we can do which is expand the economy and get money to the places where you have unrealized potential. Thats exactly what your members are doing on a regular basis. In terms of capitalization my sense is that these institutions are better capitalized than they been in a long time. Before for too long in a country will rescind the number of minority owned institutions shrink the investment we made three here is going to arrest that trend and the goal now is to make sure the institutions that exist have the ability to grow because their growth will correspond to the grocery economies in the places where they are served and the part about is continuing to make sure these institutions have access to capital but also making sure they have access to deposits because ultimately they need liquidity to do landing and thats why im encouraged by some of the small efforts we seen in terms of other institutions providing deposits to mdis and cdf eyes to key is to make sure these are sticky deposits that make sure they are around for a long time so they have the ability to lend against him but in addition to doing that we need to make sure we are getting Grant Funding to make sure we have the ability to build up the Technological Infrastructure so they have the ability to do the underwriting they need to do in order to get more than money into the economy but my general view is that today aawe made progress and theres more we need to do and we are committed to the as the administration to work handinhand with you and the mva to make sure that ndis and cdfis are prepared to serve no matter the economic circumstances the communities Going Forward. That was such an interesting and really thorough answer which gets all kinds of other observations this is a theme about Silicon Valley bank and weve had lots of turmoil in the markets from obviously signature and first republican. Its been the catalyst for lots of different challenges for regional banks and black and brown banks cdfis, for the most part most people would look at this as a story thats played out in terms of policy responses which people aaand that positive response sort of continues. Maybe just to level set, whats been the Treasury Department posture for those events and the policy conversation and do you have any particular sense as to where we are, not just in terms of the market but where you are and where the Treasury Department is when it comes to thinking through the appropriate responses . I was recently looking back at my calendar on the weekend of march 12 i looked at my sunday that week and looked as busy as any weekday because we were spending time not only thinking about what we would do about Signature Bank in Silicon Valley bank that thinking about what we are going to do to protect the system. To protect banks like mdis and cdfis as well as create a facility that would make sure institutions have access to liquiditys they can use to meet the demands of their depositors. Ultimately it was done for the entire system. I recognize the vast majority of the deposits are mostly insured. Ultimately in order for mdis and cdfis to grow and meet the needs of their communities they want to grow their deposit basis. In order for that to happen, people need to feel secure about the fact that there deposits are safe and their institution is like any other institution. Today there are better capitalized than they been historically because of the historic investment nonetheless, a key concern you have when you are a part of a larger system is people will judge your institution as they judge the system and from our standpoint protecting the entire system is what weve done that fateful weekend in march by doing that we put not only regional banks in a better position to continue landing but we also put mdis and cdfis in a position to continue landing. People are paying far more attention to their deposits because they think they can earn more money on deposits by moving them to other institutions are money market funds. Theres going to be more competition for deposits Going Forward thats why i think its critical that working as a Publicprivate Partnership we continue to encourage institutions and firms to bring dominic move more deposits not only because we want them to diversify where the deposits are but put the institutions in a position to land in the communities where the capital could be well used to grow the economy and create opportunities for all americans. My sense is that from the standpoint of the Treasury Department and the standpoint of the administration the presence made it very clear he does not want to increase the Regulatory Burden that small institutions face but we want to create a Regulatory Framework that puts them in the position to continue to responsibly led to the communities they serve and from the standpoint of the Treasury Department that includes providing resources and working closely with mdis and cdfis to get them not only access to capital but to the Human Capital and the technology they need to grow their businesses over time. I want to talk a little bit about public policy. Weve had policy conversations on the issues from raising insurance limits to more relations for banks. Where do you see mdis and cdfis fitting into those conversations and how tailored should responses be for those institutions how many of them dont feel as though they were responsible for this banking turbulence. The simple answer is to think how it should be tailored. The president has made it very clear he doesnt want to increase the Regulatory Burden these are often trying to serve populations that are underserved by traditional banking. Thats why we think the ecosystem is so important why we put capital into the ecosystem. Just a week ago we were working together with the private sector committed to try to contract aai think the mdis and cdfis Community Benefits from a well regulated Banking System. Ultimately confidence in the Banking System from the American People from individuals as critical to making sure mdis and cdfis have the ability to succeed as well to attract deposits and attract capital to be able to do the business they care about in the communities they care about throughout the country. Fundamentally what this is going to mean is that we have to continue to remain vigilant because the risk to the Financial System are things that are hard to always predict but we have to be positioned well to use the tools we have to deal with them. Thats exactly what we did in march when we address Silicon Valley bank and also Signature Bank. An important thing that both of you know that is important the American People realizes that we have more than 4000 banks in this country. We believe deeply that we need diverse ecosystem that includes big banks, mediumsized banks, small banks and mdis and cdfis because they serve different parts of our economy well. We think traditionally we look at communities of color and Rural Communities they have not been served as well by big and regional size banks thats why we think that the mdis and cdfis ecosystem need to be supported and need to be put in a position to continue to provide credit to those communities. Over the course of our conversation today, with other regulators and other kinds of panelists leaders and ceos. Weve heard different stories we heard on the one hand some really strong banks and mdis that are doing well and we also heard about deposits overall