Latest / Money And Wealth With John Hope Bryant / Inside the Federal Reserve: Money, Markets & the American Dream

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Inside the Federal Reserve: Money, Markets & the American Dream · Money And Wealth With John Hope Bryant

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Speaker 1: Welcome to Money and Wealth with John Hobe Bryant, a
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Speaker 1: production of the Black Effect Podcast Network and iHeartRadio. This
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Speaker 1: is John Hope Bryant, and this is the Money in
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Speaker 1: Wealth podcast series, season three on Black Effect Network and
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Speaker 1: the iHeartRadio platform. I want to thank you all for
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Speaker 1: making this a top one percent podcast in the world,
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Speaker 1: top two hundred and fifty business podcast on every continent,
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Speaker 1: top fifty to sixty podcast for entrepreneurship in America. This
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Speaker 1: shows me that you are genuinely interested in making this
0:45
Speaker 1: system work for all and finding your place in the system,
0:50
Speaker 1: which is one of the reasons I rode Capitalism for
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Speaker 1: All proceeds to donate it to my philanthropy, by the way,
0:55
Speaker 1: for twenty twenty six Operation Hope. As you know, if
1:00
Speaker 1: I talk a lot on this podcast myself and when
1:04
Speaker 1: I bring on a guest, it is a special occasion.
1:08
Speaker 1: It is basically the best in class in their space,
1:12
Speaker 1: in place, in my opinion, in the world. I also
1:16
Speaker 1: have to I have never said this publicly, I have
1:19
Speaker 1: to personally know them. I've got to be able to
1:21
Speaker 1: vouch for them as a human being, as a dignity
1:24
Speaker 1: principal centered leader, and that is the case today, both
1:30
Speaker 1: best in class and someone who I personally admire and
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Speaker 1: respect as a human. Now get ready to have your
1:40
Speaker 1: mind blown. Pull up to your kitchen table, or stop
1:47
Speaker 1: in your barbershop or your nail salon or commuting. Pay
1:51
Speaker 1: attention unless you're the driver, then just listen. This is
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Speaker 1: the Federal Reserve System decoded, monetary system explained as no
2:07
Speaker 1: one has ever done before. Because the person I'm interviewing, well,
2:12
Speaker 1: he just doesn't do it very often.
2:14
Speaker 2: They don't do it very often. They can't.
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Speaker 1: Today's guest is one of the most influential leaders in America.
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Speaker 1: He is also someone deeply committed to helping ordinary Americans
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Speaker 1: better understand the financial system that shapes their lives every
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Speaker 1: single day. I'm talking about the Honorable Jeff Schmidt, who
2:36
Speaker 1: serves as President and chief executive Officer of the Federal
2:40
Speaker 1: Reserve Bank of Kansas City, and it's a member of
2:43
Speaker 1: the Federal Open Market Committee for the Federal Reserve Board,
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Speaker 1: the body responsible for helping guide monetary policy and interest
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Speaker 1: rates for the United States economy, the biggest economy in
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Speaker 1: the world, the sole superpower in the world. In my opinion,
3:08
Speaker 1: you've never seen a superpower that wasn't the economic power
3:11
Speaker 1: at the same time, going back thousands of years. So
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Speaker 1: Jeff Schmidt, the Honorable Jeff Schmidt. President Jef Schmidt may
3:19
Speaker 1: not be a household name to you, but he's as
3:22
Speaker 1: important on the quality of your life. He and his
3:25
Speaker 1: eleven peers as well. I don't want to name titles,
3:31
Speaker 1: but let's just say the top three or four people
3:34
Speaker 1: in elected office in the country. Beyond titles, Jeff is
3:38
Speaker 1: a thoughtful public servant, a longtime friend, and a trusted
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Speaker 1: advisor who serves full disclosure on the board of Advisors
3:47
Speaker 1: for Operation Hope, which is in one way why he's
3:49
Speaker 1: got to speak on his own behalf to day and
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Speaker 1: not in his physical capacity as President of the Federal Reserve.
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Speaker 1: We understand he understands that economics is not just about markets.
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Speaker 1: It's about people, trust, opportunity, and whether everyday Americans believe
4:03
Speaker 1: the system still works for them. Again, one of the
4:06
Speaker 1: reasons I wrote this book, which is associated with Operation Hope,
4:10
Speaker 1: Jeff also has mister Schmidt. President Schmidt has also been
4:15
Speaker 1: a strong advocate for preserving and elevating the history and
4:18
Speaker 1: legacy of the Freedman's Bank. We get into that a
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Speaker 1: little bit understanding that financial trust one's broken can echo
4:26
Speaker 1: across generations. Today, we're pulling back the curtains on the
4:31
Speaker 1: Federal Reserve System, which recently changed chairman. By the way,
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Speaker 1: who Jeff mister Schmidt. President Smith will be working with
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Speaker 1: the American monetary system, inflation, interest rates, capitalism, financial literacy, and.
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Speaker 2: What all this means for.
4:49
Speaker 1: The future of the American dream, even as it relates
4:54
Speaker 1: to an inn ai driven world. This is not just
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Speaker 1: a conversation about money, people, is a conversation about trust
5:02
Speaker 1: and opportunity in the future of economic conclusion in America.
5:09
Speaker 1: During the two hundred and fiftieth anniversary of America itself.
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Speaker 1: You cannot make this up. It's also the one hundredth
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Speaker 1: anniversary of Black History Month twenty twenty six. Most Americans
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Speaker 1: live inside a financial system they do not understand, and
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Speaker 1: fear grows where understanding is absent. Ladies and gentlemen, please
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Speaker 1: welcome to the stage, my friend, our leader President.
5:43
Speaker 2: Yeah.
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Speaker 3: Well, thank you very much for that intro, John O'Brien,
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Speaker 3: to as you know, great pleasure. I always enjoy my
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Speaker 3: moments and time with you and have for almost twenty years.
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Speaker 3: I think I think we met in Omaha, Rascal when
6:00
Speaker 3: I was helping build a bank, and and my life,
6:06
Speaker 3: as many lives, have changed for the better. Not only
6:10
Speaker 3: connecting myself to Operation Hope, but being considered your good
6:15
Speaker 3: friend is a great honor. So it's great to have
6:18
Speaker 3: this time together. And I actually am quite looking forward
6:22
Speaker 3: to talking about and, as you said, decoding what we
6:26
Speaker 3: do with the Federal Reserve, because I, like you, believe
6:29
Speaker 3: it's very important to understand how this works, because you
6:34
Speaker 3: speak so well, and your mission is so connected to
6:38
Speaker 3: things like not only financial literacy, but but how do
6:41
Speaker 3: you empower that literacy to build wealth and to have
6:46
Speaker 3: a better life. So no doubt about that the things
6:50
Speaker 3: and the missions that we serve are connected in a
6:55
Speaker 3: very substantial way. So thanks for the invite. It's great
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Speaker 3: to be here.
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Speaker 1: I'm really honed have you, and for the audience to
7:02
Speaker 1: understand what's going on here and how important this is.
7:06
Speaker 1: It is easier for me to arrange a interview with
7:15
Speaker 1: somebody I know who is, of course a US senator, Easy,
7:20
Speaker 1: a governor Easy, a member of the president's cabinet of
7:26
Speaker 1: any administration going back nine presidents, I've known Easy fairly easy.
7:35
Speaker 1: The vice president or President of United States of any
7:37
Speaker 1: of the nine I've known easier than a member of
7:42
Speaker 1: the Federal Reserve. And when I went and met with
7:46
Speaker 1: now former Chairman Powell recently, we took a picture photos together,
7:52
Speaker 1: had a good time together.
7:52
Speaker 2: Couldn't publish it.
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Speaker 1: Because that infers something or could infer or something in
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Speaker 1: delicate times in particular, so I didn't publish a picture
8:05
Speaker 1: for well, only publish it to acknowledge his transition. I've
8:11
Speaker 1: got photos with the current that new current chairman. I
8:15
Speaker 1: never I don't publish it. It's not appropriate and it
8:19
Speaker 1: makes the staff nervous. And so for mister Schmidt, President
8:24
Speaker 1: Schmidt to do this, and I'm going to thank his
8:26
Speaker 1: team for doing this is trusting us and we will
8:29
Speaker 1: honor that trust. I know how to do this, which
8:32
Speaker 1: is me to shut up and let him what I
8:34
Speaker 1: would say, riff, let him educate you. And he's got
8:38
Speaker 1: so much to say. You don't need to hear my
8:40
Speaker 1: voice on this episode. You need to do is put
8:43
Speaker 1: out a pen and paper or a digital app or
8:46
Speaker 1: whatever you use, and take copious notes. This is one
8:50
Speaker 1: of those podcasts again, one of the most important I've
8:53
Speaker 1: done in three three seasons. You got to listen to
8:56
Speaker 1: this and re listen to this, because this is what
9:00
Speaker 1: the public things. The FED is secretive, The Fed is
9:04
Speaker 1: Wall Street wrong, The FED doesn't care about us wrong.
9:08
Speaker 1: The FED is secretive, but for a reason I would
9:13
Speaker 1: more discreet than secretive.
9:15
Speaker 2: Okay, so let's.
9:16
Speaker 1: Get into this, and President Schmidt, I want you to
9:20
Speaker 1: riff go as long as you like on each topic,
9:22
Speaker 1: and when I see you getting to the end of that,
9:25
Speaker 1: I will transition into the next question. But I really
9:27
Speaker 1: want this to be unpacked in the full breath of
9:31
Speaker 1: your experience, and at the end of this, I want
9:34
Speaker 1: to talk about your own personal narrative and why this
9:38
Speaker 1: is so important to you and the Freedman's Bank. We're
9:40
Speaker 1: going to get to that, but this is so media
9:42
Speaker 1: I normally start with the personal. I want to late
9:45
Speaker 1: weight with that. I want to get to the meat
9:47
Speaker 1: of this because of what I've already said, most people
9:50
Speaker 1: are just clueless of any socio economic strata about how
9:54
Speaker 1: this system works. Okay, so let's get it at the
10:01
Speaker 1: Federal Reserve. Is it government? Is it private? Who owns it?
10:12
Speaker 2: Uh? If it? You know?
10:13
Speaker 1: These are these are some of these those who know
10:15
Speaker 1: the system. It's a little silly question, but let's again,
10:17
Speaker 1: I'm patty. What does it actually do every day? And
10:21
Speaker 1: why should ordinary Americans care about the FED?
10:27
Speaker 2: Mister President Schmidt, Well.
10:30
Speaker 3: Thanks for that setup, John, that's really good. And by
10:34
Speaker 3: the way, I will say that talking about the Federal
10:37
Speaker 3: Reserve is a lot more interesting than talking about me.
