October 24, 2025 • 30 mins
Katie and Matt discuss JPMorgan’s new headquarters, in-office pubs, in-office gyms, the JPMorgan District, specialist fine-tuning of AI models, pls fix memes, crushing investment banking analysts’ hopes and dreams, the craft of building LBO models, credit cockroaches and indirect lending.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News. Hello and welcome to
The Money Stuff Podcast, your weekly podcast where we talk
about stuff related to money. I'm Matt Levian and I
read the Moneys dot Com for Bloomberg Opinion.
Speaker 2 (00:20):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (00:35):
You were reporting live from the field this week.
Speaker 2 (00:37):
I was. I am a studio anchor. I like being
in the studio. Boy, boy do I love sitting behind
a desk and screaming at a camera. But I had
to go into the field this week because JP Morgan
was having their ribbon cutting ceremony for their big, beautiful
building at two seventy Park Avenue. Beautiful, one big beautiful building.
(01:00):
They actually own a bunch of buildings, Yes they do.
Speaker 1 (01:04):
It's not fun to have a campus, and it is
really cool. I joked. I joked this week that the
JP Morgan building at a forest ory gold statue of
Jamie Diamond in the lobby, which you can now report.
Speaker 2 (01:18):
They can tell you it's not true. They do. I
don't know if they had the three story I don't
know if they have this all the time. But when
I was there for the ribbon cutting ceremony.
Speaker 1 (01:26):
They had uh had a live Jamie Diamond.
Speaker 2 (01:29):
There was a live Jamie Diamond or really convincing AI robot.
But they also had a flagpole and they had a
fan on the flag so that the flag was waving
in the artificial breeze.
Speaker 1 (01:43):
Wait. Wait, like they had an HVAC system that circulated
air in such a way that the end of our
flag waved, or they had like a desk fan.
Speaker 2 (01:53):
I could not see the fan.
Speaker 1 (01:56):
Everything was it wasn't It wasn't like a guy with
a stick with a dusk van.
Speaker 2 (02:00):
No, No, the fan was hidden. If it was circulating,
I didn't feel any of it. But yeah, it was
specifically for the flag so that it would flap.
Speaker 1 (02:07):
That's awesome.
Speaker 2 (02:08):
It was awesome, and it was fine. A few people,
including you, asked me who did you interview there? And
I said, no one. I was just there to be like,
I'm here the building. Yeah, I'm inside the building, but
the thing is Matt to prepare.
Speaker 1 (02:21):
For Jamie Diamond's physical ribbon cutting, which happened. Of course.
Speaker 2 (02:25):
I mean, I wasn't going to go there and not
see you. No, they wouldn't let me that Close's crazy,
but yeah, I know. He held a giant pair of scissors.
I believe New York Governor Kathy Hokeel was next to
him for that. And he cut the ribbon so it
was awesome.
Speaker 1 (02:43):
Did they have backup ribbons?
Speaker 2 (02:45):
They must have. They must have.
Speaker 1 (02:47):
I mean he cut the angle and do it again.
Speaker 2 (02:50):
Imagine if they spent five billion dollars on this building. Yeah, no, no,
they were gonna they were going to get this over
the finish line properly. But Matt, to prepare for these
hits that I had to do about the building, I
accumulated so much knowledge, so many facts about the building.
Speaker 1 (03:08):
That you're going to tell us, tell me and the listener.
I'm going to step that I need.
Speaker 2 (03:14):
I need to use it somewhere. It's not it's not
knowledge that I can build on.
Speaker 1 (03:18):
You can use it during the hits or not as.
Speaker 2 (03:20):
Much as you would think. You always you always over
prepare and then me and then they ask you, like
one question. I forgot what it's like to be a reporter,
and you have just these anchors who don't care about
what you're saying. No, are all my colleagues are lovely.
Speaker 1 (03:35):
Okay, some facts, all.
Speaker 2 (03:36):
Right, So to so Many Park Avenue is the new building,
that's what we're talking about. Six years of construction.
Speaker 1 (03:42):
Yes, so that I noticed that. Yeah, it's on the
wactor ground Central.
Speaker 2 (03:46):
It's not over because their temporary headquarters has been at
three eighty three Madison Avenue, which is directly across forty
seventh Street. And now now that the new headquarters is open,
now they're going to spend a billion dollars to renovate
three eighty three Madison. So they're going to close it
in twenty twenty six, redo the exterior, redo the interior,
(04:07):
and it'll open at the end of twenty twenty seven.
So we're just getting started when it comes to JP
Morgan doing construction in that specific area of New York City.
But let me go on, let me go on. It's
sixty stories tall, Okay, a normal number of Well that's
the thing. It's nearly fourteen hundred feet tall. So the ceiling,
(04:31):
oh yeah, no, the ceilings are super high. And the
lobby specifically it's the building itself is raised eighty feet
off the ground, so just as a super huge lobby.
And the reason why is because they wanted to like
have more outdoor space outside of the building, theoretically giving
space back to the city. But I don't know. I
(04:52):
don't think you're going to be eating your sandwich up
against the JP Morgan building necessarily, but it's a nice idea.
Speaker 1 (04:59):
Yeah, I find the overhang slightly alarming, which it does
look like a somewhat precariously balanced building. I understand at
an intellectual level that they employed good architectes and the
building will not topple over in a slight preece. But
i'd like, you know, if you're on that overhanging, yeah,
there's a big building above me.
Speaker 2 (05:16):
Well, those architects were there. Lord Norman Foster designed this building.
He's done a bunch of famous buildings over in Europe.
But he also did Apple Park in Kupertino, so that's
cool park. Yeah, yeah, yeah. Anyway, so I'm just getting started.
So six years of construction on this building, matt As,
we've established that, includeed demolishing the old building that was there.
(05:41):
So in terms of the features, I know that you're
dying about the amenities on the thirteenth floor of the building,
which I did get to see. They have a pub
called Morgan's it's reservation only, so you can't just make your.
Speaker 1 (05:59):
Reservation three o'clock for the pub or he just immediately fired.
Speaker 2 (06:02):
That's the thing I was thinking, like, would I be
bold enough, Like if Bloomberg had a pub that you
had to make reservations at, would I ever do that?
I don't know.
Speaker 1 (06:11):
I would definitely go to the Bloomberg pub all the time.
Speaker 2 (06:13):
But like, well, you have a certain amount of clout here,
so they'd be like, oh, he's thinking his thoughts.
Speaker 1 (06:20):
I just feel like Jamie Diamond has really gone on
record being like everyone in the office all the time.
And I understand that the pub is in the office,
but still.
Speaker 2 (06:30):
Yeah, well it's a great way to keep them in
the office all the time.
Speaker 1 (06:34):
Now I think about it, like taking the clients to
the JP Morgan and has pub is kind of a
nice Oh yeah at all.
Speaker 2 (06:41):
I would like to go. Invite me please, I'll go.
I have to expense it though, So anyway, apparently JP.
Speaker 1 (06:49):
Morgan, you and I just like into the JP Morgan.
Speaker 2 (06:51):
That'd be great. Let's do a podcast episode for there
from Jamie Diamond. If you're listening, you're our special guest.
Speaker 1 (06:58):
I think that we could know the guest be like
the bartender at Morgan's. Oh true, twelve hours Yeah.
Speaker 2 (07:05):
Right, yeah, that would be a lot of fun anyway,
JP Morgan imported the parts needed to pour a proper
pint of guinness at Morgans, so just no, it's quality.
There's also a fitness center at two seventy Avenue. I'm
reading off the notes that I printed out for TV.
