Indoor Cat: JPM, AI, 777

Hi, I'm Kelly Cavanaro, Managing Director, Head of North America Institutional Distribution.

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Bloomberg Audio Studios, Podcasts, radio, news.

Hello, and welcome to the Money Stuff Podcast, your weekly podcast where we talk about stuff related to money.

I'm Matt Levine, and I write the Money Stuff column for Bloomberg Opinion.

And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.

You were reporting live from the field this week.

I was.

I am a studio anchor.

I like being in the studio.

Boy.

You're an indoor cat.

Boy, do I love sitting behind a desk and screaming at a camera.

But I had to go into the field this week because JP Morgan was having their ribbon-cutting ceremony for their big, beautiful building at 270 Park Avenue.

One big, beautiful building.

One big, beautiful building.

They actually own a bunch of buildings.

I know.

They feel like a campus.

Yes, they do.

Isn't that fun to have a campus in midtown Manhattan?

It is really cool.

I joked this week that the new J.P.

Morgan building had a four-story gold statue of Jamie Dimon in the lobby, which you can now report.

I can tell you, it's not true.

They do.

I don't know if they had the rest story.

I don't know if they have this all the time, but when I was there for the ribbon-cutting ceremony, they had

a live Jamie Dimon in the lobby.

There was a live Jamie Dimon or a really convincing AI robot, but they also had a flagpole flagpole and they had a fan on the flag so that the flag was waving in the artificial breeze.

Wait, wait, wait, like they had an HVAC system that circulated air in such a way that the indoor flag waved or they had like a desk fan and a sticker.

I could not see the fan.

Everything wasn't a desk fan.

It wasn't like a guy with a stick with a desk fan.

No, no, the fan was hidden.

If it was circulating, I didn't feel any of it.

but yeah, it was specifically for the flag so that it would flap.

That's awesome.

It was awesome.

And it was fine.

A few people, including you, asked me, who did you interview there?

And I said, no one.

I was just there to be like, I'm here.

Yeah, I'm inside the building.

But the thing is, Matt, to prepare for that.

Were you there for like Jamie Diamond's physical ribbon cutting, which happened?

Of course.

Of course.

I mean, I wasn't going to go there and not see.

Did you get to touch the novelty scissors?

No, they wouldn't let me that close.

Which is crazy.

But yeah, no, he held a giant pair of scissors.

I believe New York Governor Kathy Hochl was next to him for that, and he cut the ribbon, so it was awesome.

Do they have backup ribbons?

They must have.

They must have.

I mean, cut to the right angle and just do it again.

Imagine if they spent $5 billion on this building.

And then cut the ribbon rod.

Yeah, no, no,

they were going to get this over the finish line properly.

But, Matt, to prepare for these hits that I had to do about the building, I accumulated so much knowledge, so many facts about the building that I...

You're going to tell us, tell me and the listener.

I'm going to step out.

No,

I need to use it somewhere.

It's not knowledge that I can build on.

You didn't use it during the hits where you're like, not as much as you would think.

You always over-prepare.

Not me.

And then they ask you like one question.

I forgot what it's like to be a reporter.

And you have just these anchors who don't care about what you're saying.

No, all my colleagues are lovely.

So, tell us some JF Morgan facts.

All right.

So, 270 Park Avenue is the new building.

That's what we're talking about.

Six years of construction.

Yes.

So that.

I noticed that.

It's on the walk to Grand Central.

It's not over because their temporary headquarters has been at 383 Madison Avenue, which is directly across 47th Street.

And now that the new headquarters is open, now they're going to spend a billion dollars to renovate 383 Madison.

So they're going to close it in 2026, redo the exterior, redo the interior, and it'll open at the end of 2027.

So we're just getting started when it comes to JP Morgan doing construction in that specific area of New York City.

But let me go on.

Let me go on.

It's 60 stories tall.

Okay.

Seems like a normal number of stories.

