>> rose: welcome to the program. we gib this evening with brian moynihan, the chairman and c.e.o. of the bank of america. >> the time to make the best decisions about whatnot to do is actually in the best of times. because what you are going to do today is what you will see in the next crisis. it's not what you were going to do in the last crisis that you quit doing. that san easy decision, you look at this and say we shouldn't have had all these home-equity loans that were, you know, had no equity in the homes. that is easy, not a question of how you disciplinement and so i think that is the key issues, is what will you not do now. how will you keep-- we have a concept responsible growthness we conclude with charlie savage and his book, power wars, inside obama's post 9/11 presidency. >> obama came in as the liberal law professor who was going to change on terror and ended up acting, some people think, quite a lot, like george w bush.

he kement indefinite detention even though he closed guantanamo, which he was going to do. he would use it somewhere else, grown strike, massive surveillance, went beyond bush, like overseeing a crackdown on-- . >> rose: all of this calls you to say obama is no dove on national security. >> he is certainly no dove, but the question is how did we get here what happened. >> rose: brian moynihan and charlie savage next. >> funding for charlie rose is provided by the following: >> and by bloomberg, a provider of multimedia news and information services worldwide. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> brian moynihan is here, chairman and c.e.o. of bank of

america. it is the nation's second largest bank. the company has completed a turnaround after eight years of costly litigation. it came from the financial crisis. the firm has also significantly paired back its balance sheet it has reduced noncore assets such as private equity and real estate businesses. bank of america's financial success remains closely connected to the u.s. economy. i'm pleased to have brian moynihan back at this table. >> thank you, for having me, charlie. good to see you again. >> you're hoping that the fed will raise interest ratings before the end of the year? >> well, i think, yes, because that means the economy is growing and that means that we make more money but the reality is, it's a good underlying piece, and everything we say it is. >> so you are instinct is that they will, because janet yellin is kind of signaled it? >> i think they've been pretty clear with the market. i think that the statistics that come out since the last time that they had a fairly careful consideration would favor it.

but as a large bank, it's hard to predict what the fed will do and probably in the in our best interest to get ahead of them. but if you look, i think you back off and think about the economy. what we see is consumers are still spending. businesses are still borrowing in good shape, certain areask oil & gas, related fields are, ople want but it's growing.s >> what is the pathway to growth? >> we have 2.5 predictd for this year to finish this year, two and a half for next year. that's kind of the thing that e probably up over 3% for this year. and thinking of groalt from there. and you know t didn't come true. and that creates a sort of confidence that sort of levels ore optimistic. being a little and i think that comes from probably some help, stability, you know, no issues in terms of

federal budget deficit shut down and thases' been taken care. i think you just need good core work. but it's-- the recovery is getting long now. the other concern is how long will this recovery last, it is the fourth longest recovery and that is concerning people. the path to growth is good solid investment by business and creating jobs. and that will happen if people have confidence. and i think business has pretty good confidence but they need to make sure-- they need to be not told to worry about things. and right now every day something pops up they're worried about. >> rose: that was always the question for several years is confidence, confidence to spend, to invest, to hire confidence there will be a demand for the products the business make. certainly it seemed to underlie the decision to make capital invests. >> yeah if you look at consumers which drive two thirds of the economy, what has been interesting, if you came through the summer, their confidence waned a little bit.

it kiep of flaltenned o out. they are still up 3%, now back up to 4%, year over year, and that is-- that is a good sign that consumers are out spending money. unemployment level is a very nominally low level around five percent. as a mers age of workers, that is a very low level, last time they are at the workforce sch smaller. so everything about the consumer feels pretty good. more wages, a little bit of wage growth, good solid jobs in spending. it's a questionable will businesses go for it or not. i talk to clients. they are generally optimistic. with the-- china is slowing down. they have reason to be concerned. i think what takes is a little bit of clear sailing and then they will be feel better. >> what about manufacturing. >> you know, i think if you look in the u.s., the capitol investment which has been sort of the debate has not been strofnlgt a lot of that has been driven by the oil & gas