10:40
Speaker 3: So I also appreciate you starting with the FED, because, uh,
10:44
Speaker 3: this is where I live and this is what I enjoy.
10:47
Speaker 3: But but you know that there's so much in uh
10:51
Speaker 3: in your question. Uh, maybe that we ought to start
10:54
Speaker 3: a little bit from the beginning. Especially what I love
10:58
Speaker 3: about this setup is the timing. You know, we're just
11:01
Speaker 3: weeks away from our nation being two hundred and fifty
11:04
Speaker 3: years old, and I think about that journey, and I
11:10
Speaker 3: think about where the Federal Reserve system fits in that journey,
11:13
Speaker 3: and I think it is an important discussion. And I
11:17
Speaker 3: think the American public, I'm not sure I'm going to
11:20
Speaker 3: convince them that they should care, but because I don't
11:23
Speaker 3: think that's what we ask. But I think being somewhat
11:27
Speaker 3: educated about what our mission is and how we fit
11:30
Speaker 3: into this economic ecosystem, not just nationally but globally, is
11:38
Speaker 3: an important conversation. So let's start a little bit from
11:42
Speaker 3: the beginning. I mean, when we started as a nation,
11:46
Speaker 3: there were a lot of issues as we were trying
11:48
Speaker 3: to construct a government and trying to figure out how
11:51
Speaker 3: to finance and fund that government, and then which ultimately
11:58
Speaker 3: led to the creation at least the attempt to create
12:01
Speaker 3: a central bank. And if you look at the history
12:05
Speaker 3: books there, it was very controversial because, as you can imagine,
12:10
Speaker 3: we just had a revolution, we just gained our independence
12:14
Speaker 3: from what was considered a bit of us overreaching central government,
12:20
Speaker 3: and a lot of people said, you know, no to
12:22
Speaker 3: the centralization. But when it came down to it, we
12:26
Speaker 3: really were trying to design a system where things got
12:29
Speaker 3: a little bit more efficient and more predictable around things
12:33
Speaker 3: like paying each other, you know, between states, between communities,
12:37
Speaker 3: between businesses. And as a result that the design, which
12:42
Speaker 3: isn't a new design, came from probably overseas, mostly in Europe.
12:48
Speaker 3: They had banks, and banks have been around a long time,
12:51
Speaker 3: but something too that wasn't necessarily a public a private
12:55
Speaker 3: entity to be able to accommodate the transactions between these
13:00
Speaker 3: paying entities. So this started in the creation of the
13:06
Speaker 3: first Bank of the United States, which eventually was not successful.
13:11
Speaker 3: Then we created the Second Bank of the United States,
13:14
Speaker 3: which failed to get renewal of its charter back in
13:17
Speaker 3: the mid eighteen hundreds. Because I think a lot of
13:22
Speaker 3: that was because of the centralization and the structure, and
13:25
Speaker 3: we'll get to that in a minute, because I think
13:27
Speaker 3: the current structure in essence answered the questions that broke
13:32
Speaker 3: those particular experiments down. We went through a phase through
13:38
Speaker 3: the Civil War then that banks could print their own money.
13:42
Speaker 3: It's kind of interesting a lot of the digital currency
13:47
Speaker 3: discussions today look a lot like they did in the
13:50
Speaker 3: eighteen hundreds, where people were inventing their own currency and
13:53
Speaker 3: their own payment systems, which basically kind of broke down
13:58
Speaker 3: because everybody had to try to figure out what those
14:01
Speaker 3: currencies were worth. So as we move forward into the
14:05
Speaker 3: early twentieth century, our legislators in Congress finally came up
14:12
Speaker 3: with a structure that we enjoy today, and that is
14:17
Speaker 3: the Federal Reserve Bank system. What's the way it's organized,
14:22
Speaker 3: and the reason I think it finally caught on and
14:26
Speaker 3: worked in nineteen thirteen was there's a group of nineteen people.
14:33
Speaker 3: There's a board of governors, seven people that are nominated
14:37
Speaker 3: and confirmed in Washington from the Executive branch to the Senate.
14:42
Speaker 3: There's a chair of that, as you mentioned, j Poll
14:45
Speaker 3: being the most recent chair now Kevin Worrish, who's been
14:49
Speaker 3: I think is I understand it's supposed to get sworn
14:51
Speaker 3: in on Friday, and they operate as an entity that
14:57
Speaker 3: really is located in Washington and is a bit of
15:01
Speaker 3: a central body. The change was the design of the
15:06
Speaker 3: twelve reserve bank system. So what happened was you could
15:11
Speaker 3: almost liken the current structure to the Senate and the
15:17
Speaker 3: House of Representatives, you know, where the Senate is a tighter,
15:21
Speaker 3: smaller body, and then you've got this House House of
15:25
Speaker 3: represent Representatives, which is really what I consider kind of
15:28
Speaker 3: the we the people of America. So they're the elected representatives,
15:32
Speaker 3: they get elected more often, and so the design of
15:36
Speaker 3: the twelve Reserve Banks to me, kind of mirrors the
15:40
Speaker 3: House of Representatives to agree a degree, because there's twelve
15:45
Speaker 3: regions of the Federal Reserve Bank. They started the first
15:48
Speaker 3: bank was in Boston, and you basically migrated yourself west Boston,
15:52
Speaker 3: New York, and then west to San Francisco. So we're
15:56
Speaker 3: we're in the tenth district. We're the tenth bank and
15:59
Speaker 3: the group of twelve. Our district covers seven states in
16:03
Speaker 3: the Midwest. Our primary bank is Reserve Bank is in
16:08
Speaker 3: Kansas City. We also have what we call branch office
16:13
Speaker 3: banks in Omaha, Denver, and Oklahoma City. So depending on
16:17
Speaker 3: the size of the geography, you'll have a primary bank
16:22
Speaker 3: and then you'll have the branch locations, which was really
16:26
Speaker 3: a design to try to get the services early on
16:30
Speaker 3: closer to people. And that's the next stage of the
16:33
Speaker 3: FED is we really are the distributor of currency that's
16:39
Speaker 3: printed by the Treasury and the Bureau of Engraving Printing,
16:42
Speaker 3: so we're the distribution point for currency, cash and coin.
16:47
Speaker 3: And then what was also developed over those years from
16:50
Speaker 3: nineteen thirteen was a checking system, so it was very
16:54
Speaker 3: operational for the first probably seventy or eighty years. We sorry,
17:00
Speaker 3: go ahead, so let me stop for a minute.
17:02
Speaker 1: I need to translate. The Federal Reserve is not on
17:07
Speaker 1: Wall Street. The Federal Reserve is not owned by private individuals.
17:11
Speaker 1: The Federal Reserve is organized as a government entity, but independent.
17:16
Speaker 1: The Federal Reserve has had challenges since its founding. It's
17:20
Speaker 1: had to modernize itself. One of the challenges, which we
17:24
Speaker 1: didn't mention but is inferred, came after the Great Crash
17:27
Speaker 1: of nineteen twenty nine, the Great Depression. It had to
17:30
Speaker 1: tighten up or modernize itself at that point. And you've
17:34
Speaker 1: already mentioned before that the Federal Reserve issues money, prints money,
17:41
Speaker 1: the Federal Reserve, I think you're about to say, processes
17:46
Speaker 1: the checks that we are right, The Federal Reserve centralized
17:50
Speaker 1: all of the disparate money, the Fiat currency that was
17:53
Speaker 1: being issued by mom and pop stores, banks, anybody in
17:57
Speaker 1: their mama cities were issuing their own currency. It was crazy,
18:00
Speaker 1: it was chaos, and you made and everybody realized that
18:04
Speaker 1: system wasn't had no trust and would break down.
18:08
Speaker 2: And you guys, and.
18:09
Speaker 1: It's almost like all these cryptal currencies running around now
18:14
Speaker 1: we're all saying I'm legit, I'm legit, I'm legit, and
18:19
Speaker 1: not people not knowing what's what and what's valuable. And
18:22
Speaker 1: so you guys cleaned all that stuff up one hundred
18:26
Speaker 1: and well eighty years ago, one hundred and yeah, one
18:31
Speaker 1: hundred and fifty hundred eighty years ago and created order
18:33
Speaker 1: to the system and basically said all things monetary come
18:37
Speaker 1: through us.
18:39
Speaker 2: Did I get that right?
18:41
Speaker 3: Yeah, that's generally right. So just one clarifying point. We
18:43
Speaker 3: don't print currency. We actually distribute the currency. That the
18:47
Speaker 3: function of printing is by the Bureau of Engraving and Printings.
18:51
Speaker 3: That's a treasury function. So we accommodate our through our
18:55
Speaker 3: reserve banks the distribution and the management of that currency.
18:59
Speaker 3: So perfect. But yeah, you're you're absolutely right this. You
19:03
Speaker 3: can think about money as as as water and that
19:08
Speaker 3: we're the we're the conduits, we're the plumbing of of
19:13
Speaker 3: how those moneys flow, and there's lots of different ways
19:17
Speaker 3: that money flows. Currently, currency is clearly easily understood. Checks
19:24
Speaker 3: are understandable, but there's all those things like AC eight.
19:28
Speaker 3: So we don't like the old days. We don't get
19:31
Speaker 3: paychecks anymore. Usually your check is digitally deposited in your
19:36
Speaker 3: into your bank account. And then we also have fed
19:40
Speaker 3: wire and then most recently we launched two years ago
19:44
Speaker 3: what's called fed Now, which is really going to change
19:47
Speaker 3: the nature of payments into the future. It's an instant
19:50
Speaker 3: payment platform where you'll be able to move money instantly
19:55
Speaker 3: twenty four hours a day, seven days a week, and
19:59
Speaker 3: that well, that's going to be somewhat disruptive to the
20:03
Speaker 3: system in the way of things like fees and float.
20:08
Speaker 3: Float obviously is the time it takes for a check
20:11
Speaker 3: to clear, from the time you write it to the
20:13
Speaker 3: time it hits your account, and fees would be things
20:16
Speaker 3: like the interchange fee that you might pay or a
20:20
Speaker 3: business might pay to use a credit card or some
20:23
Speaker 3: sort of digital instrument. So there's a lot of change
20:26
Speaker 3: going on in payments right now, and and that where
20:29
Speaker 3: we really are responsible for making sure a couple of
20:33
Speaker 3: things happen. One is that payments get made every day
20:37
Speaker 3: of the year that that they're that they need to
20:39
Speaker 3: be made. And secondly, we have a very significant bank
20:43
Speaker 3: supervisory function, so those payments would be made through the
20:48
Speaker 3: plumbing of banks and credit unions throughout the country, and
20:53
Speaker 3: we have to supervise those banks to make sure that
20:55
Speaker 3: they are functioning the way that we would want them
20:58
Speaker 3: to function as a central bank.