Well, that's the thing.

It's nearly 1,400 feet tall.

So the ceilings.

Oh, yeah, no, the ceilings are super high.

And the lobby specifically,

the building itself is raised 80 feet off the ground.

So it just has a super huge lobby.

And the reason why is because they wanted to have more outdoor space outside of the building,

theoretically giving space back to the city.

But I don't know.

I don't think you're going to be eating your sandwich up against the JPMorgan building necessarily.

But it's a nice idea.

Yeah, I find the overhang slightly alarming.

Like it does look like like a somewhat precariously balanced building.

I understand at an intellectual level that they employed good architects, and the building will not topple over in a slight breeze.

But it's like, you know, if you're on that overhang, it's like, yeah, there's a big building above me.

Well, those architects were there.

Lord Norman Foster designed this building.

He's done a bunch of famous buildings over in Europe.

But he also did Apple Park in Cupertino, so that's cool.

And Jeffrey Morgan Park in Norman.

Yeah.

Yeah.

Anyway, so I'm just getting started.

So six years of construction on this building, Matt, as we've established, that included demolishing the old building that was there.

So in terms of the features, I know that you're dying to know

a feature about the amenities.

On the 13th floor of the building, which I did get to see, they have a pub called Morgan's.

It's reservation only.

So you can't just stroll.

You can't make a reservation at 3 o'clock for the pub or you just immediately fired.

That's the thing.

I was thinking, like, would I I be bold enough, like, if Bloomberg had a pub that you had to make reservations at, would I ever do that?

I don't know.

I would definitely go to the Bloomberg pub all the time.

But, like, well, you have a certain amount of clout here, so

they'd be like, oh, he's thinking his thoughts.

I just feel like Jamie Dimon has really gone on record

being like, I need everyone in the office all the time.

Yes.

And I understand that the pub is in the office, but still.

Yeah.

Well, it's a great way to keep them in the office all the time.

Although now that I think about it,

taking the clients to the JP Morgan in-house pub is kind of a nice exercise.

Oh, yeah.

Not at all.

I don't know.

I would love to go.

Invite me, please.

I'll go.

I have to expense it, though.

So anyway, apparently, JP Morgan.

You and I just log into the JP Morgan.

That'd be great.

Let's do a podcast episode from there.

Let's do a podcast episode from Morgan.

Jamie Dimon, if you're listening, you're our special guest.

I think that we can...

No, the guest would be like the bartender at Morgan's.

Oh, true.

He's seen some things on his 12 hours of doing that.

Yeah, right.

Yeah, that would be a lot of fun.

Anyway, JP Morgan imported the parts needed to pour a proper pint of Guinness at Morgan's.

So just know it's quality.

There's also a fitness center at 270 Park Avenue.

I'm reading off the notes that I printed out for TV.

I was prepared to say all of this on air.

So they have a fitness center, and Bloomberg News reported that this was an uphill battle.

Apparently, Jamie Dimon personally dislikes in-office gyms and didn't want it, but eventually he was brought over.

Which, again, if you're trying to get your employees to live at the office, you need a pub, but you also need a gym.

Yeah, I'm not an in-office gym guy, but no, I think I would be.

I think I would love it.

We don't have one here.

So, like, this is all very, you know, nostalgic for me because I worked at Goldman when they opened their new office on Jonathan West Street, and it did have an in-office.

I think it has an in-office gym.

It's been so long.

Wow.

I think it has an in-office gym where people would, you know, know, like you run into like your boss's boss's boss in like, you know, a state of

madness.

Well, no, not that specifically.

That specifically.

No, I thought you were going to say.

That's the thing people mention.

Doing a chess press.

And like, I feel like I would be very good at having a conversation in that scenario.

I think you would.

Yeah.

I think that's why you're a TV anchor.

I would be very bad at having a conversation in that scenario.

But like, there's also the more specific, like, locker room scenario.