industry, basically adjusting to an oil price that went from 80 to a hundred dollars a barrel to 40. now that's good news for the consumer. so our customer base alone, think of that, our customers spend about $90 million a day on gasoline last year and this year about 70, 75. at is not good for one groupng is good for another group and the question is which group drives more activity. i think the consumer ultimately will drive more. >> do you see lowering of ticket prices and things like that on airlines when their fuel costs go dramically down? >> i think the average consumer a lot of what they spend on is gas at the pump t does go down. you see it when we fill up. but that money, for a broad segment of our mass market, that money goes back out and gets spent on something else. >> rose: we are in a political year. what ought to be the debate about the economy? republicansk democrats, people who inspire to lead, whether in the congress or at the white house, what ought to be the central question that we ought

to consider? >> i think. >> how do we support growth and jobs. and that is supporting all businesses. global businesses, small businesses and everything, how do you create the conditions for businesses to be slightly more aggressive and grow. and i think interest rates are low. capitol sin expensive. the ability to borrow is there, loans are available on good terms so it's' really, you know, to me that is fundamental tax return reform it is thinking about immigration in terms of making more available workers. there is nothing-- the debate has to be that businesses including banks, including all segments, you know, job is to improve profit-- improve profits but the job is to employ peement to do that how do we get them to grow. >> rose: if we have a healthy economy there is investment whether it's education, science or medicine. >> and how does america win, you know, investment in research by corporations and the government and everything, those are critical elements but america has these assets a how do we keep winning and that is what i

think we have to have the debate about. how do we help america keep winning. >> rose: secretary clinton and secretary-- and president obama have both criticized the inversion, the idea of merger between fiezer and-- do they have a point? that companies seeking to cut their tax bill by relocating in ireland is not a good thing for america? >> if our tax rates are, you know, 20 points higher than others or 15 points higher t creates an incentive. the inversion is really a part of it. really the question s our company is a global company. the big companies are. so they had decisions about where they're going to invest. what demand access for the products, where to make those products, where to access the raw materials to did t where to put it together, all that stuff. is it global decision and if you are on competitive, they have opportunities to make decisions. so the inversion is where a lot of the debate gets stufnlg i get more worried about the other things that go on, the noninversion transactions, c.e.o.s sitting there with

10,000 to put down, and they say i will put it over there because can i get 85 cents after taxes, or 60 cents. and they are going to make that decision. >> rose: the question becomes what is the effective tax rate. because everybody says corporate tax rate is over 30%. >> right. rrs but a lot of people say that the average corporate income tax when you take into account all the deductions available and tax credits and all that, is around 18 to 20% which is pretty much average with the rest of the world. you would know, that i don't. but that's what they say. >> the problem is, that's an average that has a lot of people on both sides. the people on the high side of it are trying to get to the low side of it. >> rose: right. >> so the tax code, and the benefits for r & d, the financial institution, we are pretty much cash is cash goes, we make money, we pay our taxes there are very little shelters but for other companies with depreciation, research and development there say big incentive. they are competing against people with the same incentives and they will try to drive it down. but somebody who has a tax rate

of five or six percent which sometimes people can get to, it's very difficult. but i think the question ought to be, and this is not a new concept, i studied back when i was in law school 30 years ago, which is the can you make this simple and take the incentives out of it. it is always hard because in every tax code there is a incentive but the reality is, if you make it really simple, then you can drive down the nominal rate because what they call a cost of compliance is the nominal rate to the actual rate paid. and those elements, that is not a new concept. >> what is the lowest moment for you in terms of what happened in 2007, in 2008, 12009. >> the lowest moment i had was in-- the-- two ways about, this the lowest moment i actually h and i remember this distinctively was working to the floor in our new building in one bryant park and realizing that some big corporate maims couldn't fund, couldn't fund,

couldn't roll their commercial paper. and he said this thing has now gone beyond it started in '07 as a subprime lender sort of going out of business. and you know, things we forget about now. the special interest vehicles and money funds. it had got into core america. i said this is now going to be very difficult. and it took 15 months to kind of migrate through the system, liquidity crunch. and when i said, i said this is-- i said this is going to be very difficult. and it wasn't that it wasn't difficult in the middle of '07 when other stuff was going on, but said this has now affected people who it was considered to be a financial crisis or banking krieses. it was actually a-- it had finally got into people on the fringes of it and weren't overleveraged. if you hear that in the markets, then the engine of the economy can't go. and how do you get out of it. >> you are a pilar of the financial sector. how does bank of america, the secretary largest bank have to change. >> well, i think it's been interesting because we ask ourselves a lot of that. if you think about it now, the