21:00
Speaker 2: I'm a little upset with you, President Schmidt, and I'm
21:03
Speaker 2: a little upset with your Federal Reserve system and its
21:05
Speaker 2: efficiency because.
21:08
Speaker 1: Now I used to float checks. I used to write
21:11
Speaker 1: a check when I was and I was a young
21:13
Speaker 1: entrepreneur in my twenties, and I would bank on the fact,
21:17
Speaker 1: and I'd put that in the mail, it handled and
21:21
Speaker 1: deposited by the recipient, and they would process. The FED
21:26
Speaker 1: system in that part of the world would process that check,
21:29
Speaker 1: and I had two or three days to run around
21:34
Speaker 1: and make some money before that check actually hit on
21:36
Speaker 1: the side. And you're so efficient. Now the floats has
21:40
Speaker 1: disappeared completely. Now it's an immediate debit and credit system.
21:46
Speaker 1: And I am really upset with you for doing your
21:49
Speaker 1: job and doing your job. Well, I'm actually not upset
21:52
Speaker 1: with you, but I'm just saying I get it.
21:55
Speaker 3: When I first met my wife, Amy, she wasn't much
21:58
Speaker 3: of a money manager, and her philosophy was, well, I
22:01
Speaker 3: can't be out of money. I still have checks, right,
22:05
Speaker 3: really work like that.
22:06
Speaker 1: So for the younger generation saying what's a check, by
22:09
Speaker 1: the way, that the modern version of that is your
22:11
Speaker 1: debit card or something.
22:14
Speaker 2: Yeah.
22:14
Speaker 3: Now, now what's interesting, and you're seeing more of it,
22:17
Speaker 3: is the tokenization of your deposit where you're actually going
22:22
Speaker 3: to be able to you know, your phone is a
22:24
Speaker 3: digital wallet or or can be uh, and and you're
22:28
Speaker 3: really going to see what's gonna what's going to be
22:31
Speaker 3: created as a very efficient system and a very immediate
22:35
Speaker 3: system of payments. And Uh. I think that's what the
22:39
Speaker 3: American people want and it's what they deserve, and I
22:41
Speaker 3: think we have h have built the technology to do that.
22:46
Speaker 3: We're in a maturing phase right now, because look, I'm
22:51
Speaker 3: an American. I love Americans, but they sometimes it's hard
22:55
Speaker 3: for them to change. I mean, we we're trying to
22:58
Speaker 3: get rid of the penny. That check has a lot
23:00
Speaker 3: of fraud in it today. And you can wash checks,
23:04
Speaker 3: you can, and so we're trying to.
23:05
Speaker 2: Move to wash check.
23:08
Speaker 3: Yeah, that is a is your people are very getting
23:11
Speaker 3: very good at modifying the numbers, uh and the letters
23:15
Speaker 3: on a check. It's not unlike a kind of the
23:18
Speaker 3: AI that you and I deal with with our image.
23:21
Speaker 3: Is checks are a paper image and uh. And so
23:25
Speaker 3: most of the fraud in the system today, UH is
23:29
Speaker 3: in the check system just because of those checks. Is
23:32
Speaker 3: those checks can be modified and they clear very quickly.
23:35
Speaker 3: As you know that with the Micker code on the check.
23:39
Speaker 3: If if nobody stops that, either by signature or by amount. UH,
23:44
Speaker 3: that's where a lot of the damage is done financially
23:47
Speaker 3: is in the paper check system.
23:48
Speaker 2: What's a Micker code present.
23:51
Speaker 3: So that that's uh. Every bank has a credit union
23:54
Speaker 3: has a code at the bottom. There's little micro codes
23:57
Speaker 3: on the bottom. You can see them on the bottom
23:59
Speaker 3: of your check. It'll tell the routing number of the
24:02
Speaker 3: institution that that that that check can clear through. And
24:06
Speaker 3: then it'll typically have the check number, and then when
24:09
Speaker 3: it runs through the system, it'll put the amount of
24:12
Speaker 3: the check in the micro encoding which allows it to
24:15
Speaker 3: run through the clearing systems, the sorting systems that are
24:21
Speaker 3: that exist not only in banks but also through clearinghouse.
24:29
Speaker 1: So let's have a financial literacy moment here, mister President.
24:32
Speaker 1: I have said something that I want you to either
24:35
Speaker 1: confirm or refute live on camera, and don't don't spare
24:41
Speaker 1: me an ounce of grace. I have said that you
24:44
Speaker 1: make money during the day, you build wealth in your sleep.
24:47
Speaker 1: I have said that people over index on the money.
24:50
Speaker 1: People say in my community, I want to get that money,
24:52
Speaker 1: we get that bag, we get that cash, we'll get
24:54
Speaker 1: that dollar, et cetera. And they're over indexing on this
25:00
Speaker 1: this dollar, which is nothing more than an exchange of value.
25:03
Speaker 1: And I could say give I'll give you my jacket
25:07
Speaker 1: for that fed pen on your on your Lapel. And
25:10
Speaker 1: if we agree on that that's an exchange of value
25:13
Speaker 1: in my example, and I've said further that that I
25:19
Speaker 1: could take your jacket, turn it on this back right,
25:23
Speaker 1: pay to the order of Jeff Schmidt, write a routing
25:28
Speaker 1: number and a check account number and a few other things, date,
25:32
Speaker 1: sign it, and and ask you to go to the
25:35
Speaker 1: local bank branch and ask them to cash your jacket.
25:39
Speaker 1: And they would have to go back and talk to
25:40
Speaker 1: their lawyers and really debate about whether they're under a
25:44
Speaker 1: legal responsibility to cash to cash your jacket. Now, I'm
25:49
Speaker 1: sure they'd find some reason why it's not appropriate to
25:51
Speaker 1: do that. But the point was that all I'm doing
25:54
Speaker 1: is transferring the value that's in my bank account to you,
25:59
Speaker 1: and we've gotten hung up on the way that happens
26:03
Speaker 1: versus why that's happening and what that leads to, which
26:06
Speaker 1: is hopefully using that to advance your life, or to
26:11
Speaker 1: to bar in trade or to invest to trigger something greater.
26:17
Speaker 1: Please educate the audience in me on what a part
26:19
Speaker 1: about that I got wrong.
26:22
Speaker 3: I think I think that's generally right. I mean, it's
26:24
Speaker 3: not a very efficient way to transact business, which is
26:28
Speaker 3: why we have come up with these payment systems to
26:31
Speaker 3: have a stable value of some kind where you do
26:34
Speaker 3: make an agreement that we can trade some sort of
26:38
Speaker 3: payment currency for that pen or that jacket. It's you know,
26:43
Speaker 3: you're you're right too. I mean, I suppose that that
26:47
Speaker 3: writing on the back of a jacket could be considered
26:49
Speaker 3: legal tender if your bank was so inclined. But that
26:54
Speaker 3: it's not. It's not a very efficient, nor is it
26:57
Speaker 3: very common. And what you're trying, or say, if you so,
27:00
Speaker 3: what you're trying to do is just to accommodate something
27:02
Speaker 3: that's efficient. Uh. And and but you know, the transactional
27:07
Speaker 3: side of money has been going on for centuries, I
27:11
Speaker 3: mean multiple uh, you know, millennia. So so it's we're
27:16
Speaker 3: just trying to make it efficient and common. Uh. Some
27:19
Speaker 3: of the systems now, uh that are being designed, uh
27:24
Speaker 3: that that I think may accommodate more cross border transactions.
27:29
Speaker 3: What what what we're trying to what we're seeing is
27:31
Speaker 3: a demand in the in the system, not just uh domestically,
27:35
Speaker 3: but internationally. How do you make those transactions uh less
27:40
Speaker 3: costly and more efficient? So the cost to uh, you know,
27:45
Speaker 3: exchange reale from Brazil and the US currency can cost
27:49
Speaker 3: you a pretty good chunk of money. If if you
27:52
Speaker 3: have things like US dollar or let's say a common
27:56
Speaker 3: stable coin, Uh, maybe that would lessen the and lessen
28:01
Speaker 3: the friction in that transaction. But domestically in the US,
28:06
Speaker 3: we have a pretty good, pretty effecient, efficient payment system
28:11
Speaker 3: as it is, and it's just going to get more
28:13
Speaker 3: efficient over the next few years.
28:15
Speaker 1: Second financial literacy moment here, President Schmidt. Fraud people have
28:24
Speaker 1: come up and said, John Bryant, there's a profile of
28:28
Speaker 1: you online and the person asked me to follow them,
28:33
Speaker 1: and then they asked me for money, and I've had
28:35
Speaker 1: to do video saying I would never ask you for money.
28:40
Speaker 1: Don't you know there's a check mark that shows that
28:43
Speaker 1: that's me, a blue check mark. You don't see that.
28:46
Speaker 1: You can't legitimize as me. My point is, don't respond
28:50
Speaker 1: to anything. If somebody gets a text and say this
28:52
Speaker 1: is a Federal Reserve, please transfer money. The Federal Reserve
28:55
Speaker 1: doesn't send text messages. Please don't do that, and they
29:00
Speaker 1: don't need your money. If I mean, it's getting so
29:03
Speaker 1: good these days presentment that I'm concerned that I mean,
29:09
Speaker 1: I'm getting text messages saying you have a ticket from
29:13
Speaker 1: the California Supreme Court, and it looks so legit, and
29:17
Speaker 1: they want you to respond so that they can get
29:19
Speaker 1: your get access to your data or worse, I believe
29:22
Speaker 1: with AI, someone's gonna call you.
29:24
Speaker 2: It's going to sound like a relative.
29:27
Speaker 1: And I think that, I mean telling my financial coaches
29:29
Speaker 1: and operation Hope, tell that person before you transit transmit
29:34
Speaker 1: money to that person that you think is you're onto
29:36
Speaker 1: your mother to send you a code by text that
29:41
Speaker 1: confirms something about you that only you and they know
29:44
Speaker 1: from your childhood.
29:45
Speaker 2: Before you send anything.
29:47
Speaker 1: Because artificial intelligence is going to make this in AI
29:50
Speaker 1: and robotics, it's going to make this so well not
29:53
Speaker 1: well AI, for sure, it's gonna make this so much
29:55
Speaker 1: more difficult to guard your wallet. What part of that
30:00
Speaker 1: did I get wrong? And what advice do you have
30:03
Speaker 1: for people before we get back to the to the decoding.
