Jamie, thank you for doing this.
You've been writing for many years about the American dream and its troubles. It's fraying. It's struggling. What happened?
Yeah. Well, first put it in context. We have the most prosperous nation the world's ever seen. Decade after decade, almost everyone's done better. However, in like the last 20 or 30 years, if you look at the lower third income, their incomes didn't really go up very much. They struggle more if you live in inner cities or certain rural areas, your schools aren't very good. I tell a lot of people here, you don't go home and worry about crime. You don't worry about your kids' schools, but there they do.
Not only the lower third, because we do polling at CBS and three out of four people say it's harder today to raise a family, buy a home, and find a good job.
Yeah. No, I think that may be true. I shouldn't say only the bottom third. There's maybe part of the middle income segment, too. But all those things are fixable. One of the things I talk about is that growth in our country is 2% a year for the last 20 years. Had it been 3%, we'd have had $20,000 per person more GDP. That would have paid for an awful lot. Why was it only 2%? I think we have tons of bad policy that made it worse for growth in America. And growth is what creates everything: capital formation, capital R&D, investment, productivity. So if you go to these inner city schools, they're not teaching kids skills to give them a good paying job. And there are solutions to most of this. But I think it's a wide variety of things that we got wrong.
Well, you mentioned capital and growth. There's polling recently that finds only about half the country even has a positive view of capitalism. And more than a third of people have a positive view of socialism. Do you understand why?
I'm not sure I do. I just think it's dead wrong. The fact is capitalism has lifted billions of people out of poverty. And like a lot of things, it may have flaws. I hear a lot of people sometimes talk about the flaws of capitalism. I realize they're talking about the flaws of human beings. Some people are selfish, some are self-centered. That's true in a communist society or a capitalist society. Some businesses do bad things and that's not because of capitalism. And so we try to have laws and regulations that get the best out of people and get rid of the worst. But we've been educating people over and over that things are bad. And if you look at them, they're not bad. They're living longer. Everyone's got air conditioning. Their cars are safer. But I do think it's become much more of a struggle. And so we really should focus on, I always ask the question, why? Why are inner city schools failing the kids? You could say real estate taxes because they don't have the same taxes to pay for the better schools. How come these schools like the aviation high school across the 59th Street bridge here, these kids graduate at 17 or 18 making $75,000 a year because they were given skills to maintain an aircraft?
But for a lot of people it's about how much money they're making. Can they go on vacation every year? Can they expect a better future for their kids? Can they expect a retirement with decency? And can they own a home? These are the core components. When I talk to regular people, we travel all over the country. You talk to regular people about someone like yourself, a business like this one doing really well. The real simple question they have is why couldn't a business like this just take a little less so that other people have it a little bit easier?
I don't think that would solve the problem at all. We only try to earn a fair return on our capital. We're not trying to take anything with anybody. I think what solves the problem is we build more affordable housing. The reason we're not building more affordable housing is because local zoning requirements and mortgage origination rules have made it so expensive to get a mortgage. We could reduce the cost of that mortgage. I think the way you fix the problem is by fixing inner city schools. We already spend a trillion dollars or some number like that on K to 12. You should be asking this question: the trillion dollars, why can't it work better? So my view is these programs failed. So why can't we build programs that don't fail? And so the answer to that why can't we? It's policy. And I think good policy is free.
Policy or is it politics?
That's a good question. You'd be more of an expert in politics than me. Definitely not. But I make a list of bad policies like schools. I think we should double the earned income tax credit. So if you're making $14,000 a year with two children, the government gives you $6,000 or $7,000 at the end of the year. I would make it $10,000. I'd get rid of the child requirement. So if you're a couple, you're both working, you're at a minimum making $48,000 a year. And that has the virtue of going into their communities, probably helping schools, get the tutors, maybe buy some more health insurance, the dignity of a job. The first job leads to a second job. And it's got much better social outcomes. More families, less recidivism, less crime, less drugs, less suicide. So, we have a lot to do to fix parts of our society. We should get at it and roll up our sleeves and acknowledge what the problems are and fix them.
How does this initiative that you're announcing today solve it?