I was prepared to say all of this on air.
(07:26):
So they have a fitness center and Bloomberg News reported
that this was an uphill battle. Apparently Jamie Diamond personally
dislikes in office gym's and didn't want it, but eventually
he was brought over. Which again, if you're trying to
get your employees to live at the office, you need
a pub, but you also need a jim.
Speaker 1 (07:43):
Yeah, I'm not an in office gym guy.
Speaker 2 (07:46):
But no, I think I would be. I think I
would love it. We don't have one.
Speaker 1 (07:49):
Here, so like this is all like very you know,
nostalgic for me because I worked at Goldman when they
opened their new office on jenderbut Street, and it did
have an office gym. It's been so long as an
office gym where people would you know, like you run
into like your boss's boss's boss in like you know, a.
Speaker 2 (08:09):
State of I would love Well, no, not that specifically
that specifically. No, I thought you were going to say,
like doing doing a chest press, and like, I feel
like I would be very good at having a conversation
in that scenario.
Speaker 1 (08:22):
I think you would. Yeah, I think that's why you're
a TV anchor. I would be very bad at having
a conversation in that scenario. But like there's also the
more specific like locker room scenario. And so the other
thing that I remember about the Goldman office is that
it was very very nice. It's like, yeah, I knew
it's shiny, but everyone got a little bit less space
(08:43):
than they had in their own office. And I have
read that something similar is true at JP Morgan where
they have this new big office building, but because the
ceilings are so hot, there's less room for desks.
Speaker 2 (08:53):
Well that's the thing. You have fewer floors, just sixty stories,
which is you know, the stories for.
Speaker 1 (08:59):
All those bankers who did you see.
Speaker 2 (09:02):
Did you see the things circulating on social media? It's
like a photo of one of their trading floors and
it's like just stocked with Dell computers, which have four
monitors a piece.
Speaker 1 (09:11):
I think I did see it, and they're all, well.
Speaker 2 (09:13):
It's exactly as I described.
Speaker 1 (09:15):
There's there right, because it's they haven't moved into the
trading floor yet.
Speaker 2 (09:18):
It's like, yeah, they've been moving people in gradually, is
what I understand. I think the floor is yeah yet Yeah.
Shall I tell you about some of their other buildings
in their campus. I need somewhere to record this, you know,
when I when I podcast, when I sort back through
the rubble of my life, I want to remember this. Okay,
(09:40):
So we already talked about three eighty three Medison Avenue.
Well get this, Matt. They bought two fifty Park Avenue
in twenty twenty four for more than three hundred million dollars.
Not sure what they're going to do with it right now.
The plans are still in flux. They collection kind of
(10:02):
They could keep it as is, They could knock it
down and build a new office tower, which they now
have some experiences, or they could turn it into a
hotel for visiting employees. That's not all four to ten
Madison Avenue. They're not sure, JP Morgan, according to Bloomberg Reporting,
not sure if they're going to keep or sell for
ten Madison. They bought that during the worst days of
(10:22):
the pandemic in twenty twenty. They've been using it basically
as a project office for the headquarters construction. But all told,
in these blocks that we're talking about, JP Morgan has
nearly six million square feet of office space, which is
almost as much as Goldman Sachs has in all of
North and South America. So the physical footprint of JP
(10:45):
Morgan is pretty stunning. Yeah, yeah, I.
Speaker 1 (10:49):
Do appreciate that there's a JPA Morgan district in Mindow, Manhattan.
Speaker 2 (10:52):
Yeah. I think Bloomberg News called it a neighborhood, which
I think is cute. Yeah, city within a city to
so many Park Avenue. I'm almost done. It's going to
house about ten thousand workers all told. In terms of
corporate employees, they have more than seventeen thousand. So this
is why they need all these buildings. Yeah yeah, all right,
(11:13):
big bank walk past it, you know, if you find
yourself in your grand center. I do see it from
I live in Hoboken now and I run a lot,
so you can see it from the waterfront and it
lights up in different colors and you know, it's a
nice addition to the skyline. Good on you.
Speaker 1 (11:30):
Okay your architecture criticism, your own record is liking it.
Speaker 2 (11:35):
I like the building, doesn't it not?
Speaker 1 (11:37):
I really like it?
Speaker 2 (11:38):
Yeah? Who doesn't like it? What are their criticisms? I
want to know, because I mean, I think it's cool
to get new skyscrapers. Sorry, and this one.
Speaker 1 (11:45):
I see it from street level and it feels threatening
to it from the street level.
Speaker 2 (11:49):
Yeah, it doesn't.
Speaker 1 (11:50):
Strike me as having to make a sense of lightness
or no rightness. It's kind of like a massive, ominous building.
Speaker 2 (11:58):
I will say that part of my brain that doesn't
really understand how airplanes stay in the sky gets nervous
about the way.
Speaker 1 (12:05):
Yeah, it's going in every direction.
Speaker 2 (12:08):
Yeah, Yeah, it's cool.
Speaker 1 (12:10):
It is cool, But like, is it cool enough? Like
you want to go there every day?
Speaker 2 (12:14):
I don't know.
Speaker 1 (12:15):
Actually, I have no basis for architectural criticism. It's fine,
it's great. It's a big building. It's cool. It's got
a pub.
Speaker 2 (12:21):
Yeah Morgan for theory, statue beautiful, a waving flag.
Speaker 1 (12:26):
I mean, he's like got on record second he had
some funny CREDI was like, it's a monument to it's
something permanent. You know, what do we do? We push
paper all day?
Speaker 2 (12:35):
Yeah, it's really good. You could ask the question, does
JP Morgan need all that space because AI is just
(12:55):
going to wipe out an entire generation of junior bankers.
Speaker 1 (12:59):
Well that's why they don't have enough space for all
the bankers, right, they need to replace the junior bankers
with AI and a monument to yeah, the last to
the bankers. Yeah, but yeah, there's a great story this
week about open AI as a thing called Project Mercury. Yes,
Sydney step back. Like the AI companies, like the first
thing they did was sort of train their models on
(13:20):
all of the Internet to like understand at some superficial
level all of human knowledge.
Speaker 2 (13:24):
And then you had a Reddit chatbot.
Speaker 1 (13:27):
Yeah, and now they're like the next step is to
get specialist humans to train the models to be really
good at specialist things. And so they've had they have
a lot of them. They have like you know, astrophysicists
and you know, like lawyers and everyone like training out
the models. But the story this week was that they
(13:48):
also have an army of former investment bankers getting paid
on hundred and fifty dollars an hour to build LBO
models for open AI, so that chat GPT can build
a really good LBO model. And by really good LBO model,
I mean not only that it as it's formula is
linked correctly and gets it correct result, but also that
(14:08):
it has all of the percentages I talicized in the
right way. And generally will not make an investment banking
VP angry because you don't want when you like, fire
all the analysts and replace them with AI, what you
don't want is to be annoyed at the formatting of
the output. Because if you're an investment banking VP, you've
spent your life getting annoyed at the formatting done by
(14:29):
investment banking analysts, and like you want the AI to
be a strict improvement over that.
Speaker 2 (14:33):
So I will say I enjoy all the police fix
memes as an outsider. I've never worked in banking. I'm
a pure play journalist.
Speaker 1 (14:40):
We have been a banking analyst, yeah, but I've been
the recipient of please fix that's yeah.
Speaker 2 (14:45):
Do people really care that much about formatting?