time to make the best decisions about whatnot to do is actually the best of times. because what you are going to do today is what you will see in the next crisis. it's not what you are going to do inspect last crisis that you quit doing, that san easy decision, you look at this and say we shouldn't have had all of these home-equity loans that had no equity in the homes. that is easy. not a question of how do you hold your discipline. so i think that is the key issues, is what will you not do now, how will you keep, we have a concept we call responsible growth and that sounds, you know, what kind of growth are you going to have, irresponsible growth, no, but responsible growth as an element that says you have got to grow but you have to do it with the right risk parameters, that is the lesson we have, we try to remind ourselves. i have a couple charts that build up our credit card book in '04, 05ee, 06y or build up our home equity. we thought we were smart then. the lesson su have to be balanced, all things in moderation, you can't lean too hard on the consumer, the

corporate that is the key lesson. and you know, we became unbalanced. we became so exposed to the u.s. consumer and consumer real estate in particular that when it went the wrong way t almost took the company. >> you got out of real estate and private equity. >> we got out of a lot of things. >> one guide in terms of what you got out of. >> things that we looked at our three groups of customers and things that-- if i walked up to one of those customers and said charlie, are you a customer of ours wa, do you expect frus. you would say i want a great transaction account. i want to you manage my money, i want to you give me statement advice. you are not asking us to sell you insurance or to try to invest to buy a company. you got out of everything the customer didn't want. you looked at that for all the different types of customers, so when you thought about proprietary trading, the way we got there was to say our customers were the people who took the kind of risk, hedge funds, private equity funds, why are we competing doing the same activity. let's help them do it.

once you did that, that u spend in setment of didodel. litigation? >> if you put it all together, $200 billion. >> rose: 200 billion. >> but it's more than settle ams. it's charge ops, operating costs, but $200 billion, five years, six years, almost now i have been c.e.o., if you looked at the times when we spent it 2u-- $200 billion, yet the book value of our company per share has grown every year. so it goes to shoi-- . >> rose: so spending $200 billion. >> i think we went from 11 to $15 across six years. think about that, with that kind of charge and that kind of-- by the way, all that was brand damage. you know, if you are in the middle of, cuz for our investors we had to fore close on homes, that is a huge brand damage. being responsible and responsible growth, also don't do things that will end up, if you are the biggest consumer franchise or one of the biggest in the country, you have to dot right thing for scierms. so you had to think about that. all these elements, and you know, when you say what lessons, did you learn, if you read the customer letters during the time and how they got overleveraged

and how we helped them do t we just can't do that to customers. >> rose: when you made decisions about litigation, did you simply say i want to get passioned this, literally let's just get passioned this, we need to put this behind us and ind it as quickly as we can. >> you made decisions on a risk basis with companies. so you would-- you would have-- we have garrett lynch sour general counsel, and teams of lawyers working for us. we spent the high point of a billion and a half dollars of exterrible legal fees. you have did a risk a sems. a lot of times you couldn't win but what would happen between here and there. so if you were willing to v you know, 25 u.s. attorneys sue you individually on eye whole bunch of actions and fight through that and the rating agency, you would say maybe will you win at the end of that. but the question was what if you didn't? and you couldn't-- so you were making a risk assessed. about, you know, and that was one thing. the secretary thing was the cost

of going through it. in some cases, we had one case in particular that had to do with one of the transactions, it was a-- that the cost of trying the case and getting through was probably $300 million. the first 300 million of the quote settlement was free in the broadest con tefntle i was going to pay that even if i won. so the settlement was i think $2 billion and it went to the shareholders as a payment. so it is a risk assessment and a cost assessment and a time assessment. and we took some to the matt. we went to court deep on some but other ones, oddly enough in the real estate sector, you also had a real estate risk. if the losses were this much, the question was what they were going to be three years litter when you finished the litigation if you won or lost. you had to make that assessment. one of the interesting questions, we tried to get a put on all the real estate exposure we had, we tried to buy insurance, tell me it won't go down in value. this is the depth in 2011.