Yeah. So, we've always done, we think our job is to finance society. Small businesses, large businesses, individuals, home ownership. We're one of the biggest in the country across the full spectrum. But we asked our own people when we have the problem, I always ask, okay, got it, what are you going to do? And so we asked the people about the American dream, what can we do more? And we have that long list. Small business, where we go from banking 7 million to 10 million. We are small business consultants. So if you're a small business and you want to know where to build your second restaurant, how to negotiate a contract, we have people who can consult for that. Now we had a thousand small business bankers. We're now in all 48 states. We have a rural state strategy which we did not have before. We're going to do skills. So I just mentioned about schools and things like that. We're going to do, 25% of our branches are in lower income neighborhoods and we have what we call community branches. Some of them we invite people in to learn about saving money with a mortgage, buying a house. We call them vital institutions where we are probably one of the largest banks in the country to cities, schools, states, hospitals, but to do more of that. We're one of the biggest affordable lenders in the country. We're going to do more of that. So, it's just kind of we're going to make it a crusade to do our part to do more for this part of America and try to help lift up all of society.
This particular moment in time, people are already feeling the pain. And now we've got a war in the Middle East that's driving up costs for diesel fuel, for gas that trickles into all kinds of other things. Where do you see this going economically?
I don't know. The economy is one big complex beast and even AI can't figure it out. I tell people anything that happens is like a straw in the camel's back. So maybe one day the straw is going to cause that tipping point and push us through a recession. Hopefully not stagflation. So the war is a couple of straws in the camel's back. Whether that causes a tipping point, I don't know. I think what's more important for the future of the world is that this war successfully conclude. I hear a lot of people on TV talking about it wasn't an imminent threat. No, it wasn't a threat at all. They were actually killing and murdering people around the world for the last 47 years. They have a ballistic missile that can now go 3,000 miles, which I think was a surprise to the American public. And they were very close to having nuclear weapons. So that's really important. Obviously the gas price is going to hurt some folks, that's very unfortunate. So the sooner it gets properly resolved the better.
So the people who feel like we're already in a recession, to them you say no we're not.
No, I think it is for them. I think it's for them. Oh absolutely. I mean there are parts of society they're not doing very well and I completely acknowledge that.
The war is at a crossroads. Iran continues to control the Strait of Hormuz. Does America need to take control of that strait, reopen it before the war ends?
I don't know the answer to that question.
You said finish the job earlier, complete it is what you said.
Yeah, I have to be a little humble here. I don't know what the military knows. I do know they're quite smart. So, if you speak to some of these folks, they've been planning this for years. They've got multiple plans on the books to do things, including Kharg Island, Straits of Hormuz. I think it's going to be hard to leave and have the Straits of Hormuz closed. I do think it would be a real problem for the global economy.
Iran would have a veto power over basically traffic. But when you said the biggest threat now is that the war isn't completed. What do you mean by that? What do you have in mind?
Well, I think for, I've thought this since the war in Ukraine started, that the world is not a safe place. It never was. We were lulled into a false sense of security until the Russians invaded Ukraine. And at that point we already knew that Russia, Iran, North Korea, somewhat aided and abetted by China, have different plans for the free and democratic world.
Let's talk about affordable housing. One of the key parts of this initiative of yours, there's a plan right now in Congress to potentially prevent large investors from buying up single family homes. Do you support a ban on that kind of investment?
I hate to tell you this. It's basically irrelevant. It's not, I think they're doing it in 350 homes, only 1% of the homes owned by what you would call large companies. So I don't think it's going to change any calculus. I'm not sure it's great because some people want to rent their homes or not and these, so they go in, they put in money. I probably wouldn't do it but if it gets done it's okay. If you want to fix affordable housing, you can change rules and regulate around mortgages that would reduce the cost of mortgage by 30 or 40 basis points and not create any additional risk in my view and take affordable housing laws, mostly local, sometimes state, and don't lard them with job programs. Let people build them. If you read the list of ridiculous rules why it can't get done, you can build a lot more starter homes and starter apartments that people could buy a lot cheaper all over the country. And there are some people doing it well. I can send you the list of what cities have got it together and they're building stuff. In California I think I read it's 50% more to build an affordable home than it is in Nevada because of those rules and regulations. So there's a lot of things to do to fix it. That's what we should be doing. That'll make a much bigger difference than limiting what big private equity guys can do.
Let's talk about AI. You've talked a lot about it in recent months. You've admitted that it could reduce jobs and it could reduce jobs across the economy somewhat quickly, too quickly. How concerned are you really about the potential for, as you put it, social unrest, even revolution?
Yeah. So, this is where I'd put it. In the context for all of us, I believe that 30 years from now, a lot of people, your kids are probably working three and a half days a week. They'll probably live to 100. And a lot of the diseases afflict a lot of us, they won't get. They'll be cured of cancer. Cars will be safer, planes will be safer, life will be better, you can hike more, do all the things.