Oh.

And so the other thing that I remember about the Goldman office is that it was very, very nice.

It's like brand new, it's shiny, but

everyone got a little bit less space than they had in their old office.

And I have read that something similar is true at JF Morgan, where they have this new big office building, but because the ceilings are so high, there's less room for desks.

Well, that's the thing.

You have fewer floors, just 60 stories, which is

enough stories for all those bankers who have been

screaming into the office.

Did you see the thing circulating on social media?

It's like a photo of one of their trading floors, and it's like just stocked with Dell computers, which have four monitors apiece.

I think I did see it.

And they're all

exactly as I described.

There's no one there, right?

Because

they haven't moved into the trading floor yet.

It's like

they've been moving people in gradually, is what I understand.

I think the trading floors.

Yeah.

Not yet.

Yeah.

Shall I tell you about some of their other buildings in their campus?

I need somewhere to record this, you know,

when I

when I sort back through the rubble of my life, I want to remember this.

Okay, so we already talked about 383 Madison Avenue.

Well, get this, Matt.

They bought 250 Park Avenue in 2024 for more than $300 million.

Not sure what they're going to do with it right now.

The plans are still in flux.

It's Kevin Diamond's sneaker collection.

Kind of.

They could keep it as is.

They could knock it down and build a new office tower, which they now have some experiences, or they could turn it into a hotel for visiting employees.

That's not all.

410 Madison Avenue, they're not sure JP Morgan, according to Bloomberg reporting, not sure if they're going to keep or sell 410 Madison.

They bought that during the worst days of the pandemic in 2020.

They've been using it basically as a project office for the headquarters construction.

But all told, in these blocks that we're talking about, JP Morgan has nearly 6 million square feet of office space, which is almost as much as Goldman Sachs has in all of North and South America.

So the physical footprint of J.P.

Morgan is pretty stunning.

Yeah.

Yeah.

Yeah.

I do appreciate that there's a JPMorgan district in Midtown Manhattan.

Yeah.

I think Bloomberg News called it a neighborhood, which I think is cute.

That's got a pub.

Yeah, city within a city.

270 Park Avenue, I'm almost done.

It's going to house about 10,000 workers all told.

In terms of corporate employees, they have more than 17,000.

So this is why they need all these buildings.

Yeah.

Yeah.

Yeah.

All right.

Big bank.

Walk past it, you know, if you find yourself near Grand Central.

I do see it from, I live in Hoboken now and I run a lot.

So you can see it from the waterfront and it lights up in different colors.

And,

you know, it's a nice addition to the skyline.

Yeah.

Good on you.

Okay.

Your architecture criticism and your own record is liking it.

I like the building.

People seem to like it.

Not everyone likes it.

Yeah, who doesn't like it?

What are their criticisms?

I want to know.

Because, I mean, I think it's cool to get new skyscrapers, sorry.

And this one is.

You can only see it from street level, and it feels threatening to me from street level.

Yeah.

It doesn't strike me as having a sense of lightness or airiness.

It's kind of like a massive, ominous building.

I will say the part of my brain that doesn't really understand how airplanes stay in the sky gets nervous about the the way.

That's what I'm saying.

Yeah, it's nice.

It looks like it's going to fall over in every direction.

Yeah, yeah.

It's cool.

It is cool.

But, like, is it cool enough, like, you want to go there every day?

I don't know.

I don't know, actually.

I have no basis for architectural criticism.

It's fine.

It's great.

It's a big building.

It's cool.

It's got a pub.

Yeah.

Morians.

Four-story statue of Jamie Dimon.

Beautiful.

A waving flag.

I mean, he's like gone on record at saying, but he had some funny quarto.

It's like, it's a monument to

something permanent.

You know, what do we do?

We push paper all day.

Yeah.

It's really good.

Hi, I'm Kelly Cavanaro, Managing Director, Head of North America Institutional Distribution.

