Stopping Poor Financial Decisions with Former FDIC Chair Sheila Bair

27:53As a matter of fact, I am not. You know what? If you want to – you want to buy a stock in KKR, go for it. You might check how it's been performing. And actually, I don't know how it's been performing. But I'm just saying, if you really want exposure, there are publicly traded ways. BDCs now, there are publicly traded BDCs. There are public ways to do it. There are some funds, 40-act funds, that do invest a small percentage in alternatives, too. So there are ways now. But yeah, opening it up directly for retail, especially 401ks, to start loading up on this asset class, I think is really problematic.

28:29And I do worry that the plan sponsors, the fund sponsors, the 401k sponsors are going to be getting the hard sell about putting this stuff into people's 401ks. And again, I don't think retail – I know I don't. I don't want exposure to it. I've read enough to make me really worried about it. So I think really sophisticated big institutions, which have traditionally been their investor base, they want to do it fine. But no, it's not right for retail and it shouldn't be going into 401ks. And I'm, yeah, I'm very worried about that. And to put some numbers on what you referenced about the performance, the median alternative funds doesn't do all that great.

29:12It's not that diversified and it doesn't outperform the S &P 500. Hey, if you're lucky enough to get into a top decile fund, you're going to kill it, but it's going to take a couple hundred million dollars. Yes, exactly. To have access to that. Yeah, the retail people are not going to be getting the creme de la creme on this. No, that's – and that's a huge issue. They're going to stuff the riskier stuff into the 401ks. It makes a lot of sense. So we've talked about everything but too big to fail, which was a big part of the lead-up to the financial crisis and how the Fed, the FDIC, everybody dealt with it afterwards.

29:52As an example, JPMorgan Chase now has over$4 trillion, with a T, in assets. Can a bank that size be effectively regulated? Is too big to fail the norm now? Oh, I think so. It absolutely is. I mean, I worked hard in Dodd-Frank to come up with, you know, to instill more better authorities to put these large institutions into a resolution-type process where you would impose that accountability. You could fire the top management, the boards, make the shareholders and bondholders, unsecured creditors, absorb the losses, all the stuff we didn't do during the crisis. You mean normal bankruptcy rules.

30:32Yeah, exactly. It was similar to the FDIC process, which is basically a bankruptcy process. And Title II and Dodd-Frank provides for both the Title II mechanism, which is FDIC run in a bankruptcy process, a Title I process. So the tools are there, but I don't think there's any – I hate to say this, but I don't think there's any chance they'd ever use it. I really don't. I think they're going to bail out again. They already do. They'll set up special lending facilities or ratchet interest rates down. You know, private equity. So actually, I worry more about private equity than private credit because private equity funds are heavily exposed to software companies, which we don't know how that's going to shake out.

31:14But there's quite a bit of concentration there. So, you know, so but if that sector gets into trouble, you know, the Fed will lend to the banks who can then lend to the funds. I mean, that's that's just the way I think it works now. And I think a lot of the push for ever more deregulation, lower capital rules is based on the assumption of the big bank lobbyist that they're never going to go down. There's another kerfuffle, another problem. The Fed's just going to open up the spigot again. So, you know, why should they have to operate with all this capital when they can lower their capital and get much higher returns in equity?

31:47And I do think that's the unspoken rationale because it doesn't make any sense otherwise. Because we've got a lot of uncertainties in the banking system right now to be lowering capital. Makes no sense unless you're just banking on a bailout if things get dicey. Let's talk about a financial crisis that really has gotten a lot of short shrift given everything else we just discussed, which is the student debt crisis. We've seen just an explosion of student loans. It was briefly and defaults. It was briefly put on pause during the pandemic and right afterwards. I just saw a survey earlier today that said 83 % of young people say this is a bad economy, when by most historical measures, it's a booming economy.

32:42So how did we get here? Why is it so difficult to fix? What is a potential policy solution to the student debt crisis? Yeah. Well, and I think the headline numbers are in this K-shaped economy. I think the headline numbers can be can be misleading because you've got to look at how all that wealth is being distributed. But I think for student debt, I will give credit to the Trump administration in Congress, the BBB, the big, beautiful bill. I hate that name, but it had some really important reforms to the student loan system. So they've dramatically simplified the repayment options. There's now a standard plan and one income based repayment plan.

