Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're Inside the ICE House, our podcast from intercontinental exchange on markets, leadership and vision in global business. The dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week, we feature stories of those who hatch plans, create jobs and harness the engine of capitalism, right here, right now at the NYSE and at ICE's 12 exchanges and six clearing houses around the world. And now welcome Inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King:
If you've ever taken Amtrak's Acela from Penn Station in New York to Union Station in Washington, you can't miss a gorgeous glimpse of the US Capitol, a powerful reminder of the city's past, present and future, and a gleaming icon that's fueled dreams of many young Hill staffers, elected officials, businessmen, lawyers, even me throughout the years. Back in the days that I worked in government and politics, we also went not only to Washington, but also places like Detroit. And the feeling was a little different.
Josh King:
Some fun nights in Greektown to be sure, but the urban core, even back then, was beginning to hollow out when the sun went down. As sure as I have a half dozen Shinola watches that I wear in a regular rotation, there are green shoots coming from the Motor City. It got me thinking, "What drives people to work in politics and government? Love of country? The thrill of the campaign?" The reasons are endless and the opinions and perspectives of those who come to Washington to help shape public policy are just as varied.
Josh King:
And yet, for all those who call the city home, many ask a common question, "What can I do, I mean really do, to help?" CEOs ask this question too, at least the civic-minded ones. Today, our focus is on JPMorgan Chase & Co., that's NYSE ticker symbol JPM, the largest bank in the United States and its CEO, Jamie Dimon. In 2014, still fresh from the financial crisis that had rocked the country, Dimon took a granular view on how JPMorgan Chase could help bring prosperity back to a specific part of the nation, the Midwest, where a year earlier, in 2013, the city of Detroit had filed for bankruptcy.
Josh King:
Our guest today, Peter Scher, was tapped by Mr. Dimon during the financial crisis to join the bank as executive vice president and head of corporate social responsibility. How has this important work evolved since Peter took the helm? How JPM's investment in Detroit has become a business model for its AdvancingCities initiative across America and across the world? And how corporations like JPM are working alongside with government to change policies and help us all prosper? That's all right after this.
Speaker 3:
And now a word from Artur Bergman, CEO of Fastly, NYSE ticker symbol FSLY.
Artur Bergman:
Fastly is an edge cloud platform. We help deliver digital experiences for amazing customers like Spotify and Ticketmaster, and New York Times. We have started eight years ago, it's been an amazing journey. We work very closely with our customers. We're a very critical part in their business. We're very selective in type of customers we want in our network. Fastly is built by developers for developers. Fastly is listed on the New York Stock Exchange.
Josh King:
Peter Scher got his start in politics at the ripe age of 15, running phone banks on Long Island for Pat Moynihan's first Senate campaign. In the late '70s, he headed South to American University and then AU's Washington College of Law. Unlike most students, Peter's career goals didn't involve Capitol Hill, but there he found himself eventually interviewing for a job on Capitol Hill as Chief of Staff to Montana Senator Max Baucus. As Peter once said, "A guy from Montana and a Jewish lawyer from New York, not your typical Capitol Hill duo."
Josh King:
Then, pivoted from the legislative branch to the executive branch, which is where I got to know him during the Clinton years, serving as Chief of Staff to the US Trade Rep, then nominated by the president to serve as the US Special Trade Ambassador, where he served as one of the lead US negotiators on China's entry into the WTO.
Josh King:
After a detour to private law practice, he joined JPM Chase where he's added to his duties the title as chairman of the bank's Middle Atlantic Region. Peter, welcome to Inside the ICE House.
Peter Scher:
Josh, thanks for having me. It's great to see you.
Josh King:
Welcome to the New York Stock Exchange, a frequent stop over the years for you?
Peter Scher:
Not frequent enough, but have been here a decent amount.
Josh King:
I've always wondered, the duties of the chairman of a region of a bank and your actual line role in the bank and helping run its business.
Peter Scher:
So, this is probably three or four years ago. The firm was looking at the Washington region, we think of it obviously as a powerful political capital of the country and the world, but it has become a enormous economic region. And if you think about Richmond to Baltimore, that's the third largest economy in the United States, seventh largest in the world, five of the 10 wealthiest counties in the United States are in that region. So, there's a desire to grow our business.
Peter Scher:
And Jamie Dimon, and the firm's operating committee asked me to take on this additional role, helping to grow the business. And we actually started expanding our branch network just last year. So, by the end of this year, we'll have 40 branches in the region, 70 by the end of next year. So, we see enormous opportunities, the largest tech hub outside of Silicon Valley.
Peter Scher:
And frankly, it's also a place, given how much economic growth there is, where we think we have an opportunity to demonstrate, "How can we make sure that growth is inclusive, that more people are getting an opportunity?" So, if you can't do that in the nation's capital, where can you do it? So, we're trying to actually create a model in which we're not only growing our business, but we're growing in a way that benefits the entire community.
Josh King:
The Middle Atlantic Region, Peter, Washington, DC, specifically for JPM Chase. It was an area where, frankly, you had been held back from your growth for many years.
Peter Scher:
So, we have wanted to expand our branch network, not just in Washington, but throughout the country. The reason is obviously we see this big business opportunity as much as technology, people are driving more toward technology. The role of branches is still a very important part of our business. Actually, 70% of our revenue and our consumer business still comes through our branches. So, we see it as a very important part of our business.
Peter Scher:
We also see it as a very important part of community, 30% of our branches go into low and middle-income communities and to help grow the economy, the community create more jobs, create more opportunity, we see the branches as important. Post financial crisis, understandably, there was concern by a number of the regulators that they didn't want banks to be growing too quickly, be getting too big. I think, in our view, that was taken to a little bit of an extreme and we were not given, not just us, but very few of the banks were given authorizations to expand their branch networks. And that was provided in 2018.