30:06
Speaker 3: Yeah, so I guess I would just double down on
30:09
Speaker 3: your your expression that you you really have to be
30:14
Speaker 3: so skeptical and and try to verify and validate any
30:22
Speaker 3: transaction that involves money, especially if it if it's demanding
30:25
Speaker 3: electronic pass through. So it's a it's a huge issue, John,
30:31
Speaker 3: I mean it's it's where AI is gonna We're going
30:34
Speaker 3: to have to develop from both a legislative and a
30:39
Speaker 3: legislative and a societal way of of of kind of
30:43
Speaker 3: simplifying some of these transactions. To your point about having
30:48
Speaker 3: code words, having we're gonna have to get better at biometrics. Uh.
30:53
Speaker 3: This whole name, image, and likeness processes is very concerning
31:00
Speaker 3: the cyber side of our business is only increasing exponentially.
31:05
Speaker 3: I mean, people expect that if it's in the Federal
31:09
Speaker 3: Reserve system that it's safe and sound, and so we
31:12
Speaker 3: work just tirelessly on making sure we have systems that
31:18
Speaker 3: are resilient and impenetrable. But they're designed by people, and
31:22
Speaker 3: they can be broken by people. So that's that's a
31:26
Speaker 3: huge piece of what we're trying to do, not just
31:30
Speaker 3: in the federal reserve system, but in the payment system
31:32
Speaker 3: at large, because it involves you know, you've got four
31:36
Speaker 3: thousand banks in the US, You've got another four thousand
31:39
Speaker 3: credit unions, and we're moving somewhere between five and I
31:44
Speaker 3: think as much as ten trillion dollars of transactions through
31:49
Speaker 3: the system every day.
31:51
Speaker 2: Whoa whoa, whoa, whoa whoa slow down? Well, what did
31:54
Speaker 2: you just say repeat that again?
31:57
Speaker 3: You have a thirty trillion dollar American economy. You have
32:00
Speaker 3: about one hundred and ten trillion dollar global economy. The
32:04
Speaker 3: flow of funds through that system is somewhere between five
32:08
Speaker 3: and ten trillion dollars a day through your system, I'm sorry.
32:14
Speaker 2: Through your federal reserve system, our federal reserve system.
32:16
Speaker 3: That's correct.
32:17
Speaker 2: Yes, I told you this guy was important.
32:20
Speaker 1: People, this just did Did you hear five to ten
32:26
Speaker 1: trillion dollars a day. That's all of our net worth,
32:31
Speaker 1: that's all of our incomes, our payment systems, our salaries,
32:35
Speaker 1: are our gig income.
32:37
Speaker 2: It's everything.
32:39
Speaker 1: It's school fees, his mortgages, his car notes, his credit cards,
32:43
Speaker 1: it's it's the effects of inflation. It's small business lending
32:46
Speaker 1: his jobs, his retirement savings, his investment. If you didn't
32:51
Speaker 1: know how important this gentleman is, he just dropped the
32:54
Speaker 1: mic on you.
32:55
Speaker 2: Very very casually.
32:57
Speaker 1: Five to ten trillion a day a year would be
33:02
Speaker 1: impressive a day, and the systems are not impenetrable, even
33:07
Speaker 1: though they're trying constantly to make them hard to hit.
33:14
Speaker 1: You've just given me, by the way, a new mission
33:17
Speaker 1: with my hope AI work I'm gonna go back to
33:20
Speaker 1: the wood shed, and suggests Van Jones and are co
33:23
Speaker 1: chairing that that we double down on AI fraud and
33:28
Speaker 1: the back end piece and help financial institutions to and
33:31
Speaker 1: communities to future proof themselves against We're so focusing on
33:37
Speaker 1: the opportunity side of AI and the job lost side
33:41
Speaker 1: of AI. No one's watching the back door.
33:45
Speaker 3: Yeah. I think that even recently this h there were
33:49
Speaker 3: two instances the last year or two and then more
33:53
Speaker 3: recently that gives every is giving everyone pause around the
33:57
Speaker 3: electronic system and applications and software. The first was a
34:04
Speaker 3: couple of years ago when CrowdStrike had hiccup and and
34:08
Speaker 3: I had an epiphany we all did that we're so
34:11
Speaker 3: interconnected from a digital standpoint, uh, that that systemically we've
34:17
Speaker 3: got to make sure that we've got these these firewalls intact.
34:22
Speaker 3: The most recent one was the the mythos uh software
34:26
Speaker 3: that that can identify holes in these systems and the
34:31
Speaker 3: patches needed to make sure that you don't have any
34:36
Speaker 3: cyber issues in your in your organization. That's another big
34:40
Speaker 3: wake up call. So so, and then you've got on
34:43
Speaker 3: top of that, you've got quantum computing that's starting to emerge,
34:49
Speaker 3: which is also Uh, it's gonna that style of computing
34:53
Speaker 3: is going to be so fast it's going to make
34:56
Speaker 3: the the the our abilities to create safety in the
35:01
Speaker 3: system with certain applications that keep bad people out of
35:08
Speaker 3: our systems difficult to keep up with. So we've got
35:13
Speaker 3: our we've got major challenges ahead.
35:15
Speaker 2: Uh.
35:16
Speaker 3: And I would I don't go anywhere that people don't ask,
35:20
Speaker 3: you know, what are we doing recently on cybersecurity and
35:23
Speaker 3: how are we making sure that the system stays safe?
35:27
Speaker 1: So let me see if I can translate what my
35:30
Speaker 1: friend President Schmid just said. He said, your passwords can
35:33
Speaker 1: get hacked. He said that a bank's passwords can get hacked.
35:41
Speaker 1: He said that the airlines got penetrated, that was cloud strike.
35:49
Speaker 1: He said that reservation systems can get penetrated. He said
35:54
Speaker 1: that a corporation's HR department, if they're not lucky, if
35:59
Speaker 1: they're not paranoid, can get hacked. If you have smart
36:03
Speaker 1: people working on the solutions, you have also smart people
36:07
Speaker 1: trying to counteract and undermine those systems who are bad
36:14
Speaker 1: people who are harving to be smart. And what he
36:17
Speaker 1: also said was you add quantum computing and the level
36:23
Speaker 1: of the next level AI thinking on of this where
36:28
Speaker 1: it works so smart and so fast that it's cracking
36:33
Speaker 1: some of the encryption systems.
36:39
Speaker 2: That we thought were impenetrable. Did I get that right, President?
36:42
Speaker 3: One hundred percent? Yeah, it's really the inside the encryption
36:45
Speaker 3: ecosystem that the quantum computing is really kind of a
36:50
Speaker 3: scary proposition, but it's coming.
36:54
Speaker 1: So what before I get back to interest rates and
36:57
Speaker 1: Open Market Committee?
36:58
Speaker 2: What is that?
37:00
Speaker 1: Before I get to that, what are a couple of
37:02
Speaker 1: things that have scared the bajeebers out of you that
37:05
Speaker 1: you don't often talk about, but you can maybe share
37:08
Speaker 1: with the audience sitting in this role in the Federal
37:11
Speaker 1: Reserve Bank. Oh, let me just a random personal question.
37:15
Speaker 1: So when you said the first Federal Reserve was in Boston,
37:18
Speaker 1: and it went east to west and Boston was, of
37:21
Speaker 1: course where America had the Boston Tea Party and all
37:23
Speaker 1: that kind of stuff, and then went to the New
37:24
Speaker 1: York And I think you said one bank failed. I mean,
37:27
Speaker 1: I'm assuming that's in Philadelphia, but you'll correct me if
37:29
Speaker 1: I'm wrong.
37:30
Speaker 2: The first bank of the.
37:31
Speaker 1: US did so was the last Federal Reserve bank the
37:35
Speaker 1: twelfth in San Francisco?
37:36
Speaker 2: Because everything went west.
37:38
Speaker 3: That's right. That's the newest clarifying point. The first two
37:43
Speaker 3: United States Central banks were based in Philadelphia, So you
37:47
Speaker 3: can go to Philadelphia today. Those buildings are still there.
37:50
Speaker 3: You can you can tour them and see the history
37:52
Speaker 3: of the first and second Bank of the United States.
37:55
Speaker 3: When I talked about Boston, when they designed the twelve
37:59
Speaker 3: rision her bank regions, think about nineteen thirteen, the population
38:05
Speaker 3: and demographics were a lot different. But but what you
38:08
Speaker 3: see is you've got the twelve banks that are named.
38:11
Speaker 3: You can see in my our our brand, we're ten J.
38:14
Speaker 3: So we're the tenth of that of that group of
38:18
Speaker 3: twelve and it just moved west. So I think Dallas
38:22
Speaker 3: is the eleventh district in San Francisco's the twelfth, and
38:26
Speaker 3: then the nine that come before us. What's what's kind
38:29
Speaker 3: of fun about our our ten J is when you
38:34
Speaker 3: when you see when you look at your a dollar bill,
38:36
Speaker 3: there'll be a there'll be a letter on it, and
38:39
Speaker 3: that letter will be associated with the bank that originally
38:42
Speaker 3: distributed that dollar bill. Uh and and it'll only have
38:47
Speaker 3: a letter.
38:48
Speaker 2: And so the.
38:50
Speaker 3: If it was genius or not, but J is the
38:53
Speaker 3: tenth letter of the alphabet. So Boston is one A. Uh,
38:58
Speaker 3: we're ten J. And it was really just an easier
39:01
Speaker 3: lettering system than a number system. You won't you'll find
39:05
Speaker 3: what if you got a dollar bill there? Okay, so
39:09
Speaker 3: you'll see the number and the and the letter is
39:13
Speaker 3: up in the left. Oh is it? Okay? So that
39:18
Speaker 3: that originally came out of our vault, I'll be darn.
39:22
Speaker 1: And by the way, signed by a friend of mine,
39:26
Speaker 1: President Steve Amunition, who I just texted a couple of
39:29
Speaker 1: days ago. He's in the Free Enterprise, but he was
39:31
Speaker 1: fed secretary.
39:34
Speaker 2: It's signed by him.
39:35
Speaker 3: And hang on it. That's a J ten note, that's
39:39
Speaker 3: a that's valuable. That's for twenty dollars.
39:43
Speaker 2: That's pretty cool.
39:47
Speaker 1: Okay, let's get back to this question of you came
39:52
Speaker 1: from the private sector, you came from academia. You were
39:57
Speaker 1: president of several big banks. We'll talk about that before
40:00
Speaker 1: we wrap up. Great experience, broad deep, you've seen it all.
40:06
Speaker 1: You get sworn in, you go take your desk at
40:09
Speaker 1: the Federal Reserve. You're part of the Open Market Committe,
40:12
Speaker 1: which're gonna explain in a minute. What scared the bajeebers
40:16
Speaker 1: out of you? Major Eyes, pop or Water and you're like,
40:20
Speaker 1: oh my god, oh.