33:20And they have imposed some accountability on colleges, which desperately needed to be done. And so it's easier to kick colleges now with high default rates out of the loan system. They have gotten rid of negative amortizations. One of the frustrating things about student loan borrowers was that because in previous administrations, the repayment plans that were based on a percentage of your income were set so low that people were even – some of them were paying zero. Because you had to earn a certain amount of money before a loan payment obligation even kicked in. But what happened was, for bookkeeping purposes or whatever, they would negatively amortize the loan.

34:01So all your unpaid interest was going into your debt principal, and it was getting bigger and bigger. Just recapitalized forever. Even if you were making some payment, you got frustrated because your debt was getting bigger and bigger. That's all gone away with now. Negative amortization has been abolished. Everybody has to pay at least$10 a month. I don't think that's unreasonable. If you got a loan from taxpayers, even if you're struggling, you can pay$10 a month. And then there's – and then – so if that payment is so low, if your income-driven payment is so low that you're not covering your interest, the government will pay$50 a month to lower your principal.

34:40So as long as you're making at least$10 a month, your principal will go down each month. And I think this will be simpler and will provide better incentives to make loan payments, keep up the loan payments, because you'll actually be able to see the principal going down. So I give credit. And in full disclosure, my son, who's a fellow at the AEI, was also heavily involved in this. So he's a chip off the old block that we think alike when it comes to student. Yeah, simplification, more accountability. And those are the things that this bill accomplished. So I'm hoping that this gets straightened up.

35:14And people are having to pay now. But the transition to going from not paying for years, you know, and Trump did that, too. We had this three or four year long moratorium. People are going to have to pay now. It's going to hurt. They haven't made room in their budget for these loan payments. Well, ten dollars a month isn't it's not huge. No. Right. And if the government is kicking in 50. Yeah. I mean, it's not a ton of money, but it's still six hundred dollars a year. Have we done enough to resolve the student debt crisis or what else can we do to move this along? Yeah. Well, I do think there needs to be more accountability for colleges to assume some of the losses.

35:52The schools themselves. Yes, the colleges themselves. Because this was the classic misaligned economic incentives. So with the best of intentions, the Congress said, OK, from now on, all the student loans are going to be made. Pretty much all of them are going to be made by the government because we're worried the banks are not treating borrowers as well as they should. So we're going to be doing this. And then the colleges themselves will basically originate the loan. So you apply to a college, and the college financial aid office will come up with a financial aid package. And they will calculate how much you need to borrow to go to their school.

36:26Well, now, what are their incentives? They're going to get the money. You're buying for a tuition, room, and board. So they're going to get the money. They're not on the hook if the student can't repay the loan. So what do you think is going to happen? And what happened exactly is you could have predicted it. Inflation, you know, with tuition, you know, many multiples. Nine percent a year for 40 years, 50 years. For whatever, yeah. So tuition, as any parent knows or student knows, has skyrocketed, become very unaffordable without borrowing. But, you know, there was all this easy money. And the undergraduate is a problem with the graduate schools.

37:04You know, a lot of young people then sold a bill of goods to get a master's or a Ph.D. because they're unlike undergraduate loans. There is some caps on your federal loans, but no effective caps. That's been changed now, too. There are some caps. Thank goodness. On your graduate and professional schools, you know, so somebody like me, oh, I'm going to go get a Ph.D. in philosophy so I can teach. Right. So I pay$300 ,000 to get my Ph.D. in philosophy and get a job maybe paying 60 ,000 a year at some small college. Well, that makes sense. But I think that's happened to a lot of people. And I don't think, you know, I don't absolve the borrower either.

37:41They should have known better. But the schools let this happen. These graduate professional schools can be real moneymakers. They are the graduate schools in particular, real moneymakers for colleges. And the degrees are frequently do not enhance the earnings potential of the student. So do you have any hope that students are in a better shape financially going forward? Or is this still very problematic and need more help? I think things are getting better, and a lot of it is something else that the first Trump administration did, which Biden continues and the current Trump administration continues, is to publish postgraduate outcomes.

