Executive Suite 7/22/2012: Venture for America's Andrew Yang, PC's Michael Kraten

♪
♪ 41 OF THE NATION'S
SMARTEST, NEW COLLEGE
DOCTORED IT AS ARE AT BROWN
UNIVERSITY THIS SUMMER FOR
ENTREPRENEURIAL BOOT CAMP.
THE FIRST CLASS OF FELLOW
ADVENTURE FOR AMERICA WHICH
HOPES TO TEACH WHAT AMERICA
DID FOR SCHOOL.
IT IS LAUNCHING IN
PROVIDENCE AND FOUR OTHER
CITIES AND IT IS WINNING
PRAISE FROM PRESIDENT
OBAMA.
OUR GUEST ON THE FIRST HALF
OF EXECUTIVE SUITE, VENTURE
FOR AMERICA FOUNDER ANDREW
YANG, PLUS, SHOCK WAVES WERE
WALL STREET TO LONDON AFTER
A TOP BANK ADMITS IT FIXED
INTEREST RATES.
HOW ONE LOCAL ACADEMIC FOUND
IT.
JOIN US FOR THE SECOND HALF,
PROVIDENCE COLLEGE PROFESSOR
MICHAEL KRATEN.
♪
♪ ♪
♪ ♪
♪
THIS WEEK ON EXECUTIVE
SUITE, AM TED NESI.
SO LET'S START OFF WITH
THE MOST BASIC QUESTION:
WHAT IS VENTURE FOR
AMERICA?
VENTURE FOR AMERICA IS A
NEW NATIONAL NONPROFIT THAT
RECRUITS TO TRAIN TOP
COLLEGE GRADUATES WHO WANT
TO START AND FOUND THEIR OWN
BUSINESS.
WE MATCH THOSE AND HAVE A
COUPLE OF YEARS TO DEVELOP.
SO I MENTIONED THEY TEACH
FOR AMERICA AND YOU HEAR
THAT A LOT ONCE PEOPLE ARE
WRITING BACK, YOU PUT THESE
IN ALMOST UNDERPRIVILEGED
CITY THESE WAY THOSE
STUDENTS PUT INTO UNDER
PRIVELEDGED SCHOOLS.
PROVIDENCE IS ONE OF THE
FIRST CITIES WE CHOSE.
HOW ARE YOU CHOOSING?
WITH, HONESTLY, WE CAME
TO PROVIDENCE BECAUSE OF THE
PERSONAL CONNECTION HERE.
I GRADUATED AROUND BACK IN
1996.
VENTURE AMERICA WAS INSPIRED
BY CHARLIE AN ON TRA PRA
MOOIER HERE IN PROVIDENCE.
PEOPLE MIGHT RECK HIGH
THE NAME AND THE TECH FIRM.
YEAH.
CHARLIE WAS INSPIRATION TO
ME PERSONALLY WHERE HE
GRADUATED 90-PLUS JOBS.
SAW THERE WAS A THE
OPPORTUNITY TO BRING OTHER
PEOPLE ALONG IN CHARL'S
FOOTSTEPS.
THIS IS TO HELP THE
COMPANIES?
HOW DO YOU LACK AT THAT
WELL, WE THINK IT IS A
WIN-WIN OVER THE THIRD WIN
BEING THE REASON THE
COMPANIES ARE BASED IN.
IF YOU LOOK AT THE COMPANY
LIKE IT HERE IN PROVIDENCE,
THEY ARE PROSPERING, BUT
THEY NEED AN IN FLUX OF
RECENT TALENTED GRADUATES TO
HELP FUEL THE GROWTHMENT YOU
HAVE ALL OF THESE ASPIRING
ENTREPRENEURS WHO DON'T KNOW
HOW TO GET STARTED SORB WHAT
WE DO IS MATCH THE TWO
GROUPS TOGETHER WITH A HOPE
THAT OVERTIME, THESE FELLOWS
WILL GO ON TO BE LIKE CHARL
HI AND START MORE
COMPANIES.
NOW CHARLIE I KNOW HIS STORY
WELL.
HE STARTED IT THE DORM ROOM
AND STARTED AND BUILT IT UP
FROM THERE.
WHY HAVE THIS SORT OF MIDDLE
STEPS TO THESE
ENTREPRENEURS.
WELL, YOU KNOW, CHARLIE IS
REMARKABLE ENTREPRENEUR, HE
IS A BIT OF OUTLIER IN THE
SENSE THAT MOST SENIORS IN
COLLEGE ARE NOT UP TO
CREATING, AND YOU KNOW, I
PUT MYSELF IN THE CATEGORY.