Speaker 1 (14:48):
Well, it's like it's a signaling thing, right, It's like
your analysts come in and they're humans with hopes and dreams,
and you want them to immediately become automative. You can
tell to produce a pitch book, and they will produce
a perfect pitch book. And if they produce an imperfect pitchbook,
you want them to charge. It's reinforcement learning, but it's
(15:11):
you know, you want them to quickly be trained out
of that so that they produce perfect pitch books for
you so you don't have to worry about it anymore. Right,
You want the analyst to take the work off your plate,
and if they give you bad formatting, then you worry
about what else is in the pitch book that's wrong
because you can't you want to get to check the
numbers necessarily, right, I mean the depends like like you'd
like to be at a point where you can trust
(15:31):
the analyst and not have to check the numbers, and
formatting is a visible sign of something else might be wrong.
And it's also like, you know, the people who get
to these positions are perfectionists and they get troubled by
bad formatting.
Speaker 2 (15:45):
Yeah, okay, fair enough. It sounds almost am I going
to get this wrong? That sounds like broken window theory.
Speaker 1 (15:50):
It is like recommended theory.
Speaker 2 (15:52):
Okay, that makes sense. I really want to interview actually
the one hundred x investment bankers working on this project
in the pub at JP Morgan.
Speaker 1 (16:01):
Not one hundred, not all at I have a guess.
Speaker 2 (16:04):
You don't want to interview all one hundred of them,
not at once, No, just the funniest ones.
Speaker 1 (16:09):
I have a guess about what the vibe is. Like,
it's interesting to me like these people are clearly putting
their successors out of work. Maybe they're not, but like, yeah,
that's what it's the vision, right, And you might think
that if you went to people in some industry and said, hey,
(16:32):
would you like to get paid one hundred fifty dollars
an hour for like three months? One month? I don't
know how long this project is, but I don't I
don't think they envision a decade's kind of thing. Would
you like to get paid one hundred and fifty dollars
an hour for a month to put everyone in your
industry out of work? I think a lot of people
in a lot of industries would say no. Like I
think if you went to a lot of journalists, they'd
be like, no, I don't want to put journalists out
(16:54):
of work. I think if you went to a lot
of investmentanking analysts. You'd get a pretty good hit rate.
You know, you'd be like I hated it, or they'd
be like, yeah, I'm out of it now they can
move on. Yeah.
Speaker 2 (17:04):
I do you feel like journalists have a certain affection
for the craft of journalism, whereas a burnt out banker
might not.
Speaker 1 (17:12):
I think a lot of bankers do have an appreciation
for the craft of building LBO models, and I think
that the opportunity to have their LBO model enshrined perpetually
as the official CHATCHPT, like the best practice is that
chat GPT perpetuates forever. I think that would be kind
of cool.
Speaker 2 (17:31):
Yeah, I could see that, you know, you know, it
sounds like, you know, you're raising your hand a little bit.
Speaker 1 (17:37):
I take it back. I would put journalism out of
work now. I think it's like if open A came
to me and Zeid, we want whenever people ask a
question about a financial topic, we want chat GPT to
explain it the way you would. So I spend three
months training chat GPT to do that. I'd be a
little flattered.
Speaker 2 (17:57):
You're speaking that into the universe. It could happen anything.
Speaker 1 (18:00):
Could I feel like they're already trained onized Like that's
the thing. They're already just.
Speaker 2 (18:04):
Like you do, have a public body.
Speaker 1 (18:06):
Training themselves on my work, whereas the LBO models are
not the model of like the best analyst that JP
Morgan is not public, right, so they got to hire
that guy and type it in.
Speaker 2 (18:16):
Let's get into some of the details of this article.
In terms of the application process, according to a person
familiar with the matter, it involves almost no human interaction.
The first step is a roughly twenty minute interview with
an AI chatbot who asks questions based on the resume,
and then the second phase test candidates on their knowledge
of financial statements. The final stage is a modeling test,
(18:38):
so it's fairly involved.
Speaker 1 (18:40):
For like three months ago, they hired some major R
people to train chat GPT to hire the investment banks. Yeah,
get and everything so automated.
Speaker 2 (18:51):
Apparently, the job expects contractors to submit one model per week.
Instructions include writing prompts in simple terms, then executing the models.
Receive feedback from a reviewer and are expected to fix
any issues before their work is ultimately plugged into opening
as systems.
Speaker 1 (19:06):
Open feedback is a pencil, please fix a fix.
Speaker 2 (19:09):
Please fix for a job that isn't going to last
that long. I mean, I wonder if you could do
this as just a side hustle.
Speaker 1 (19:15):
I am sure that everyone doing it is doing it.
Speaker 2 (19:18):
You don't think anyone is just I'm just going to
devote to some people.
Speaker 1 (19:22):
I shouldn't say ever. I feel like some of them
are like current NBA students who are like, yeah, I'm
used to working one hundred hours a week and banking,
and now I'm doing two to fifteen minutes of homework
a week in my MBA program, and so I could
use some free cash, and it's interesting to do.
Speaker 2 (19:38):
It's funny you bring that up because some current NBA
candidates at Harvard and MIT are participating for sure.
Speaker 1 (19:45):
And then I think probably there are some people who
like were burned out and are like, I could do
it twenty hour a week job from.
Speaker 2 (19:51):
Yeah, why not. One of the perks here, in addition
to the one hundred and fifty dollars per hour, is
that contractors get early act access to the AI that
is being created that aims to replace these entry level
tasks at investment banks. So that's pretty cool.
Speaker 1 (20:06):
Too, right, Like I shouldn't be too cynical about this
because I think a lot of investment banking analysts do
think a lot about how can I automate this work
so that it's just, you know, it is button pushing,
and like, maybe in the long run that is bad
for employment at investment banks, but it's not clear that
it is. Right. Yeah, it's like very possible that if
you had the ability to push a button and produce
(20:27):
a perfect model, you would keep the same number of
analysts and they would run more hypothetical scenarios. And the
thing people always say is like, move up the value
chain and think more creatively and not have to just
spend all their time modeling. I'm not sure that's true,
but you know they certainly you know, throw more spaghetti
against the wall.
Speaker 2 (20:45):
Yeah, maybe AI could compliment the human experience rather than destroying.
Speaker 1 (20:49):
But I think it is hard for me to imagine
investment banking becoming purely automated. It feels like it's a
high dollar, high touch sales business, and so you always
need some people to shake the client's hands, and so
it is very possible that AI can be complementary to
that experience. Now that people do worry about, you know,
(21:09):
if the junior bankers don't ever build the models and
they just push a button. Do they learn less? And
they are they less intuitive about you know, financial analysis
when they become senior bankers. And I think that is
a hard problem.
Speaker 2 (21:23):
Yeah, the idea that you're just hollowing out the bench.
One of the people who has voiced a concern similar
to that is actually the CEO of Bridgewater near Bardea.
He said in March, we are well positioned to replace
a lot of the basic tasks with machines, but what
does that then mean to talent development over the long
period of time? And then he continued, you do the
(21:44):
tough work, then that leads you to be able to
do the higher level, more conceptual things. So I think
that's like a nice summary of the concerned there.
Speaker 1 (21:53):
Yeah, and I tend to believe that, Yeah.
Speaker 2 (21:56):
You have to cut your teeth.
Speaker 1 (21:57):
Yeah, there's a you know, just a period of learning
that gives you the sort of foundation to think creatively
later on. And if you just cut that out, it's hard.
By the way, that's not an investment anything, that's a
that's a life thing, right, like you see that in
school now, right, Yeah, you use AI to de Allier homework.
Speaker 2 (22:15):
You never learned how the kids can't read.
Speaker 1 (22:16):
Kids can't read?