38:15So you can go on College Scoreboard now and put in a college and a degree that you may be thinking about it, and you can see what the graduates are actually making. And you can find out the graduation rate. You can find out the retention rate. You can find out all sorts of information that will tell you, is that college graduating students and are they getting good jobs after they leave? And so I think more and more parents and student advisors, high school, college advisors are using those tools. There are more calculators, too, that are based on to help you figure out how much you can borrow based on what your postgraduate income will likely be in that field at that college.

38:53So there is more awareness. And then I think a lot of, you know, ironically, this is coming back to bite a lot of the colleges now because I think it got so expensive. People are starting to take a second look. Well, do I really need to go to college? You know, for so long, there was all this social pressure to go to college. I was a college president. I've taught a university. I think it's a wonderful experience, but it's not for everybody and you don't have to do it. And there's no stigma if you don't do it. You know, you might want to go directly into the workforce, learn on the job. You might want to go to a trade school.

39:22There are community colleges. You've got to be careful there, too, but many of them provide really good education that's less expensive and a shorter duration. So I think students and their parents are also thinking more broadly that they don't have to go to college. There may be other options available. Last question about college and education. We have thousands and thousands of universities and colleges. Do we have too many? Yeah, probably. I mean, are we going to lose 10 or 20 percent of the college base over the next decade? We probably will. And I think the part of it that's really, really struggling are the private liberal arts schools.

40:05And they became too pricey. And I think that's sad because I used to be the president of one of those colleges. And I think they do offer very special educational experience. It's a very, you know, it's more high touch. It's more, you know, for some, you know, going to college when you're 17, 18 years old can be pretty traumatic. You've never been away from home, you know. And so some students, that small, intimate college environment was a good option, but they're really struggling now. And so I think we'll still have them, but I think there'll be a lot of consolidation there. And then it's the weaker schools.

40:36You know, if they're not proving their worth, they're going to close probably. Really, really fascinating. So you went from writing a crisis memoir for adults to totally the opposite direction, basic financial literacy for children. What made you decide to aim in between young adults and teenagers? Well, actually, it was my editor who, you know, everybody, when I first started running the picture books, everybody said, oh, this is too, you know, elementary school children are too young for this. And they're not. They absolutely, and the books have sold well, and they totally get it. But my publisher, everybody said, you need to write a book for teenagers.

41:16And my publisher thought that was a good idea as well. And so I thought about it, and I thought, yeah, because, you know, there's more and more financial education being required in high schools. And I want, I'm concerned that as schools start offering these courses, that there's, you know, good quality, accurate content. There's a lot of people out there providing financial, you know, a lot of people on social media, a lot of curricula, you know, sponsored by industry groups. And so I thought, well, you know, I'm going to I'm going to throw my hat in here to try to provide some basic financial advice to teenagers as they're entering adulthood.

41:49So that's that was the I will have to say my my publisher's initiative. But I think it was a good idea. And I'm pleased with the way the book came out. So I'm glad you brought up social media. Gen Z and what's the new generation after them? Generation Alpha? Someone said Generation Jones is another one. I can't keep up with it. But they all seem to get a lot of financial advice from Instagram and YouTube and TikTok rather than, let's say, more professional experience folks. Right. How did that impact how you thought about reaching this age group and how did it shape the tone of your book? Yeah.

42:33So it was I did want to get some accurate information out there because there's a big theme of this book is, you know, I say in the introduction, building wealth is not hard. You need to establish a regular saving investing habit. You need to avoid debt. That's really what you need to do. and uh and uh but there's so much advice it's just the opposite and especially on social media pushes debt you know well why bother with a nice safe index fund you can go borrow some money and buy a rental property and make way you know way more returns no no no no so but there's crazy stuff like that or borrowing to invest in crypto or mem stocks or you know gambling you know and their kids are getting confused about the difference between gambling and investing They're very different things.