I GRADUATED FROM BROWN IN
'96 AND TOOK ME A NUMBER OF
YEARS TO TART THE FIRST
COMPANY.
I SAW HOW DIFFICULT IT WAS.
WE FELT THERE WAS A
NECESSARY INTERMEDIATE STEP
AND RECENT GRAD OUTS WHO RY
R ASSIGNED TO BE LIKE
CHARLIE TO GET SEASONING,
EXPOSURE, INDUSTRY
EXPERIENCE MOVEMENT AND WHY
PUT THEM AT SMALLER FIRMS
AND PUT THEM IN APPLE AND
PLACE LIKE THAT INTO WELL,
THE WAY THEY FUNCTION IS
DISTINCT TO COMPANIES WITH
THAT STAGE OF PROT.
IF THEY WENT TO APPLE.
APPLE IS A MATURE
WELL-ESTABLISHED COMPANY.
IF YOU WERE TO PUT A GRAD
ATE AS 10,000 EMPLOYEE AT
ONE OF THE COMPANIES THEY
WOULD LEARN HOW A LARGE
ORGANIZATION FUNCTIONS
WHEREAS YOU PUT THEM AT A
GROWING FIRM LIKE THE
OTHERS, THEN, THEY WILL
LEARN HOW A GROWING COMPANY
BUILDS ITSELF UP AND CREATES
VALUE.
TO SEE FIRSTHAND THE
CHALLENGES AND WHAT WORKS
AND WHAT DOESN'T WHEN YOU
ARE IN THE EARLY STAGE
GROWTH.
IT IS ALSO A DEGREE OF
PERSONAL MENTORSHIP.
BECAUSE THERE IS NOTHING
LIKE SPENDING A NUMBER OF
YEARS AROUND ANY EXPERIENCED
ON TRA PRA MU YEAR.
I DID IT MYSELF.
AFTER I STARTED THE FIRST
COMPANY WHICH DID NOT WORK
OUT.
I ENDED UP BEING ON THE
EXISTING ON TRA PRA YEAR AND
MATURING THAT WAY.
SO I BELIEVE, IN THE DIRECT
IMPACT OF THE MENTORSHIP CAN
HAVE.
DO YOU THINK YOU WOULD HAVE
BEEN FITTED TODAY IF YOU
HAVE THAT EXPERIENCE FIRST.
VERY MUCH SO.
I WENT TO LAW SCHOOL AFTER I
GRADUATED FROM BROWN WHICH
DIDN'T CHURN OUT TO BE THE
RIGHT STEP FOR ME BECAUSE I
PRACTICED LAW PREVIOUSLY.
AND SO, I THINK THAT A LOT
OF PEOPLE THAT ARE INVOLVED
WITH VENTURE AMERICA SEE IT
AS PROGRAM THAT WISH
EXISTED.
NOW LET'S TALK NULTS AND
BOTTS.
NOW MANY STUDENTS THIS
YEAR?
HOW MANY APPLICATIONS?
HOW DID YOU PICK THEM?
WHO ARE THEY INTO WELL, WE
GOT HUNDRED OF AP I APPLINT
AS FROM ALL OVER THIS
COUNTRY.
I VISITED 35 UNIVERSITIES
LAST YEAR TO HAKE THE PITCH
AND RECRUIT GRADUATING
SENIORS WHO WERE INTERESTED
IN LEARNING HOW TO BUILD
BUSINESS AND CREATE
OPPORTUNITY.
SO HUNDRED OF APPLICANTS AND
THERE WAS MULTI STAGE
SELECTION PROCESS THAT
INVOLVED ON-LINE SUBMISSIONS
AND PHONE INTERVIEWS AND IN
NEW YORK CITY.
SO THEN AFTER THE SELECTION
DAY, WE MAKE OFFERS TO
SUCCESSFUL CANDIDATES SO I
AM HAP I TO SAY, WE EXTENDED
AH OFFICER TO ACCEPT IT AND
JOIN THE PROGRAMNA, RIGHT
NOW THEY FINISH UP AT BROWN
AND RHODE ISLAND A BOOT CAMP
FOR ON TRA PRAYERS A
TRAINING CAMP.
WHAT IS THAT?
WHAT ARE THEY DOING?
WELL, WE KNOW THAT MANY
START UPS DON'T HAVE VERY
RIGOROUS ESTABLISHED
TRAINING PROGRAM BECAUSE
THEY ARE NEW.
THEY ARE JUST GETTING
START.
WHAT WE WANTED TO DO.
WE WANTED TO GIVE THESE
UP-AND-COMING ENTREPRENEURS
AND FELLOW AS CHANCE TO BE
ABLE TO DEVELOP
PROFESSIONALLY FROM DAY
ONE.