we couldn't find anybody to sell us that option to say from 2011 . buffett could sell us thate option. >> but there is an teunlt lost too. you want to focus on running the condition and creating new groalt model and all of that you don't want to simply be out here fighting. >> all the time. >> right. >> you want to do what is right. >> exactly. >> but at the same time, the opportunities in the future not the past. >> and the brand risk, if you are being bandied in the press and those types of things. the last time we were together was two and a half years ago, if you think about that 30 months, we've made, you know, 25, 30 billion and settled all the stuff and got through the justice and all that stuff. but our brand is probably ten points better than it was then because all of this as it falls away, people are seeing the good company we have. and so that, you are right, there is an opportunity an occupy see cost, that is not quite es timable.

some c.e.o.s call me and say how did you think through. this i say look, you have to think of these factors. the toll on your people, on your shareholders, all the lawyers in the world can tell you you are going to win, but what if you don't. and then you have to sit there and say if i can get to the other side of this, what happens. we finished the last litigation last year and the four quarters since then we made a total of 69 billion which is the second highest earning four quarters, or third in the company's history. >> rose: it's interesting when you talk about brand. how important to you is the second largest bank in the united states, is brand? how do you measure? >> well, if you think about it, we-- consumers and we have wealthy customers and then we have business clients and then we have investors. we measure all different ways. and so we go in an survey our customers continuously. and are you thinking about, not just do they like you, but does your problem resolution work? we surveyed the branch.

do you like the branch experience, do you like the phone experience, the online experience, and are you always using it to gain insight to try to figure out, are you on a good trend. and our lowest point was in the fall of 2009. and we're back to levels we were in 2006. so we recovered that. does that mean, you know, people buy more from you, no but it means they are willing to listen to you. and then you have to give good products and services. but without them thinking are you a good company, without having a general favor. >> it is tough. >> and then you go to the trust factors and other factors and other businesses. and the asset-- acid test is simple, moment of truth in everything is do your customers tell their friends? >> is the business model at bank of america, because i'm from north carolina, i know, you know, a lot about what north carolina national bank became and bank of america and all that happened in that growth. >> right. >> there was a lot of acquisitions. >> right. >> a lot. it was a bank that grew by acquisition, first in north carolina then in the south, and

nationally. is the business model today not about acquisitions but about-- you know. >> since 2007 we've been prohinted from doing any more acquisitions because of a deposit cap. a lot of people don't know. the law of the land is if you have more than 10% of deposits you knts make an acquisition. not only is it not about acquisitions for a whole host of reasons, it's not about acquisitions because i don't want to buy-- so it is an organic growth story. interestingly enough, you have 2, 300, 400, you can trace this lynn yaj back 230 years of this great company. if you think about a lot of tri beu tears to a great river, you have this great river going on now, and so think about all those pieces, but what you have now is completely different. so mr. mccall or-- they ran different companies than i run now. because they had to really figure out the question of whether they were going to be here. i don't have that question. we're going to be here. >> you have to figure out what. >> i have to figure out how do you actually organically grow a company this size day in day out.

>> organically grow it day in, day out. >> and keep ited risk parameters. and keep-- and that comes back to the pivotal-- we had to make as a company which is a pivot from cleaning up the legacy to responsible growth and how we have to grow but we also have to do it with the right risk, or else because if you grow too fast, every financial institution finds a-- . >> jaimy diamon at jpmorgan is very clear we not have done bear sterns in retrospect. is it very clear that you would not have done mer il lynch? retrospect? >> mer il lynch was different. the operating company mer il lynch was a tremendous capability for-- the issue was they came with $20 billion-- and it caused great dilution. i know that avoids the answer but from an operating business it was a homerun transaction, from a shareholder we issued more shares than we should have and that i am still working through. >> you do believe in the idea of a universal bank.