43:18So I wanted to provide some correctives to that. And then just basically also address and flag common financial behaviors that cost people money, like carrying a credit card balance. That I'm very open in my first chapter about my – I totally got in trouble with credit card debt. I was just graduated from law school. I was a civil rights lawyer then, didn't know anything about finance, didn't care, thought it was beneath me. I needed to buy some clothes for work. I needed to get an apartment and furnish my apartment. And so I was getting all these solicitations from various credit card issuers who had found out that I was now working for a living somehow.

43:57So, yeah, I got in trouble with credit card debt, and I made that minimum payment. I thought, wow, this is great. I can borrow this money and use this tiny little payment every month. And I ended up, I think it was about$6 ,000 in interest when all of a sudden. Oh, my God. That's a lot. Well, yeah, which if it invests in the S &P 500, it would be worth around$240 ,000,$250 ,000 now. So there you go. But I think just avoiding things like that, the average family pays$1 ,600 a year in credit card interest. If that was just put into an S &P 500 index fund, boy, over 30 or 40 years, you're talking real money.

44:29So I wanted to emphasize that is the simplicity of how to build wealth. Compounding opportunity costs are big themes. I think those are so fundamental to understanding how to manage money. But basically, I just want to help kids avoid mistakes. I don't want them to have financial problems when they grow up. I want them to get off on the right foot, which I did not, and a lot of people don't. Coming up, we continue our conversation with Sheila Bair, discussing her latest book, How Not to Lose a Million Dollars, A Young Person's Guide to Avoiding the Tricks and Traps of Our Financial System. I'm Barry Ritholtz.

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45:59I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Sheila Baer. She is the former chair of the FDIC. Her latest book is out, How Not to Lose a Million Dollars, A Young Person's Guide to Avoiding the Tricks and Traps of Our Financial System. So you mentioned a couple of really interesting things that taken together, Howard Lindzen runs a venture fund, and he calls it the degenerate economy. Gambling, speculation, end of day options, mean stocks, crypto coins. And all of these have been through apps and other methods. Yes. So the phones have been adopted by teenagers en masse.

46:48What do you make of the degen economy and what does it mean to the future health of these young adults? Well, it's very dangerous. It's particularly a problem with young boys. And, oh, by the way, they shouldn't be doing this if they're under 18. But a lot of them are, as we know. They're targeted. And they don't understand the worth of money. The apps just make it so easy. They don't make the connection between the financial losses they're experiencing. It's a game for them. And the industry advertises. they do gamify it. So, and even, you know, stock trading, some of these online brokers, the big ones, they gamify it.

47:25And it's not a game. It's serious. Money's serious. And I think one of the things from early on, if parents give their children allowances, but tie that to work, I think it's really important for kids to understand early on the connection between work and money. It's not just free easy, you know, because too many kids don't make that connection on their parents or genus with the credit cards or whatever. And, and they use their credit card numbers to do all these gaming apps. And, and I just don't think the reality of what these kids are doing actually sinks in until they're really in over their head.

48:00And I think it's purposeful. I think, you know, kids don't understand the difference between gambling and investing. Well, there's a big difference in it. You're investing, you're supporting capital formation and the real economy, helping businesses who make real goods and real services, raise money and operate or supporting the secondary market that enables all that and what are you supporting with gambling or crypto i mean some crypto to the extent it represents the technology i think crypto technology is is very valuable but these these these uh you know these different currencies and tokens they have nothing behind them you can call them coins okay i call them coins because that's nothing behind them i'm amazed that bitcoin has held up i think it's just you know it's kind of the granddaddy of them all.

48:42So if you're going to invest, most people do a Bitcoin because they've heard about it and the rest of it is crap. Bitcoin may be too, but it has lasted. I will give it that. But yeah, I mean, what are they supporting? And they're losing money. You know, there was a study done of gambling apps that showed that the people that use gambling apps, only 5 % take out more money than they put in. And it's addictive. And these gambling platforms, even if you start winning well wow oh you're doing great here's a little money why don't you keep going you know they want you to keep going until you start losing money because the odds are you will always lose money and bloomberg came out with some great research recently on prediction markets 75 of the profits i believe are going to one percent of the users less than one percent it's crazy it's so so the whole game is rigged with even active trading of stocks very few people can do that and make make money consistently yeah and you're going to be going against people who do it for a living You can have a lot more access to data and expertise and algorithms and all the things, all the tools you will not have when you try to actively trade stocks.

