John Stumpf, Wells Fargo chairman & CEO, shares his thoughts on where the “purchase money business” is likely headed, along with banking, and the housing recovery. See John Stumpf CNBC interview below.
John Stumpf Video and computer transcript below
John Stumpf Mortgages: ‘Don’t Kill the Golden Goose’
squawk box is coming right back. welcome back. donald stumpf wells fargo’s ceo. we haven’t talked about where you think the mortgage market will go as it relates to the treasury market and the economy. well, as rates increase, of course, refinances will renew us. the $64 question is there enoughbuilt-up momentum in the market is up that the purchase money will recapture or capture some of that reduction. i actually think housing is clearly healthier than it’s been. there the a lot of talk of what happens with gse reform. we saw with corker and warner across the aisle have a proposal out there.you like that proposal? i like parts of it. i’m nor interested in thejourney than the destination. first of all, the government hasbeen involved in housing since the ’30s and americans are inlove with the 30-year fixed rate mortgage. so if you take that asprecursor, i’m not sure it should be. should it be? i don’t know.i know this we can’t kill the golden goose, housing is critically important. the optionality is with the customer to pay us off early. then you think i think have to help liquify or sell. when you look at other countries and banking systems. they don’t have a po. correct. what does that do to the banking business? a lot keep them on portfolio. again, this is unique the largest mortgage market on the planet $12 billion. it dwarves our market. we need a secondary market. some say you can do that. you may be, let’s take incremental stems. so we test and learn. we don’t want to do this in one fell swoop, 20% a year. i don’t know what the destination is? that optionality is key,correct? it’s a great loan for a consumer. i can pay you off army.if rates go to 6% next 84, i can’t go to a customer and say, be i the way, i don’t like this deal any more. right. if the rates go to 2% next 84, i don’t like the deal. what do you think will happento housing rates? i think housing prices will continue to drop.this is a bargain, there are three important this ipgs to boy a house, what do you make, what does the house cost? what is the financing costs? housing is black to 10 or 20 years ago levels, financing is at 50-year levels. it’s a bargain. so if you were born after fine 80, you think 4 sponsors a normal rate. it’s not, my first rate was 8%. my second one is 11%. my parents had like 16 or 17%. yes, so these are fabulous rates. real quick. on the famous or infamous issue of too big to fail, it’s too big to ask. you are worried about a hit. a pretenders.diversifying. getting involved. there has been another billproposed in washington around too big to fail banks. your bank would be included around capital pharmas and other things.where is that debate an where do you stand on what needs tohappen still? first of all, my.is the i don’t think any kane if anyindustry especially bafrging should be too big to fail? do you think banks today are too big to fail? it can be unwound in a situation where the economy is falling apart at the same time? i don’t know if are you talking about ten at the same time, let’s talk about the episodic where one company goes off the rails, if the way youing will at the legislation title one, title two paragone, frank, the enkrossed liquidity and capital and debt holders should be at risk. you put it altogether in a pot, you got 30 or 35% coverage. so and that’s the key here. everybody ought to take a haircut. i get it in a one off situation that would work. i wonder if it works in 2008. again, then i don’t know working with 100 banks is better tan working with 10 or 4 or 5. so i’m not saying that, you know, i guess what i’m saying is that if you look at the one off or even two off, the key is, i think there is processes, you know, in place today, legislation and other things that have made that a very unlikely event and an event that i don’t think would impact taxpayers. john stumpf thank you for coming in, a whole hour early. this is mac95 sent. this is like the easiest hour of my day. you guys get paid for this.shocking? it is shocking. we are not having the ploy i don’t see you have. team members. team members. i know, okay.whatever. john, thanks. my pleasure. when we come back, we will
Fed’s Move Will Not Remove All Volatility: Expert
John Stumpf, Wells Fargo chairman & CEO; Gary Stern, former Federal Reserve Bank of Minneapolis president, and Alfred Broaddus, former Richmond Federal Reserve president, provides perspective on how the Fed has dealt with the nation’s economic problems and its impact on Capitol Hill.