Peter Scher:
So, we committed actually one of the things after the tax bill, which a number of people have criticized, we committed to actually using part of the benefits that we got from that not only to raise wages for our employees, but to expand our branch network. So, 400 new branches across the country, which, again, we think it's important to our customer base, it's very important to these communities.
Josh King:
And you have a real estate and design and construction team that once you get the green light to expand the branch network, they know where they want to put a branch, they know how to build it out, they know how to get in business pretty quick.
Peter Scher:
They do. One of the challenge is, is that we still, we needed to get authorization from regulators to actually expand our branch network. And then, every time you open a branch, you have to get specific regulatory approval from the federal government as well as local. So, it's still a process, but our guys have kind of figured out how to keep the process moving.
Peter Scher:
And frankly, the local city councils and the mayors have a vested interest in keeping the process. So, we want to get appropriate approvals. We want to make sure we're building in the right place in the right way. But the benefit to these communities, I was just a couple weeks ago in Anacostia, where we have two branches, which you know, one of the poorest areas of Washington, DC, that kind of economic activity is what brings back these neighborhoods. We're looking in Baltimore right now, which is a tough place to be. But we think in some locations that putting branches can help spur some economic growth in areas that really need it.
Josh King:
And one thing you cannot afford to do is lose the lollipops in the branches.
Peter Scher:
We cannot, we will not. Josh, you have my word on that. Next time, I will bring a whole box of green lollipops for you.
Josh King:
I enjoy also the digital boards behind the tellers, watching Serena do her work at the US Open. I mean, you guys make great use of your endorsements and corporate sponsorships.
Peter Scher:
There are so many people like Serena in public life, who are so admired for their grit and their determination and overcoming their obstacles. And we think they're great role models. And support, I mean, we were talking a little bit before about the new Chase Center and our association with the Warriors out in San Francisco. This is an important part of our, obviously our branding and reaching out to more parts of the country.
Josh King:
We're going to get into the work that you're doing specifically for a minute. But just an unrelated aspect of your expertise. Two weeks ago, sitting in the very chair that you're sitting in now, Steve Schwarzman, the founder, chairman and CEO of Blackstone. It was a day in which China talks had resumed, or it was announced that they would resume. Immediately, the market takes a big tick up. So, I asked him about where China stood. But you may sit and have a slightly different perspective. But as we continue to watch during the autumn months and toward the end of the year, where the relationship is between the United States and China, from your background, your expertise, your perspective? What's your take?
Peter Scher:
So, listen, I don't think there is a more important relationship on the planet today than that between China and the United States. And it's a complicated relationship. China, if you look at how far China has gone, just even since 1980, when Deng Xiaoping said, "It's time to open up." It's extraordinary. I mean, literally hundreds of millions of people coming out of poverty, the market reforms that have been made. But China also lives in a very dangerous part of the world. Unlike the United States, which is surrounded by, we got Canada to the North and Mexico to the South, friendly neighbors. We got two big oceans that protect us. China lives in a pretty tough neighborhood. So, they have their own challenges in managing a country with 1.3 billion people.
Peter Scher:
I think it's in our interest to continue to push China to open its markets. We think it's good for the economy. We think it's good for the Chinese people. We think it's good for the United States. They're not always going to move at a pace that we would like them to move. I think our view in the current situation is many of the concerns that president Trump and his administration have raised, and I say this as a former China trade negotiator, are legitimate concerns.
Peter Scher:
The pace of the rule of law, the protection of intellectual property, allowing US or European companies to do business in China, the same way Chinese companies can do. I think these are all really legitimate issues that need to be raised. Traditionally, the business community has not been as vocal about saying, "We want to see progress on those issues." So, I think the administration should get credit for it. I think where there's probably a divergence is, how do you get there?
Peter Scher:
And I think our view would be, ultimately, we didn't get China into the WTO until we locked arms with Europe and really had an agreement. And I think the more we can do with our allies to send a clear signal to China, that the world wants them to progress in this way. This is why, frankly, something president Clinton's and president Obama's focused on the Trans-Pacific partnership. Those types of things are really important, because I think our engagement, the US engagement in the world.
Peter Scher:
So, I think our hope is that the US and China it's like, get to the table, approach these things in a rational and responsible way, come to some resolution. We'd like to see the Chinese make more progress in a quicker way. But I think it's in our interest to manage this relationship to reflect its importance in the global economy.
Josh King:
Its importance in the global economy was way off the radar when Senator Daniel Patrick Moynihan was in office, I would probably say, when you were doing phone banking for him on Long Island, did you imagine a career in Washington?
Peter Scher:
No.
Josh King:
How did it all start for you?
Peter Scher:
Well, I grew up not far from here, 20 miles or so. I was actually born about 10 miles North in The Bronx. Grew up about 20 miles East of here in Great Neck, on Long Island.
Josh King:
Your parents came to The Bronx originally?
Peter Scher:
Well, my parents grew up in New York. My great-grandparents actually came on boats, were immigrants from Russia and Lithuania, but I always loved politics. And I went to Washington, always thinking I would actually probably-
Josh King:
Were your parents into politics, whether it's local stuff?
Peter Scher:
My dad was in local politics. One of my first memories was in 1968, you're in a former advance man, at the age of seven we all loading our car to drive to a Hubert Humphrey rally in October of 1968. So, they were involved in local politics.
Josh King:
Where was he holding his rally?
Peter Scher:
This was at... It was out of Long Island. I was seven. I don't quite remember where it was. I'm sure your rallies were much bigger and better.