At Janice Henderson Investors, we believe working together is the way to work better, like combining your portfolio plans and our in-depth strategy, your valued assets, and our valuable insights, your mission, and our vision.

Working in harmony to seek the right investment opportunities.

Janice Henderson Investors, Investing in a Brighter Future, Together.

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You could ask the question: Does JPMorgan need all that space because AI is just going to wipe out an entire generation of junior bankers?

Well, that's why they don't have enough space for all the bankers, right?

Right.

They need to replace the junior bankers with AI and a monument to

the last of the bankers.

But yeah, there's a great story this week about OpenAI as a thing called Project Mercury.

Yes.

Taking a step back,

the AI companies, the first thing they did was sort of train their models on all of the internet to

understand at some superficial level all of human knowledge.

And then you had a Reddit chatbot.

Yeah, and now they're like the next step is to get specialist humans to train the models to be really good at specialist things.

And so they have a lot of them.

They have like, you know, astrophysicists and, you know, like lawyers and everyone like training up the models.

But the story this week was that they also have...

an army of former investment bankers getting paid $150 an hour to build LBO models for OpenAI so that ChatGPT can build a really good LBO model.

And by really good LBO model, I mean not only that it has its formulas linked correctly and gets a correct result, but also that it has all of the percentages italicized in the right way and generally will not make an investment banking VP angry.

Because what you don't want when you like fire all the analysts and replace them with AI, what you don't want is to be annoyed at the formatting of the output.

Because if you're an investment banking VP, you've spent your life getting annoyed at the formatting done by investment banking analysts.

And you want the AI to be a strict improvement over that.

So I will say I enjoy all the please fix memes as an outsider.

I've never worked in banking.

I'm a pure play journalist.

I've never been a banking analyst.

Yeah.

But I've been the recipient of please fix notes.

Yeah.

Do people really care that much about formatting?

Well, it's like it's a signaling thing, right?

It's like your analysts come in and they're humans with hopes and dreams and you want them to

immediately become automata who you can tell to produce a pitch book and they will produce a perfect pitch book.

And if they produce an imperfect pitch book, you want them to

I choked it's it's reinforcement learning, but it's you know you want them to quickly be trained out of that so that they produce perfect pitch books for you so you don't have to worry about it anymore.

Right.

Like you want the analyst to take the work off your plate and if they give you bad formatting, then you worry about what else is in the pitch book that's wrong.

Because you can't, you're not going to check the numbers necessarily, right?

I mean, like, depends.

Like,

like you'd like to be at a point where you can trust the analyst and not have to check the numbers.

And formatting is a visible sign of something else might be wrong.

And it's also like, you know, the people who get to these positions are perfectionists and they get troubled by bad formatting.

Yeah.

Okay.

Fair enough.

It sounds almost, am I going to get this wrong?

That sounds like broken window theory.

It is like broken window theory.

Okay.

That makes sense.

I really want to interview actually the 100 ex-investment bankers working on this project in the pub at JPMorgan.

Oh, yeah.

Not 100.

Not all 100.

I have a guess.

You don't want to interview all 100 of them.

Not at once.

No, just the funniest ones.

I have a guess about what the vibe is.

It's interesting to me.

These people are clearly putting their successors out of work.

Maybe they're not, but like.

Yeah.

That's what OpenAI wants, right?

That's the vision, right?

And you might think

that

if you went to people in some industry and said, hey, would you like to get paid $150 an hour for like

three months, one month?

I don't know how long this project is, but I don't think they envision a decades kind of thing.

Would you like to get paid $150 an hour for a month to put everyone in your industry out of work?

I think a lot of people in a lot of industries would say no.

Like, I think if you went to a lot of journalists, they'd be like, no, I don't want to put journalists out of work.

But I think if you went to a lot of investment bank analysts, you'd get a pretty good hit rate.

They'd be like, oh, I hated it.

Or they'd be like, nah, I'm out of it now.

