The following is a transcript of an interview with Bank of America CEO Brian Moynihan that aired on "Face the Nation" on June 4, 2023.
MARGARET BRENNAN: For more. Now we are joined by the CEO of Bank of America, Brian Moynihan. Good to have you back here in person.
BANK OF AMERICA CEO BRIAN MOYNIHAN: It's great to be here, Margaret. Thank you for having us.
MARGARET BRENNAN: Well, the, our last two guests talked about the fact that we came to the edge. What do you think is the financial cost here since America's credit rating is still in question?
MOYNIHAN: Well, since I've been CEO, we had the one in '11. We had the one in '13. It's not good for the United States to go through this. It's a political process. It's it's good they came to resolution. It's good it's behind us. And I think that has provided momentary momentum and markets and allows us to face the real economic issues and real debt level issues ahead of us.
MARGARET BRENNAN: Because some of the CEOs of banks have talked about setting up war rooms and doing emergency planning. I mean, how much of an impact is there?
MOYNIHAN: Well, it's because it's over, there was an impact, we were doing all that, we were prepared in case, uh, you know, it didn't come out right. But the good news that came out, right, and you heard your past guests talk about the, uh, coming together in the center and voting it through, which is good. And so now we can move forward, but there's still issues ahead of us. And we can talk about those.
MARGARET BRENNAN: Well, do you think that they should get rid of the debt ceiling as some CEOs have called for?
MOYNIHAN: Well- it- that's a political question. At the end at the end of the day, we need to have a serious discussion about how much debt we can have in this country, how much we could afford and how it's spent and that discussion needs to go on. The debt ceiling triggers certain, uh, debates around it at certain times. It's, it's part of the process of government and whether you're Republican or Democrats have to get together and do it. And we have to be careful that we keep the financial stability and strength in the United States paramount because at the end of the day, if we're not strong, the rest of the world is not gonna be strong.
MARGARET BRENNAN: Well, let's talk about that strength because the Federal Reserve is predicting a mild recession on the horizon. What are you seeing there in terms of how the consumer is behaving and where we might be seeing any kind of slow down?
MOYNIHAN: So the last time I was here was it was the end of, uh, last year and we predicted a recession this year. We moved it out. It's basically third quarter this year, fourth quarter, this year into first quarter, a mild recession. And unemployment gets up in high 4% range, still very low by historical norms. And that's our core prediction. As you think ahead of it, what's going on now is the impact of the Fed's tightening has had, had its effect. So consumer spending '22 over '21 by Bank of America consumers ,4 trillion plus a year was up 9%. Year to date it's up about 5%. In the month of May it was up about 4% over last May. So it's slowing down. That level ismore consistent with a 2% growth economy and a 2% inflation economy, not a 4% inflation level economy, four to 5%. So the Fed is getting the consumer spending level in line. And now you're, we have the jobs report and other things which sends some confusing--
MARGARET BRENNAN: Yeah.
MOYNIHAN: --and ambiguous messages, but the route is the, the activity of consumers more in line with what the Fed wanted because the rate increases and other aspects have had their effect. Quantitative tightening's had the effect.
MARGARET BRENNAN: You just gestured to this, that the prediction of recession keeps getting pushed out. It's basically like economists, keep getting surprised by some of the data out there is the prediction that going into this presidential election year ahead of us, that we will be in the midst of a recession.
MOYNIHAN: You know, I think we're at the point now with the Fed, having tightened as much as it has with the impact of, of the failures of two or three banks which are different than why the banks, but failed the impacts of the Treasury funding has to come forward. The impacts of the environment around us. It slowed the economy down. The question is, is inflation under control.
MARGARET BRENNAN: Yeah.
MOYNIHAN: And right now, you know, most people are thinking and like in 1984, when continental Illinois failed and Volker who was fighting inflation heavy paused, then that maybe the Fed pause and let, let the effects of all this take hold, and let's be seen what happens. But at the end of the day, that has a slight recession or a slight recession.