40:25
Speaker 3: Boy, that you can share this job. Yeah, okay, Well,
40:32
Speaker 3: so I'll dig a little bit into my background because
40:36
Speaker 3: I am a bit of a hybrid president. I mean,
40:38
Speaker 3: you've got some amazing academics, because so much of what
40:44
Speaker 3: we do with the FED is driven by the economy.
40:47
Speaker 3: That your knowledge and your ability to both research and
40:53
Speaker 3: synthesize what's happening in a thirty trillion dollar domestic economy
40:58
Speaker 3: is pretty darn important. And we can talk a little
41:01
Speaker 3: bit later maybe about kind of macro and microeconomics, because
41:05
Speaker 3: that's really how all this happens. I'm not I didn't
41:10
Speaker 3: come from academy. I'm actually a practitioner. I cut my
41:16
Speaker 3: teeth with the FDIC in the eighties as a bank examiner.
41:21
Speaker 3: So in the eighties were was a really hard decade
41:24
Speaker 3: both economically and for banks. I mean, I think a
41:27
Speaker 3: couple thousand banks failed in the eighties, and so understanding
41:33
Speaker 3: the nature of the financial system is where I can
41:37
Speaker 3: play to my strengths. And then later on I helped
41:41
Speaker 3: build a couple banks with a lot of smart people
41:43
Speaker 3: that gave me a really good insight into the payment system.
41:48
Speaker 3: Into how to manage and build banks around the regular
41:53
Speaker 3: regulated system. And then I was fortunate enough to take
41:57
Speaker 3: a position at SMU and the School of Banking for
42:01
Speaker 3: some time, which is really a leadership development program for
42:06
Speaker 3: banks and bank directors, and then I got a call
42:09
Speaker 3: for this job. So I would say that the answer
42:12
Speaker 3: your question is maybe I take a couple of different directions.
42:15
Speaker 3: One is because I wasn't steeped in economic theory, I
42:22
Speaker 3: really depended and needed to find partners inside the FED
42:28
Speaker 3: that were. And so I was fortunate enough when I
42:31
Speaker 3: showed up in Kansas City, Joe Gruber, who's our director
42:36
Speaker 3: of Research and has is one of the smartest economists
42:41
Speaker 3: in the country, was here in Kansas City along with
42:45
Speaker 3: a team of almost thirty economists PhD level economists. So
42:50
Speaker 3: why that's important is it was a little bit daunting
42:52
Speaker 3: for me coming into the FED because I knew you
42:55
Speaker 3: needed to be steeped in economics. But the fact that
42:59
Speaker 3: I had this team here in Kansas City that could
43:03
Speaker 3: really help me form my opinions and my judgments around
43:07
Speaker 3: monetary policy was very important. Uh. And then the second
43:11
Speaker 3: thing really is the technology I I was asked to share. Uh,
43:17
Speaker 3: we we're actually been working the last two or three
43:20
Speaker 3: four years on trans UH transforming our our application system
43:26
Speaker 3: from an from an owned database system. All twelve banks
43:30
Speaker 3: had their own data centers too, to the cloud and
43:34
Speaker 3: to a co located UH system of technology and software
43:41
Speaker 3: storage and usage. So so we're we're literally moving almost
43:46
Speaker 3: two thousand applications that run the Federal Reserve from from
43:50
Speaker 3: a from a data an owned data center to the cloud. UH.
43:53
Speaker 3: And that that that part is going to help us
43:56
Speaker 3: be more resilient, be safer, be more predictable. UH. And
44:01
Speaker 3: that's a that's a pretty daunting project. It here again,
44:05
Speaker 3: it's it's a little bit like changing the tires on
44:08
Speaker 3: a on an airplane that's going a couple hundred miles
44:10
Speaker 3: an hour. You know, the it has to work while
44:14
Speaker 3: you're changing it. And and thank god, we have thousands
44:18
Speaker 3: of really smart people that know how to do that
44:21
Speaker 3: on the fly. So so those are a couple of things,
44:25
Speaker 3: you know, just how I was going to find my
44:28
Speaker 3: voice from an economic policy standpoint, and how I was
44:32
Speaker 3: going to lead a system to move this this technology
44:36
Speaker 3: from one place to another safely. U is really has
44:41
Speaker 3: been occupied a lot of my my moments.
44:45
Speaker 2: Has the Uh.
44:46
Speaker 1: I'm glad you gave your experience personally, by the way,
44:49
Speaker 1: I love that people understand that he was also chairman
44:51
Speaker 1: of the global banks, which I won't mention the names of,
44:53
Speaker 1: but you can go do your research.
44:56
Speaker 2: Did did anything spook you?
44:58
Speaker 1: Like the like the like the encryption issue that you
45:02
Speaker 1: woke up one day and you just turn sheet white, like, oh, what,
45:06
Speaker 1: what the heck? Is there anything you can share that
45:10
Speaker 1: was like I.
45:11
Speaker 3: Would say, I wouldn't say spooked me. I. I think
45:16
Speaker 3: there's there's moments where you know, there's there's there's a
45:21
Speaker 3: couple of networks inside the Federal Reserve that are really important. Obviously,
45:25
Speaker 3: the things the Board of Governors do in Washington, uh
45:29
Speaker 3: and the connectivity that they have uh to uh, the
45:34
Speaker 3: really important places and people in Washington are important to
45:38
Speaker 3: the system and the protection of the system. UH. So
45:42
Speaker 3: that Board of Governors works well and tirelessly to protect
45:47
Speaker 3: the system. Then you have what's called a Conference of Presidents,
45:51
Speaker 3: which is the twelve Federal Reserve Bank presidents. You know,
45:54
Speaker 3: we're a we're a deliberative, collaborative body that also uh,
45:59
Speaker 3: you know, there's two major pieces of the FETA Reserve
46:03
Speaker 3: that people need to understand. One is monetary policy, which
46:06
Speaker 3: is really the FMC trying to decide how do we
46:10
Speaker 3: use the you know, big but limited tools of the
46:14
Speaker 3: Federal Reserve to keep the economic system on track around
46:20
Speaker 3: two primary mandates. One is keeping prices stable, which is
46:24
Speaker 3: inflation at two percent, and keeping full employment, which is
46:30
Speaker 3: you know, give or take somewhere in that ford of
46:33
Speaker 3: five percent range unemployment. That's the mandate of monetary policy.
46:40
Speaker 3: Then there's what's called monetary operations, and that really is
46:44
Speaker 3: is the system that's run by the collective of twelve
46:47
Speaker 3: reserve banks. And what's important about that is we are
46:51
Speaker 3: close to the people we serve in our regions, so
46:54
Speaker 3: we have this constant dialogue with the people in these
46:58
Speaker 3: regions that really kind of drive are driven through our
47:02
Speaker 3: boards of directors. So to your first question, which is important, UH,
47:07
Speaker 3: this this really is what you call a quasi public organization.
47:12
Speaker 3: It's invented and designed by the legislative branch. It can
47:16
Speaker 3: be changed and modified by the legislative branch. It is
47:21
Speaker 3: it is their purview and function from a policy standpoint
47:26
Speaker 3: to UH, to give us guidance on what they want
47:29
Speaker 3: the FED to do and and that's that's an important piece.
47:33
Speaker 3: But yet we're all we're also overseen from a private
47:36
Speaker 3: sector standpoint, with a nine member board that that has
47:42
Speaker 3: that's selected on a rotating basis that are that are
47:45
Speaker 3: public citizens. And so that that's that that creates this
47:50
Speaker 3: really important dynamic between the reserve banks and the Board
47:54
Speaker 3: of Governors as we try to collaborate on both policy,
48:00
Speaker 3: economic policy, and on operational policy. And that's how that's
48:04
Speaker 3: how the system is really works. And I'll be from
48:08
Speaker 3: an outsider standpoint, I think it works pretty well.
48:11
Speaker 1: Yeah, let me so I can translate there every Federal
48:14
Speaker 1: Reserve Bank, which is the government or part of the
48:19
Speaker 1: government apparatus of the Federal Reserve system. Uh, the Federal
48:23
Speaker 1: Reserve Bank has directors from the private sector and community.
48:28
Speaker 2: That creates a dynamic.
48:29
Speaker 1: Of connecting from the what I call the streets to
48:33
Speaker 1: the suites. And then the Federal Reserve Bank serves with
48:38
Speaker 1: the Federal Reserve Presidents along with the Federal Reserve governors
48:42
Speaker 1: to protect and honor the system.
48:45
Speaker 2: And and and you mentioned.
48:47
Speaker 1: A couple of the rules of the system and full
48:49
Speaker 1: employment it's close as you can get to it, and
48:51
Speaker 1: keeping inflation at two percent, and we'll get to that
48:54
Speaker 1: in my next question about the what and how and
48:57
Speaker 1: then the only it's important part of the audience that
49:00
Speaker 1: understand civics lesson that the Federal Reserve can only be
49:03
Speaker 1: fundamentally changed by Congress. Hello, okay, so, uh what why
49:12
Speaker 1: does the FED raise interest rates? This is everybody's just
49:15
Speaker 1: gonna go right to forty eight point the forty nine
49:17
Speaker 1: minute mark in that podcast. Why does a FED raised
49:21
Speaker 1: interest rates? So let me be really blunt about this.
49:24
Speaker 1: Can you explain slowing, you know, slowing overheating, balancing employment
49:30
Speaker 1: and inflation, long term stability versus short term pain, and
49:35
Speaker 1: what I call sugar high? Some people on Wall Street like,
49:39
Speaker 1: just lower the interest rates. Knock it off, Just give
49:42
Speaker 1: me that lower injury. Why won't you just give me
49:43
Speaker 1: lower interest rates? That's what I call a sugar high.
49:47
Speaker 1: You can win the battle and lose the war. Okay, Please,
49:50
Speaker 1: everybody's gonna go right to a minute forty nine to
49:53
Speaker 1: fifty three.
49:55
Speaker 2: Explain this?