They can move on.

I do feel like journalists have a certain affection for the craft of journalism, whereas a burnt out banker might not.

I don't know.

I think a lot of bankers do have an appreciation for the craft of building LBO models.

And I think that

the opportunity to have their LBO model enshrined perpetually as the official ChatGPT LBO model, or like the best practices that ChatGPT perpetuates forever, I think that would be kind of cool.

Yeah, I could could see that.

Sounds like you're raising your hand a little bit.

I take it back.

I would put journalism out of work.

No, no.

I think if like if OpenAI came to me and said,

we

want,

whenever people ask a question about a financial topic, we want ChatGPT to explain it the way you would.

So spend three months training ChatGPT to do that.

I'd be a little flattered.

You're speaking that into the universe.

It could happen.

Anything could.

I feel like they're already trained on my stuff.

Like, that's the thing.

They're already just like

actively training themselves on my work, whereas the LBO models are not.

The LBO model of like the best analyst at JP Morgan is not public, right?

True.

They got to hire that guy and have him type it in.

Let's get into some of the details of this article in terms of the application process.

According to a person familiar with the matter, it involves almost no human interaction.

The first step is a roughly 20-minute interview with an AI chat bot who asks questions based on the resume.

And then the second phase tests candidates on their knowledge of financial statements.

The final stage is a modeling test.

So it's fairly involved for.

Presumably, like three months ago, they hired some HR people to train ChatGPT to hire the investment banks.

It's like a wave.

Bootstrapping, yeah.

Yeah.

Getting everything

automated.

Apparently, the job expects contractors to submit one model per week.

Instructions include writing prompts in simple terms, then executing the model.

Participants receive feedback from a reviewer and are expected to fix any issues before their work is ultimately plugged into OpenAI systems.

I hope the feedback is a pencil.

Please fix that.

Please fix.

Please fix.

For a job that isn't going to last that long, I mean, I wonder if you could do this as just a side hustle.

I am sure that everyone doing it is doing it on the business.

You don't think anyone is just, I'm just going to devote one or two people.

Sorry, I shouldn't say everyone.

I feel like some of them are like current MBA students who are like, yeah, I'm used to working 100 hours a week in banking, and now I'm doing 2 to 15 minutes of homework a week in my MBA program, and so I could use some free cash and

something to do.

It's funny you bring that up because some current MBA candidates at Harvard and MIT are participating in the effort.

And then I think probably there are some people who

were burned out and are like, I could do a 20-hour a week job for a little bit.

Why not?

Why not?

One of the perks here, in addition to the $150 per hour, is that contractors get early access to the AI that is being created that aims to replace these entry-level tasks at investment banks.

So that's pretty cool, too.

Right.

Like, I shouldn't be too cynical about this because I think a lot of investment banking analysts do think a lot about how can I automate this work so that it's just, you know, it is button pushing.

And like, maybe in the long run, that is bad for employment at investment banks.

But it's not clear that it is, right?

Yeah.

It's like very possible that if you had the ability to push a button and produce a perfect model, you would keep the same number of analysts and they would run more hypothetical scenarios.

And

the thing people always say is like move up the value chain and think more creatively and not have to just spend all their time modeling.

I'm not sure that's true, but

they'd certainly

throw more spaghetti against the wall.

Yeah, maybe AI could complement the human experience rather than destroy it.

I think it is hard for me to imagine investment banking becoming purely automated.

It feels like it's a high-dollar, high-touch sales business.

And so you always need some people to shake the client's hands and so it is very possible that AI can be complementary to that experience.

Although people do worry about

if the junior bankers don't ever build the models and they just push a button, do they learn less and do they are they less intuitive about

financial analysis when they become senior bankers?

And I think that is a hard problem.

Yeah, the idea that you're just hollowing out the bench.

One of the people who has voiced a concern similar to that is actually the CEO of Bridgewater near Bardea.