MARGARET BRENNAN: We're going finish this thought on the other side of the break, stay with us.
MARGARET BRENNAN: Welcome back to Face the Nation. We're back with the CEO of Bank of America, Brian Moynihan. I wanna pick up on something you indicated earlier when you said the Fed had accomplished something, you, you said recently the Fed won the war. Is that the war against inflation?
MOYNIHAN: Well, the inflation's tipping over, but one of the toughest things for the Federal Reserve is the power of the US consumer. And they were, they were, they were employed, they were earning more money and they were spending. And what you're seeing is that's tipping down. That's a key component to actually getting inflation under control. Because if people, if the unemployment's at all time, lows, people are getting, you know, five, six, seven percent wage increases and on a multiyear above the rate of inflation in a one year, not, uh, that, that creates a hard job for the Fed to slow that down, because the US economy is so consumer led, they, they have won that battle. They've won that that battle inflation's tipping over, but importantly you can see the us consumer activity slowing down, which then if you project that up ought to bring inflation down.
MARGARET BRENNAN: With one of the impacts of the banking turmoil, we just went through for lack of a better term, we're hearing about credit tightening up. What are you doing to tighten up lending standards? How much harder is it for consumers to come out and borrow money?
MOYNIHAN: At bank of America, we have responsible growth, we have for a decade. We don't really change lending standards that much given different types of cycles. But just to give you a sense, the consumer credit quality in our industry is very strong. Most of us are reporting numbers now that are below 2019, which is a multi decade low in consumer credit costs. So that's good news. Lending is tightened largely because of two factors beginning late last year, just the feeling that a recession, every, everybody was predicting a recession and going to recession mm-hmm people tend to tighten credit standards, tougher, covenant and things like that. And then the second thing is the disruption caused the capacity for lending to come down, which again is the, as a pulled money out of the banking system and onto the, into the federal reserve it's cash or into the overnight repo facility and deposit have come down part of the monetary tightening, there's less engine in, in the engine room to lend. And so that causes banks to make- be more careful when they lend and who they lend to and how much they lend. And so that's tighten credit standards pretty, pretty dramatically,
MARGARET BRENNAN: And it's more expensive to get a mortgage.
MOYNIHAN: It's- it's more expensive because rates went up when, when the Fed raises rates, they're trying to slow down borrowing cap, uh, capacity. And in the most, house, you know, housing and autos and things are most straight sensitive, come down the quickest. And then things like mortgage loans, most, you know, 90% of consumers are locked into mortgage loans below 5%. So that slows down.
MARGARET BRENNAN: Right.
MOYNIHAN: And so, but home buying and other things kind of bounce around until everybody gets used to rate cycle and then it moves back up. We were in a very low rate cycle for 15 years. And that that's a little bit, what's confusing people.
MARGARET BRENNAN: Are you slowing down your hiring right now?
MOYNIHAN: Yes, we are. Last may. We hired 3,000 people. This May, we hired 700 people and that's due the attrition rate has slowed so much and we need to trim ahead to count. So we'll be down 3000 F-T this quarter. We don't, we're not making layoffs. We're trying to do it by attrition, but even the attrition slowed to half what it was last year. And when I talk to other companies, I get the same input. Depends on the industry. If you're trying to get welders in very specific areas, that's, that's a lot of, that's a tough work on the employment side.
MARGARET BRENNAN: Yeah.
MOYNIHAN: But if you're in a general industry, the employment conditions have leveled back out.
MARGARET BRENNAN: Right.
MOYNIHAN: There's still, still strong for employment, but have leveled out a bit. And that's good news--
MARGARET BRENNAN: RIGHT.
MOYNIHAN: Because again, that allows the, uh, tightening cycle to pause or slow down and let the economy get back under itself.
MARGARET BRENNAN: Brian Moynihan. Good to have you here in person. We'll be right back.
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