Josh King:
I'm just thinking, Hubert's draw in Long Island was probably, he can't fill that big event.
Peter Scher:
I was having done advance, I was definitely not in the VIP section. I just have this very vague memory of being in the back and seeing a bald head looking over the top of a podium. But I went to Washington to go to school thinking I'd eventually move back to New York and just stayed. I realized that the opportunity to work behind the scenes to really be part of politics in Washington was something that really excited me.
Josh King:
In a speech you gave, I think it was at Florida International University, back in 2017. You explained that when you were interviewing with Senator Baucus, you said that you'd never worked on Capitol Hill and frankly you didn't know much about Montana. And yet, it didn't seem to phase the Senator. He said, "I want somebody who has a different background and different experiences." Did you use the same belief when you were forming your own teams later on?
Peter Scher:
Oh, it was one of the great leadership lessons for me. This is early '91, I guess it was. I had been in politics, I had had a law degree, I was practicing law at the time. And I got a call from a friend, who I knew from one of the political campaigns saying, "Would you want to go talk to Senator Baucus?" And I said, "Well," you're in Washington, if a Senator says they want to talk to you, you go talk.
Peter Scher:
And we had this conversation, he was looking for chief of staff. And I said to him, "I never interned on the Hill, I never worked on the Hill. I don't really know much about Montana." And he said, "You know what? I'm a fourth generation Montana. And I got that covered. I got plenty of people here. I want someone who brings a different perspective." And I thought it was so interesting to me just to... I was young, I hadn't thought about it at the time. But we're always looking for the unicorn, not just in stocks, but in teams and that's not in individuals and that's not really the way to put a team together.
Peter Scher:
You have to be thinking about what are the different backgrounds and experiences and skillsets? And how do you actually form and lead a team with those? And it proved to be a great move for me, because I felt like I was able to contribute without trying to become the expert in all the areas that he already had that I expertise.
Josh King:
What's the special sauce about someone like Baucus? Because it turns out a Peter Scher, it turns out a Jeff Forbes. You look at the experience of young Senator Barack Obama and how basically he gathered, cultivated and collected talent from all disparate parts that he could find when he showed up on the Hill. Baucus seemed to have special talent for finding people who would then go on to much bigger and greater things.
Peter Scher:
Listen, I think it's reflective of Baucus, and I think it's also, we often see this in leaders, is everything about the leader or are they about supporting and cultivating a team? Listen, I see this, I think there a lot of similarities I see in the business world. Do you want people around you who can shine and you give an opportunity to shine? If everything is about simply supporting that leader and making that leader look good, I don't think you're ultimately going to keep the type of talent you want. And I think whether it's Jeff Forbes, who you mentioned, or Michael Punke, who was on the staff, went on to be the US Ambassador to the WTO. I mean, there's a long line of people and they saw the opportunity to learn. But also Baucus pushed us all to step out as well. And I think that's a unique, not everyone has that willingness and openness to do that.
Josh King:
I mean, talking about leaders and giving people an opportunity to shine, in the business world, 2008, Jamie Dimon taps you to be the executive vice president, head of corporate responsibility at JPMorgan, were you're ready to make the jump from legal practice into running corporate responsibility practice for the nation's largest bank? How did you make that?
Peter Scher:
I was actually hired in '08 to be head of government relations. And it was interesting, I was actually very happy in my law practice. I had become the managing partner on my firm's Washington office. And actually another former colleague of ours, Bill Daley, who he was the head of corporate responsibility at JPMorgan at the time, he called me and he said, "Would you be interested?" And I said, "No, I'm really happy doing what I'm doing." And he said, "Well, why don't you come and spend some time with Jamie Dimon?" Well, that was a big mistake.
Peter Scher:
It wasn't as much that. So, I was doing some research about it before I went to meet with him. Because I had no financial... I mean, I shouldn't say no, I was not a banking expert, let's put it that way. I found a speech he had given six months earlier or it was an interview or something like that. And he said, "Corporations have a responsibility to get involved in public policy beyond their narrow self interest." This is 2007. And I'm thinking, "Wow, that's not something you often hear from bank CEOs or many CEOs." So, it was very intriguing. And this is before the financial crisis really hit. So, we had a series of conversations and it was really a compelling thing. I joined the firm in June of '08. So it was after Bear Stearns.
Josh King:
But still in the middle of it.
Peter Scher:
Before Lehman. My wife likes to say that the banking industry seemed just fine until I got there. But it was so... I mean, it was an unbelievable time to join the firm and particular, JPMorgan, I think, really was a port in the storm. I mean, the government came and said, "Please take on Bear Stearns." A couple months after I got there, Sheila Bair, the head of the FDIC called Jamie and said, "You need to essentially take over Washington Mutual." I mean, this was literally on a Wednesday night. Team took it over Thursday night. By Friday morning, it had the Chase name on and every employee still had a job and every deposit was protected.
Peter Scher:
So, at a time that we were, no one would buy the bonds of Illinois and Jamie said, "We'll buy them all." And to be in a firm, at that time, with a sense of, this is about the broader system, this is about the economy. I mean, it was not an easy time. It was a time of TARP and a lot of really tough issues, but it was an incredibly important time. And I couldn't have been prouder to be a part of it.
Josh King:
I mean, about that same time, May 2008, I'm in Hartford working for Neal Wolin. We're at The Hartford, we're looking at our share price. Maybe the last day in May, it's $105 a share. By post Labor Day, it's $5 a share. And we're having town halls with our employees and people are asking, honestly, of our chairman and CEO, "Can you lose 50% of the value of your stock every day and then, at some point, just cease to exist." And it must have been an incredibly scary time for your wife and kids and you to think about walking into the storm.