49:46So this is kind of fascinating. I bet most people don't know how much of a passion project this has been for you so long. Did I read this correctly? You established the Financial Education Division within the Treasury Department. I did. Early 2000s? In 2001, yeah. Yeah. Yeah, I did. I established the Office of Financial Education, and it's grown now. It's in the treasurer's office now, and I think they held a group. It's called FLEC, and it's basically a council of all the different financial education components of the various different regulatory agencies. And it's a good group. Yeah, I did start it.

50:23That's one of the things that got me interested. Actually, my first book was pre-crisis, Rock, Rock, and the Savings Shock. It actually came out in 2006 because based on that experience, it inspired me to start writing kids books because I became aware that there really weren't any resources for elementary age schools. So how not to lose a million dollars covers basics like savings accounts, student loans, debt avoidance, and retirement planning. It kind of raises a question, why aren't we teaching our kids financial fundamentals at the grade school level? Why is this not just part of civics? Yeah, yeah.

51:00Well, it can and should be. I mean, I think there's a big movement now to have a standalone high school personal finance class, which I think is good. But it really, it needs to be more than that. It needs to be every year. It needs to be introduced. And, you know, math curricula is an obvious place because I think it makes, it will make math more interesting to kids if you do use money examples, right? So you want to learn about ratios and percentages? Let's talk about compounding and how much your money grows at 4 % interest a year or whatever. So it does need to be introduced every year. And again, that's one of the reasons my books are – I mean, they're supplements to curricula.

51:36I don't write educational curricula, but there certainly could be assigned readings to go with those classroom efforts. And I think that's important. And the kids get it. They're interested in it. They absolutely get it. They're not too young. One of my favorite parts of the BBB was the newborn accounts. Oh, the Trump accounts, yeah. The baby bonds, which Cory Booker started talking about. I'm drawing a blank on the name of the venture capitalist who suggested something like this years ago. But it's only$1 ,000 to every newborn in an investment account. Yeah. Is this a good start? Is this going to help kids learn about money?

52:15Yeah, it absolutely is. It's I think, you know, it's only for there's a three year period where children are born within a three year period. We'll get the thousand dollars, but it can be matched by employers. A lot of employers. We're hearing already Dell and JP Morgan and a bunch of big employers announced they'll do a thousand dollar match. And the assumption is this will be renewed after three years. I hope so. I hope it is. I'm kind of a fiscal conservative when it comes to our deficits, but I think this is a good way to spend the money because it goes directly. You know where it's going.

52:48You know it's helping. And it's a wonderful way to learn about the power of compounding. Congress mandated that money has to be invested in broad-based index funds, which is good. And, you know, we'd be seeing crypto and memsocks or whatever. So that's good. But you can see over time how it will grow. And I hope, you know, when they're 18, they can take it out. But I hope they leave it there. And it just converts into a regular IRA at that point. But it's great. It's a wonderful financial educational tool as well as some additional financial security for low-income families and their children.

53:19So let's talk about another aspect of money that's so different today than it was when we were kids. money is effectively invisible credit cards apps buy now pay later subscriptions all that there have been studies that have shown that if you give people a pile of cash to spend or a credit card loaded with the same amount they spend more with the credit card than with actually paying you know greenbacks which says a lot about the psychology of you know modern spending. It does. So how do you, how do we recognize that? And how do we teach kids the value of a dollar? It's, it's, it's really a challenge when you just tap the card and it's magic.

54:07It's not real money. It's funny money. Yeah. Well, that's what I think it's important to attach an allowance to jobs. I think helping kids make the connection between having to work and earning money is really, really important because the parents are too generous. They'd let them use their credit card. So that's, they start getting that easy usage. And if they're using their parents' credit card, they're not having to, it's not causing them any pain to spend money. So I think the parents can control a lot of this, but the kids need to understand the connection between earning money and spending money.