SO WE HAD McKENZIE,
PROFESSOR FROM HARVARD
BUSINESS SCHOOL AND
PROFESSOR FROM BROWN AND A
NUMBER OF ESTABLISHED
ENTREPRENEURS TO TRY TO
TEACH THE FELLOWS HOW
SUCCESSFUL BUSINESSES GET
STARTED.
THE NEXT STEP, THEY STAND
OUT THE COMPANIES LOOK YOU
TOLD ME BEFORE.
FOUR ARE GOING TO BE BASED
HERE IN PROVIDENCE.
A ARE THE OTHER CITIES?
THE CITIESES ARE DETROIT,
NEW ORLEAN, SINCE HAITI AND
LAS VEGAS.
INTERESTING COMPANY AND
THEY GET PAID WHILE WORKING
THERE OVER TIME.
HOW DID THAT WORK?
THEY HAVE A GENUINE BUSINESS
NEED.
THEY ARE NOT INTERNS.
THESE ARE EARLY STAGE HIRE.
THAT IS AN IMPORTANT POINT
THEY WILL HAVE RULE ROLE AND
REAL JOBS.
OH, YEAH.
THE COMPANY IS PAYING A
SALARY, SO DISCOUNTED TO
WHAT NANNY ON THE MARKET BUT
THEY ARE GETTING PAID A
SALARY FOR TWO YEARS BY THE
COMPANY AND THE COMPANY HAD
A CHANCE TO INTERVIEW THEM
ON DURING THE SELECTION
PROCESS.
THEY SPENT TWO YEAR DOING
IT?
THAT HAPPENS THE OTHER SPEND
WELL, THE GEL AT THE END OF
TWO YEARS.
THE FELLOWS WILL HAVE A
SOLID SENSE AS TO HOW
BUSINESSES ARE DEVELOPED AND
STILL, A NUMBER OF THINGS
THAT COULDP PEN.
AT THIS POINT, ARE PROBABLY
ALREADY QUITE EXPERIENCED
WITH THE COMPANIES AND READY
TO ASSUME MORE
RESPONSIBILITIES SO THEY
COULD BE READY.
IT WOULD BE A GREAT WIN
BECAUSE ALL THE COMPANIES
NEED CONTINUING DEVELOPMENT
OF THEIR TALENTS.
THEY COULD ALSO START
THEIR OWN COMPANY AND AT
THIS STAGE, THEY HAVE A
LITTLE BIT MORE EXPERIENCE.
THEY HAVE SOME RELATIONSHIPS
AND NETWORKS WITHIN THE CITY
ACCESS TO SOME CAPITAL.
VENTURE FOR AMERICA HAS
PLEDGED $100 THOUSAND IN
FUNDING FOR THE FIRST CLASS
FOR THOSE WHO DO GO ON TO
START A BUSINESS.
ALL RIGHTMENT WE HAVE TO
TAKE A BREAK.
-WE COME BACK WE'LL HEAR
WHAT ANDREW HEARD FROM
BARACK OBAMA AT THE WHITE
HOUSE.
STAY WITH US.
YOU ARE WATCHING "EXECUTIVE
SUITE."
WELCOME BACK TO EXECUTIVE
SUITE.
I AM TED NESI.
OUR GUEST THIS WEEK IS
ANDREW YANG.
HE IS A BUSINESSMAN,
ENTREPRENEUR, NOW THE
FOUNDER OF NONPROFIT VENTURE
FIRM AMERICA THIS SUMMER.
I WANT TO HEAR A LITTLE BIT
ABOUT YOUR OWN STORY,
ANDREW.
I KNOW YOU WENT TO BROWN.
WHERE DID YOU GROW UP?
WHERE DID DO AT RUN INTO I
GREW UP IN THE SUBURB OF NEW
YORK CITY.
I WENT TO BROWN AND
GRADUATED IN '96.
WENT KNOW WHAT I WANTED TO
DO.
I WENT TO LAW SCHOOL.
I WENT TO LAW SCHOOL IN NEW
YORK AT COLUMBIA AND RACK
ISED LAW PROOFLY AND
REALIZED I WAS NOT A GOOD
FIT FOR THE WORK AND VICE
VERSA.
I LEFT THERE TO START
BUSINESS AT 20 AND THAT
BUSINESS ENDED UP RAISING
HUNDREDS OF THOUSANDS OF
DOLLARS AND HAVING A RISE
BUT THEN EVENTUALLY
FALL-THE.COM BUBBLE BURST
BUT I HAVE BEEN BITTEN BY
THE BUG THAT POINT, SO I
KNEW I WANTED TO GET BETTER
AT DEVELOPING BUSINESSES, SO
I BECAME AN EXECUTIVE.