49:56
Speaker 3: All right? So let me let me do give people
49:59
Speaker 3: a visual because it'll also set the tone for this
50:04
Speaker 3: next discussion, and it actually will maybe express a little
50:09
Speaker 3: bit about this discussion that we've had over the last
50:13
Speaker 3: couple of years. And frankly it's it's been going on
50:15
Speaker 3: for one hundred years about FET what we call fed independence,
50:19
Speaker 3: uh and and what so I think about it. Think
50:22
Speaker 3: of it as a locomotive and and the and cars
50:25
Speaker 3: behind a locomotive. Whoever's in charge that's feed sets fiscal policy,
50:32
Speaker 3: that's the executive and the legislative branches. Uh, they're in
50:36
Speaker 3: they're in the engine. Okay, Uh, they're they're actually stoking
50:41
Speaker 3: the engine. And by the way, most times, and it's
50:46
Speaker 3: intuitive that you want an economy that grows fast. You
50:49
Speaker 3: want because the faster and the larger it grows, the
50:52
Speaker 3: more everybody can kind of get a piece of the pie. Right, So,
50:55
Speaker 3: so the larger the pie, the bigger opportunity for a
50:59
Speaker 3: larger lice. Now we're all the American people are on
51:04
Speaker 3: are in the cars for the ride, and and they're
51:07
Speaker 3: they're encouraging, and they're you know, talking to their representatives
51:10
Speaker 3: about what they want. But but at the end of
51:13
Speaker 3: the day, someone's in the engine trying to make it
51:16
Speaker 3: go fast. We're not the engine and we're not the cars.
51:19
Speaker 3: We're the rails. So we're we're part of the system.
51:24
Speaker 3: We're not the train.
51:26
Speaker 2: Uh.
51:26
Speaker 3: And the two rails are inflation, uh and employment and
51:32
Speaker 3: and as we know, Uh, if you if you have
51:35
Speaker 3: curves or if your rails are uneven and the train
51:40
Speaker 3: is going too fast, guess what happens? There's risk of derailment.
51:44
Speaker 3: You could say derelment is a recession. You could say
51:48
Speaker 3: derelment is hyperinflation. You could say derelment is high unemployment.
51:53
Speaker 3: Those are all why that at the end of the day,
51:56
Speaker 3: what what we're after as a federal reserve system in
51:59
Speaker 3: our polly making, is keeping the rails somewhat balanced. Okay,
52:05
Speaker 3: And that's that dual mandate that people talk about. It's
52:09
Speaker 3: it's employment, full employment and inflation. So uh so what
52:13
Speaker 3: would what do we have for tools to do that? Well, John,
52:19
Speaker 3: you're you're one of the most eloquent people I know
52:22
Speaker 3: when it comes to talking about capital and credit. What
52:26
Speaker 3: what what you want people to know is how do
52:29
Speaker 3: I get into the system to leverage capital and credit?
52:33
Speaker 3: Leverage my skills, capital being what's in my brain? What
52:37
Speaker 3: what I can do with my heart and my hands? Right?
52:41
Speaker 3: What can I make? What can I build?
52:44
Speaker 2: Uh?
52:44
Speaker 3: And that that's a function of capital and credit. It's
52:47
Speaker 3: just not money. Money is actually just the transfer of
52:51
Speaker 3: those things. It's what you do to build those things
52:54
Speaker 3: and how you do it, which creates capital. And and
52:57
Speaker 3: then you there you have the ability to bark and
53:00
Speaker 3: leverage to speed up the process potentially. Right. So where
53:06
Speaker 3: the FED, where monetary policy comes in, is trying to
53:10
Speaker 3: keep those rails even trying to understand are they balanced
53:15
Speaker 3: or imbalanced? And I often get asked, I'll give you
53:20
Speaker 3: an example of how. You know, we talk a lot
53:22
Speaker 3: about the wealth gap and what do FED do about
53:26
Speaker 3: the wealth gap? Well, what I know we can try
53:30
Speaker 3: to do with monetary policy is be true to our
53:33
Speaker 3: mandate of keeping inflation at or around two percent, because
53:38
Speaker 3: if you do that, then hopefully what you're able to
53:42
Speaker 3: do with your hands and your head is to make
53:44
Speaker 3: more over time, more than a two percent accretion of
53:49
Speaker 3: salary or investment gains, whatever that might be. What you're
53:54
Speaker 3: trying to do is exceed two percent. Now, if we
53:57
Speaker 3: let inflation get to eight, that's really hard for you
54:01
Speaker 3: to You're gonna you could probably you'll probably go backwards
54:05
Speaker 3: if you might get a two or three or four
54:07
Speaker 3: percent increase in your payroll. But but but it's being
54:10
Speaker 3: eaten up by price increase. So what we do with
54:14
Speaker 3: rates is we try to we try to manage what
54:20
Speaker 3: the demands of what's happening in the economy. If there's
54:24
Speaker 3: too much demand, too little supply, guess what happens. Prices
54:29
Speaker 3: go up, things go up. And that's that's the beauty
54:32
Speaker 3: in the in the economic system of what's called supply
54:35
Speaker 3: and demand. What you're trying to do with rates UH,
54:39
Speaker 3: and we really only have somewhat control of the short
54:42
Speaker 3: end of rates more immediate rates, daily rates UH, short
54:47
Speaker 3: run rates UH is try to try to create a
54:52
Speaker 3: dynamic which keeps prices stable using our monetary policy tools.
55:00
Speaker 3: We do have a balance sheet. The FED does that
55:04
Speaker 3: that we can also use to try to create easing
55:08
Speaker 3: or tightening play.
55:09
Speaker 2: Of balance I'm sorry, explain a balance sheet.
55:13
Speaker 3: Okay, So balance sheet where the feeder reserve is concerned
55:17
Speaker 3: is there's an asset side the balance sheet, and there's
55:20
Speaker 3: a liability side, and the asset side is going to
55:24
Speaker 3: react to the liability side. So the liability side of
55:27
Speaker 3: the FED balance sheet has things like today the balance
55:31
Speaker 3: sheet is about six and a half trillion dollars, about
55:34
Speaker 3: two and a half trillion of that six and a
55:36
Speaker 3: half is currency issued, So there's about a trillion to
55:41
Speaker 3: two trillion dollars in US currency domestically, and then globally
55:46
Speaker 3: there's another half to trillion dollars in currency around the globe.
55:51
Speaker 3: That's a liability of the of the feeder reserve in
55:54
Speaker 3: the in the in the country at large. We also
55:57
Speaker 3: maintain the checking account for the for the US Treasury,
56:00
Speaker 3: so at any given time, that's going to have five
56:03
Speaker 3: hundred billion to maybe a trillion dollars in it. And
56:06
Speaker 3: then and the remainder, which is around three trillion dollars,
56:10
Speaker 3: are the reserves that banks hold in the Federal Reserve.
56:14
Speaker 3: So if you're accommodating payments, banks are going to have
56:19
Speaker 3: reserves at the FED. All those things that are liabilities
56:23
Speaker 3: are then invested on the asset side, primarily in treasuries.
56:28
Speaker 3: So today we would have let's say four trillion dollars
56:32
Speaker 3: give or take in US Treasury on our balance sheet,
56:36
Speaker 3: and then we would have another couple trillion dollars worth
56:38
Speaker 3: of mortgage backed securities on our balance sheet, so that
56:42
Speaker 3: that's the nation's balance sheet through the Federal Reserve. As
56:47
Speaker 3: we try to manage the monetary system.
56:50
Speaker 1: So if you are out here listening to this, I'm
56:53
Speaker 1: gonna try to go again translate again a little bit,
56:57
Speaker 1: and you say, well, if are let me just say this.
57:03
Speaker 1: If interest rates I'm picking this up are six percent,
57:05
Speaker 1: let me pick a number, then why am I being
57:08
Speaker 1: charged twenty eight percent? I'm saying this, President Schmidt's not
57:14
Speaker 1: because your credit is tort from the flow up. Are
57:16
Speaker 1: you being preyed upon by some predator because you're financially
57:19
Speaker 1: illiterate or both uh the risk or third you're being
57:25
Speaker 1: perceived as an extremely high risk, or you're in an
57:28
Speaker 1: area that has extremely low competition for money, or a
57:33
Speaker 1: version of all those things. So if you if you
57:36
Speaker 1: have if interest rates are five or six percent, that's
57:39
Speaker 1: you know, set by the Federal Reserve, and you're being
57:43
Speaker 1: charged in a seven hundred credit score neighborhood eight percent,
57:48
Speaker 1: I'm making this up.
57:49
Speaker 2: Then you don't.
57:51
Speaker 1: Need you don't need an illegal You can you can
57:53
Speaker 1: operate in the legal system like you can get a
57:55
Speaker 1: job and you're getting a two or three percent pay
57:58
Speaker 1: of cost of living increase every year to keep up
58:01
Speaker 1: with inflation, and you're making enough money to take care
58:04
Speaker 1: of all your obligations, and the interest rate is not
58:07
Speaker 1: prohibitive or painful. On your car note, your mortgage, it's
58:10
Speaker 1: you know, reasonable, six eight percent whatever. But if you're
58:14
Speaker 1: living in where I grew up and a car notes
58:18
Speaker 1: eighteen percent and the credit card is twenty six percent,
58:25
Speaker 1: there's a lot of people doing illegal stuff in those
58:26
Speaker 1: neighborhoods because they don't perceive that they can pay the
58:30
Speaker 1: cost of money and live without doing so. More risk
58:35
Speaker 1: triggers more risk. So if you're being charged more, you
58:40
Speaker 1: take more risk to outrun the cost on the other side.
58:47
Speaker 2: So one thing leads to the other.
58:49
Speaker 1: Now that's probably the Federal Reserve President has never been
58:52
Speaker 1: in an interview or a meeting in the history of
58:55
Speaker 1: the Federal Reserve where his counterparty explain.
59:00
Speaker 2: Impacts in that way.
59:02
Speaker 1: But I want the audience to understand that just because
59:05
Speaker 1: the interest rates are set by the Fed at two percent,
59:08
Speaker 1: three percent, five percent, that does not necessarily mean that's
59:10
Speaker 1: what the banks or credit union is going to charge.
59:13
Speaker 1: You are worse Pooky and Them or Homeboy Shopping network
59:17
Speaker 1: who is trying desperately to separate you from your wallet
59:20
Speaker 1: and assuming and hoping you're financially illiterate. So if you
59:23
Speaker 1: can raise your credit score, it lowers your cost of funds.
59:28
Speaker 1: If you lower, if you raise, if you lower your
59:30
Speaker 1: level of risk in the marketplace, perceive risk, it lowers
59:34
Speaker 1: the cost of borrowing, and you get closer to that
59:37
Speaker 1: rate that the FED provides the marketplace. The FED is
59:42
Speaker 1: providing banks and credit providers at interest rate. Well, sorry,
59:46
Speaker 1: the FED is setting an interest rate and banks are
59:48
Speaker 1: financial sues are reacting to that. Let me just say
59:50
Speaker 1: that in broad terms. Now correct me as he should
59:56
Speaker 1: for anything. I just said that was way off the rails,
59:59
Speaker 1: as he'd say. But then I want to explain also
1:00:01
Speaker 1: the Open Market Committee, because we're already at an hour.