54:37And if they make that connection, they will be more judicious and careful with their money because they realize how dear it is because it took, that$10 took an hour of their life raking leaves or whatever, you know. So I think it's important to make that connection. And financial education, understanding, you know, I have a chapter on, I spend a lot of time on credit cards because I think it is an early trap for a lot of families and a lot of kids because it's just so easy. And BMPL is the same thing. BMPL, I don't like it. Buy now, pay later. Buy now, pay later. The whole idea is to facilitate impulse buying.

55:12Let's face it, you know, you're using BMPL when it's really beyond your budget to buy. You weren't thinking about buy it you don't really have the money now to buy it but you really want it and that's what bmpl does and they're you know bmpl users a very high percentage of them uh you know first of all it's not interest fee because it ends up going on your credit card because you can't pay it off so you're just carrying the balance on your credit card or it's coming out of your checking account and you overdraft and you get an overdraft fee so it's not really they say it's interest rate for a lot of users it's not really i guess i'm in a financial when we were kids it was called layaway and you didn't get the good or item until you paid it off.

55:49And you very much understood, I got to shovel more, more sidewalks or more lawns if I want that bike or whatever it happened to be. It was, this is the opposite lesson. It is. It totally is. Um, and I, you know, so I think it feeds a lot of overspending. I think impulse, I, you know, kids are making decisions more impulsively. I mean, they don't have the same impulse control adults have. And I think, you know, people know that. Retailers know that. Commercial entities know that. So they try to encourage them to make snap decisions to buy something. And it's just so important. I have a rule, wait a week.

56:30In my chapter on budgeting about buying things, just wait a week. You know, there's some things you have to buy. Your needs, like your rent or whatever. but if it's your wants first of all don't buy any want that's not within your budget even if you do wait a week you know just don't buy it on impulse wait a week come back to it do you really want to or not when I go into grade schools and do readings I my common question is raise your hand if you've ever bought something you wish you hadn't bought every hand every hand goes up every hand goes up it's amazing yeah already you know at seven years old they've got buyer's remorse it's usually junkie toys what I speaking of junkie toys when there's a car I fixate on, my little hack is I'll buy one of the die-cast models and put it on my shelf.

57:14So for 60 bucks, I like, all right, I feel like, all right, I have a little experience in this car. And after a few weeks, it's like, all right, I have the toy, I'm good. I don't need to spend$100 ,000 on another stupid thing for the garage. Well, that's right. There's a chapter on buying a car too. I just bought a car, actually, a used car. I didn't want to, maybe it'd appreciate it so fast. It's going to be a second car. But this, I couldn't believe it. I mean, I knew this. I've had experience in the past. It'd been a while since I bought a car. He was trying to upsell me with everything. And now they're trying to sell me, give me all these service contracts that would increase the price of the car by about 25%.

57:52It's just unbelievable. Kids want to buy cars. They want their own car. See, I don't think that's true anymore. Maybe not. A lot of kids aren't getting licenses. They can Uber wherever on Monday. In urban areas, I think that's true. Right? And it's, there seem, although there is a renaissance of kids buying, let's call them 20-year-old analog as opposed to digital cars with stick shifts. Really? Like there's a whole generation of new car enthusiasts coming up that I think a stick shift today is an anti-theft device. You know, you bring it to a valet, they look at you, you know, go to a restaurant.

58:36They're like, would you mind pulling it in over there? Yeah. Okay. That's funny. But it's really true. And it's good because, you know, cars are expensive. The average monthly payment is like 700 a month, you know, for a young boy. It's a thousand dollars a month is not uncommon on a lease. Yeah. Kids don't understand why, hey, no down payment. Well, yeah, but no, no residual at the end. You hand it back. That's right. It's just the cost. Exactly right. Yeah. So, yeah, it's really expensive for in person to buy a car if they can avoid that. So I only have you for a few more minutes. So let me jump to my favorite questions I ask all my guests, starting with, tell us about your mentors who helped shape this career you've enjoyed through academia, finance, and government.