>> absolutely. i believe in universal bank because our customers demand it of us. if you go to a middle market client in charlotte or san francisco, middle market client in new york, their business is globalized. go back to our earlier discussion, they have factories around the world, they are buying resources around the world. they're selling into the world's markets, so if you think about that client, they have to have a bank that can help them figure that out. and so our business of kormt investment banking, certainly the largest companies in the world or middle market banking is a global business and requires capital markets capabilities. access capitol for the clients. trading capabilities to help them edge and ultimately it requires global capabilities. and you know, that model is what they want. it produces billions of dollars of extra revenue for us to have these pieces topg. now let me flip that doesn't mean you will be the biggest trading company in the world. that is what we try to do is keep it in balance. tom and the team that run the trading operation for us, we keep that to one-third our size.

that was a decision we made. and that kind of all works for us. we are big enough for the clients but small enough we can push the market around if we hit a market turbulence. >> rose: was it larger at an earlier time? >> if you think about the balance sheet, is a simple way to measure that. visualize in 2 thousand when bank of america mer il lynch came together, that balance sheet was probably $8900 billion, it is 600 billion now. and now interestingly enough, bank of america was 400 bill. so we are only 50% bigger than bank of america was. and you wouldn't have thought in 2005 or 6 that bank of america was a big capable capital markets bank, what we have done is by getting rid of all that stuff we talked about and simplifying the company, you end up with a smaller business all dedicated to customers which is plenty big enough. 600 billion say limit. they don't even use it because of the opportunities have to be there for them. >> you are recognized as a good manager and people talk, fortune magazine talked about your man ger yal style. what does a good manager have to do?

>> you know, in a company our size, i ti you have to get good people. you have to mot gate-- motivate them. they have to shall-- they don't have to like it but they have to think are you fair and will help them develop. and that is sort of one level thasm is your-- and then you have. >> to vay future. >> and have fun and have interest andk able to tell their significant other this say great place to work. and then they have to be able ts that come to you are easy. the question is who is the teammate that actually has to do it and so i had a number of years ago a woman that ran the private bank for us. she said you know, brian, she was-- had come up to run a priech at bank, and she said, you know, brian, you have got to remember that these ideas are easy. but you have got to visualize the last person who is going to do it. >> and i hold that every day

thinking, you know, thinking about, if somebody comes to me and says we're going to do t do x, can the person actually do x. but more importantly, i ask a question. do you really understand whether at is where you fail.he day, hat is where the client will come in, that is where-- and so i think a good leader also has to have either instinct, intuition or desire to understand that dynamic. so you have to have talented people and motivate them and get them to work and get them to share a decision and a strt gee and get them to have urgency but you know, stability and things like that but on the ore hand you have to have a group of people can instinctively understand what the kution mer needs. >> rose: reason i'm interested in the question is because when i look at politics, there is a question about leadership. the political world is very different than the corporate world. yet there are certain things that would serve both. >> i think it comes down to people and can they-- you need mixes of people. people have great ideas, you need people-- and i think

whether it's the president or the mayor of a city, and then but you--ed second element i think you need is people who are trying to drive to the common purpose. and tha campaigns. i get choose them. but the purpose unites, so when you sct darkest days of the crisis. the darkest days, when the darkest days i would always come back in and say you know, would people miss us tomorrow if we weren't here? why are we coming to work every day, that comes back to you drive the reason why you are serving customers and clients and figure everything else out that keeps you motivated because no matter what goes on, you have to go out and say what do i come to, without, i think that's tough in a political context to get people to really union fie around a purpose. that is the toughest part. that is why what has been interesting is i worked business executives around the country,

thinking about how can we help youth unemployment as a group, the national business council. even growps of the united states doing it. >> youth employment. >> youth unemployment. >> and dealing with employment. >> helping get more youth employed. >> it's interesting. all of us gravitate to one thing, because they have more of an executive power to cause things to happen. and that's not-- that's a statement of construction, not a statement of aptitude or ability or things like that. their job allows them to cause things to happen. a lot of other places it's either policy making. or i have to get at&t. >> it is all are the rubber meets the ground. >> in some places you don't have the power to actually pick the people and the process and stuff. so i think so i think leadership is a lot of it as a c.e.o. and i think the common traits but there are differences because of the structures. but i think the common thing is can you get stuff done in a day and how-- and it's incumbent upon whatever job you have to get stuff down. >> why should a c.e.o. and a

chairman of the board be the same person? >> you know, it is-- this is really-- you got to separate the governance question. jack boaf and-- the board meetings, meets the regulators, meets the shareholders and drives it. sew does what a lot of people think a chairman does or not. but in a u.s. context the combination say normal thing. the board made a decision, we had a chairman who was leaving, you know, did they want to join it back together. they made the decision to join it so we went through the process and got the share of approval ultimately and with some fits and starts but the key is do we govern well. and as we think about being responsible to the company and responsible growth, one of the elements is to have a sustainable business model and corporate governance and corporate social responsibility and what we do on the environment or with our teammates or volunteers, it all the board?o. being chairman >> it's who