Speaker 2 (22:17):
Yeah, I mean, I just relate everything back to myself
as the center of my own universe. I remember being
a baby reporter and just doing these bullet point fixtures
on the Bloomberg terminal that like twelve people read. But
it taught me a lot and it really serviced those
twelve people.
Speaker 1 (22:32):
Now AI does a lot of those blood Well.
Speaker 2 (22:35):
That's true though.
Speaker 1 (22:51):
Okay, if credit cockroaches for like five minutes.
Speaker 2 (22:53):
Okay, you talk about it in the same way that
I told you everything I know about JP Morgan's new
building a two seventy Park Avenue, Tell me everything you
know about cockroaches. At this moment, part.
Speaker 1 (23:05):
Of me hates that we just decided that they're called cockroaches.
Part of me is like I keep leaning into it
in the columns or whatever.
Speaker 2 (23:12):
That's the thing. It's already it's interesting, it's a useful shorthand.
Speaker 1 (23:16):
But right there's been a number of, you know, credit
blow ups, and they all kind of have the same flavor,
which is that someone is or maybe it was, or
looks like they might have been double pledging collateral, or
it happens its collateral they didn't have come on, you know,
all these things, and I think we talked about Tracolor
and first Browns.
Speaker 2 (23:37):
I'm not even sure we've definitely named dropped them.
Speaker 1 (23:39):
And then I think last week the Zions and Western
Alliance news had just come out and you mentioned it
on this podcast.
Speaker 2 (23:46):
Thank god I did well.
Speaker 1 (23:48):
Then I had it cut out because we didn't really
talk about it.
Speaker 2 (23:52):
Something that's happening today on Thursday is what's going down
with Western Alliance and Zions. These are two regional banks
and apparently they disclosed problems with loans involving allegations of
fraud and currently, at like two twenty three pm last
sight check, the stock market was kind of freaking out
about that.
Speaker 1 (24:11):
Who's wrong?
Speaker 2 (24:11):
Let me tell you? Okay, So Zions apparently it disclosed
a fifty million dollar charge off for a loan underwritten
by its wholly owned subsidiary, California Bank in Trust Western.
Their problem is is that it said that it's dealing
with a borrower that failed quote to provide collateral loans
in first position.
Speaker 1 (24:31):
Yeah, you know, topy market toppy mark, don't know, let's
check your collateral.
Speaker 2 (24:35):
Yeah, why would you?
Speaker 1 (24:37):
Yeah, they compete to make the loans. So like Zions
and Western Alliance both announced that they sort of were
exposed to what they characterized as fraud, although the people
who allegedly defront of them said they didn't defrove them.
But basically they like made some loans to this like
real estate lending firm, and the real estate lending firm
they say did not actually own the mortgages that they
(25:01):
were boring against or like they did and then they
sold them or they did and the properties were for
clothes on or they made the loans with they were
second leans. Like there's all this like stuff where there's
like sort of sloppiness around collateral. And then the other
story that came out I think last week was on
seven seven seven Partners, which is a fascinating company that
(25:22):
both buys your lottery payments few in the lottery and
you get twenty years of payments like they'll buy them
from you and so you get cash upfront. And they
also buy sports teams like they own a lot of
like European soccer teams. They own the London Lions, the
basketball team, and they tried to buy Everton, the big
Premier League team, and there are some allegations that they
(25:44):
were at least sloppy with the collateral that they were
selling on to investors, where they basically were borring against
these future cash flows of lotteries or structured settlements, and
they would maybe double pledge them and maybe didn't have
all the assets that they claimed to have. Think the
founder was charged criminally last week in part because one
(26:04):
of the lenders got i think an anonymous whistleblower tip
saying that they were double pledging assets, and the lender
called them to be like, what's all this then, and
the founder, on a recorded line, was like, yeah, we
did do that, but like it's because our computer systems
are stoppy and we'll fix it.
Speaker 2 (26:20):
Oh my gosh.
Speaker 1 (26:21):
After I read about this, I got a number of
emails from readers with anecdotes about their own dealings with
seven seven seven partners that I think are largely supportive
of the theory that they might have actually screwed up
their computer systems. Like there's a lot of like, yeah,
they were kind of unprofessional, so you never know, but uh,
it doesn't look good to me. We may have barred
against our collateral from.
Speaker 2 (26:42):
Two different lenders, So are you holding this up as
an example of a cockroach potentially.
Speaker 1 (26:48):
This is a reference to Jamie diamond saying when you
see one cockroach, there will be more. And it's definitely
since he has said that, there have been a lot
of like these credit problems that all you know, have
similar features.
Speaker 2 (26:58):
It's like if you see a missile margin, yeah, in
a deck, there might be other issues, right, It's.
Speaker 1 (27:06):
Like an indicator of sloppiness. And all of these are
kind of small. I mean, you know in the scheme
of like the banking system, right, but like you see
one cockroache, you.
Speaker 2 (27:15):
See more they can pound potentially potentially.
Speaker 1 (27:19):
The other thing that I think is interesting, and they
wrote this week, is that another thing that a lot
of these cases have in common is that the problem
company is essentially a lender. It's like a financing company,
it's a trade finance company, or a structed settlement company,
or a real estate lending firm or something. It's a lender, right,
And then the people who complain about it, the people
(27:40):
who take losses are lenders to that lender, right. So
it's like second order or sometimes third or fourth degree lending,
where like a bank lends to someone who lends the
someone who lends to someone and somewhere in that chain
problems happen. And I think we've talked about on this podcast,
and I certainly write a lot about like there's been
this move to banks reach launching where instead of like
(28:02):
banks making loans, private credit firms make loans, and then
banks make loans to the private credit firms to make
the loans. And the upside of that is that the
banks have more seniority, right, they're cushioned by like the
private credit firm takes the first loss or the you know,
the factoring firm, whoever takes the first loss. But the
downside is like they don't get to see perrectly into
the loan, Like there are several steps removed from the
(28:25):
actual car loan or the actual structured settlement or whatever,
and there's just more opportunity to get this sort of
cockroage situation where like you were lending against collateral, it
doesn't exist. Yeah, it's like can you make a mortgage
lane directly? You're like you see the house, you know, Yeah,
so this is all sort of indirect And I do
think it's like, you know, it is both like these
stories seem symptomatic of like late cycle exuberants, specifically like
(28:49):
indirect lending, where because it is indirect, it is a
little bit easier to get hoodwinked out of collateral.
Speaker 2 (28:57):
So let's not cut this out of the podcast in
case we need to reference back to it a couple
of weeks.
Speaker 1 (29:03):
Yeah, yeah, sorry, I cut out your crush reference to
week and that was the Money Stuff Podcast.
Speaker 2 (29:15):
I'm Matt Levine and I'm Katie Greifeld.
Speaker 1 (29:17):
You can find my work by subscribing to the Money
Stuff newsletter on Bloomberg.
Speaker 2 (29:21):
Dot com, and you can find me on Bloomberg TV
every day on the Clothes between three and five pm Eastern.
Speaker 1 (29:28):
We'd love to hear from you. You can send an
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Speaker 2 (29:35):
You can also subscribe to our show wherever you're listening
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Speaker 1 (29:41):
The Money Stuff Podcast is produced by anam Aserakas and
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Speaker 2 (29:46):
Theme music was composed by Blake Maples.
Speaker 1 (29:48):
Amy Keen is our executive producer.
Speaker 2 (29:51):
And Stage Bauman is Bloomberg's head of Podcasts.
Speaker 1 (29:54):
Thanks for listening, to the Money Stuff Podcast. We'll be
back next week with more stuff.