59:23Yeah. Well, Bob Dole obviously stands out. He really taught me what public service meant, and he was always focused on the public interest. He was a populist in the good sense. He was from a small rural town in Kansas. He was horribly injured during World War II, laid up for years. The townspeople rallied, supported him, got him back to health, helped him become who he became. So he really focused on the public, and I learned that. And I think later in my career at the FDIC, we kept that focus on the public, the people who were using the banks, not the banks. Who are we helping? We're helping the people who use banks.

1:00:00So I'm proud of that. And I learned a lot from him. You know, later I got to know Paul Volcker. I learned a lot from him. Paul, Paul. Yeah, that's right. Elizabeth Dole was someone I never really had a chance to work with her, but I knew her through Senator Bob and have maintained contact with her over the years. another woman who inspired me, not a mentor, but Sandra Day O 'Connor, the first woman Supreme Court justice. When I was on the Judiciary Committee, I got to handle her confirmation. And she was just a lovely person. So a lot of people I've met over the years, but Dole really stands out as my prime supporter and mentor in my career.

1:00:41Let's talk about books. What are you reading now? What are some of your favorites? Yeah. So I love murder mysteries. I'm reading Anthony Horowitz's new book, A Deadly Episode. I don't know if you know Anthony Horowitz. He's a British mystery writer. I know the name. My wife is a fan of those, so she burns through those. Yeah, he's quite prolific. He was actually chosen by the Ian Fleming estate to continue writing. Oh, no kidding. He's written, too. They're really good. Yeah. I actually like them better than Ian Fleming. Now owned by Amazon, the movie franchise. That's right. So, so that, and then I'm reading John Hersey's Hiroshima.

1:01:17My family and I are going to Japan at the end of the month and I wanted to take them. Yeah. Yeah. And I, the kids kind of balked. I said, we're going to go to Hiroshima because I think that's an important part of history. You need to, we need to see this and understand it. And I read Hiroshima when I was young, you know, probably, you know, high school, I think when it came out. and uh and it had such an impact on me and so i'm reading again and it still has an impact on me and especially everything going on in the world now on other countries even japan talking about wanting to have a nuclear capability because things just don't seem very unsettled on that square right now so that's those are my two i usually have two books going one non-fiction one fiction so so i'm going to recommend a book to you okay it's really kind of fascinating an american who's a professor somewhere in the UK, Brian Kloss with two A's.

1:02:05And the book is called Fluke. And the book starts with this story of a young couple honeymooning in Kyoto. Later in life, the husband becomes the head of the War Department. And when we have to figure out where to drop the A-bomb, he absolutely vetoes Kyoto. And Hiroshima is what gets – because this couple went there for a honeymoon. Oh, that's brilliant. That country – that city is spared. And then it wasn't supposed to be Nagasaki. It was – I don't remember what city it was. But there was cloud cover and they couldn't – back then you were doing visual reads. Right. You couldn't see. So they went to the secondary target.

1:02:54Yeah. And so think about, talk about flukes, how random things are. So Hiroshima gets it because somebody went there on a honeymoon. Just crazy. Well, and now you look back and why did any city get it? Couldn't you drop it over the ocean or something? You want to make a point. I mean, really, I don't, it's hard for me to understand now. I know. And that's just, you know, we're not there at the time. There was a lot of. The psychology during world time. Yeah. So different. And the Japanese had been, everybody had been horrible, but the Japanese had done some brutal things well for centuries yeah well okay all right speak to speak to China and Korea they are not I'm a big fan of Japan yeah but but they were quite a ruthless empire for a long time yeah so there was a lot of um so I understand that and I think well maybe the horror of it when you know and the and I think that's why John Hersey's book was so important because it really underscored the horror of it but maybe because people then understood how horrible it was it made it even less likely anybody would ever use it again.

1:03:55I'm going to rationalize it that way, but it is hard. You know, you look back and, oh my gosh, did we really have to do that to people? Because it was not just the people who probably were killed immediately were the lucky ones, the radiation sickness after the horrors. I think I got to sign that same book in high school. Everybody read it, yeah. And plowed through it and it was just powerful. It was, yeah. No, it's very well written. It was, yeah. Let's shift to, are you streaming anything these days? You listen to any podcasts or watching anything? Yeah, I don't stream or podcast that much. I get podcasts or I like to read transcripts of podcasts because I can read a lot faster.