recommendeds-- represents the company on the public side and clients. >> but are you saying we have an independent force at work on our board. >> yeah. >> but i mean, you understand the argument too that in running today's complex businesses and also for diversity of opinion, some people have elected not to have, you have had a conversation about that within your own company and kept both jobs. >> we have had both. but i think in our company, the gof earnance process, we have 13 board members, i'm one of them. the other 12 are independent. one was a former chairman of our company. we have hired basically two thirds of them to come on in the last several years. i never met them before. they got in the process. very independent group, very different skill set. >> that is not your best friend. >> the key is to have people with a variety of experiences, so we have people that have defense industry experience or we have people with public auditing experience, people that have one fellow, arnold runs carnival, big you know consumer company.

we have another person worked at pepsi, we have die virts of ethnicity, background, gender. the idea is to take that group. because what a c.e.o. looks to board for is perspective. help me think through a problem. and then the board has to govern. and believe me, with all my net worth in the company, with my highest interest, i want a company to govern well too and they do a good job of that. transactions?rise of online >> it is an amazing-- if is changing because of customers. so i had a great story come up the other-- six months ago or so. you know, from a branch. i get an e-mail from the branch manager saying, through the chain, a couple of chains up to me saying you got to see this story. i said you know, so and so signed up for mobile banking. i'm thinking that happened, we have 18 million mobile bank customers. >> 101 year old person. >> now that is optimism, right. >> what it shows you is that the

utility of the capabilities embedded in the phone, you know, the ease of use, the flexibility, the easy to understand, is just there, so a 101 year old person to do mobile banking, it's so convenient that it's leading us, and our job is to, as a big company, to be as good as these so called disrupters. and yet scale it. and the scale is the unbelievable things. so since last niem if you 30 months ago, we put in a product to take a picture of a check. this quarter 13 or 14% of all checks depoitsed at bank of america, a person took a picture and sent it. what does that mean? that means they didn't have to drive to a branch. they didn't have to drive to an atm thevment could do it at their house, store the check there, see the check, take the picture. think about that. 14% in two and a half years. it took us-- . >> rose: where will it be in the next two and a half years, 25. >> i think it keeps going. the rate of growth will be more controlled about the decline in checks than the opportunity.

>> if you think of our mobile banking, 18.5 million, customers, if you think about t the activity goes through that just in depositing checks is equal to almost 700 branches. 700 branches, about the 209 largest bank of the country. so that device, not even the computer part, just that device. and so that is like the 20th largest bank in the country, sitting there. so imagine that it wasn't here. three years ago. doing that activities. so what is driving is the consumers. it's the customers. so people our age are doing what eight to 25 year olds did with the a mobile phone for financial services two years ago, that is how fast they are closing the gap. they are growing faster than that cohort because it was already penetrated, my parents have smartphones. my parents 65th wedsing anniversary, in seam, south carolina which you have been through down there clemson, a woman comes up. it is always, the c.e.o. of a large bank, 80 plus year old woman walks up, are you always

nervous when she says i bank with you in salem and down here, and you are waiting for the next thing because sometimes it can be not so good. she goes, you know, and they took me over and taught me how to use the mobile stuff. and you know i'm waiting for her to say and they made me do it. she said it was wonderful. and so you see that cohort just become irrelevant which is, it's so convenient and so we're driving it and it will shift the industry in ways i'm not sure we figured out. we arrived this way, and drive this way, we have put probably 700 million dollars in mobile technology over the last five years to drive it. >> do regulations restrict your growth? >> from an acquisition, absolutely. because that is not our strategy. not from what we do. when we simplified the company, did we know exactly what regulations were going to be? no, cuz it was 2010. we started, the script wasn't quite written yet. did we have a sense where they are going? >> yeah, so we built the idea that what we want to do for

customers and what customers want us to do would b consistent enough without regulation we could do it. so it is not restricting opportunities now. you hear a lot of people in the trading areas saying well, we used to do this and we can't do it any more. the rules are. >> this is the rules, go optimize the opportunity. >> yeah. >> and you will find out you can be all right. >> yeah. and there is huge opportunities for us. and so especially because this the trading areas, especially. the cost of doing this has come high enough that for people who have the scale like we do, you know, we can actually win market share right now. you are seeing the market share con sol date, bigger banks, largely because we have the 900 million a year to spendz on systems development work, we have the compliance capabilities and stuff and things. and we can, you know, have the mber one research platform and so does it constrain growth, yeah, if you whine about the stuff you used to do. but our people are over that. it is now, here is the rules.