it deals with cisco in the future. let’s get back to our fedconversation, we have been talking about tapering. former fred al brottus here and minneapolis gar stern is here and our guest host is wells fargo chairman ceo john stump. leave liesman asked about it, how devastating is it going to be to watch the fed make this transition? and, al, i know you already mentioned a little bit you think there is going to be volatility around this, do you think that is going to be devastating amount of volatility? i don’t think it has to be devastating and i don’t think it has to be ugly inevitably the first step which i think you can argue occurred yesterday was going to get a reaction. but to me, and you may have continued volatility to some extent. i think the key is for the fed to keep the public as fully informed of it can of what it’sthinking, of what its own uncertainties are and where it will go under certain circumstances. i think what the chairman said in the chair conference is a step in the right direction. it’s not going to eliminate all volatility. it can help to moderate and keep it contained. i think al is exactly right on that. this has to happen.we want to get back to normal. it’s not been normal t. fed hasbeen very accommodative and, you know, think of it. we’re four, five years into this. when is this going to start to ppen? it sounds like you think we have began to little too long. well, you know, i’m not a big fan of this much accommodation this late in the game, because i think the benefits from it. the effectiveness is not there. it’s not there, also it helps mask the things that should be happening on the fiscal side. so, but this is going to happen, one of the impacts of qe, it reduce volatility. you expect to see volatility. so people will overreact on the upside and the downside. we said we all know it’s in the future. it’s looming.knowing something is coming is like knowing you will get ashow. we’re all waiting for it. it would be nice to get it out of the way, wouldn’t it? you would think people would position for. you know. i think the fed has worked very hard to try to containvolatility. they won’t succeed for one very obvious reason. the incoming information on the economy and global developmentsand so forth won’t be entirely consistent with what the chairman said yesterday. so there will be positive and negative surprise along the way. market participants will react and guess how does that affect the fed, et cetera, et cetera. that’s the environment we are in. that’s the environment we have been in for quite some time, really. john, let me ask you one morequestion. yesterday, i was listening to bill gross. after the statement had come out but before the chairman had actually moved and started his xramps, he was talking about where he thinks rates will be at the end of the ten year, i think he hopes they will be lower than now, closer to 2%. what do you think? i don’t know i have a better crystal ball than he does. i do afree with this, this won’t be the low outer mark today where we are at the ten year, whatever. i haven’t looked at it. i think it’s 2.4, or 2.43. we could visit the low 2z againment i think we will seeagain more volatility on the upside, gary is right, all theeconomic information between now and we are done is not going to be the same. you alluded to this idea the way the fed dealt with this is mass the hard decisions. the question has become a second or third-day story, what is the implication you think washington at large when it comes to actual fiscal policy?well, they have a lot of things to do. i think, working on immigration is an important thing. it’s hopeful. does this change that equation at all in. i think it could. i think it could.now, more of the focus will be on washington. we need a deal.you just heard john chambers talk about taxes. the tax policy in the u.s. at minimum should be neutral to job growth here at best it ought to be positive for job growth here. it is not today.you know, we’ve had a lot of changes, a lot of regulatory things going on. so we had a lot of things that we can, you know, maybe now focus on, work together, cross that and that will be important. who will be the next person at the fed, gary? next chair in. yeah. well, i think there are a number of capable candidates. i think one of the criteria besides who is up to the yob is who can get confirmed. among the people that can getconfirmed in my opinion are janet yellen, john coen alanblinder. allen blinder? you asked me. let’s ask al. i didn’t hear tim nightner on larry somers. i think larry somers, my ownpolitical analysis, that’s not my strong suit, larry would havetrouble getting confirmed. tim i’m sort of guessing would like to retire from public policy. allen blinder, who do you think, al? i think gary is right that who can be confirmed is going to be a big consideration. i think janet is one of those people, i think janet is generally at the moment seeing as of the front reasoner, she’s, you know, i think the betting is in that direction. it’s understandable. gentleman thanks, great
What’s the Fed’s Next Move?