WHAT DRAWS YOU TO BE AN
ENTREPRENEUR.
THES SES OF BEING ABLE TO
CREATE VALUE.
BEING ABLE TO
MR. SOMETHING.
IT IS LIKE, IT IS LOOK THE
SAME SORT OF PLUG YOU GET IF
YOU WERE TO BUILD A
STRUCTURE MODEL.
AT THIS CASE IT IS A COMPANY
OR BUS MESS WHERE YOU DO
WORK ONE DAY.
YOU COME BACK THE INCOMES
DAY AND YOU CAN BUILD ON IT
I ENJOY THAT PROTS SES.
NOW YOU EVENTUALLY
FOUNDED THE TEST PREP
COMPANY IN MANHATTAN WHICH
WAS FOR GRD OUTS FOR PEOPLE
WHO WANT TO GO TO MEDICAL
SCHOOL.
IT IS A BUSINESS SCHOOL.
SORRY.
PART OF THE WASHINGTON
POST COMPANY.
WHAT WAS THE PROCESS LIKE OF
BUILDING UP A COMPANY LIKE
THAT WELL, IT WAS ACTUALLY
FOUNDED BAY A FRIEND OF MIN
AND I ASSUMED THE CEO ROLE
IN 2006 AND BUILDING THAT
COMPANY WAS FANTASTIC
EXPERIENCE CERTAINLY, I HAD
HAN MY GREAT TEAMMATE AND
ONE OF THENGS THIS I LEARNED
THAT ARE BUILDING A COMPANY,
IT IS NO AT ONE-MAN SHOW
THAT YOU NEED THE PEOPLE
AROUND YOU TO HELP DEVELOP.
AND YOU HAVE, YOU HAVE
GOTTEN A LOT OF ATTENTION
ALREADY WHEN I WAS PREPARE
FOR THE SHOW.
NO LACK OF ARTICLES, "WALL
STREET JOURNAL" ARTICLE,
OTHER PEOPLE WRITING AND
ALSO, YOUR SUCCESS STEM FROM
THE WHAT YOU LEARN.
IRE THINK I HAVE
ADVANTAGES.
I KNEW MY ENGLISH BETTER
THAN EX PEED IN THE
RESTAURANT.
IT WAS JUST THAT IF YOU
SMILE OSH YOUR TIPS GO UP.
YOU FIND THAT WORK FOR A
NON-ROV FATE YEAH.
I SAY, IT DOES.
SO AMONG THE PEOPLE WHO
NOTICED YOU, PRESIDENT
OBAMA.
I THINK WE HAVE A PICTURE
THERE THAT I ASSURE YOU WHEN
YOU WENT THERE.
HOW DID YOU GO THOUGH WHITE
HOUSE?
WHAT WAS IT LIKE.
I WAS NAMED THE CHAMPION
OF CHANGE BY THE WHITE HOUSE
FOR MY WORK WITH VENTURE
AMERICA.
THEY INVITED US TO MEET WITH
THE PRESIDENT IN APRIL OF
THIS YEAR.
SO YOU LO, ID A CHA TOPS SIT
DOWN WITH THE PRESIDENT AND
TALK TO HIM.
YEAH.
HE ASKED THE SAME QUESTIONS
YOU ARE ASKING ABOUT ABOUT
VENTURE AMERICA AND
INTERESTED ON WHAT WE ARE
DOING BECAUSE OF THE
CREATION OF JOBS.
AND WAS IT CALL AT THE
WHITE HOUSE?
IT WAS GREAT.
SECRET SERVICE AGENT.
FELT LIKE A MOVIE STAR.
LET ME ASK YOU.
ONE OF THE BIG KNOCKS ON
AMERICA THIS YEAR IS THAT
YOU BRING IN A LOT OF ELITE
HIGH PRILIENT STUDENTS GRD
OUTS THAT POINT AND THEY
COME TOLL THE
UNDERPRIVILEGED SCHOOLS IN
THAT CASE AND START UP AND
THEY ARE THERE FOR TWO YEARS
AND THEN THEY GO.
WHAT DO YOU THINK ABOUT
THAT?
DOES IT APPLY TO VENTURE
AMERICA?
DO PEOPLE COME IN FOR TWO
YEAR AND DID BACK TO NEW
YORK.
DO YOU THINK THEY WILL BEN
AT THIS TIME THE REGION?
EYE DO.
THE REASON I DO BECAUSE I
CAN SAY THAT
ENTREPRENEURSHIP IS SOMEWHAT
ADDICTIVE.