1:00:05
Speaker 3: No, You're analysis is right. I'll just maybe put my
1:00:09
Speaker 3: banker hed on real quickly on that. And look, we
1:00:15
Speaker 3: could spend hours talking about the difference between the macro economy,
1:00:19
Speaker 3: which is thirty trillion dollar US economy one hundred and
1:00:22
Speaker 3: ten trillion dollar global economy, to the microeconomy, which is frankly,
1:00:27
Speaker 3: you you're a microeconomy. So that's the nature of rates,
1:00:33
Speaker 3: between what the FED is trying to do on a
1:00:35
Speaker 3: much more macro basis through monetary policy, and which you
1:00:39
Speaker 3: need to make the same decisions sometimes as the as
1:00:42
Speaker 3: the Fed's doing, only in your micro economy world. So
1:00:47
Speaker 3: with my banker hat on, if the discount rate, the
1:00:51
Speaker 3: rate that the FED sets somewhere around three and a
1:00:54
Speaker 3: half to three seven five today, you can make a
1:00:59
Speaker 3: pretty good argument that if you're if you're actually add
1:01:03
Speaker 3: up the average rate that you're paying, and all the
1:01:05
Speaker 3: all the credit in your in your economy is double digits,
1:01:10
Speaker 3: then you need to find a banker or a coach
1:01:13
Speaker 3: at at Hope inside to really break it down for you,
1:01:18
Speaker 3: because frankly, in this world, you shouldn't have to pay
1:01:22
Speaker 3: large double digit rates for credit, and there is a
1:01:26
Speaker 3: reason you are. And and then the other thing I
1:01:29
Speaker 3: would say is most most transactional payment systems are really
1:01:34
Speaker 3: designed to be a payment process, not a credit process.
1:01:39
Speaker 3: And so by that I mean I love using my
1:01:44
Speaker 3: credit card because it allows the transaction to be fairly
1:01:48
Speaker 3: efficient and fairly fast, But I don't carry balances on it.
1:01:51
Speaker 3: I use it as a transaction tool. So you're using
1:01:55
Speaker 3: it to carry credit, then there probably are alternatives actually
1:02:00
Speaker 3: a in a seven hundred plus credit score world, and
1:02:05
Speaker 3: you just need to find a smart banker or a
1:02:08
Speaker 3: smart credit coach to talk about it on how how
1:02:12
Speaker 3: do you get your cost to credit in the single digits?
1:02:15
Speaker 3: That would be a good economic goal for you and
1:02:19
Speaker 3: your household if you could, If you're if that's happening
1:02:22
Speaker 3: in your economic.
1:02:23
Speaker 1: World, yes, yes, and yes and again. If anybody has
1:02:27
Speaker 1: short on time, you tell them to go from minute
1:02:30
Speaker 1: fifty nine to one oh three and they'll get a
1:02:33
Speaker 1: life lesson on money and finance that almost no one's
1:02:37
Speaker 1: ever told them, and then work backwards to listen to
1:02:40
Speaker 1: the rest of the stuff and it gets going to
1:02:41
Speaker 1: get richer in the next five minutes. As we wrap up,
1:02:43
Speaker 1: he's got to go run the bank, so we're gonna
1:02:44
Speaker 1: have to wrap up. But this is really rich stuff.
1:02:47
Speaker 2: So I want to talk.
1:02:50
Speaker 1: About macroeconomy and micro you know, and how to open
1:02:53
Speaker 1: market committee sits into that, and whatever else you want
1:02:56
Speaker 1: to say. As as we close up, I want you
1:02:58
Speaker 1: to just give your vision of what you think is
1:03:00
Speaker 1: most important for people to hear and understand. Let me
1:03:05
Speaker 1: break something down for the audience, because the minute I
1:03:07
Speaker 1: was told by a twenty five year old college graduate
1:03:10
Speaker 1: one day or asked John, what's the stock? What's equity?
1:03:14
Speaker 1: I realized what kind of a situation we're in. I
1:03:17
Speaker 1: assumed people knew this stuff. An ATM card, a debit
1:03:23
Speaker 1: card is analogous to a checking account. In this example,
1:03:28
Speaker 1: it's cash in cash out. A charge card is different
1:03:32
Speaker 1: from a credit card. Charge cards you pay off a
1:03:36
Speaker 1: thirty day balance within you pay off the balance in
1:03:38
Speaker 1: thirty days you're charging. It's not a credit card. A
1:03:43
Speaker 1: credit card you can carry a balance. But President Schmid
1:03:46
Speaker 1: just said he used this credit card as basically a
1:03:50
Speaker 1: process revolver, and he just like a thirty day line
1:03:53
Speaker 1: of credit. Now everybody can do that like he can
1:03:55
Speaker 1: do it. He has a different income strata. You may
1:03:59
Speaker 1: need to float a little bit and manage. That's why
1:04:01
Speaker 1: financial literacy becomes very important. And then you have term
1:04:05
Speaker 1: loans and all kinds, and then well term credit facilities
1:04:11
Speaker 1: like a car loan and things like that. So a
1:04:14
Speaker 1: coach can break all that down for you in some detail.
1:04:17
Speaker 1: And federal reserve banks have education systems. Take your kids
1:04:21
Speaker 1: and you on a tour of your local federal reserve.
1:04:26
Speaker 1: By the way, they'll give you some dead currency. By
1:04:28
Speaker 1: the way, they'll give you like a currency bag, like
1:04:31
Speaker 1: ground up money that you can take home with you. You
1:04:34
Speaker 1: can't spend it, but you can take it home with you,
1:04:36
Speaker 1: all right, President Schmidt.
1:04:37
Speaker 2: Whatever.
1:04:37
Speaker 1: As we come to the home stretch here, I'm letting
1:04:40
Speaker 1: you loose whatever you want to talk about.
1:04:42
Speaker 3: This has been great, so a good segue to what
1:04:45
Speaker 3: you just said. John. By the way, your Capitalism for
1:04:49
Speaker 3: All book is fantastic. You've got some really good, very
1:04:57
Speaker 3: thoughtful theories and practice in that, and so I just
1:05:01
Speaker 3: I really enjoyed the part of it where you talked
1:05:04
Speaker 3: about three things, and you talk about it so well.
1:05:08
Speaker 3: On FIRSTUS financial literacy understanding and people. There are people
1:05:12
Speaker 3: out there, including the Federal Reserve, that can help you
1:05:15
Speaker 3: understand money. Let it work for you, not against you.
1:05:20
Speaker 3: The second is I really appreciated your conversation on AI literacy.
1:05:25
Speaker 3: I think there's a lot of fear in the marketplace
1:05:28
Speaker 3: on what AI is and what it can do. But
1:05:31
Speaker 3: I'm actually an optimist on it, and I think you
1:05:34
Speaker 3: are too relative. How do we get this new technology
1:05:38
Speaker 3: to work for us? And that's important. And then I
1:05:42
Speaker 3: always love kind of when you get into these summations
1:05:46
Speaker 3: to talk about relationship building and relationship capital You've been
1:05:51
Speaker 3: so consistent about that it's really, it's really the story
1:05:55
Speaker 3: of my personal and professional life is the best and
1:06:00
Speaker 3: healthiest relationships in my life have made me who I
1:06:04
Speaker 3: am today. And now, no doubt you have to act,
1:06:09
Speaker 3: but those relationships and those networks are golden when it
1:06:13
Speaker 3: comes to living a really well lived life. And so
1:06:19
Speaker 3: I really enjoyed those pieces of your manuscript and would
1:06:26
Speaker 3: second all of those motions. Then then the other thing
1:06:30
Speaker 3: I would say is, and I really appreciate your calling out.
1:06:34
Speaker 3: If you don't know somebody at the FED, you should.
1:06:39
Speaker 3: This isn't this isn't a black box, This isn't a
1:06:42
Speaker 3: secret society. This is something that the Federal Reserve in
1:06:46
Speaker 3: Kansas City helped me make a better life for myself
1:06:50
Speaker 3: and for the people that worked with me and for
1:06:53
Speaker 3: me over the last thirty five forty years building banks.
1:06:58
Speaker 3: But it's so approachable. The thing is, you don't hear
1:07:01
Speaker 3: about it much because we we're a public service. You know,
1:07:05
Speaker 3: we're we're a self denial entity. We we you know,
1:07:08
Speaker 3: our mission statement says we serve the public to promote
1:07:12
Speaker 3: financial and economic stability. That and we're we're on it
1:07:18
Speaker 3: every day. We do our work. And but but I
1:07:21
Speaker 3: will say I so appreciate this broadcast because it does
1:07:25
Speaker 3: help me and my associates here in Kansas City and
1:07:29
Speaker 3: throughout the system to get to get our word out
1:07:32
Speaker 3: that we're doing this on your behalf, So approach us
1:07:35
Speaker 3: if you need something. I'm guessing that in most cases
1:07:39
Speaker 3: we have the resources that you may be looking for
1:07:41
Speaker 3: and could at least build a relationship to guide you
1:07:45
Speaker 3: to the right place, So that that's important. The second,
1:07:49
Speaker 3: the last thing I'd say is, you know, take a
1:07:53
Speaker 3: look at our website if if you really want to
1:07:56
Speaker 3: get kind of wonky about economics. You know, we have
1:08:01
Speaker 3: the Jackson Hole event every year. There's a couple of
1:08:04
Speaker 3: really important papers that came out from our twenty twenty
1:08:08
Speaker 3: five Jackson Hole. One is on demographics and and things
1:08:13
Speaker 3: like birth rates. I mean, we're we're going to go
1:08:16
Speaker 3: into a phase that actually our labor forces is going
1:08:20
Speaker 3: to shrink, and it probably is shrinking. I mean, I'm
1:08:24
Speaker 3: I'm part of part of a baby boomer class that's
1:08:26
Speaker 3: retiring at the at about three hundred thousand people a month,
1:08:30
Speaker 3: about four million a year. And then you throw on
1:08:32
Speaker 3: top of that new immigration policies. I mean, we're going
1:08:37
Speaker 3: to need ai as a intellectual resource to kind of
1:08:42
Speaker 3: fill back with the numbers of people that we won't
1:08:46
Speaker 3: have to run these institutions like the FED or Operation Hope.
1:08:50
Speaker 3: So and there's a lot of really good migration statistics
1:08:54
Speaker 3: and there's just a lot of good you know, to
1:08:57
Speaker 3: understand financials, you got to understand economics, and as much
1:09:01
Speaker 3: as you want to learn or know, we'll help you
1:09:04
Speaker 3: with that. So so I'm I'm just so appreciative of
1:09:09
Speaker 3: this time because it's it's really broadcasts like this and
1:09:14
Speaker 3: partners like you where we can get the word out
1:09:17
Speaker 3: and say, hey, this is your FED, use it, understand it,
1:09:21
Speaker 3: know it, and if you want more, just ask.