CNBC’s Steve Liesman; John Stumpf, Wells Fargo chairman & CEO; Gary Stern, former Federal Reserve Bank of Minneapolis president, and Alfred Broaddus, former Richmond Federal Reserve president, share their thoughts on how the Fed’s tapering process will impact the markets.
can control zero. what did the banks do, they probably sold off, too. ? a little bit. it’s better for the for the banks. what’s best for us is the economy does well. if rates rise because of animproving economy, even though some business might bedisadvantaged in the short run, we really are the success of ourcustomers. that’s what we want. good news is food news. good news is not bad. if the yield. al brought us. yeah. where is he?he’s on the remote. you are gary stern, all right. i should know all you guys. now i recognize you, former minneapolis fed president gary stern here. and also al brottus. nick faldo? i’d like to be? 6’3.5. you are listening, should he be the senior economi reporter here in. i really think he is pretty capable. not yet there. the potential. is this the — i was, this is sort of a bit of a nerm term nant point it goes to sort of where it should be six months from now, the 10 year and 30 year? i thought this was all surprising. the economy has been getting better. the outlook has been getting better. the fed acknowledged that. the fed acknowledged that that affects when they’re going to begin tapering and the path of tapering and all of that. and it all seemed to me to be mostly unsurprising. now, obviously, you got a big market reaction and i’m not sure that’s all bad either, quite honestly. you know, everybody knew rates were going to go up at some point. do you think there is anyone sitting on a position that’s problematic right now that it would be anything, obviously, it’s not going to hopefully spread to other sectors.there could be some places that go under from this, do youthink? are there dislocations? are there people on the wrongside of there? oh, without question. that’s what makes markets,markets. people place their bets and sometimes they get it right, sometimes they don’t, if you get it ride, you get rewarded, if you don’t, you lose money. do you see people rushing for the door at the same time? could it get out of hand at this point or do you think this would be orderly? well, i think there is alwaysa risk in a situation like this of some volatility. it’s hard to believe that we’re going to make the transition that has to happen at some point in the not too distant future without some volatility. i guess, i would say, with respect, let me first say i agree that steve liesman is quite comp ten. oh, exactly. on courage point, he’s right, it’s not surprising, but i think for me the really q3 thing is the fact that the chairman laid out a situation, namely, theirforecast and said, look, if we get something like this, this iswhat you can expect from us. it reduces uncertainty at least a little bit. the uncertainty is down a little bit. it doesn’t change things a lot. there is still plenty of uncertainty out there. i think it’s basically a constructive step and i was glad to see it. you didn’t hear my weekend’s argument in my report there, which was really your argument, that we shake out yesterday themarginal buyer who didn’t believe in the consensus, so youwere making the point in the last hour, ultimately, worry not that far down, what did you say, a couple hundred stock markshere. will you have some blood in the bond market that everybody expected. you don’t notice, by the way, by looking at the blood bath or what is happening there. the losses to the extent guys are hedged on the other side. before you came on set, you were talking about something i to the was fascinating which is this idea you had ben bernanke out there. it mubarak consensus or the view, but it seemed to go a little farther than what was seen in the actual policy state and, therefore, how does that work? it’s really cool both gary and al are here, they can comment on this let me just say what happened the fed chairman this his statement talked about a consensus of the committee for how it would react where quantitative easing if the forecast comes out. now, that was not policy, so to speak.the first question i asked was not the within i had hoped to ask.i had to ask it because it was new process. they’ve never done that before, gary. now, if you want to comment on this did you hear what he said? do you know what that was that he was talking about? is there a new way of kind of setting policy here?i really don’t think, i think he was sighing it straight, steve, when he said there has been no change in policy. i think he really manet that. what he is trying to do is you know policy includesexpectations of what will happen with quantitative easing and the certain circumstance. and you had a statement about that in the last statements. what he did was to make it more precise.he was trying to i think make it more ro bust and informative. i think it’s fair. i do think there is some specificity. i would say he was being more explicit about the conditionality. that was the way i took it. and, you know, i think there has been sentiment in the market to try to get that step taken, that is for the fed to be more exexplicit how they aring willing at the world, what thetiming might be. what the key variables. i think that was a step in that direction. do you think it was serendipitous that he can start tapering before, apparently, he’s leaving, or was itsomething he is doing because he has to do it. you couldn’t get it started