I THINK IN A GOOD WAY.
I THINK THAT MANY OF THESE
ASPIRING ON TRA PRA MU YERS
VERY BADLY WANT TO BE ABLE
TO WALK THAT PATH AND THAT
IS WHY WE THINK THAT REN
TURE AMERICA IS GOING TO PUT
THEM IN SPECIAL POSITION TO
HAVE A SUSTAINABLE LONG-TERM
CAREER.
THERE AS BAN STUDY THAT
SHOWED THEY ARE MORE LIKELY
TO BE SUCCESSFUL IN AREAS
THEY ARE HIGHLY NETWORKED
IN.
SO WE HAVE TWO YEARS TO GET
THEM EMBEDDED IN THE
COMMUNITY.
TO GET THEM TO BECOME A
VITAL PART OF THE NETWORK
HERE IN PROVIDENCE SUCH AS
THE COMPANY AND DO THE
NATURAL PACE TO DO ITMENT
INTO YOU ALLUDED EARLIER ONE
MORE TIME THE FOUR COMPANIES
YOU WILL BE PUTTING
PROVIDENCE TOGETHER.
SURE OF.
IT IS A NEW COMPANY.
OOP THAT IS WITHIN I HAVE
NOT HEARD OF.
YEAH.
IT IS A FANTASTIC NEW
COMPANY THAT HELPS
NONPROFITS RAISE MONEY THAT
IS NEAR AND DEAR TO MY
HEART.
THEY HELP RAISE MONEY
THROUGH T SHIRT CAMPAIGN
WHERE IF YOU HAD CAUSE WOULD
YOU LIKE TO SUPPORT.
WHAT YOU DO IS TELL YOUR
FRIENDS AND FAMILY, HEY.
HERE IS A COOL T SHIRT AND
THEY SAY I WANT TO BUY THAT
T SHIRT THEN THE COMPANY
PRINTS THEM AND SENDS THEM
TO ALL THE INDIVIDUALS WITH
MINIMAL TROUBLE ON HAIR
PART.
SO OUR FELLOWS ACTUALLY USED
IN A COMPETITION AND ONE OF
THE CHALLENGES AND THEY
ENDED UP SELLING ABOUT
20,000 WORTH OF T SHIRES AND
RAISED $50055 SO IT GUESS TO
SHOW THE POTENTIAL OF THE
PLATFORM.
NOW YOU WERE A CLASS OF
'93 AT BROWN.
THAT IS RIGHT NOT A WERE YOU
HERE THROUGH '96.
HE WENT TO NEW YORK.
YOU DID YOUR THING AND NOW
YOU ARE BACK WORKING ON
THIS.
WHAT PERCENT DO YOU GET OF
THE BUSINESS SECTOR IN
PROVIDENCE FROM BEG HERE FOR
A COUPLE OF WEEKS NOW
WORKING ON THE BOOT CALM
SHOOP I AM FRIENDS WITH MANY
THAT ARE HERE THE CITY THEY
LOVE IT HERE.
THEY THINK IT IS FANTASTIC
ENVIRONMENT.
THE ISSUE THAT I THINK THEY
HAVE RAISED AND ME AND THE
SURE I AM HERE TO HELP
ADDRESS IS REALLY THE TALENT
ISSUE.
AND THIS IS SOMETHING I CAN
RELATE TO DIRECTLY.
IF YOU ARE RUNNING A COMPANY
, BE THERE ARE OBVIOUSLY
VERY IMPORTANT ISSUES OF TAX
AND THE IN VIRN PRESIDENT
BUT THE SINGLE BIGGESTS THE
PEOPLE.
SO IF YOU CAN TET THE RIGHT
POMERON YOUR COMPANY THEN
THE SKY IS THE LIMIT.
IF YOU STRUGGLED TO ENLIST
THE PEOPLE, THEN THAT IS
WHEN YOU START THINKING
ABOUT YOU KNOW, THE REGION
YOU ARE LOCATED IN.
I LO, WE ALWAYS R ACTUAL
TALK OPP UP THE SHOW NOW
ABOUT WHAT WE CAN DO WITH
THE SECOND HIGHEST IN THE
COUNTRY IN RHODE ISLAND
NOW.
THE GOVERNOR OR WHOEVER ENDS
UP THE ECONOMIC DEVELOPMENT
CORPORATION ASKED YOU FORKED
A RIS.
WOULD YOU SAY TO FOCUS ON?
THINK I PROVIDENCE HAS A TON
OF ADVANTAGE IS.
CITY IS A LIVABLE CITY.
IT IS A GREAT SIZE.
THE COST OF LIVING IS
REASONABLE.