Peter Scher:
Yeah, no, I mean, listen, I had the entire operating committee JPMorgan Chase was in Washington the week proceeding the Lehman failure. And people kept getting called out of the room for meetings. I thought, "Okay, something seems to be going on here." We were very lucky as a country to have, and I would say not just, President Bush, but Hank Paulson and Ben Bernanke and Tim Geithner, who was at the New York Fed at the time. And business leaders, including Jamie Dimon and other leaders in the industry were saying, "This is not about the next quarter or the next year. This is about essentially the future stability of the country. And we have to put this fire out." So, you didn't have time to be too scared, because you were just focused on, what do we have to do to make sure that we're keeping the system intact?
Josh King:
Pivoting more now toward the present as we make our way forward, past the financial crisis, Peter, when you served, let's just do a little bit of a flashback to the time that you were US Special Trade Ambassador under President Clinton. You said that being in the role, you see that no matter where you are around the world, all problems are local problems. I think I've heard that somewhere before. And most people, no matter where they're from, have pretty similar aspirations, hopes and dreams. Has that thinking formed the way you look at what JPMorgan is doing in the area of corporate responsibility?
Peter Scher:
Yeah. In many ways, I think it's become even more pronounced. I mean, it was Tip O'Neill who said, "All politics is local." But I think, if you look at the challenges that we see around the world. And today, we see it in the United States, we see what's going on in Hong Kong, we see in Brazil, certainly what's going on in Europe with Brexit. My own view just from a political standpoint is that these are not isolated situations, that there is a thread that runs through this of people feeling like the system has let them down, that institutions have let them down, that they're struggling to keep up to raise a family, to take care of their kids.
Peter Scher:
And I think what's clearer is that central governments are less and less in a position to solve those problems. And the public is resisting, because what they see, and I think we've seen this in Europe, they see Brussels with the edicts, but not with the solutions. I think Washington is seen as having edicts, but not solutions.
Peter Scher:
And certainly, our experience in Detroit, which you mentioned, was just a reinforcement that if we're going to solve these challenges, if we're going to create opportunity, you have to do it locally. You have to be on the ground, in the communities, working across society with the government and political leaders, with business, with the nonprofit, with community groups. That's the only way we're actually, in our view, going to solve.
Peter Scher:
Now, the federal governments of course have a role to play in it. But in my view, I think what we need to be moving towards, how does the federal government, with its resource and expertise, support those local efforts?
Josh King:
So, the federal government and governments around the world does come at us often with edicts and not necessarily solutions. You are active, Peter, on LinkedIn and often refer to the hashtag #investinopportunity and #futureofwork. In March, talk about solutions, JPMorgan announced $350 million worth of investment in job training to prepare workers for jobs of the future. That's $350 million of potential solutions. How you put into work that?
Peter Scher:
A lot of it, we're putting to work locally. And I think this is one of the... When you look at the challenges right now, and I think it's not unfair to say the failures of our current system. We are not training people for the jobs that are being created. I mean, one of the things that would be surprising to a lot of people is that JPMorgan Chase has 250,000 roles, 75% of those do not require a four-year college degree. 60% of the jobs that are being created, and this is not just in the United States, do not require four-year degrees.
Peter Scher:
And when you look at inner cities, in which half the kids aren't graduating, and you look at companies who don't have the workforce they need, we have a disconnect. So, what we have been doing over the last few years, it was one of our first big initiatives, is trying at the local level through data, through expertise, and Detroit's a great example of this, is, first, let's understand, whether in Detroit or New York or Paris or Hong Kong, what are the jobs that are going to be needed in this community over the next five, 10, 15 years. And it's going to be different and by community.
Peter Scher:
And then, how do you actually align the training, whether it's nonprofit training or the training in high schools or the training in colleges with those jobs. So, I talked a little bit of our work in Washington, one of the things we've created in Washington is something called The Greater Washington Partnership. And we have something called the Capital CoLAB, in which we've literally brought together both universities and high schools with employers. And what the employers are doing is they're signaling what are the skills that we need in the people we're hiring. And are helping the educators design the curriculum so that you know, if you come out of one of these high school problems, which is called TalentReady, or you come out of have a college program, which is CoLAB, and you have this credential, you have a pretty good shot at getting one of these jobs.
Peter Scher:
One of Amazon's new 35,000 jobs in the Washington region or in the defense industry, or frankly, even in the federal government, in terms of the technology jobs. So, it's different in Detroit, a lot of the focus is on the construction industry, on healthcare. So, we're literally going community by community, working with local partners, working with government leaders to get the employers and the trainers together to drive solutions. And it's been very powerful. And part of the next iteration is how do you get companies to be thinking about it?
Josh King:
You mean how to get other companies to think about it?
Peter Scher:
How the other companies think about both for their own workforce and what they're doing in these communities? How they're supporting their community?
Josh King:
Yeah. So, a couple weeks ago, in one of the episodes that we've recorded, we had Alan Murray, who's the CEO of Fortune, was its editor. He wrote a long article recently looking at The Business Roundtable's new purpose. As Murray points out, the new mission statement is 300 words long. And the word shareholders isn't even mentioned until you get to word 250 or so. And normally, CEOs would put shareholders and doing what's right for them at the very beginning of the statements that they make.
Josh King:
Jamie Dimon shares The Roundtable, and he said the statement, "Is an acknowledgement that business can do more to help the average American." So, if you think you've published a playbook now, how can more companies follow that playbook?