before you left, would you? depending on conditions, joe, i really do think. they’re luck years it’s their serendipity they got better. that’s right t. key element here, i think this has beengoing on a while the fed has now acknowledged it. if i think about the economic developments over the past 12 months or so. most of the surprises have been positive. they haven’t been huge, but they’ve been positive. a done deal that he’s leaveing?is it a done deal he’s leaveing? i think there are lots and lots of indicators. what did you think of the interview of charlie rose with the president? well, i think some of the reaction to that was exaggeration. not by the media, which we would never do.al, do you think that we jumped on that a little bit? i love that line, it sure has staled. it was supposed to. whoa, man, has he screwed things up. that’s not what he said. you can read that into it if you are looking. the ned e media, you are overdock it.what do you think, i’m not the media? he exaggerates for a living. he gets paid for exaggeration. go ahead. the hype. you know, on the rose interview, i wasn’t fair to listen to whatever private conversation the president bernanke had, but as i’vewatched it, i gentleman i think that probably ben bernanke saidsomething to the president that made him comfortable that saywhack he did. yes. would not not, was not insensitive, so that’s the sort of the way i read it. at the same time, it certainly seems to me that given all that ben bernanke has gone through the contributions he’s made to the country and through theeconomy throughout the crisis, sure, i don’t agree witheverything he’s done, i doubt everyone does, by and large, it’s a good record. it would be good to have a formal sex where he gave it praise, reviewed his record and said, thank you, we’re not going to move to find your saysors. he’s been, we aren’t allowed to talk about times he may have been around somewhere off the record and stuff. i can just tell you and therehave been a few times i have been around. my impression, he was not doing this for the power and glory of the office at all.three or four years ago, one of his quotes was, i think i said what if this happens and this and you will get this. he said, welcome to my life. that’s what it means to be me. he more or less — the most humble least assuming guys that i’ve met. i totally agree with that. i think he’s been a very good fed chairman. can i ask very quickly, i don’t think you can, they’recoming back, right? we are coming back. my question is whether or not we will tease this to break the idea that greenspan said this is going to be ugly. i want to know if stern, if gary and al think this exit will be ugly. there is a limit to that. we may have hit the term nant
Markets Read FOMC Negatively: Expert
David Blitzer, S&P 500 Index Committee chairman, and Carl Riccadonna, Deutsche Bank senior economist, discuss the impact of the Fed’s expected tapering process on stocks and bonds. And John Stumpf, Wells Fargo chairman & CEO, weighs in on the housing recovery.
i have no pity for them. anyway, eunice yoon, thank you. joining us is david blitzer and you’re on the set of rikidonna. i named that. am i not right about that? is anyone totally blindsided bythis? the bond side might not stay there? absolutely. there’s the china story that eunice was discussing. if any global economy is not good at — just spend. we’re pretty good, too.we’re definitely in second place. china through the globalfinancial crisis put the pedal to the medal. yesterday from ben bernanke we see that the era is coming to an end. is the market so big that people can be expecting it but they still have these overs positions and the door to get out is so small that there will be dislocations with even these tiny moves? well, certainly the u.s. treasury market there’s enough liquidity that i don’t think the door i small. right. as we’ve seen in the jectestimony, people get caught on the wrong side. i had no idea.then they’ve got leverage. there could be something that would blow up. here is the 30 year which cramer’s tweeting about.massive correction there. when do you think you really pull the punch bowl? doesn’t even matter at this point. here’s the point, bernanke mentioned that maybe they’ve been too optimistic. my concern is maybe they’re not optimistic as much. we’ve been stuck in this milk toast sluggish economy since the end of the recession. if this looks like the typical economic cycle, we could be shifting to 4% growth. i think the time line will be more compressed than what bernanke told us yesterday. he suggested it could be mid next year. watch the economic data.look at a calendar. watch how the data ve. i think the data could actually evolve in a stronger fashion and maybe the fed’s going to be — there are going to be a lot of doubters. paul krugman was blogging at 3:30. yeah, i readhe — he tweeted at 3:31 in the morning and i read through the entire thing. 