I WOULD IT WILL THE GOFF
THOR TO FOES CAN ON THE TOWN
ISSUES WHERE YOU HAVE A OR A
NUMBER OF WORLD CLASS
EDUCATIONAL INSTITUTIONS
HERE IN RHODE ISLAND
THROWING OFF GROVES OF
PEOPLE THAT ARE CREATIVE AND
HAVE AS TY TO GENERATE A LOT
OF VALUE AND POTENTIALLY
GIVE RY TO NEW COMPANY AND
NEW INDUSTRIES AND THOSE
PEOPLE OFTEN ARE INTERACTING
THE SAME WAY I DID IN '90s
WHERE I WAS HERE FOR FOUR
YEAR AND THEN I LEFT AND I
WENT TO NEW YORK AND I AM
BACK NOW.
I WOULD TELL THE GOFF MORE,
LOOK, YOU KNOW, SO MONEY
THOUSANDS OF PEOPLE PASSING
THROUGH THE STATE, THAT MORE
YOU CAN GET THEM TO SEE
RHODE ISLAND IS A PLACE TO
BUILD THE KAY REMEMBER, HE
BETTER OFF IT WOULD BE TO.
FANTASTIC.
ALL RIGHT.
WE HAVE TO TAKE ANOTHER
BREAK.
I WANT TO THANK OUR GUEST
FOR THE FIRST HALF BEING
HERE.
COMING UP THE PROVIDENCE ROW
PROFESSOR WHO RAISED A RED
FLAG AND TALK ABOUT THAT
STANDS FOR AND MORE.
WELCOME BACK TO EXECUTIVE
SUITE.
I AM TED MESSY.
OUR GUEST FOR THE SECOND
HALF IS MICHAEL KRATEN.
ACCOUNTING PROFRESSOR AT
PROVIDENCE COLLEGE AND
SUDDEN LAY CELEBRITY THANKS
TO THE WORK SCANDAL.
LONDON INTERBANK OFFERING.
THAT IS RIGHT.
THAT IS THE RATE.
WILL LET YOU, PLAIB IT.
EXPLAIN WHAT IT IN THE
SIMPLEST TERMS YOU CAN AND
WHY VIEWERS THINK IT SOUNDS
ARCANE.
WELL, ABOUT 15 TO 20
GLOBAL BANKS, GLOBAL BANKS
AROUND THE WORLD THAT ALSO
CALL TOO BIG TO PAIL.
THEY HAVE OFFICES IN
LONDON.
EVERY ONCE IN A WHILE, ONE
OF THE LONDON OFFICES RUNS
THE MONEY.
SO THEY WHACK ACROSS THE
STREET OR PICK UP FIRST OWN,
CALL THEIR FRIENDS, THE BANK
WHO ARE ALSO IN THE SAM
COMMUNITY IN THE FINANCIAL
DISTRICT OF LONDON AND THEY
SAY, PLEASE LEND ME A FEW
BRITISH POUND.
THE BANKS THAT IS DOING THE
LONDON TO TIE THE OTHER BANK
OVER WILL SERVE AN INTEREST
RATE AND THE RATE IS THE
DAILY ESTIMATION FOR WHAT ON
AVERAGE EACH OF THOSE BANKS
ARE LENDING EACH OTHER MONEY
AT FOR THOSE LENDING
TRANSACTIONS THAT ARE
OCCURRING IN THE CITY OF
LONDON.
AND THAT IS TO HELP PEOPLE.
I REMEMBER, AS A FINANCIAL
REPORTER DURING THE CRISIS
IN THE FALL OF 2008 EVERY
MORNING, EVERYONE LOOKED AT
IT BECAUSE THAT WAS, AS YOU
WATCHED IT.
WAS THE FEAR THAT THE BANKS
WERE NOT TOUGHING ANTICIPATE
OTHER AT THE TIME.
IT WAS VERY IMPORTANT AND A
LOT OF OTHER FINANCIAL IN
YOU ROOM TOES BASED THEIR
WORKS OFF IT CORE RE.
THAT IS RIGHT.
TELL ME WHAT HAPPENED WITH
BARCLAYS IN LONDON.
WELL, WHAT HAPPENED IS THAT
WITH ANY BORROWER IF YOU ARE
CONCERNED THAT THE BANKS
THAT ARE BR ROWER BIS TO GO
BANKRUPT THEN YOU WILL
INCREASE THE INTEREST RATE
THAT YOU CHARGED THEM.
THEREFORE BACK IN THE
FINANCIAL CRISIS TIME, EVERY
ONE WAS LOOKING AT THE RATES
TO SEE WHICH BANKS MIGHT BE
CONCERNED THAT IT MAY BE
GOING BELLY-UP.