He said in March, we are well positioned to replace a lot of the basic tasks with machines, but what does that then mean to talent development over the long period of time?

And then he continued, you do the tough work, then that leads you to be able to do the higher level, more conceptual things.

So I think that's like a nice summary of the concern there.

Yeah, and I tend to believe that.

Yeah.

You have to cut your teeth.

Yeah, there's a, you know, just a period of remote learning that gives you the sort of foundation to

think creatively later on.

And if you just cut that out, it's hard.

And by the way, like, that's not an investment banking thing.

That's a life thing, right?

Like, you see that in school now, right?

Yeah.

If you use AI to do all your homework, you never learn how to read it.

The kids can't read.

Kids can't read.

Yeah.

I mean, I just relate everything back to myself as the center of my own universe.

And I remember being a baby reporter and just doing these bullet point fixtures on the Bloomberg terminal that like 12 people read.

But it taught me a lot.

And it really serviced those 12 people.

And now AI does a lot of those blood points as well.

That's true, though.

Hi, I'm Kelly Cavanaro, Managing Director, Head of North America Institutional Distribution.

At Janice Henderson Investors, we believe working together is the way to work better, like combining your portfolio plans and our in-depth strategy, your valued assets and our valuable insights, your mission and our vision.

Working in harmony to seek the right investment opportunities.

Janice Henderson Investors, Investing in a Brighter Future, Together.

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You're thoughtful about where your money goes.

You've got your core holdings, some recurring crypto buys, maybe even a few strategic options plays on the side.

The point is, you're engaged with your investments, and public gets that.

That's why they built an investing platform for those who take it seriously.

On Public, you can put together a multi-asset portfolio for the long haul.

Stocks, bonds, options, crypto, it's all there.

Plus an industry-leading 3.8% APY high-yield cash account.

Switch to the platform built for those who take investing seriously.

Go to public.com and earn an uncapped 1% bonus when you transfer your portfolio.

That's public.com.

Paid for by Public Investing.

All investing involves the risk of loss, including loss of principal.

Brokerage services for U.S.-listed registered securities, options, and bonds in a self-directed account are offered by Public Investing Inc., member Finrun SIPC.

Crypto trading provided by Backed Crypto Solutions LLC.

Complete disclosures available at public.com slash disclosure.

Okay.

Okay, you talk about it in the same way that I told you everything I know about J.P.

Morgan's new building at 270 Park Avenue, tell me everything you know about cockroaches at this moment.

Part of me hates that we've just decided that they're called cockroaches.

Part of me is like I keep leaning into it in the columns or whatever.

That's the thing.

It's already

in charge.

It's a useful shorthand.

But there's been a number of credit blow-ups, and they all kind of have the same flavor, which is that

someone is or maybe was or looks like they might have been double-pledging collateral or

something it's collateral they didn't have

you know all these things and I think we talked about tricolor and first brands I'm not even sure about that.

We've definitely name-dropped them

and then I think last week the Zions and Western Alliance news had just come out and you mentioned it on this podcast Thank God I did well then I had it cut out because we didn't really talk about it

Something that's happening today on Thursday is what's going down with Western Alliance and Zion's.

These are two regional banks.

And apparently, they disclose problems with loans involving allegations of fraud.

And currently, at like 2:23 p.m., last I checked, the stock market was kind of freaking out about that.

Who's fraud?

Let me tell you.

Okay, so Zion's apparently it disclosed a $50 million charge-off for a loan underwritten by its wholly owned subsidiary, California Bank and Trust.

Western, their problem is, is that it said that it's dealing with a borrower that failed, quote, to provide collateral loans in first position.

Yeah.

You know, toppy market.

Toppy market.

Don't always check your collateral.

Yeah.

Yeah.

Why would you?

Yeah, they compete to make the loans.

But anyway, so like Zions and Western Alliance both announced that they sort of were exposed to what they characterized as fraud, although the people who allegedly defrauded them say they didn't defraud them.