Peter Scher:
Well, I think in many ways, the BRT statement, it's two important things. I think, and you know, you work with so many companies, Josh, it's a reflection of the fact that I think most companies are trying to do the right thing. But I think it reflects the fact that we have to keep evolving. And I think it was an important message to the public that we get it. And I think a lot of people right now, when you look at the kind of distrust in the system and the inequities in society, people think that there is kind of a ruling class in this country of both political and business, who don't understand that there's a problem out there.
Peter Scher:
And I think it was really important for the top CEOs in this country to say, "We get it, we understand that our purpose is not only," and I think it's really the short-termism that we see in too many companies. Our purpose is not simply worrying about next quarter's earnings. I think it's also a reflection of the understanding. And we've gone through this kind of metamorphosis at JPMorgan, that no business can outgrow their communities.
Peter Scher:
If Detroit continue to fail, okay, that means we're closing branches and we're laying people off. If Detroit's growing, that means, you know what, we're opening more branches, we're getting more deposits, we have more bankers working, it's going to help others as well. I mean, Detroit's a good example and I don't know if I should use GM today, but it used to be, they said, "What's good for GM is good for the country." I think it's, we now flipped it.
Peter Scher:
What's good for the country is good for the business community. And I think that is a really important acknowledgement that the challenges to capitalism, the debates that you and I are watching, that many of our former colleagues involved in, certainly some of the ideas, a lot of the ideas, we don't agree with, but the sentiment that capitalism is not working for too many people is absolutely real.
Peter Scher:
And I think the idea that we have to just tell our story more effectively. If we just explain it a little better, that people understand. I think that's really misguided. I think we have to step up, recognize and government can't do it certainly on its own. The companies have to step up and play a much more active role in addressing this both within their own workforces and within their communities.
Josh King:
You say that what's good for the country is good for the business community. We're all very conscious of, I think, the special place that companies now have to play to carve out a role in the public dialogue. I think you're familiar with the Edelman Trust Barometer published by Edelman each year. Richard Edelman sat in this chair as well when his last survey came out. Jamie's annual letter to shareholders even referenced the Trust Barometer and that he said, "Yes, CEOs should lead on change." And I know the process that goes into writing that letter every year. But as he looks down at what must be sort of the third and fourth quarter of his time at this bank, what's the legacy he's trying to leave?
Peter Scher:
This is a really important point. We actually, we don't view those things as social responsibility. In fact, we don't use the word social. I'm actually the head of corporate responsibility. Because in any ways our view is, this is business responsibility. That we want, we need our employees to feel good about where they're working, as great a technologies we have, and as smart as people may be, we need employees to feel dedicated, to feel they're being treated well, to feeling they're being paid well, that when they're going through a tough time... I just had a woman who works on my team, who just came back from maternity leave. And she said to me, this was her third child, she said, she used to work at another company. "This is the first time I came back not being worried that someone was trying to take my job."
Peter Scher:
So, if we don't create a culture within our firm like that, we're not going to attract the best and the brightest, we're not going to have the kind of commitment to the job. So, I think that part of the narrative here, from all of us, is that this is a business imperative, paying our employees well, making sure they have adequate healthcare, making sure they have time off, paternity leave, maternity leave, adoption leave. We want them, and frankly, we need them to play a long game.
Peter Scher:
I've say this to my people like, "You guys sitting here at 9:00 every night is not good for me. Okay? Because I'm not looking to where you at and have to bring someone back and bring someone new in." So, I think as we think about traditionally a social safety net, we've always thought that the government's job is to create the social safety net. And I think companies have to think about their responsibility to create the kind of social safety net around their employees and around their families, that are going to, frankly, be the right thing for business.
Peter Scher:
I mean, one of the things, I mean, not to go on too long. So, I've been on the firm's operating committee for two years. And one of the things that struck me is how much time we spend on talent. An extraordinary amount of time talking about both individuals, even employee opinion surveys. It's everything. We spend a lot of time on technology as well, but the predominant thing we talk about is talent.
Josh King:
Talent is everything. After the break, Peter Scher and I discuss the investment made by JPMorgan Chase that is working to reinvent and revitalize cities across the nation and across the world. That's right after this.
Speaker 6:
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Josh King:
Welcome back. Before the break, Peter Scher, head of corporate responsibility and chairman of the Mid-Atlantic Region of JPMorgan Chase and I were talking about the origin story of his career and how he came to the bank. Peter, on July 18th, 2013, the city of Detroit filed for chapter 9 bankruptcy. In 2014, JPMorgan announced a new initiative to invest 150 million in the city of Detroit's economic redevelopment. Let's hear from Jamie on the investment as he was talking five years ago.
Jamie Dimon:
Let me tell you about this investment. This investment is kind of the first time that JPMorgan Chase has, of course, all of JPMorgan Chase, all parts of our business came into a town, met with the leadership of the town, the mayor, the not-for-profits and said, "What can we do to help?" Dan Gilbert helped us, what can we do to help? What skills do we have, what investments do we have that can help you to accelerate what you're doing?
Jamie Dimon:
And the investments, which I won't go through, are investing in schools, they're investing in the M1, they're investing in blight, helping the mayor figure out exactly how to handle blight. Rehab loans, because when people buy some of these loans, that'll be in auction. We're investing in infrastructure, buildings, CDFIs, small business in a different way, think of more a venture capital long term to accelerate. Maybe other people come invest here, maybe when starts to work, it'll accelerate some of these things. So, I'm thrilled. We're thrilled to be part of that. So, I want to thank all the JPMorgan Chase here, people that just do a fabulous job for this company.
Josh King:
I mean, there's a lot of excitement in Jamie's voice, but the whole initiative really came out of a proxy fight, didn't it?