RIGHT.
TERRIBLE RATE OR
SOMETHING.
EXACTLY.
THEREFORE EVERYONE PAID
ATTENTION TO THE RATES THAT
TIME.
NOW, THE BANKS THEMSELVES IN
LONDON GOT TOGETHER DECADES
AGO AND HERE THAN 20 YEARS
AGO AND SAID IT MIGHT BE
HOPEFUL FOR US IF WE TOLD
THE WORLD THE RATE THAT
WORKS WE WERE LENDING EACH
OTHER MONEY.
AND THEREFORE, THEY CREATED
THE POLICY OR PRACTICE WHERE
THEY REACHED OUT TOT THEIR
OWN TRADE ASSOCIATION CALLED
THE BRYISH BANKER AOCEAN
LOCATED IN THE CITY OF
LONDON.
AND EVERY DAY, THE BRITISH
BANKER'S ASSOCIATION WHICH
IS THE TRADE ASSOCIATION FOR
THE BANKS THEMSELVES CALLED
EACH OF THE 15 TO 20 BANKS
WHICH ARE GLOBAL BANKS IN
CITY.
THEY EVENTUALLY ASKED EACH
BANK A QUESTION.
IF YOU NEEDED TO BORROW
MONEY FROM ANOTHER BANK IN
LONDON TODAY, WHETHER YOU
ARE ACTUALLY BR ROWING MONEY
OR NOT, WHAT DO YOU THINK
YOU WOULD NEED TO PAY FOR A
RATE.
NOW BARCLAY'S HAS ADMIT
THEY FUDGED THE RATE MUCH
THAT IS A FAIR WAY TO PUT I
IN LAY MACHINE'S TERM.
WELL, I WOULD SAY THEY
PROVIDED A RATE THAT WAS NOT
NECESSARILY EQUAL TOLL THE
RATES THAT THEY THOWGHTD
THEY WOULD PAY BUT WRATH EAR
RATE THAT WAS OOKUAL TO
SOMETHING THAT WOULD HELP
THEM MAKE MOREEN IN NY.
AND TO GIVE PEM.
THAT ACCEPTEDS OFF A CASCADE
OF CHANGES AND CHANGES THE
RATE THAT IS REPORTED AND
CHANGES ALL THOSE THAT
INCLUDE HORT GAGE OR
NONPROFITS HAVE HERE IN
RHODE ISLAND.
I KNOW SOME OF THEM HAVE.
PART OF WHY I HAVE YOU ON
WITH ME.
YOU YET A PEP PAP WE'RE
COLLEAGUES.
WHAT DID YOU FUND IN THE
PAPER?
BACK IN 20 I GOT TOGETHER
WITH WITH THREE COLLEAGUE
AND WE SAID YOU OH,
SOMETHING INTERESTING IS
HAPPENING.
EVERY TIME THE BRITISH
BANKER ASSOCIATION IS
ISSUING THE DAILY RATE, THEY
DON'T JUST ANNOUNCE THE RATE
ITSELF, THEY ANNOUNCE THE
ESTIMATES THAT EACH OF THESE
15 TO 20 BANKS ARE PROVIDING
THEM THE ESTIMATES THAT THEY
USE TO CALL CUE LATE THE
RATE.
AS A RESULT, IT MAY NOT ONLY
BE INTERESTING TO LOOK AT
THE RATE ITSELF BUT IF YOU
LOOK AT HOW EACH BANK QUOTED
RATES OR ESTIMATES IS
CHANGING ALL THE TIME, YOU
CAN LEARN OVER A PERIOD OF
TIME HOW THE BANKS FOR TOONS
ARE CHANGING.
AND SO WE START TO LOOK AT
EACH BANK'S INDIVIDUAL
QUOTES FROM DIE DAY, WEEK TO
WEEK AND MONTH TO MONTH.
IT IS WHAT WE DIDN'T NOTICE
THAT WAS INTERESTING.
HOW SO ALE WITH YOU WOULD
EXPECT THAT ON A DAILIES
ABOUT SIS SINCE BANKS
FINANCIAL POSITIONS CHANGE
DAY TO DAY AND MINUTE TO
MINUTE AND SECOND TO SECOND
SOMETIMES, BE THAT THE
INTEREST RATE THAT EACH BANK
WOULD FOR BR ROW MONEY AT
WOULD NORMALLY CHANGE.
HOWEVER, THERE WERE CERTAIN
BANKS WHICH WERE EXTENDED
PERIODS OF TIME CLAIMS THAT
THE BR ROWING RATE THAT THEY
WERE QUOTING WOULD NOT
CHANGE AT ALL.