Speaker 2 (30:00):
Bob
Bloomberg Audio Studios, Podcasts, Radio News. Hello and welcome to
The Money Stuff Podcast, your weekly podcast where we talk
about stuff related to money. I'm Matt Levian and I
read the Moneys dot Com for Bloomberg Opinion.
Speaker 2 (00:20):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (00:35):
You were reporting live from the field this week.
Speaker 2 (00:37):
I was. I am a studio anchor. I like being
in the studio. Boy, boy do I love sitting behind
a desk and screaming at a camera. But I had
to go into the field this week because JP Morgan
was having their ribbon cutting ceremony for their big, beautiful
building at two seventy Park Avenue. Beautiful, one big beautiful building.
(01:00):
They actually own a bunch of buildings, Yes they do.
Speaker 1 (01:04):
It's not fun to have a campus, and it is
really cool. I joked. I joked this week that the
JP Morgan building at a forest ory gold statue of
Jamie Diamond in the lobby, which you can now report.
Speaker 2 (01:18):
They can tell you it's not true. They do. I
don't know if they had the three story I don't
know if they have this all the time. But when
I was there for the ribbon cutting ceremony.
Speaker 1 (01:26):
They had uh had a live Jamie Diamond.
Speaker 2 (01:29):
There was a live Jamie Diamond or really convincing AI robot.
But they also had a flagpole and they had a
fan on the flag so that the flag was waving
in the artificial breeze.
Speaker 1 (01:43):
Wait. Wait, like they had an HVAC system that circulated
air in such a way that the end of our
flag waved, or they had like a desk fan.
Speaker 2 (01:53):
I could not see the fan.
Speaker 1 (01:56):
Everything was it wasn't It wasn't like a guy with
a stick with a dusk van.
Speaker 2 (02:00):
No, No, the fan was hidden. If it was circulating,
I didn't feel any of it. But yeah, it was
specifically for the flag so that it would flap.
Speaker 1 (02:07):
That's awesome.
Speaker 2 (02:08):
It was awesome, and it was fine. A few people,
including you, asked me who did you interview there? And
I said, no one. I was just there to be like,
I'm here the building. Yeah, I'm inside the building, but
the thing is Matt to prepare.
Speaker 1 (02:21):
For Jamie Diamond's physical ribbon cutting, which happened. Of course.
Speaker 2 (02:25):
I mean, I wasn't going to go there and not
see you. No, they wouldn't let me that Close's crazy,
but yeah, I know. He held a giant pair of scissors.
I believe New York Governor Kathy Hokeel was next to
him for that. And he cut the ribbon so it
was awesome.
Speaker 1 (02:43):
Did they have backup ribbons?
Speaker 2 (02:45):
They must have. They must have.
Speaker 1 (02:47):
I mean he cut the angle and do it again.
Speaker 2 (02:50):
Imagine if they spent five billion dollars on this building. Yeah, no, no,
they were gonna they were going to get this over
the finish line properly. But Matt, to prepare for these
hits that I had to do about the building, I
accumulated so much knowledge, so many facts about the building.
Speaker 1 (03:08):
That you're going to tell us, tell me and the listener.
I'm going to step that I need.
Speaker 2 (03:14):
I need to use it somewhere. It's not it's not
knowledge that I can build on.
Speaker 1 (03:18):
You can use it during the hits or not as.
Speaker 2 (03:20):
Much as you would think. You always you always over
prepare and then me and then they ask you, like
one question. I forgot what it's like to be a reporter,
and you have just these anchors who don't care about
what you're saying. No, are all my colleagues are lovely.
Speaker 1 (03:35):
Okay, some facts, all.
Speaker 2 (03:36):
Right, So to so Many Park Avenue is the new building,
that's what we're talking about. Six years of construction.
Speaker 1 (03:42):
Yes, so that I noticed that. Yeah, it's on the
wactor ground Central.
Speaker 2 (03:46):
It's not over because their temporary headquarters has been at
three eighty three Madison Avenue, which is directly across forty
seventh Street. And now now that the new headquarters is open,
now they're going to spend a billion dollars to renovate
three eighty three Madison. So they're going to close it
in twenty twenty six, redo the exterior, redo the interior,
(04:07):
and it'll open at the end of twenty twenty seven.
So we're just getting started when it comes to JP
Morgan doing construction in that specific area of New York City.
But let me go on, let me go on. It's
sixty stories tall, Okay, a normal number of Well that's
the thing. It's nearly fourteen hundred feet tall. So the ceiling,
(04:31):
oh yeah, no, the ceilings are super high. And the
lobby specifically it's the building itself is raised eighty feet
off the ground, so just as a super huge lobby.
And the reason why is because they wanted to like
have more outdoor space outside of the building, theoretically giving
space back to the city. But I don't know. I
(04:52):
don't think you're going to be eating your sandwich up
against the JP Morgan building necessarily, but it's a nice idea.
Speaker 1 (04:59):
Yeah, I find the overhang slightly alarming, which it does
look like a somewhat precariously balanced building. I understand at
an intellectual level that they employed good architectes and the
building will not topple over in a slight preece. But
i'd like, you know, if you're on that overhanging, yeah,
there's a big building above me.
Speaker 2 (05:16):
Well, those architects were there. Lord Norman Foster designed this building.
He's done a bunch of famous buildings over in Europe.
But he also did Apple Park in Kupertino, so that's
cool park. Yeah, yeah, yeah. Anyway, so I'm just getting started.
So six years of construction on this building, matt As,
we've established that, includeed demolishing the old building that was there.
(05:41):
So in terms of the features, I know that you're
dying about the amenities on the thirteenth floor of the building,
which I did get to see. They have a pub
called Morgan's it's reservation only, so you can't just make your.
Speaker 1 (05:59):
Reservation three o'clock for the pub or he just immediately fired.
Speaker 2 (06:02):
That's the thing I was thinking, like, would I be
bold enough, Like if Bloomberg had a pub that you
had to make reservations at, would I ever do that?
I don't know.
Speaker 1 (06:11):
I would definitely go to the Bloomberg pub all the time.
Speaker 2 (06:13):
But like, well, you have a certain amount of clout here,
so they'd be like, oh, he's thinking his thoughts.
Speaker 1 (06:20):
I just feel like Jamie Diamond has really gone on
record being like everyone in the office all the time.
And I understand that the pub is in the office,
but still.
Speaker 2 (06:30):
Yeah, well it's a great way to keep them in
the office all the time.
Speaker 1 (06:34):
Now I think about it, like taking the clients to
the JP Morgan and has pub is kind of a
nice Oh yeah at all.
Speaker 2 (06:41):
I would like to go. Invite me please, I'll go.
I have to expense it though, So anyway, apparently JP.
Speaker 1 (06:49):
Morgan, you and I just like into the JP Morgan.
Speaker 2 (06:51):
That'd be great. Let's do a podcast episode for there
from Jamie Diamond. If you're listening, you're our special guest.
Speaker 1 (06:58):
I think that we could know the guest be like
the bartender at Morgan's. Oh true, twelve hours Yeah.
Speaker 2 (07:05):
Right, yeah, that would be a lot of fun anyway,
JP Morgan imported the parts needed to pour a proper
pint of guinness at Morgans, so just no, it's quality.
There's also a fitness center at two seventy Avenue. I'm
reading off the notes that I printed out for TV.
I was prepared to say all of this on air.
(07:26):
So they have a fitness center and Bloomberg News reported
that this was an uphill battle. Apparently Jamie Diamond personally
dislikes in office gym's and didn't want it, but eventually
he was brought over. Which again, if you're trying to
get your employees to live at the office, you need
a pub, but you also need a jim.