Peter Scher:
So, it was an interesting story and it's been told before, but it had not a lot. So, back in 2013, some of your listeners might recall, there was a shareholder resolution that was going to split the role of chairman and CEO. And a number of companies face this and we faced it as well. We won the fight, but one of the big advocates of the resolution was AFSCME, the American Federation of State, County and Municipal Employees, a big, very important powerful union.
Peter Scher:
And there's a guy who ran AFSCME, Lee Saunders, and Jamie one day... Even after we won the fight, Jamie said, "I want to go see him. I want to talk to him. I want to see him." He went to see Lee in Washington and they had never met. And he said, "I'm just trying to understand why do you care? What does it matter to a municipal worker whether I've got one title or two titles or seven titles?"
Peter Scher:
And Lee called out to a guy in his office. He said, "Joe, why do we care about this thing again?" And the guy gave him an explanation and Lee said, "I really don't care that much. What I do care about is that Detroit just filed for bankruptcy. I've got municipal employees and retirees who spent their careers and they're going to lose their pensions. That's what I care about." And Jamie said, "Well, you know what, let me see if there's anything we can do." That's something.
Peter Scher:
So, Jamie called me soon after and he said, "Go to Detroit and see what we can do to help." And we went out there, we started with five or six people. And what I'll tell you is he was perfectly prepared for us to come back. And I think, had it been two years earlier, we would've likely come back and said, "You know what, it's a mess and there's really not a lot we can do. If we want to just give a charitable contribution, say we did, we can do that, but you're not really gone going to have an impact."
Peter Scher:
But it was so interesting as we went and met with business leaders like Dan Gilbert and community leaders and the nonprofits and the new mayor had just been elected on a write-in, and you'll appreciate this politically. Here's a guy who got elected in a write-in, 80% African-American city. And everybody was on the same page. Everyone knew tough decisions had to be made. Priorities had to be made. There had to be a focus.
Peter Scher:
And we, as Jamie said in your clip, we said, "Are there things that we could do to help?" And the things where we have unique expertise. So, we started looking and spent six months, eventually we brought about 50 people out there from various parts of our business. We structured this as investment, lending. We didn't think just like throwing more money away was going to do it. I mean, billions of dollars had gone to Detroit over the years. And we focused on the areas where we thought we could make a difference in terms of skills training, technology.
Peter Scher:
One of the things, as Jamie mentioned, they had enormous challenges around blight, and how do you map that? So, we brought in some technology people and worked with a local group called Motor City Mapping and developed a technology that allowed people to go out and use their cell phones to map blighted properties. It was so successful that we've taken that technology to Cleveland and to Cincinnati and to Columbus, three places in Ohio.
Peter Scher:
We focused on affordable housing. The mayor was auctioning off homes to people, but the cost of rehabilitation for those homes was significantly greater than the actual cost of the homes. So, how do you actually create lending programs? So, we went in initially with $100 million, it was enormously successful. We tried things that worked and we tried some things that didn't work and we would continually adapt.
Peter Scher:
Within two years, we thought we were going to hit 150 million. And then, just a few months ago, we said by 2022, it'll be 200. And one of the things, because of the way we've structured it, we've been able to leverage our investments four, five times over. So, literally, hundreds of millions of dollars have been leveraged into the lending programs. And in fact, I'm going to Detroit tomorrow.
Peter Scher:
The whole firm has gotten into this. So, there's a conference with hedge funds that we normally do in Florida. And the leaders of the conference that we sponsor said, "Why don't we go to Detroit?" So, we have hedge funds representing $1 trillion in investible opportunities. And they're all coming to Detroit to see what's going on and see how that could help. So, it's really been a genuine firm wide effort. As you said earlier, it became a model for our AdvancingCities program.
Peter Scher:
So, we now have similar efforts in Ward 7 and 8 in Washington, on the South and West side of Chicago, in and outside of Paris. I mean, it's a common theme... Washington, I like to talk about, most powerful, one of the wealthiest cities in the country and blocks from the Capitol, you have the highest rates of poverty.
Peter Scher:
In Paris. I mean, clearly one of the wealthiest cities on the earth and within 20 minutes, you've got 40% unemployment rates. You have poverty. And these are communities that can be revitalized. So, where we think we can bring people together and you have the local buy-in and they're making decisions, we're trying to be part of the solution.
Josh King:
I mean, $100 million goosed up to 150 and now 200 by 2022. And whether you're in Ward 7 and 8 in DC or Paris or Detroit, I don't know if you commonly look at it across all the cities that you go into, but across four main categories, jobs and skills, number one, neighborhood revitalization, number two, small business growth, number three, financial health, number four. What are some of the tactics within those sort of four pillars?
Peter Scher:
Yeah. So, I'll give you one example. Small business is a great example. So, when we originally went into Detroit, I don't think that we anticipated how much small business could help drive economic growth. And one of the things that we've had is our data made available. We have this JPMorgan Chase Institute and it's constant running data on spending patterns in 15 major cities around the United States.
Peter Scher:
And what we noticed in Detroit was how much spending, consumer spending was going through small business. The challenge was, when you actually break it down and look at the neighborhoods, the poorest neighborhoods are not getting small businesses. And we were having these conversations with the mayor and he said, "You guys are actually missing the real problem. We have Black women, minority entrepreneurs, who want to start small businesses, who want to expand small business. They can't get access to capital." We couldn't lend to them through normal banking.
Peter Scher:
So, we actually work with the Kellogg Foundation. We brought in some of our business bankers, and we created something in Detroit called the Entrepreneurs of Color Fund. $5 million initially, 40 loans. In two years, we had one default. It is now a $25 million fund in Detroit. We have now taken it to Washington, to Chicago, to the South Bronx, to San Francisco.