WHAT DID YOU THINK WHEN YOU
NOTICED THAT THAT THAT IS
ODD.
BECAUSE BY DEFINITION THE
REASON WHY IT IS QUOTED
DAILY IS BECAUSE YOU WOULD
EXPECT TO SEE DAILY
CHANGES.
AND THEN THERE WERE OTHER
TIMES WHEN THE RATES AT
CERTAIN BANKS WOULD OFFER
WOULD CHANGE BY DRAMATIC
AMOUNT.
THEN AND THEN SOMETIMES WE
WERE ABLE TO LOOK BACK IN
THE NEWSPAPERS AND TRY TO
FIGURE OUT WHAT WAS
HAPPENING ON A CERTAIN DAY
WHEN A PARTICULAR BANK TREND
WOULD CHANGE.
AND WE WOULD SAY, WELL THAT
IS INTERESTING.
THERE WAS A BIT OF NEWS THAT
FIT THE NEWSPAPERS ON THAT
DAY.
BUT ACTUALLY, IT AFFECT THE
BANKS ON THAT SAME DAY.
CERTAIN BANKS HAVE CHANGED
THE RATE QUOTE.
AND NOT HAVING CHANGED THEM
AT ALL FOR AN UNUSUALLY
EXTEND PERIOD OF EYE.
THAT MAINS YOU THINK.
SOME, IT DIDN'T SEEM LIKE IT
WAS REALLY MOVING THE WAY IT
WOULD BE IN THE NATURAL
MARKET.
A EXACTLY.
SO YOU KNOW, WHAT DO YOU
MAKE.
WERE YOU SURPRISED WHEN YOU
HEARD ABOUT WHAT YOU CAME
ABOUT THEY ADMITTED OR WERE
YOU NOT SURPRISE.
WE WERE NOT SURPRISED
BECAUSE OF WHAT WE SAW.
NOW WHAT WAS SURPRISING TO
ME PERSONALLY IS THAT WE
FIRST WROTE OUR INITIAL
PAPER IN 200.
WE DID IT FOUR YEAR AGO IN
AUGUST OF 0.
WE POSTED IT ON-LINE ON TO
THE SOCIAL RECESS NETWORK
WHICH IS A GLOBAL ON-LINE
HET WORK OF ACADEMICS TO
LOOK AT EACH OR'S WORKS AND
IN 2008 AND 2010 WE SHARED
OUR INFORMATION IN
UNFINISHED FORM.
IN 2010, I WANT AHEAD WITH
PERMISSION OF MY COAUTHORS
AND HAD THE BOOK REVIEW THEN
PRESENTED BY ME AT A
NATIONAL CONFERENCE OF THE
AMERICAN ACCOUNTING
ASSOCIATION TRYING TO RAISE
THE VISIBILITY OF WHAT WE
HAD FOUND.
AND WE HAD SOME SUCCESS AND
REGULATORS SPEAK WITH YOU AT
HARV?
NEVER HEARD FROM
REGULATORS.
ACADEMICS DID.
NO REGULATORY FEEDBACK.
NO FEEDBACK FROM THE BANKS
HEM SELLS.
WASES THAT SR. PRICING?
I WAS SURPRISED AND A BIT
DISAPPOINTED NI.
ON THE OTHER HAND, THOUGH,
IF YOU ARE ENGAGED YOU KNOW
IN A SYSTEM OF REGULATING
RATES THAT ARE BEING
MANIPULATED ON MATTERS AND
THEN IT MAY NOT BE SR.
PRICING.
THE FED SHOULD BE
WATCHING THAT AND SHOULD BE
CONCERNED AS A REGULATOR AS
OPPOSED TO BANK.
VERY INTERESTING LATE
LAST WEEK WE FOUND OUT FOR
THE FIRST TIME THAT TIMOTHY
GEITHNER OUR REG LATER IN
ISSUED A RAVE VATE TO HIS
COUNTERPART A REGULATOR IN
THE U.K. IN THE UNITED
KINGDOM BACK IN 2008.
EXACTLY.
OKAY.
ISSUED A MEM ME AT THE
SAME TIME THAT WE WERE FIRST
HOSTING OUR PAPER RAISING
SIMILAR QUESTIONS.
THE VICTORY HERE TODAY.
I WANT TO THANK OUR GUESTS
MICHAEL KRATEN, OUR GUEST ON
THE FIRST HALF WAS ANDREW
WRANG, OF VENTURE FOR
AMERICA, IF YOU MISSED IT.
CATCH IT ON OUR WEB SITE,
THANKS FOR WATCHING
EXECUTIVE SEAT YOU NEXT
WEEG.