We're joined now by the president and CEO of Bank of America, Brian Moynihan. Welcome back to Face the Nation.
It's great to be here again, Margaret. How are you doing?
Doing well. I want to ask you about though how Americans seem to be feeling these days. You've got some unique insight. Our polling shows 22% of Americans say economic affordability will be America's biggest challenge over the next 50 years. They seem to really be doubting that their living standards are going to be improving. What are you seeing in terms of how consumers are actually behaving?
Well, affordability is a challenge, a talked-about challenge that we see in our customer base. But as you look at what's really going on, we see a couple things. One is the consumers at our 70 million consumers who spend about $400 billion plus a month are spending about five or six percent more money this month, month of June of '26 versus '25, and likewise in the first part of July here. So they're spending money, and you know, while the consumers reflect on higher gas prices or higher food prices and inflation and things like that and they're worried about it, what you see is especially of the middle third of households and the top third of households by income, their spending is growing faster. What's been interesting frankly in the more recent past in the last couple months is we're seeing the wage growth of all income cohorts kind of coalesce together around three to four percent, which is good. So at the end of the day, how consumers feel is critically important to their future desires to purchase and demand. And we watch that, but we also watch what they're doing today, and today they're spending at a pretty good clip and faster than they did last quarter or last year.
So they're holding in there even though we're seeing gas prices have raised the cost for drivers by 31% since this war with Iran began. I know fuel inventories remain low. How are you thinking about how this geopolitical uncertainty factors into planning?
So the price of oil and gas affects not only the gas at the pump, which is what you're first reflecting on, and that is up. It actually started coming down, and if as the oil prices rise, it might rise back up, but it basically when we were running around $100 barrel equivalent oil, you were running about a $4 and change gas price. It actually came down from the month of May to June because that's when the oil started flowing more. But I think if you talk to businesses, it's different what consumer sees and in a concerning nature of that is out there. But when business see it, they worry about the cost of goods that's coming through the pipeline. So the goods are being manufactured now have imported that oil and gas to go into the plastics production or the material production or the whatever it was during the time when gas prices were high. That's why our team has inflation staying higher all the way into '27 and '28 and why the Federal Reserve will probably, you know, our belief was we'll raise rates, whereas six months ago they thought the Fed would be cutting rates. They're actually believing they'll raise rates to fight off this inflation and it will take them a while to get through it.
So raise rates. You think the Fed will act as soon as next week to do that, or excuse me, end of the month to do that?
I don't think so, more towards the end of the year. Our team has them raising rates, and you know, I think based on the recent data that came out, they had three rate rises. Whether they hold that with some of the inflation numbers, but the reality is it's sort of the tail end of this year into next year, and it really will depend a lot on the path of other price cohorts other than just oil and gas at the pump. And that's a question of what's going on in housing and food and other places where you're seeing some progress being made, it's drifting down, and it's drifting down slower than people would like it, but the reality is this type of inflation takes a long time to squeeze out of the system. When you go back to the post-pandemic infusion of cash and infusion of activity, that just takes a while to squeeze out.
You say the consumers holding in, but I was looking at some of your research and it says credit card delinquencies are elevated. They are rising and that seems to be from younger consumers. So are individuals just choosing to live beyond their means with a statistic like that, or does it imply that people are unable to keep up with their cost of living?
Yeah, there's some confusion out there. Our credit card delinquencies and frankly mostly industry delinquency came down, and so what there's been a report out there from the Federal Reserve that actually keeps on the file seven years of charged-off data. So without getting too technical here, that way overinflates what's really going on in the current year. And the reality is credit quality for prime credit cards has gotten better quarter to quarter for the industry and for our company. So that's good news. At the end of the day, it's coming back to whether consumers are employed or not. The unemployment rate of 4.2%, wages grow, excuse me, jobs growing somewhat, claims for employment were 28,000 this week, you know, which is low. That's all pretty good and stable. And if you listen to the teammates we have, you know, the fact that that's going on means wages, employment stability is there. Now they got to get to inflation and that's the part of wages. So I think consumers have a lot of borrowing capacity. The line usage of our home equity lines is still way below where it was in 2019. The value of homes is up a lot. People aren't moving as much. They're capturing that value. They could, they aren't selling to get it, but it's sitting there. And so their household carry as a percentage of their income is in line with normal times. It's the inflation that gets on their mind and affordability because that's a sticker shock question and it takes a while to get that to flatten out and through the system, and I think that's what you're seeing in the dialogue. But credit card, what you're reading about has a little bit of confusion there. People using points to pay everyday things. That's what our team said. But that happens. It's a little, that's what they do with it because our rewards program is a lot about the cash back on the card.
Got it. So when you're talking about factors in driving up inflation, one of the things that the Fed chair Kevin Worsh was asked about was whether AI investments are also, you know, inflating things. He told lawmakers there's a supply shock, but he doesn't view a one-time change in prices as inflationary. How do you think about AI and how it's factoring in here?
Well, I think you know Kevin being a well-versed economist, they talk about supply shocks and once it's in the baseline, it goes out of the growth rate a year later and things like that. And that's important, but the question is what's the nominal price is what human beings pay. And so when they see prices go up, they're concerned. And that's the general issue about oil $3 or four or gas price of three or four hits them. When you think about on the institutional side, the corporate side, the real question is if inflation in goods and services or inflation in chips and things like that goes up, you have to be able to price them through. And that tug-of-war is going on and our ability as a consumer of that activity of AI technology, whether it's the data centers to support the AI models, the models themselves, etc., is going to be geared by what we can get out of them. And so when we look at Bank of America, how we apply AI, we look at a business case. Does the amount we spend for the capacity, the capability, whatever, is it offset by more revenue or less expense and more productivity? And we look at that in every case, and I think that will be a little bit of a gating factor of the implementation as people try to find that business case. But it's true that it's inflationary short term, it's true that goes out of the base, that becomes goes out of the math over the course if it sits and it goes up and then stays there and doesn't go further up. But the reality is when people who are actually paying for all this look at it, we have to think about does it make economic sense, and we're looking at nominal price versus what we can get out of it.
Well, I want to ask you about what's happening with those companies because when we looked at Bank of America's earnings recently, you had record sales and trading revenue in the quarter past. A lot of that, some of it churn from energy price swings, but some of it seems from the tech boom of these massive AI companies and the public listings. How do you think about that what looks like a tech boom?
It's absolutely a strong market for technology and other IPOs. There's biotech, there's biology, there's drugs going out getting IPOed and things like that. There's M&A activity. And so when you're talking about the investment banking activity of Bank of America, it was up 70% year-over-year or something like that, and our peers were up like amounts, at 50%. Actually, that has a lot to do with the amount of activity our corporate clients are doing, in part also comparing to last year which was liberation day quarter. The good news is at our company, the nominal dollars we earned in the first quarter and second quarter went up in investment banking, and that's reflecting the environment around us. We held our market share, gained a little bit here and there, but it's really around debt issuance, equity issuance, IPOs, and M&A activity, all of which are very strong, and the pipelines are very full, which is good for the American economy because that activity is always generating something. Premiums that people get to spend when they sell their company and invest, it's creating debt proceeds that can be invested in the growth of the company or buying equipment or employing more people. So that economic activity is good for the country, and Bank of America is benefiting as are our peers.