Peter Scher:
So, as we went into Detroit and we go into each of these places, we think of how do we innovate? Let's try different things. And how do we think about how do we take those to other places? I think, the important thing, Josh, is Detroit's challenges were at an extreme, but not unique. Affordable housing, small business growth, jobs and skills, financial capability, all of these issues.
Peter Scher:
I don't care if you're in Paris or Hong Kong or DC or New York or the South Bronx, these are all the same issues. And we thought, "Okay, if we can solve some of these challenges in Detroit, we can solve them anywhere." So, it's become, so now AdvancingCities is a $500 million effort. We take applications and we're doing some interesting work all over.
Peter Scher:
And a lot of this, as you said earlier, is trying to get other... We're not calling this, it's not called the JPMorgan Chase Entrepreneurs of Color Fund. So, any company, we have other banks, we're about to announce an expansion to the fund in Chicago. If any bank wants to come in and call it the Goldman Sachs Entrepreneurs of Color Fund, that's fine. If we can solve the problem, we'll all benefit from it.
Josh King:
Let's get Jake Siewert on the phone.
Peter Scher:
Get him on. We're ready.
Josh King:
We've talked about a lot of the US cities that you're in. You mentioned the work that you're doing outside of Paris, but Paris, of course, opens up a whole new landscape in the AdvancingCities dream. How did you know you were ready to take the model from domestic work, where you've got branches, where you kind of know the lay of the land, where you know the representatives in Washington and scale international?
Peter Scher:
Yeah, it's interesting. We've been in Paris for 150 years, so we actually financed the Allies in World War I and got a very nice building at Place Vendome as thanks for that. So, we've been doing work in Paris and we've been looking at the areas and we saw the challenges and we did it slightly different. We really went in early and tested whether or not the key leaders across civic society would be open to it.
Peter Scher:
So, one of the key things in each of these places, do you have the kind of nonprofit and partner capacity on the ground? So, we actually sent a team of 15 people in for or a month to work with some of the leading nonprofits who we were thinking about to kind of get under the hood a little bit and see, very successful.
Peter Scher:
I went over and spent time. I met with President Macron's team. I spent a lot of time with the mayor of Paris. And it's interesting. I was told she's a socialist mayor, she doesn't like banks, she doesn't speak English. I'll tell you, her English is a lot better than my French. And we spent about two hours together and it was like, "How do we solve these problems?"
Peter Scher:
So, the work we're doing is in an area called Seine-Saint-Denis, and it's about maybe 20 minutes outside Paris. And one of the interesting things, there's two things happening. A lot of the 2024 Olympics, a lot of that will be in the area. So, part of our thinking was, "How do we leverage the Olympics in terms of the jobs that are going to be created and the jobs that actually can outlast the Olympics? How do we train people for those jobs?" They also have a major new rail system going through there.
Peter Scher:
So far, in fact, I'll be back there in November, people have been very receptive. So, this is for us. We're not going to go where people don't want us. And look, it's not inconceivable that some community can say, "You're a big bank. We don't want you here." And that's fine. JPMorgan Chase can't go into Anacostia, go into Detroit and say, "Okay, we're going to decide which neighborhoods. We have to have the leadership at the community level. And where you have that, we can be incredibly additive in terms of what we're doing. And that's what we've tried to do.
Josh King:
We're not going to go where people don't want us, Peter, in your own backyard, at the end of 2018, an announcement was made that would bring 25,000 new jobs to Arlington, Virginia, a place you know well. Let's hear from Virginia's governor, Ralph Northam.
Ralph Northam:
I'm proud to announce today that Amazon has found its next home for innovation right here in our Commonwealth of Virginia. Innovation is the lifeblood of our Commonwealth. And it is the driving force of Amazon's work. Together, we will think big, create a world class model for public-private partnership and test and implement the technological solutions that will drive Amazon, our communities and the Commonwealth forward.
Josh King:
I mean, congratulations to Amazon, I guess, Peter, but they were also supposed to build another headquarters right here in New York City, but due to protests and complaints, going to places that people didn't want them, the second headquarters has been pulled. People aren't always in favor of big corporations coming to town and taking over. What's the way to deal with that?
Peter Scher:
Well, it's interesting. So, I mentioned earlier my involvement with an organization called the Greater Washington Partnership, which JPMorgan was one of the founders of. And one of the things that we recognized, which is relevant in the Washington region, but it's also, I think, relevant in most regions, that if you look at the global economy, economic activity has been concentrated in fewer but larger economic regions.
Peter Scher:
And I think one of the things that happened in the Washington region was you had actually all three jurisdictions, Maryland, DC, and Virginia, which was on the final finalist list for Amazon. And one of the things we did was we got the governors of Virginia and Maryland and the mayor of DC together. And we said, "If Amazon comes to any one of these cities, any one of these states, it's going to be a boom for the entire region. And we have to make clear to Amazon that if one of us wins, we all win."
Peter Scher:
And we actually worked to orchestrate a letter from the three jurisdictions to Amazon during the process and said, "Look, each of us is putting our best foot forward. We're competing. But if you choose one of us, we will all be in. And we recognize that we have to deal with issues like affordable housing. And we have to deal with skills training. We have to make sure," I mentioned some of the work we're doing around TalentReady, "We have to make sure that it's not just people coming in from Seattle or coming in for school, but that we're creating opportunities in that region. So someone in high school in Anacostia or in Richmond or in Baltimore can aspire to those jobs."
Peter Scher:
And I think one of the things that we tried to do in the Washington region is say the business community understands that these are critical issues, that Amazon coming can have enormous benefit. Those 25,000 jobs will probably actually, when you think about all the secondary jobs, will probably mean 75 or 100,000 jobs, enormous benefit, but challenges. We have to get ahead of affordable housing. We have to deal with issues like transportation. We have to make sure there's opportunity.