Speaker 1 (07:43):
Yeah, I'm not an in office gym guy.
Speaker 2 (07:46):
But no, I think I would be. I think I
would love it. We don't have one.
Speaker 1 (07:49):
Here, so like this is all like very you know,
nostalgic for me because I worked at Goldman when they
opened their new office on jenderbut Street, and it did
have an office gym. It's been so long as an
office gym where people would you know, like you run
into like your boss's boss's boss in like you know, a.
Speaker 2 (08:09):
State of I would love Well, no, not that specifically
that specifically. No, I thought you were going to say,
like doing doing a chest press, and like, I feel
like I would be very good at having a conversation
in that scenario.
Speaker 1 (08:22):
I think you would. Yeah, I think that's why you're
a TV anchor. I would be very bad at having
a conversation in that scenario. But like there's also the
more specific like locker room scenario. And so the other
thing that I remember about the Goldman office is that
it was very very nice. It's like, yeah, I knew
it's shiny, but everyone got a little bit less space
(08:43):
than they had in their own office. And I have
read that something similar is true at JP Morgan where
they have this new big office building, but because the
ceilings are so hot, there's less room for desks.
Speaker 2 (08:53):
Well that's the thing. You have fewer floors, just sixty stories,
which is you know, the stories for.
Speaker 1 (08:59):
All those bankers who did you see.
Speaker 2 (09:02):
Did you see the things circulating on social media? It's
like a photo of one of their trading floors and
it's like just stocked with Dell computers, which have four
monitors a piece.
Speaker 1 (09:11):
I think I did see it, and they're all, well.
Speaker 2 (09:13):
It's exactly as I described.
Speaker 1 (09:15):
There's there right, because it's they haven't moved into the
trading floor yet.
Speaker 2 (09:18):
It's like, yeah, they've been moving people in gradually, is
what I understand. I think the floor is yeah yet Yeah.
Shall I tell you about some of their other buildings
in their campus. I need somewhere to record this, you know,
when I when I podcast, when I sort back through
the rubble of my life, I want to remember this. Okay,
(09:40):
So we already talked about three eighty three Medison Avenue.
Well get this, Matt. They bought two fifty Park Avenue
in twenty twenty four for more than three hundred million dollars.
Not sure what they're going to do with it right now.
The plans are still in flux. They collection kind of
(10:02):
They could keep it as is, They could knock it
down and build a new office tower, which they now
have some experiences, or they could turn it into a
hotel for visiting employees. That's not all four to ten
Madison Avenue. They're not sure, JP Morgan, according to Bloomberg Reporting,
not sure if they're going to keep or sell for
ten Madison. They bought that during the worst days of
(10:22):
the pandemic in twenty twenty. They've been using it basically
as a project office for the headquarters construction. But all told,
in these blocks that we're talking about, JP Morgan has
nearly six million square feet of office space, which is
almost as much as Goldman Sachs has in all of
North and South America. So the physical footprint of JP
(10:45):
Morgan is pretty stunning. Yeah, yeah, I.
Speaker 1 (10:49):
Do appreciate that there's a JPA Morgan district in Mindow, Manhattan.
Speaker 2 (10:52):
Yeah. I think Bloomberg News called it a neighborhood, which
I think is cute. Yeah, city within a city to
so many Park Avenue. I'm almost done. It's going to
house about ten thousand workers all told. In terms of
corporate employees, they have more than seventeen thousand. So this
is why they need all these buildings. Yeah yeah, all right,
(11:13):
big bank walk past it, you know, if you find
yourself in your grand center. I do see it from
I live in Hoboken now and I run a lot,
so you can see it from the waterfront and it
lights up in different colors and you know, it's a
nice addition to the skyline. Good on you.
Speaker 1 (11:30):
Okay your architecture criticism, your own record is liking it.
Speaker 2 (11:35):
I like the building, doesn't it not?
Speaker 1 (11:37):
I really like it?
Speaker 2 (11:38):
Yeah? Who doesn't like it? What are their criticisms? I
want to know, because I mean, I think it's cool
to get new skyscrapers. Sorry, and this one.
Speaker 1 (11:45):
I see it from street level and it feels threatening
to it from the street level.
Speaker 2 (11:49):
Yeah, it doesn't.
Speaker 1 (11:50):
Strike me as having to make a sense of lightness
or no rightness. It's kind of like a massive, ominous building.
Speaker 2 (11:58):
I will say that part of my brain that doesn't
really understand how airplanes stay in the sky gets nervous
about the way.
Speaker 1 (12:05):
Yeah, it's going in every direction.
Speaker 2 (12:08):
Yeah, Yeah, it's cool.
Speaker 1 (12:10):
It is cool, But like, is it cool enough? Like
you want to go there every day?
Speaker 2 (12:14):
I don't know.
Speaker 1 (12:15):
Actually, I have no basis for architectural criticism. It's fine,
it's great. It's a big building. It's cool. It's got
a pub.
Speaker 2 (12:21):
Yeah Morgan for theory, statue beautiful, a waving flag.
Speaker 1 (12:26):
I mean, he's like got on record second he had
some funny CREDI was like, it's a monument to it's
something permanent. You know, what do we do? We push
paper all day?
Speaker 2 (12:35):
Yeah, it's really good. You could ask the question, does
JP Morgan need all that space because AI is just
(12:55):
going to wipe out an entire generation of junior bankers.
Speaker 1 (12:59):
Well that's why they don't have enough space for all
the bankers, right, they need to replace the junior bankers
with AI and a monument to yeah, the last to
the bankers. Yeah, but yeah, there's a great story this
week about open AI as a thing called Project Mercury. Yes,
Sydney step back. Like the AI companies, like the first
thing they did was sort of train their models on
(13:20):
all of the Internet to like understand at some superficial
level all of human knowledge.
Speaker 2 (13:24):
And then you had a Reddit chatbot.
Speaker 1 (13:27):
Yeah, and now they're like the next step is to
get specialist humans to train the models to be really
good at specialist things. And so they've had they have
a lot of them. They have like you know, astrophysicists
and you know, like lawyers and everyone like training out
the models. But the story this week was that they
(13:48):
also have an army of former investment bankers getting paid
on hundred and fifty dollars an hour to build LBO
models for open AI, so that chat GPT can build
a really good LBO model. And by really good LBO model,
I mean not only that it as it's formula is
linked correctly and gets it correct result, but also that
(14:08):
it has all of the percentages I talicized in the
right way. And generally will not make an investment banking
VP angry because you don't want when you like, fire
all the analysts and replace them with AI, what you
don't want is to be annoyed at the formatting of
the output. Because if you're an investment banking VP, you've
spent your life getting annoyed at the formatting done by
(14:29):
investment banking analysts, and like you want the AI to
be a strict improvement over that.
Speaker 2 (14:33):
So I will say I enjoy all the police fix
memes as an outsider. I've never worked in banking. I'm
a pure play journalist.
Speaker 1 (14:40):
We have been a banking analyst, yeah, but I've been
the recipient of please fix that's yeah.
Speaker 2 (14:45):
Do people really care that much about formatting?