But basically they

made some loans to this real estate lending firm, and the real estate lending firm, they say, did not actually

own the mortgages that they were buying against.

They did, and then they sold them, or they did, and the properties were foreclosed on, or they made the loans, but they were second liens.

Like, there's all this stuff where there's sort of sloppiness around collateral.

And then the other story that came out, I think, last week was 777 Partners, which is a fascinating company that both buys your lottery payments.

Right.

If If you win the lottery and you get 20 years of payments, they'll buy them from you and so you cash up front.

And they also buy sports teams.

They own a lot of European soccer teams.

They own the London Lions, a basketball team.

And they tried to buy Everton, the big Premier League team.

And

there are some allegations that they were at least sloppy with the collateral that they were selling on to investors where they basically were borrowing against these future cash flows of lotteries or structured settlements and they would maybe double pledge them.

Maybe didn't have all the assets that they claimed to have.

And like the founder was charged criminally last week, in part because one of the lenders

got, I think, an anonymous whistleblower tip saying that they were double pledging assets.

And the lender called them to be like, what's all this then?

And the founder on a recorded line was like, yeah.

We did do that, but like, it's because our computer systems were sloppy and we'll fix it.

Oh my gosh.

After I wrote about this, I got a number of emails from readers with anecdotes about their own dealings dealings with 777 partners that I think are largely supportive of the theory that they might have actually screwed up their computer systems.

Like, there was a lot of like, yeah, they were kind of unprofessional.

So you never know.

But

it doesn't look good to me that we may have borrowed against our collateral from two different lenders.

So are you holding this up as an example of a cockroach potentially?

This is a reference to Jamie Dimon saying, when you see one cockroach, there will be more.

And it's definitely, since he said that, there have been a lot of these credit problems that all, you know, have similar features.

It's like if you see a misaligned margin.

Yes.

Yeah.

In a deck, there might be other issues.

Right.

It's like an indicator of sloppiness.

And all of these are kind of small.

I mean, you know, in the scheme of like the banking system, right?

But like you see one cockroach, you see more.

They compound potentially.

Potentially.

The other thing that I think is interesting, and I wrote this this week, is that another thing that a lot of these cases have in common is that the problem company is essentially a lender.

It's like a financing company.

It's a trade finance company or a structured settlement company or a real estate lending firm or something.

It's a lender, right?

And then the people who complain about it, the people who take losses are lenders to that lender, right?

So it's like second order or sometimes third or fourth degree lending where like a bank lends to someone who lends to someone who lends to someone.

And somewhere in that chain, problems happen.

And I think we've talked about on this podcast, and I certainly write a lot about like there's been this move to banks retrenching where instead of like banks making loans, private credit firms make loans and then banks make loans to the private credit firms to make the loans.

And the upside of that is that the banks have more seniority, right?

They're cushioned by like the private credit firm takes the first loss or the, you know, the factoring firm, whoever takes the first loss.

But the downside is like they don't get to see

directly into the loan.

Like they're several steps removed from the actual car loan or the actual structured settlement or whatever.

And there's just more opportunity to get this sort of cockroach situation where you were lending against collateral.

It doesn't exist.

Yeah.

Whereas when you make a mortgage loan directly, you're like, you see the house.

So this is all sort of indirect.

And I do think it's like, you know, it is both, like, these stories seem symptomatic of late cycle exuberance because all Mark Rowland would say it.

Specifically, like indirect lending, where because it is indirect, it is a little bit easier to get hoodwinked out of collateral.

So let's not cut this out of the podcast

in case we need to reference back to it in a couple weeks' time.

Yeah, yeah.

Sorry, I cut out your precious reference to Western Alliance and Islands last week.

And that was the Money Stuff podcast.

I'm Matt Levini.

And I'm Katie Greifeld.

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We'll be back next week with more stuff.

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