Peter Scher:
And we leaned into that and I think it was a message... And that was the business community leaning into it, that we know the quality of life that we have to preserve. And we want to make sure people see the Washington regions, a place they not just want to work and live, and you've spent a lot of time there. And I think that made a big difference.
Peter Scher:
Look, there will always be naysayers. There will always be people questioning. But I think it's important on this side to sit back and say, "Hey, some of those are legitimate concerns." And how do you actually engage in a conversation about how to address those concerns in a way that's constructive in the long term and benefit of the whole region?
Peter Scher:
And I think if you talk to Jay Carney, who you know, or others, I think that collaboration, look, no company wants to go move operations into a place that there's some civil war going on. And I think this is where the business and political and civic leaders have to come together to address head on some of the challenges that that growth creates.
Josh King:
I mean, you're talking about what the business leaders and the civic leaders are doing. You've talked a lot about what local political leaders are doing to help you and engage with you, whether you are in Detroit or talking to the socialist mayor of Paris. But talking about maybe the federal government's role, last year, you wrote an op-ed for CNBC on why tax reform gives companies an opportunity to drive more inclusive growth, where in an election year, major issue, topic of conversation, topic of debate, where do we stand a year after you wrote that piece?
Peter Scher:
Listen, I think our view was that ensuring that we have a competitive corporate tax system is a prerequisite for having a competitive economy in this. The fact is, as you look around the world, jobs and investments are going to be, in part, reflected by the taxes that companies have to pay. And what we saw was that steadily, over the last 20 or 30 years, the world, many countries were bringing their tax, the corporate tax rate down and we were not.
Peter Scher:
Now, whether or not we needed to do the individual taxes and that, I think could be debated. But I think we thought it was important to send a statement, the benefits of this tax reform would be felt. So, we raised wages, we increased our philanthropic commitments. We committed to open new branches. So, not all of that gets heard, but I think in the communities that are seeing those results, I think they're benefited.
Peter Scher:
Look, I think, long term... It's interesting, because a lot of the opponents or critics of business say, "You think too short term. You're just thinking about the next quarter." And I think that's a fair, in some cases, criticism. But I would sort of put it back on our friends in government. If your expectation is that every time you pass a law, you're going to have an immediate benefit, we don't, as a government, think long term enough in terms of public policy.
Peter Scher:
And I think we have to have our view and I know people disagree with that, but that having a competitive corporate tax system is the right long term thing for the United States of America. And that may not be felt in the first months or first couple years, but we think long term, it's the right thing to do. And I think we'll see it. And you're already starting to see investment come back into the United States. So, we think it's the right for the economy. And look, you're seeing the kind of growth and confidence in the economy right now. And I think it's a part of that.
Josh King:
Well, these debates go on over months and years, Peter, and we hope for progress at every turn. Like tomorrow, when you travel to New York, you're going to get off the plane at Metro Airport and you're going to encounter people trying to start businesses, follow their dreams and make a better life for themselves.
Josh King:
As we wrap up, I want to take a minute and listen to Alexandra Clark, a pastry chef who started her Detroit-based chocolate shop on a $32,000 loan. She's just one of the many young people eager to help rebuild her city. Let's take a listen.
Alexandra Clark:
I kind of like hard work. Maybe I'm a sucker for punishment. Maybe it's being from Detroit, and growing up in this blue collar kind of community, where people really value hard work. But it's something that has really taken us very far. I had a lot of ideas about the chocolate industry that I thought were right. I don't think that the packaging should cost more than the chocolate ever. I think that it's okay to package chocolate by machines, but you should probably make it by hand.
Alexandra Clark:
They were just little things. We even have that phrase like, "Life is like a box of chocolates. You never know what you're going to get." And it's like, how about we just label our chocolate? How hard is this? The world is so used to these really antiquated ideas about what happens in this industry, an art form that I love. And I wanted to try my ideas, because I thought that they were right.
Josh King:
Life is just a box of chocolates.
Peter Scher:
You know what, I got to tell you, just listening to that, one of the things, I work at a bank and we spend a lot of time evaluating balance sheets and numbers. But ultimately I think is that clip showed our investment in Detroit, just like we were talking about the key thing for our company is our employees, our investment in Detroit was at the people of that city. That the confidence that we had in them, that there was a grittiness and determination to bring their city back. And I think you heard that.
Peter Scher:
And I think the thing that, every time I go back to Detroit right now, you get is the sense of hope that they have turned the corner, not that there's not a lot more work to do, but that you have young people who are now imagining a future for themselves in a city that never did before. And that's, there's nothing that can give you more satisfaction than that.
Josh King:
I mean, whether you're buying a Shinola or a box of chocolates, Detroit is, thanks to the work of JPMorgan Chase, making its way back. Thanks so much for joining us Inside the ICE House.
Peter Scher:
Josh, thanks for having me.
Josh King:
That's our conversation for this week. Our guest was Peter Scher, head of corporate responsibility and chairman of the Mid-Atlantic Region at JPMorgan Chase. If you like what you heard, please rate us on iTunes, so other folks know where to find us. And if you've got a comment or question you'd like one of our experts to tackle on a future show, email us at [email protected] or tweet at us @icehousepodcast.
Josh King:
Our show is produced by Theresa DeLuca and Pete Asch, with production assistance from Stephen Romanchik. I'm Josh king, your host, signing off from the library of the New York Stock Exchange. Thanks for listening. Talk to you next week.
Speaker 1:
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the information, and do not sponsor, approve or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of mental clarity.
