The following is a transcript of an interview with Bank of America CEO Brian Moynihan that aired on “Face the Nation with Margaret Brennan” on August 11, 2024.
MARGARET BRENNAN: We now welcome the CEO of Bank of America, Brian Moynihan. We’re delighted to have you with us.
BRIAN MOYNIHAN, CEO, BANK OF AMERICA: It’s a pleasure to be back. Margaret, it’s great to see you again.
MARGARET BRENNAN: I’m glad to see you. This week, we’ve had a lot of turbulence in the financial markets and some nervousness. We know that both presidential campaigns will be laying out their vision for the economy in the coming days. So I hope you can give us a sense of where American consumers are right now.
BRIAN MOYNIHAN: Well, in our consumer base of 60 million people who spend every week, you see that their spending growth rate is about 3% this year compared to last year, for July and August so far. That’s half the growth rate of last year at this time. So the consumer has slowed down. They have money in their account, but they’re running out a little bit. They have jobs, they’re making money, but if you look at it, they’ve really slowed down.
So the Fed is in a position where it has to be careful not to slow down too much. Right now, its spending is comparable to 2017, 2018, and 2019, with lower inflation and more normal economic growth.
MARGARET BRENNAN: I read in one of your reports from Bank of America that you just alluded to this increased price sensitivity and the shrinking of savings accounts. That suggests that people aren’t making enough money and so they need to invest in their savings. Is this all just inflation putting pressure on?
BRIAN MOYNIHAN: If you look at the different segments of earning power, the answers are somewhat different. But if you look at the big picture, a lot of money has been moving out of checking accounts and into vehicles that pay higher interest rates. They’ve cleaned up because interest has gone from 0% to 5%. And so if you strip that out, people who had accounts with us in January 2020, before the pandemic, still have a lot more money in their accounts, even adjusted for inflation.
The problem is that the price has started to come down, which indicates that consumers are using that money to maintain a lifestyle that is not that unusual in the summer months, really, because of travel and vacations and all the rest of it. And our consumers are spending money on those kinds of experiences. But if you look closely, they’re still eating out and they’re traveling, but on the other hand, they’re spending a little bit… They’re going to the grocery store as many times as they’re spending a little bit less, which means they’re basically finding bargains and things like that. And you see businesses lowering prices to respond to that. That’s the way the economy works and it’s slowing down, and that’s where we have to be careful, because we’ve won the war on inflation, it’s come down. It’s not where people want it to be yet, but we have to be careful that we don’t try to be so perfect that it puts us in a recession.
But our team is great, Bank of America Research is no longer predicting a recession. This time last year, it was a recession. This year, we said it’s no longer a recession. And basically, they’re saying we’re going to grow 2%, one and a half percent over the next six quarters and we’re going to kind of maintain that growth rate more or less…
MARGARET BRENNAN: — And they’re betting that in September, the Federal Reserve will cut interest rates.
BRIAN MOYNIHAN: Yeah, and I think the market consensus is that there’s actually going to be more rate cuts than our team is anticipating. We have two this year, in September and December. Four next year and two next year. But I think one of the concepts that you hear a lot, Margaret, is higher rates for longer. The reality is that our team and most people think that we’re going to have the federal funds rate at 3, 3.5%, which is very different than what people have experienced over the last 15, 17 years. People who came into business in 2007, 2008 didn’t experience this type of interest rate environment. So we’re getting back to normal, and it’s going to take some time for people to adjust to that. Both on the corporate side, the commercial side, and the consumer side.
MARGARET BRENNAN: I’m not asking a political question here. The Federal Reserve was created by Congress to be politically neutral. It’s to be concerned with employment and price stability. Last week, Donald Trump was asked whether, as president, he could manage a soft landing for the economy with the current direction of the Federal Reserve. Here’s his answer.
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FORMER PRESIDENT DONALD TRUMP: I think the president should at least have a say. Yes, I do. I think in my case, I’ve made a lot of money, I’ve been very successful, and I think I have better instincts than, in many cases, the people who sit on the Federal Reserve or the president.
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MARGARET BRENNAN: Fed Chairman Jerome Powell was appointed by Donald Trump and continues to serve. But what he’s talking about now is that politicians are influencing or overriding economists in setting the federal funds rate and interest rates. What would be the implications of that?
BRIAN MOYNIHAN: I think if you look at the economies of the world and you see central banks that are independent and free to operate, they tend to do better than those that aren’t. So I think that’s kind of the American way. It’s been that way forever. Does that prevent people from giving advice to Chairman Powell or others? No, I give him advice. So we all give him advice. So I think he should be careful, you know, when he goes up and does the Humphrey Hawkins, he gets a lot of advice about where rates should go. So there are a lot of people who have opinions on this, but their job is to sort through it and say what’s best for the American economy on those two dimensions that you talked about and be consistent.
Brian Moynihan, who advises, thinks we need to be more cautious than just starting to lower rates to get the sense that there’s light at the end of the tunnel. They’ve told people that rates probably won’t go up, but if they don’t start lowering them pretty quickly, it could demoralize the American consumer. Once the American consumer starts to have very negative rates, it’s hard to get them back. And on the commercial side, the higher rate environment slows down commercial growth, so businesses aren’t using their lines of credit. The middle markets, the small businesses, have been regressing in using lines of credit. So why aren’t they using a line of credit? Either there’s an opportunity, or the cost is high, or both. And right now, that’s kind of what they’re worried about going forward.
So I think it’s time for them to start being a little more accommodative, to lift the restrictions and let the situation calm down. I give them advice. Everybody does, and I think a strong central bank has to take all that advice and internalize it.
MARGARET BRENNAN: It’s not uncommon to hear populist ideas in a political campaign. But I’ve heard Jamie Dimon of JP Morgan and you at Bank of America express this concern: When you send people checks, as we discussed with J.D. Vance, when you talk about not taxing tips, as both campaigns are doing now, there’s still the difficult question of how America deals with the debts and the deficit that it already has. Those discussions are just not happening. What’s the cost?
BRIAN MOYNIHAN: I think the cost is not that high right now. There is a mathematical cost. When interest rates go up, the cost of debt goes up for the federal government, as it does for consumer businesses. So that hurts the economy because that money could have been used for other things if they hadn’t borrowed so much. The second question is, has there been more stimulus than necessary to deal with the COVID problems? The answer is yes, according to most economists. Multiple stimulus. So let the system work itself out. That’s what’s contributed to inflation, and that’s happened under both administrations. But the third question is really about debt management. And ultimately, about 15 years ago, the Bowles-Simpson Commission came up with ways to do that. The idea was to raise taxes.
The answer to the business community is, if you’re going to raise taxes for what? If you’re going to do it to pay down debt, you know, individuals and businesses would probably say, I get it. We had to fight a war against Covid. We won the war. Now we have to move. But we can’t just raise taxes and things that don’t really provide a product, for productivity or, frankly, to help manage debt. And that’s a concern that people have that’s going to become a high-level political battle here in the coming months.
MARGARET BRENNAN: We’ll certainly talk about that as we get closer to 2025, as some of these tax policies expire. Brian Moynihan, it’s a pleasure to have you with us.
BRIAN MOYNIHAN: It’s always a pleasure to be here. Margaret, thank you.
MARGARET BRENNAN: We’ll be back in a moment.