24 hours a you don’t read what he blogs. it was interesting. i wanted to know what his argument was going to be, and he does make a good point that when you look at the number of people who are employed verse — the percent of people who are employed versus the percentage of people unemployed, it’s taking a huge downturn. maybe some of that is because people are getting older but not a lot of it. these are the labor metrics that bernanke is pointing to. the one america understands is the unemployment rate. chairman bernanke talks about the employment ratio and people throw their hands in the heir and say, this is something we can’t forecast. on a month-to-month basis you can’t forecast it. over a longer period of time they pull the larger participants in and you see them all move in a direction. dragging. david, you’ve been listening, what are your comments after you saw that testimony yesterday? well, ink the first thing that happened was everybody was wishing for him to say, forget about may, i was just kidding, and calm the markets.obviously that’s not what he did. so i think the immediatereaction was a huge amount of disappointment. i don’t think the fed is at this point overly optimistic. we’ve been looking for the same gradual improvement we’ve been trying to recognize for the last year or two. i think there is a chance it does a whole lot better than we currently anticipate. if anything, it reminds me ifyou go back to the 1993, 1994 when everybody was shocked athow fast the fed, greenspan, was raising rates. that time it was raising the fed’s funds rate, and it did have disastrous activity in the mortgage market and the treasury market, of course, for the stock market, then you had probably the five best years in anybody’s memory at that point. so, you know, i wouldn’t reallyworry about it being too strong. in fact, i’d love to have thatproblem. d anybody who says inflation, i’d suggest they forget that. yeah. i want to get through this. when it happened in may i was hoping it would be june. i knew that was probably going to be too soon, but, you know, most people thought next year itshould be this year. we get lulled into this so quickly, david, that 85 billion is normal. when he first said it we had people in here just could not find the words to describe what 85 billion a month forever meant. it was such a huge tool. suddenly when we take about going to 60 billion a month people think that the world isending and it made no sense. i think everybody always reacts to the fed that way. either they love it because they think — the internet. — or they hate it because they think it’s going destroythe world. yeah. maybe we should have a moment to feel sorry for the fed chairman, whomever he is the next time around. or she. yeah. all right. but — and i’m heartened by where the s&p is and where the dow is. 244 on the ten year and we’re still above 15,000 so you knew there was going to be among these traders that are so short term and that all they care about is that the punch bowl stays full with lots of like grain alcohol and the slightest thing happens, you just cut down the proof on the booze and they’re already starting to sell. but, you know, now i think it’s pretty clear what he meant, and i think he tried it, too, inmay. t was a balloon. it was a balloon. right. and your argument yesterday, that it worked. yeah, it worked. it was a surprise from a lot of people. andrew, we talked about it may 22nd and a week later i said what was that date? because we need to write that date down for the date when this — the beginning of the beginning. the beginning of the beginning. the fixed differential. i didn’t believe it, i have to admit. i was not a believer. in the beginning, like they always say, when he comes on today, we’ll ask him that. what is that tenant that traders, once they see the beginning they discount it to the end. yeah, it goes straight towards where it was. considering the reason that they do this is positive, we should look beyond some of this near-term stuff, right? well, part of it — you hope the sfed is right and take it from there. yeah. yeah. part of it is tapering on a healthy economy. the other part of the story is the treasury is likely going to be reducing issuance into the back half of the year or at the latest by q4 or q1 of next year. the sequester growth means that we’re simply borrowing too much. if the fed is purchasing the same amount and the treasury is reducing issuance, that alone is actually becoming moreaccommodative, not less accommodative. we need the prospect of dancing. i’m looking at john stumpf. we should bring him up. housing market is getting better. he’s over here like a prospector. he is here. yeah, he’s right here. turn around the camera. right? he’s right there. you don’t want to — why don’t you come up. pull up a chair. we’re flexible. good morning. good morning. get a mic on. i’ll give him my mic for now. here. go. in fact, housing is the difference. housing is the difference everywhere. housing has always played aleadership role in every recovery. it’s been absent so far but it’snot absent now. there’s a woody allen movie where he’s talking about what marshal mcclewen said. woody says that’s absolutely wrong and marshal said he wouldn’t say that. he said, yes, he would. and marshal walks up and says, woody’s right. we were talking about what john stumpf said and he walks away. there you are. this was different? we saw this coming 18 months ago. we do 400 different nsas in 20. we knew it was happening at a very granular level. it continues to get better and in those markets one of the biggest hits came by the biggest recovery. you look at arizona, the sand states, florida. miami. we talked to someone who is in the condo business. yeah. condos in miami. nevada. did you know may — you deal in nevada. yeah, nevada doesn’t have many houses.did you know on may 22nd this was the beginning of thebeginning? no, i didn’t. how come you didn’t? we knew here.and one of us got it right. i got it wrong. i didn’t believe this was the beginning. it looked like a flubbed response. it was very good testimony. am i in trouble? we got the ceo of wells fargo.