drive, where you can gain market share consistent with the spirit of the rules and letter of the rules it reay doesn't restrict us now. >> i want to talk about challenges of the future, cybersecurity. >> how big an issue is that for. >> go back to that device on that mobile phone. if the mobile phone, all this work is going on and people lost confidence that they could transact with us through that, just think what would happen. i would have to put up 700 branches, they would have to hire 20, 30,000 people to staff those branches. we just don't have the capacity. so we have to keep people confident that the bank, just like in the old days, you know, the vault is safe. i was driving in boston the other day and i saw the box on the ours of the bank's vault alarm and it used to light up. we have to be as safe as that. we spent all the money it takes. on protecting our customers to get information, protecting our company. >> rose: do you feel like you

are under assault every day? >> if you put in a war termology gilant and on ult mullutely tell-- multiple dimensions, outside attacks, inside attacks, employees doing stupid stuff and exposing the company, what we call-- we call it hygiene, you have to wash your hands and you. >> they are not always happy with us. so you just have to ---- so that group has basically spend the money to protect us because it's so important to the trust question. and yet it gets interesting out there. so knock on wood we continue to do a good job. >> looking at the global economy, are you concerned about china at all? >> you know, we have got a lot of experts. and they think china has slowed down. their growth rates are six to sefn. but it's a big economy. they have gotten a size now where six or seven percent growth, that is a lot of activity.

so in their core question of you know, industrializing urbanizing, all this stuff, i think you know t may be up and down but it's going to keep going. and people are spendzing and all the things are coming along. i think this administration over there is serious, we will do it the right way thravment is causing some adjustments but our people are relatively sanguine on it because it's just sheer power. you know, as the thing gets bigger, does it have issues, everybody has issues. but the banking system there they have the shadow banking system, the core banking system. >> i will ask you about that, shadow banking, is that a big challenge for snu. >> here in the u.s >> here, over there. >> well, the issue, if you go back to the kries ises, and those of us who were core banks, commercial banks,s people that got in trouble were the people who didn't have the funding structure and the capitol and regulation around it. and what people call shadow banks now. and i am a little concerned that the activity is migrating.

the largest part of the institution control enough of the activity that they ought to be able to stabilize it but it if it keeps growing it will be hard to stabilize it. >> does your concern lead you to suggest they should be regulated more. >> i think everybody will be. >> when you make a mofort loan, you have to be subject to the same rules, whether you do it inside regulating an institution or not. if you participate in the payment system-- . >> rose: it say function that ought to be regulated rather than the nature of the institution. >> they did a lot of that. but it's creeping away from them. just because something's small doesn't mean there isn't risk. >> rose: being a lawyer good training to run a bank? >> yeah, i mean, i haven't done it for a long time. i think if you go to law school and you know this personally, are you taught how to think with a discipline. and i think you are taught how to be curious. and i think any other day those are good things. >> rose: it's great to you have here. >> thank you so much. >> thank you. >> rose: brian moynihan, c.e.o. and chawrm of the bank of

america. back in a moment, stay with us. charlie savage is here, a pulitzer prize winning journalist and washington correspondent for the new york sometimes. his latest book is called power wars, inside obama's post 9/11 presidency it is an in-depth look at the current administration's delib rations and acquisitions on national security and counterterrorism. i am pleased to have him at this table for the first time. welcome. >> thank you so much. >> rose: so what is this about? >> so this is a book about the obama administration's legal policy delib rations. obama is one of the most lawyerly president's we've ever had. he is a lawyer himself, as is joe biden. and they surrounded themselves in policy making roles with people who went through law scoovment and as a result, they have a very lawyerly way of looking at the world, a very lawyerly way of thinking about problems, both in intention to the law and as a way of breaking down problems. and their delib rations about