the system continue to shrink and and a layover effective a stigma of accessing the discount window. When you think large macroeconomic macro prudential perspective number one, how healthy is the Banking System right now . We heard today from other regulators, keeping an eye out for commercial loans and commercial real estate loans and then what keeps you up at night . When you think about any risks to the Banking System. Are there any areas that are of particular concern for you . We have to remain vigilant thats the most important lesson we learned in the financial crisis of 08 09. When regulators and policymakers are no longer vigilant about innovation in the financial sector, thats when you face challenges. The strength and resilience speaks to the fact that we have more than 4000 banks that are serving consumers and credit is being created. One of the challenges you always have his economy like ours where you see rapid break we always knew growth would be slow and return to trend. And when that happens you want to make sure credit creation continues in order to make sure the economy can grow and we are continuing to see that not only coming out of the biggest banks but regional banks and smaller banks. Most of you know, more than 50 of lending in this country comes out of the regional and small banks and our goal is to make sure the mdis and cdfis play an increasing role there and while many of you might have noticed just a week ago a number of large banks in this country and other big institutions both financial but also nonfinancial firms decided they are going to take deposits or excess money and place those in mdis and cdfis. While they started with 1 billion, they express this amount to grow over time as a sign of confidence both in the Banking System but particularly in mdis and cdfis and not only confidence in the institutions but demonstrating their respect for the Important Role they play in making sure the communities of color, Rural Communities, people who are living in parts of the country that have not been served have access to the credit that they need. My view is that the Banking System remains resilient and im particularly impressed by the resilience of mdis and cdfis given the aencouraged by the fact that other institutions particularly agree and putting deposits in the institutions to demonstrate support for what they are doing in the economies of the communities they serve. Deputy secretary, you have talked about three things that are priorities for mdis. Capital, deposits and grants. On the capital side he talked about the unprecedented capital that has come from the Biden Harris Administration on the deposit side he talked about the efforts from the private sector to make deposits 1 billion and mdis and cdfis and you also talked about the importance of grants to help bridge the gap between tech and talent and that really is whats needed to help them scale grow and push the r. Looking forward, what will be the Treasury Department primary point of interest or really emphasis when it comes to mdis . We have in all of the above strategy when it comes to mdis because ultimately we know mdis are critical to growing the economy and if i step back and talk a little bit about the way that secretary allen thinks about our Economic Strategy for the country and it starts from this idea of modern supplies a athe idea of unlocking the supply of the economics by focusing on things like labor force and also places where we have unrealized potential in the economy. And we know because of discrimination and other barriers a lot of the unrealized potential in our economy lies in the rural areas and areas in minority communities and the best way to unlock the potential and innovative individuals and innovation is making sure they have access to capital. Thats why we were focused on making sure these reach the communities through the mdis and cdfis thats why in addition the cdfis fund provides our clients and while they are focused on working with the private sector to make sure the deposits flow to these institutions so they can lend against the capital, i do think that one of the most important things we can do, to your point, make sure these institutions have access to technology that enables their professionals to be able to make loans and make them at scale. A big piece of this is making sure they get access to grants. I recognize that part of this is something that the private sector in collaboration with philanthropy can help do in a place where we are very engaged in our conversation but ultimately the most important thing for these communities is going to be making sure if you have an ecosystem of businesses to support with loans and i havent mentioned it but the Small Business Credit Initiative that provides 10 billion to states to support Small Businesses was a particular focus on Small Businesses that are run by women and people of color is going to be a way that credit can flow from mdis and cdfis to the businesses and establish longterm relationships in businesses that will hopefully grow in these communities over time because as you know as your clients gross over the banks and the cdfis that they serve and thats the hope for years and decades to come. We only have a minute left and i did sort of cheer you up because you mentioned the Technology Issue and everyone is talking about ai nowadays. Do you have any sense of your perspective about how that enables this idea of Technology Transformation but also risk talked about data and the challenges of data. I know this cant be the first time he talked about it but this is particularly importance and interesting topic for smaller banks. I think my view on this i know everyone today is talking about the importance of ai my view is 10 to 20 years from now the most important thing is that the institution remains talented. Getting talented people on board that can use the Technology Im still very focused around the Treasury Department on making sure i get the most talented people as im sure all the institutions that nicole you work with and part of the mdi and cdf institution. The data piece is something that we ought to invest in and, frankly, we often think about our individual institutions taking advantage of this but one of the things weve been very focused on is how can we create technological and ai solutions aaultimately thats what we need we need to make sure industrywide we have access to the types of technologies that will allow us to do things like better underwriting. Ai has the potential to do that and it shouldnt be something that we try to do institution by institution because it can be quite expensive. The third thing i would say is probably the most important thing we can do as a Banking Sector is that because banking is based on trust by the individuals making sure that while we think about ai and the opportunities it creates make sure we are focused on cybersecurity. Ultimately making sure the money people put in these institutions are secure is going to be a key piece of showing that people are going to put more money in and i know that for myself im thinking about how to make the investments but its can be critical we think about how to make those investments and scale so that mdis and cdfis have access to the protections they need to secure the money they have. I think this is a discussion in a debate we will be having in terms of how we make sure we take advantage of the