1:09:25
Speaker 1: And if you think, thank you for those comments, President Schmid.
1:09:28
Speaker 1: And if you think you're you may be being defrauded,
1:09:31
Speaker 1: you think somebody's trying to separate you from your wallet,
1:09:34
Speaker 1: you think that something says so it seems a little
1:09:36
Speaker 1: fishy about a request, about a text message, an email,
1:09:41
Speaker 1: a letter, somebody's asking you for money. Pause and call
1:09:47
Speaker 1: your local feder reserve or go down to the office
1:09:51
Speaker 1: and see the person at the counter and say I
1:09:53
Speaker 1: just have a question. They'll find somebody for you. Go
1:09:57
Speaker 1: to the website I mean this is is he said,
1:09:59
Speaker 1: this is your FED. And for lack of I mean,
1:10:02
Speaker 1: we die for lack of knowledge. The Bible says, well,
1:10:06
Speaker 1: there's no vision that people perish. Have a vision for yourself.
1:10:09
Speaker 1: Use every resource available to you, every resource available to you.
1:10:15
Speaker 1: And this is the Federal Reserve in the United States
1:10:17
Speaker 1: of America is the model for the world.
1:10:21
Speaker 2: It is.
1:10:22
Speaker 1: Admired by every other FED system in the world. So
1:10:27
Speaker 1: it's right down the street from you. There's twelve banks.
1:10:31
Speaker 1: Go access them. Find out who's on the board of
1:10:33
Speaker 1: those banks. Go access them. Be nosy, be nosy. And
1:10:41
Speaker 1: the last thing I'll say is thank you President Schmidt
1:10:43
Speaker 1: for before you became president of the Federal Reserve Bank
1:10:47
Speaker 1: of Kansas City and joining the Open Market Committee, which
1:10:49
Speaker 1: we still haven't explained, but I think we explained around it.
1:10:53
Speaker 1: We've run out of time. But it's a committee of
1:10:55
Speaker 1: body serves on to make these decisions about the economy.
1:10:58
Speaker 1: The nineteen members he mentioned, I think it was nineteen.
1:11:02
Speaker 1: But before this, I got a call from President Schmidt
1:11:05
Speaker 1: and he said, when we had succeeded in getting the
1:11:08
Speaker 1: Freedman's Bank renamed and under President Obama, I believed that
1:11:15
Speaker 1: was and secretary Jack Lou and it was at my
1:11:18
Speaker 1: urging and it was a bank charter to teach free
1:11:21
Speaker 1: slaves about money. And this man, this great man here, said,
1:11:26
Speaker 1: you know, I'm looking at different things I want to
1:11:28
Speaker 1: do in life. Maybe I want to run the Freedman's bank.
1:11:32
Speaker 1: And there was no Freeman's bank, by the way. He
1:11:34
Speaker 1: was going to go create water help me. I don't
1:11:35
Speaker 1: know what it was, but just the fact that he
1:11:37
Speaker 1: said that, I got so excited I hit my keyboard.
1:11:40
Speaker 1: The fact that he said that says, and this was
1:11:43
Speaker 1: in quiet of a quiet conversation. No one would know
1:11:46
Speaker 1: it unless I told you, that says the world about
1:11:50
Speaker 1: who Jeff Schmidt really is a human case. As we
1:11:54
Speaker 1: wrapped up this episode, can you tell the audience why
1:11:57
Speaker 1: that was so important to you? And why did you
1:12:01
Speaker 1: invite me to speak in the same sentence to your
1:12:06
Speaker 1: banking group in Texas? Something that Bishop Tdjas who was there, says,
1:12:11
Speaker 1: was my greatest presentation he's ever seen me give, and
1:12:14
Speaker 1: it sticks with him to this day about connecting the
1:12:17
Speaker 1: streets to the suites. Why would you bring me into
1:12:21
Speaker 1: this August group of elite leaders, and why would you
1:12:25
Speaker 1: be interested in the banking banking system of the Freedman's
1:12:29
Speaker 1: Bank for former slaves.
1:12:31
Speaker 2: Why did you care so much?
1:12:35
Speaker 3: Oh boy? Well, look, I would say, John, my relationship
1:12:40
Speaker 3: with you led me to really think hard about not
1:12:45
Speaker 3: only the history of banking, but the whole nature of
1:12:49
Speaker 3: capital and credit. As you know, I really believe to
1:12:54
Speaker 3: this day the formation of hope and side and just
1:12:59
Speaker 3: the pure focus of understanding our system and having people
1:13:02
Speaker 3: understand what what a credit score is, which is really
1:13:06
Speaker 3: so much of the fabric of how we do move
1:13:10
Speaker 3: capitol and credit in our day and age, is really important.
1:13:13
Speaker 3: But from a bigger standpoint, you know what it did.
1:13:16
Speaker 3: It introduced me to Frederick Douglas, which really was kind
1:13:21
Speaker 3: of a You introduced me to him, and then you
1:13:24
Speaker 3: introduced me to Ambassador Young. And here again, if if
1:13:28
Speaker 3: I had the dream of a statue in Lafayette Park
1:13:31
Speaker 3: right outside the Freedman's Bank annex, it would be that
1:13:34
Speaker 3: of Frederick Douglas, kind of with one arm around Andrew
1:13:40
Speaker 3: Young looking at the Freedman's Bank. And but think, but
1:13:44
Speaker 3: if in this in this America two fifty, if you
1:13:48
Speaker 3: haven't studied the life of Frederick Douglas, and and and
1:13:52
Speaker 3: where he was and where he went as as a
1:13:55
Speaker 3: true American story, which which Friedman Evening's Bank was just
1:14:01
Speaker 3: a part of an American story. You should and and I.
1:14:06
Speaker 3: And it's a game changer when you think about who
1:14:09
Speaker 3: you are as an American. And if you think you've
1:14:11
Speaker 3: had a tough day, uh, read the life of Frederick
1:14:16
Speaker 3: Douglas and then and then later on the life of
1:14:19
Speaker 3: Andrew Young and and so we're all we all want
1:14:22
Speaker 3: the same thing. We just got to keep working hard
1:14:26
Speaker 3: to make it happen for everyone, uh in our neighborhoods
1:14:30
Speaker 3: and our cities. And uh and I it's part of
1:14:33
Speaker 3: why I do this work. It's a it's partly why
1:14:36
Speaker 3: I love being a banker. Uh and uh and I
1:14:39
Speaker 3: think you've you've helped me grow uh and I'm a
1:14:44
Speaker 3: lifelong learner about the mechanisms we need to make that happen.
1:14:49
Speaker 3: So let's just keep working on it. There's work to do.
1:14:52
Speaker 2: Amen.
1:14:53
Speaker 1: And that respect and love and admiration goes both ways
1:14:57
Speaker 1: to the audience. As we wrap this incredible episode up,
1:15:00
Speaker 1: and it was everything I thought it would be, except
1:15:02
Speaker 1: longer because we needed more time to cover. We probably
1:15:05
Speaker 1: covered half of what we should have, but he has
1:15:07
Speaker 1: been is better than being bored. We were not bored.
1:15:10
Speaker 1: But as we wrap this up, I want the audience
1:15:13
Speaker 1: who are listening to this to wait a week.
1:15:15
Speaker 2: We'll post a video.
1:15:17
Speaker 1: Go watch it, and I want you to see this
1:15:20
Speaker 1: gentleman who is a white male right and looks proper
1:15:25
Speaker 1: and conservative and all that stuff. And if you saw
1:15:28
Speaker 1: him on the street or saw of the speech, you
1:15:29
Speaker 1: might go, I have nothing in common with him. I'm
1:15:32
Speaker 1: not going to approach him. I'm uncomfortable or he's not
1:15:34
Speaker 1: gonna want to talk to me. He doesn't understand me.
1:15:38
Speaker 1: We make these presumptions both ways, white to black, black
1:15:43
Speaker 1: to white, rich to poor, poor to rich, Republican, A Democrat, Democrat,
1:15:49
Speaker 1: the Republican and in between. We make these assumptions. And
1:15:53
Speaker 1: God gave you two ears in one mouth. So you
1:15:55
Speaker 1: listen twice as much as you talk. Be nosy, be curious,
1:15:59
Speaker 1: Go meet somebody makes you slightly uncomfortable. You might be
1:16:01
Speaker 1: pleasantly surprised. I wouldn't. I think I cold called Jeff Shman.
1:16:05
Speaker 1: I don't know how I met him, but we will
1:16:07
Speaker 1: talk about that. Maybe we do a follow up. But uh,
1:16:10
Speaker 1: he was very receptive and My life changed for the
1:16:14
Speaker 1: better because I met this man. And yes, I had
1:16:18
Speaker 1: to do my part. I had to show up and
1:16:19
Speaker 1: I had to and I had to keep my commitments.
1:16:21
Speaker 1: Yes he was going to do my work for me.
1:16:24
Speaker 1: But then he kept his commitments right, and together we
1:16:28
Speaker 1: built our friendship and a relationship and uh and more.
1:16:33
Speaker 1: That has I think done his little small part to
1:16:35
Speaker 1: help him make a country better in this two hundred
1:16:37
Speaker 1: and fifty anniversary. Build more bridges and less toll bridges,
1:16:41
Speaker 1: build more bridges, uh and less and less barriers. Let's uh,
1:16:46
Speaker 1: let's find our way back to each other. President Jeff Schmidt,
1:16:51
Speaker 1: you make me feel proud of this country. Thank you
1:16:55
Speaker 1: for being a walking role model for good and everybody.
1:16:58
Speaker 1: Be very nosy, crowd and pound his website to death
1:17:03
Speaker 1: and life back. I want you to get all the
1:17:06
Speaker 1: information that is there, download the resellers and the tools,
1:17:09
Speaker 1: go to visit his refed and other vents.
1:17:13
Speaker 2: Be nosy. This is John O'Briant.
1:17:17
Speaker 1: This is the Money Wealth Podcast, episode well season three
1:17:21
Speaker 1: on iHeartRadio and Black Effect Network. And you just heard
1:17:24
Speaker 1: Federal Reserve, the Federal Reserve, the COVID FITH President Jeff Smith,
1:17:32
Speaker 1: thank you vid Pleasure, Money and Wealth with John O'Brien
1:17:38
Speaker 1: is a production of the Black Effect Podcast Network. For
1:17:41
Speaker 1: more podcasts from the Black Effect Podcast Network, visit the
1:17:44
Speaker 1: iHeartRadio app, Apple Podcasts, or wherever you listen to your
1:17:48
Speaker 1: favorite shows.