Speaker 1 (14:48):
Well, it's like it's a signaling thing, right, It's like
your analysts come in and they're humans with hopes and dreams,
and you want them to immediately become automative. You can
tell to produce a pitch book, and they will produce
a perfect pitch book. And if they produce an imperfect pitchbook,
you want them to charge. It's reinforcement learning, but it's
(15:11):
you know, you want them to quickly be trained out
of that so that they produce perfect pitch books for
you so you don't have to worry about it anymore. Right,
You want the analyst to take the work off your plate,
and if they give you bad formatting, then you worry
about what else is in the pitch book that's wrong
because you can't you want to get to check the
numbers necessarily, right, I mean the depends like like you'd
like to be at a point where you can trust
(15:31):
the analyst and not have to check the numbers, and
formatting is a visible sign of something else might be wrong.
And it's also like, you know, the people who get
to these positions are perfectionists and they get troubled by
bad formatting.
Speaker 2 (15:45):
Yeah, okay, fair enough. It sounds almost am I going
to get this wrong? That sounds like broken window theory.
Speaker 1 (15:50):
It is like recommended theory.
Speaker 2 (15:52):
Okay, that makes sense. I really want to interview actually
the one hundred x investment bankers working on this project
in the pub at JP Morgan.
Speaker 1 (16:01):
Not one hundred, not all at I have a guess.
Speaker 2 (16:04):
You don't want to interview all one hundred of them,
not at once, No, just the funniest ones.
Speaker 1 (16:09):
I have a guess about what the vibe is. Like,
it's interesting to me like these people are clearly putting
their successors out of work. Maybe they're not, but like, yeah,
that's what it's the vision, right, And you might think
that if you went to people in some industry and said, hey,
(16:32):
would you like to get paid one hundred fifty dollars
an hour for like three months? One month? I don't
know how long this project is, but I don't I
don't think they envision a decade's kind of thing. Would
you like to get paid one hundred and fifty dollars
an hour for a month to put everyone in your
industry out of work? I think a lot of people
in a lot of industries would say no. Like I
think if you went to a lot of journalists, they'd
be like, no, I don't want to put journalists out
(16:54):
of work. I think if you went to a lot
of investmentanking analysts. You'd get a pretty good hit rate.
You know, you'd be like I hated it, or they'd
be like, yeah, I'm out of it now they can
move on. Yeah.
Speaker 2 (17:04):
I do you feel like journalists have a certain affection
for the craft of journalism, whereas a burnt out banker
might not.
Speaker 1 (17:12):
I think a lot of bankers do have an appreciation
for the craft of building LBO models, and I think
that the opportunity to have their LBO model enshrined perpetually
as the official CHATCHPT, like the best practice is that
chat GPT perpetuates forever. I think that would be kind
of cool.
Speaker 2 (17:31):
Yeah, I could see that, you know, you know, it
sounds like, you know, you're raising your hand a little bit.
Speaker 1 (17:37):
I take it back. I would put journalism out of
work now. I think it's like if open A came
to me and Zeid, we want whenever people ask a
question about a financial topic, we want chat GPT to
explain it the way you would. So I spend three
months training chat GPT to do that. I'd be a
little flattered.
Speaker 2 (17:57):
You're speaking that into the universe. It could happen anything.
Speaker 1 (18:00):
Could I feel like they're already trained onized Like that's
the thing. They're already just.
Speaker 2 (18:04):
Like you do, have a public body.
Speaker 1 (18:06):
Training themselves on my work, whereas the LBO models are
not the model of like the best analyst that JP
Morgan is not public, right, so they got to hire
that guy and type it in.
Speaker 2 (18:16):
Let's get into some of the details of this article.
In terms of the application process, according to a person
familiar with the matter, it involves almost no human interaction.
The first step is a roughly twenty minute interview with
an AI chatbot who asks questions based on the resume,
and then the second phase test candidates on their knowledge
of financial statements. The final stage is a modeling test,
(18:38):
so it's fairly involved.
Speaker 1 (18:40):
For like three months ago, they hired some major R
people to train chat GPT to hire the investment banks. Yeah,
get and everything so automated.
Speaker 2 (18:51):
Apparently, the job expects contractors to submit one model per week.
Instructions include writing prompts in simple terms, then executing the models.
Receive feedback from a reviewer and are expected to fix
any issues before their work is ultimately plugged into opening
as systems.
Speaker 1 (19:06):
Open feedback is a pencil, please fix a fix.
Speaker 2 (19:09):
Please fix for a job that isn't going to last
that long. I mean, I wonder if you could do
this as just a side hustle.
Speaker 1 (19:15):
I am sure that everyone doing it is doing it.
Speaker 2 (19:18):
You don't think anyone is just I'm just going to
devote to some people.
Speaker 1 (19:22):
I shouldn't say ever. I feel like some of them
are like current NBA students who are like, yeah, I'm
used to working one hundred hours a week and banking,
and now I'm doing two to fifteen minutes of homework
a week in my MBA program, and so I could
use some free cash, and it's interesting to do.
Speaker 2 (19:38):
It's funny you bring that up because some current NBA
candidates at Harvard and MIT are participating for sure.
Speaker 1 (19:45):
And then I think probably there are some people who
like were burned out and are like, I could do
it twenty hour a week job from.
Speaker 2 (19:51):
Yeah, why not. One of the perks here, in addition
to the one hundred and fifty dollars per hour, is
that contractors get early act access to the AI that
is being created that aims to replace these entry level
tasks at investment banks. So that's pretty cool.
Speaker 1 (20:06):
Too, right, Like I shouldn't be too cynical about this
because I think a lot of investment banking analysts do
think a lot about how can I automate this work
so that it's just, you know, it is button pushing,
and like, maybe in the long run that is bad
for employment at investment banks, but it's not clear that
it is. Right. Yeah, it's like very possible that if
you had the ability to push a button and produce
(20:27):
a perfect model, you would keep the same number of
analysts and they would run more hypothetical scenarios. And the
thing people always say is like, move up the value
chain and think more creatively and not have to just
spend all their time modeling. I'm not sure that's true,
but you know they certainly you know, throw more spaghetti
against the wall.
Speaker 2 (20:45):
Yeah, maybe AI could compliment the human experience rather than destroying.
Speaker 1 (20:49):
But I think it is hard for me to imagine
investment banking becoming purely automated. It feels like it's a
high dollar, high touch sales business, and so you always
need some people to shake the client's hands, and so
it is very possible that AI can be complementary to
that experience. Now that people do worry about, you know,
(21:09):
if the junior bankers don't ever build the models and
they just push a button. Do they learn less? And
they are they less intuitive about you know, financial analysis
when they become senior bankers. And I think that is
a hard problem.
Speaker 2 (21:23):
Yeah, the idea that you're just hollowing out the bench.
One of the people who has voiced a concern similar
to that is actually the CEO of Bridgewater near Bardea.
He said in March, we are well positioned to replace
a lot of the basic tasks with machines, but what
does that then mean to talent development over the long
period of time? And then he continued, you do the
(21:44):
tough work, then that leads you to be able to
do the higher level, more conceptual things. So I think
that's like a nice summary of the concerned there.
Speaker 1 (21:53):
Yeah, and I tend to believe that, Yeah.
Speaker 2 (21:56):
You have to cut your teeth.
Speaker 1 (21:57):
Yeah, there's a you know, just a period of learning
that gives you the sort of foundation to think creatively
later on. And if you just cut that out, it's hard.
By the way, that's not an investment anything, that's a
that's a life thing, right, like you see that in
school now, right, Yeah, you use AI to de Allier homework.
Speaker 2 (22:15):
You never learned how the kids can't read.
Speaker 1 (22:16):
Kids can't read?
Speaker 2 (22:17):
Yeah, I mean, I just relate everything back to myself
as the center of my own universe. I remember being
a baby reporter and just doing these bullet point fixtures
on the Bloomberg terminal that like twelve people read. But
it taught me a lot and it really serviced those
twelve people.