1:04:30You read it much faster. Yeah. How about Netflix or HBO? Yeah, I can. You know, again, I'm, you know, one note on this. BBC, I'm there, you know. I love the murder mystery. Bird Box, yeah. All the Agatha Christie's I've seen. David Suchet, Prarose are by far the best. Foil's War was great. also Anthony Horowitz. He did the... They made it into a series or a movie? Which one? The Foils of War. The Foils of War, actually, that was a TV series. It wasn't a book. That was one of the few things, but it's really good. I like the Morse, you know. Have you ever watched Morse? Inspector Morse? No, that's not famous.

1:05:10That sounds vaguely familiar. It used to be on PBS at one point. Yeah, yeah, it's old, but there were three, Morse and then Endeavor, which was about Morse when he was younger, and then Lewis, who is Morse's sidekick. So BBC did a really good job there. So yeah, these are old stuff. I recycle them. But yeah, I love BBC and I love British, I love Redbox, excuse me. I love them. Our final two questions. What sort of advice would you give to a recent college grad interested in a career in banking or finance or government service? Yeah, well, I would say be open-minded because I think the job market is, we don't know, AI is kind of, having a negative impact on entry-level white-collar jobs.

1:05:52So you need to be thoughtful about that and how to navigate that. So I think you need to be open-minded, but preferably if you have options, pick a company that has a good culture. Ask them how they think about their customers. If they're an investment firm and they talk about them like Muppets, you probably don't want to work there, but if they talk about them as – I remember Muppets way back when, yeah. Just to mention an example. So I think it's important, any business actually, whether it's finance or any real economy business, how they think about their customers and treat their customers.

1:06:28Because I do think long-term success is based on having a mutually beneficial relationship with your customers. So I would, you know, just the work ethic. And again, keep an open mind. Sometimes things you weren't even thinking about come up and they turn out to be really, really good job choices. And our final question, what is it that you know about the world of banking regulations, government service, financial industry today? It might have been useful to know way back when, when you were first getting started. Yeah, I thought about that. Markets, right? Not personal finance, but markets. Clearly credit card debt.

1:07:06Go whichever way you want. Yeah. Well, compounding was something I did not understand in credit card rates. That comes up surprisingly frequently. Yeah, yeah. Because it's not intuitive. Yeah, no, it's not. And the daily compounding is, you know, it backs up pretty quickly. I think for markets, financial markets and investing in particular, I've actually done pretty well over time. My grandmother gave me$1 ,000 when she was getting later in life, near her death. And she didn't have much, but she wanted to give my sister and I something. So she gave me$1 ,000 and told me to put it in an IRA. That was back when IRAs had just gotten started.

1:07:42And with my dad's top, I put it in the contra fund. It's worth a lot of money now. So I've made some lucky – I've stuck mainly – I've picked a few stocks, but I've picked mainly diversified index funds of various sorts. And I wish I'd understand better about being brave during the dips, though. You know, I think – usually I buy and hold, so I don't sell when the market's going down, which is the worst thing you can do. But I think I would have been a little more courageous buying in the dips, you know. Buying more into weakness. Yeah. Well, Sheila, thank you for being so generous with your time.

1:08:13As always, a delight. We have been speaking with Sheila Bair, former chair of the FDIC, author of the new book, How Not to Lose a Million Dollars. If you enjoy this conversation, well, check out any of the 600 we've done over the past 12 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcasts. I would be remiss if I didn't thank the crack staff that helps put these conversations together each week. Alexis Noriega is my video producer. Sean Russo is my researcher. Anna Luke is my podcast producer. I'm Barry Brit Holtz. You've been listening to Masters in Business on Bloomberg Radio.

1:09:03The Bloomberg Sustainable Business Summit returns to Singapore on July 22nd. Our fifth annual Asia Pacific Summit will explore how business and finance leaders are shaping the next phase of globalization by strengthening resilience, advancing climate adaptation and driving a multi-speed energy transition across Asia's diverse markets. Join us for solutions-driven discussions, interactive workshops, and networking opportunities. Learn more at bloomberglive.com slash SBS dash Singapore.