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…wasn't everyone else copying it? Have people changed, and does everyone else run their banks like this now? I think people are more conservative today. I think regulators are more conservative today. But again, I go back to people get involved in aggressive accounting; they don't look at stressing their own bank in a real way.You saw people take too much interest rate risk, too much credit exposure, too much optionality risk, or sometimes it's new products. So if you look at the financial services, very often it's the new products that blow up. It takes a while. They haven't been through a cycle.And you had that with equities way back in 1929. You had it with options, you had it with equity derivatives, you had it with mortgages, you had with Ginnie Maes. Even Ginnie Maes at one point blew up even though they're government guaranteed. Arguably you had it with quant and with LTCM. It happened with leveraged lending. And then people become more rational in how they run these balance sheets now. They think through the... So I have to ask you, is this private credit today? I don't really think so. I don't think it's $2 trillion. It's grown rapidly. That's an issue. But the other thing about markets is there are some very good actors in it who know what they're doing. Customers like the product. So I always say, the customers like it, but there are also people who don't know what they're doing, and it's grown rapidly. So there may be something in there that would become a problem one day, but I don't think it's systemic.So that $2 trillion... the mortgage market, when the market blew up, was, I'm going to say, nine trillion, and a trillion dollars was lost. This is, and it was... A trillion dollars was also in a... Highly leveraged. Back then. Yeah, a lot of these private credits are not leveraged. That doesn't mean there won't be problems. But it's slightly different. But if you look at the whole system, there are other things out there that are leveraged that can cause problems. Of course, people take secret leverage in ways that don't necessarily... I see it. What are some of these in your mind that are potentially problematic today? Well, look, when you look at asset prices, they're rather high. I'm not saying that's bad. But if today P/Es were 15 as opposed to 23, I'd say that's a lot less risk, a lot less to fall. And you have some upside. I would say at 23, there's not a lot of upside, and there's a long way to fall. And that's true with credit spreads.So, we stress test everything. We do like 100 stress tests a week to make sure we can handle a wide variety of things.And then the other thing, and the biggest risk to me, is cyber. I mean, I think this cyber stuff is, we're very good at it. We work with all the government agencies. They would say the chamber, we spend $800 million a year or something on it. We educate people on it. We just do.But it is... you're talking about grids and communications companies and water and even part of the military establishment. The protections are not what you need if we ever get any kind of war where cyber is involved. re talking about grids and communications companies and water and even part of the military establishment. The protections are not what you need if we ever get any kind of war where cyber is involved. And China is very good at it, and so is Russia, but Russia is mostly criminal, which is slightly different. All right, I'm going to pull us back to the story. We're going to fast forward to 2023. We're not really equipped to talk about Russia. It's not what we do on Acquired. But, Silicon Valley Bank... Yeah. And First Republic both fail. You're there again. Did you see it coming? What lessons did you learn from how 2008 went that you could apply in 2023? Obviously, you bought First Republic. Silicon Valley Bank did some very good stuff, but they both had something unique that we didn't know at the time. I'm going to call them concentrated deposits. Not uninsured, because people were misstating that. Concentrated.And so a lot of venture capital... What happened to Silicon Valley Bank and First Republic is some of these large venture capital companies — call them, there are hundreds of them, maybe a thousand — told their constituent clients that they invested in, who all banked in Silicon Valley and First Republic, "The banks aren't safe. Get out." And they all removed their deposits.At Silicon Valley Bank, I think they had 200 billion in deposits; 100 billion in one day. And that caused the problem. But they also had other problems. They didn't have proper liquidity. They didn't have their collateral posted at the Fed, and they had taken too much interest rate exposure.And the interest rate exposure was hidden by accounting. It was called "held to maturity," where you don't have to mark even Treasuries to market. And I always hated held to maturity, but it gives you better regulatory returns and stuff like that.But when that "held to maturity" [asset was re-evaluated], if you said, "What's the tangible book value of one of these banks?" And you said it was 100, all of a sudden it was 50. If you just marked that one thing to market, now you're into judgment land.At what point, if you saw a bank where just that one mark had the tangible book value drop to 40 or 30 cents to the dollar, would you panic? I would have said, "That's too much risk."And the regulators helped us because they said rates were going to stay low forever. So these banks bought a lot of 3% mortgages. And when 3% mortgages, when rates went up to 5%, were worth 60 cents on the dollar or 50 cents, that was it.And so both of those had [issues]. They took too much interest rate exposure, known to management and the regulators, and it was fixable.So we knew a little bit about Silicon Valley Bank. We were trying to compete in that area. So we learned a lot afterwards about how to do a better job for that ecosystem of venture capital. We have a whole campus in Palo Alto now. We've hired 500 innovation bankers. We cover venture capital companies. We're not as good as they are yet. We're going to get there because we're organized slightly differently.And we knew First Republic. We were watching it. I called Janet Yellen. ture capital companies. We're not as good as they are yet. We're going to get there because we're organized slightly differently.And we knew First Republic. We were watching it. I called Janet Yellen. I said, "That company's in trouble." And one or two others, if you want, we'll take a look. We could probably buy it and eliminate the problem. They waited a little bit too long. A melting ice cube.But you can imagine, the day we bought it, you never heard about it again. We hedged all their exposures in a couple of days. And we merged everything, we wrote everything down.But we did get some good stuff. We actually got some good people. The normal thing in an acquisition is, "They're terrible, get rid of them" or "They failed." But we also looked at what they did, how they dealt with clients. Let me be clear here. They did a great job with high-net-worth clients. Single point of contact, concierge services.So now if you go down Madison Avenue, you see things called JPMorgan Financial... "Center." That's your first JPMorgan branded consumer effort, right? Yes, because it's based on that. When you walk in there, we know your small business, we know your mortgage, we know your consumer banking. We can get you travel, we can do a whole bunch of different stuff.So very high-level services. I think we have 20 of them now, but I love it. And if it works, in 20 years we'll have 300. And so these things are opportunities, and I hope it works. You don't always know they're going to work for a fact, but so far, so good. All right, so we're effectively caught up to today. And if we're trying to... Now we've got the whole story, we've got a lot of context. Obviously, it didn't go into every detail. But if we're now trying to answer civilizer. Yes. If we're now trying to answer the question: how did you separate from the pack? Why did you become a completely different animal than your whole competitive set? What are the things in your mind that led to this success? What we do is the same thing that a community bank does — other than investment banking, global investment banking.Okay. So if you walk into a small community bank, they know your business account, they know your consumer account. They usually have a trust company; they used to call it trust. They manage your private affairs, they set up a trust for you, and they do stuff like that. And their CRM is up here. They don't need a Salesforce CRM because they know everyone in town.And they didn't do big-time global investment banking. But the strategy: those businesses fit together, they feed each other, and so does investment banking. A lot of our middle market clients use investment banking products. A lot of our consumer clients use some FX. So all of our businesses feed each other. There's nothing extraneous. We got rid of everything that didn't fit a strategy.And then you start building client businesses and client services: fortress balance sheet, fortress accounting, all those various things. And I've always talked about... So it's holding a portfolio of things that actually feed each other, that actually fit.…

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