Speaker 1 (22:32):
Now AI does a lot of those blood Well.
Speaker 2 (22:35):
That's true though.
Speaker 1 (22:51):
Okay, if credit cockroaches for like five minutes.
Speaker 2 (22:53):
Okay, you talk about it in the same way that
I told you everything I know about JP Morgan's new
building a two seventy Park Avenue, Tell me everything you
know about cockroaches. At this moment, part.
Speaker 1 (23:05):
Of me hates that we just decided that they're called cockroaches.
Part of me is like I keep leaning into it
in the columns or whatever.
Speaker 2 (23:12):
That's the thing. It's already it's interesting, it's a useful shorthand.
Speaker 1 (23:16):
But right there's been a number of, you know, credit
blow ups, and they all kind of have the same flavor,
which is that someone is or maybe it was, or
looks like they might have been double pledging collateral, or
it happens its collateral they didn't have come on, you know,
all these things, and I think we talked about Tracolor
and first Browns.
Speaker 2 (23:37):
I'm not even sure we've definitely named dropped them.
Speaker 1 (23:39):
And then I think last week the Zions and Western
Alliance news had just come out and you mentioned it
on this podcast.
Speaker 2 (23:46):
Thank god I did well.
Speaker 1 (23:48):
Then I had it cut out because we didn't really
talk about it.
Speaker 2 (23:52):
Something that's happening today on Thursday is what's going down
with Western Alliance and Zions. These are two regional banks
and apparently they disclosed problems with loans involving allegations of
fraud and currently, at like two twenty three pm last
sight check, the stock market was kind of freaking out
about that.
Speaker 1 (24:11):
Who's wrong?
Speaker 2 (24:11):
Let me tell you? Okay, So Zions apparently it disclosed
a fifty million dollar charge off for a loan underwritten
by its wholly owned subsidiary, California Bank in Trust Western.
Their problem is is that it said that it's dealing
with a borrower that failed quote to provide collateral loans
in first position.
Speaker 1 (24:31):
Yeah, you know, topy market toppy mark, don't know, let's
check your collateral.
Speaker 2 (24:35):
Yeah, why would you?
Speaker 1 (24:37):
Yeah, they compete to make the loans. So like Zions
and Western Alliance both announced that they sort of were
exposed to what they characterized as fraud, although the people
who allegedly defront of them said they didn't defrove them.
But basically they like made some loans to this like
real estate lending firm, and the real estate lending firm
they say did not actually own the mortgages that they
(25:01):
were boring against or like they did and then they
sold them or they did and the properties were for
clothes on or they made the loans with they were
second leans. Like there's all this like stuff where there's
like sort of sloppiness around collateral. And then the other
story that came out I think last week was on
seven seven seven Partners, which is a fascinating company that
(25:22):
both buys your lottery payments few in the lottery and
you get twenty years of payments like they'll buy them
from you and so you get cash upfront. And they
also buy sports teams like they own a lot of
like European soccer teams. They own the London Lions, the
basketball team, and they tried to buy Everton, the big
Premier League team, and there are some allegations that they
(25:44):
were at least sloppy with the collateral that they were
selling on to investors, where they basically were borring against
these future cash flows of lotteries or structured settlements, and
they would maybe double pledge them and maybe didn't have
all the assets that they claimed to have. Think the
founder was charged criminally last week in part because one
(26:04):
of the lenders got i think an anonymous whistleblower tip
saying that they were double pledging assets, and the lender
called them to be like, what's all this then, and
the founder, on a recorded line, was like, yeah, we
did do that, but like it's because our computer systems
are stoppy and we'll fix it.
Speaker 2 (26:20):
Oh my gosh.
Speaker 1 (26:21):
After I read about this, I got a number of
emails from readers with anecdotes about their own dealings with
seven seven seven partners that I think are largely supportive
of the theory that they might have actually screwed up
their computer systems. Like there's a lot of like, yeah,
they were kind of unprofessional, so you never know, but uh,
it doesn't look good to me. We may have barred
against our collateral from.
Speaker 2 (26:42):
Two different lenders, So are you holding this up as
an example of a cockroach potentially.
Speaker 1 (26:48):
This is a reference to Jamie diamond saying when you
see one cockroach, there will be more. And it's definitely
since he has said that, there have been a lot
of like these credit problems that all you know, have
similar features.
Speaker 2 (26:58):
It's like if you see a missile margin, yeah, in
a deck, there might be other issues, right, It's.
Speaker 1 (27:06):
Like an indicator of sloppiness. And all of these are
kind of small. I mean, you know in the scheme
of like the banking system, right, but like you see
one cockroache, you.
Speaker 2 (27:15):
See more they can pound potentially potentially.
Speaker 1 (27:19):
The other thing that I think is interesting, and they
wrote this week, is that another thing that a lot
of these cases have in common is that the problem
company is essentially a lender. It's like a financing company,
it's a trade finance company, or a structed settlement company,
or a real estate lending firm or something. It's a lender, right,
And then the people who complain about it, the people
(27:40):
who take losses are lenders to that lender, right. So
it's like second order or sometimes third or fourth degree lending,
where like a bank lends to someone who lends the
someone who lends to someone and somewhere in that chain
problems happen. And I think we've talked about on this podcast,
and I certainly write a lot about like there's been
this move to banks reach launching where instead of like
(28:02):
banks making loans, private credit firms make loans, and then
banks make loans to the private credit firms to make
the loans. And the upside of that is that the
banks have more seniority, right, they're cushioned by like the
private credit firm takes the first loss or the you know,
the factoring firm, whoever takes the first loss. But the
downside is like they don't get to see perrectly into
the loan, Like there are several steps removed from the
(28:25):
actual car loan or the actual structured settlement or whatever,
and there's just more opportunity to get this sort of
cockroage situation where like you were lending against collateral, it
doesn't exist. Yeah, it's like can you make a mortgage
lane directly? You're like you see the house, you know, Yeah,
so this is all sort of indirect And I do
think it's like, you know, it is both like these
stories seem symptomatic of like late cycle exuberants, specifically like
(28:49):
indirect lending, where because it is indirect, it is a
little bit easier to get hoodwinked out of collateral.
Speaker 2 (28:57):
So let's not cut this out of the podcast in
case we need to reference back to it a couple
of weeks.
Speaker 1 (29:03):
Yeah, yeah, sorry, I cut out your crush reference to
week and that was the Money Stuff Podcast.
Speaker 2 (29:15):
I'm Matt Levine and I'm Katie Greifeld.
Speaker 1 (29:17):
You can find my work by subscribing to the Money
Stuff newsletter on Bloomberg.
Speaker 2 (29:21):
Dot com, and you can find me on Bloomberg TV
every day on the Clothes between three and five pm Eastern.
Speaker 1 (29:28):
We'd love to hear from you. You can send an
email to Moneypod at Bloomberg dot net, ask us a
question and we might answer it on the air.
Speaker 2 (29:35):
You can also subscribe to our show wherever you're listening
right now and leave us a review. It helps more
people find the show.
Speaker 1 (29:41):
The Money Stuff Podcast is produced by anam Aserakas and
Moses ondem Our.
Speaker 2 (29:46):
Theme music was composed by Blake Maples.
Speaker 1 (29:48):
Amy Keen is our executive producer.
Speaker 2 (29:51):
And Stage Bauman is Bloomberg's head of Podcasts.
Speaker 1 (29:54):
Thanks for listening, to the Money Stuff Podcast. We'll be
back next week with more stuff.
Speaker 2 (30:00):
Bob
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