these incredibly interesting dilemmas that have arisen in the sort of poses 9/11 world are the focus of this book. i talked to-- i spent a couple years writing it, i talked to over 150 current and former administration officials. i gained access to many documents which not public and still aren't public today. and it is essentially an investigative history of how they came into office thinking this pregoing to do one thing, found that the world as it was was not always cooperative with that. >> rose: what did they think they were going to do and then what did they find out that made them do something else? >> they came in as tremendous critics of the bush administration, of course. >> rose: they were going to close guantanamo. >> they were going to fix the war on terror. they were going to not have a global war on terror. they were going to right size all these things. and they found that things were much more complicated than they thought on one level. many more people at guantanamo, for example, who could not be released. they were dangerous and yet could not be prosecuted for any

crime because either they had been tortured or because certain statutes about material sport for terrorism did not apply to them until after their capture, because they are not expanded to apply to noncitizens abroad. but more broadly, they also had a certain idea about how to fix the war on terror and that idea had to do with law. and there is where one of the great disconnects, and it is sort of like the fundamental question of the book. obama came in as the liberal law professor who was going to change the war on terror and he ended up acting, some people think, quite a lot, like george w bush. he kept indefinite detention even if he closed guantanamo which he failed to do he weus it somewhere else, used drone strikes a massive surveillance, went beyond bush in certain respects like overseeing a crockdown on-- . >> rose: all of this leaves you to say that obama is no dove on national security. >> he is certainly no dove, but the question is how did we get here? what happened? and one of the insights that a is radios from all of these stories, behind the scenes where you are sort of fly on the wall

as they are wrestling with this stuff, is that in retrospect approximate-- retrospect, we can see now something not as clear at the time during the bush years, which was there were two very different strands of criticism of what bush was doing, and cheney was doing after 9/11. there was a real of law critique and a civil lib rertds critique. civil liberties critique says things like warrantless surveillance are inherently wrong, the state should not have the power to prosecute people on military instead of traditional trials against individual rights. the rule of law critique is agnostic about these policies maybe except for torture which is always illegal. the rule of law critique its focus said can the president disobey the law. if the law says you have to get a warrant to wiretap on u.s. soil, maybe that law doesn't make sense any more but the president has to go to congress to get st changed. the president doesn't just get to say in secret, i'm cot mander in chief, i will blow through it. and in retrospect, so these are very different. in retrospect the obama people, obama himself and many of the

people he was gathering around him were duringed bush years making this rule of law critique of what the problem was. nd the difference between those two are the one can be fixed. and late in bush's second term, congress comes in, they pass laws like the military commissions act. they adjust federal law to bring it into alignment with what bush was already doing. and as a result, by the time obama takes office, at least from that lawyerly mindset, the problems have largely been solved. so they thought we're not acting like bush. ter rim is still a problem but this is what we're going to do. meanwhile groups like the american civil liberties union, libertarians on both the left and right who diagnose what it means to act like bush very differently thought this is betrayal. >> paibts the four lawyer profiles in "the new york times." >> we thought we knew what there was to know about the bin laden

raid, and yet there is a whole other element, dimension to it which was not yet told. so osama bin laden raid raised all these tremendous legal issues. can you violate pakistani sovereignty by using military force on its soil far from the tribal areas where there say normal, functioning pack stain government without asking their permission. >> rose: don't we do that a lot? >> well, we definitely use force in countries where there is not a functioning government. >> right. >> and the tribal area of pakistan is kind of like that. it is like that. rural yemen, somalia, bad lands which not the battle field but are also not normal countries where if there say terrorist threat you can send the police to go arrest them. one of the great controversies of the post 9/11 era, of course, is first the bush administration an obama administration as well have taken the position that the war follows our enemies when they go to these places. and some, the international law.

>> they escape afghanistan and go into north waz irstan then to to invade that pakistani security is perfectly okay. >> it seems to be that the pakistanis have granted consent to strike within a box within that area. a harder case might be somalia which doesn't even have a government really that can grant consent in the first place. but certainly pakistanis were not granting consent to abottabad. >> rose: and didn't know. >> sand so these lawyers there is that, there is can it be a kill mission instead of a capture mission. can we bury him. >> rose: what do you think that was? >> what do i think what. >> it was definitely a kill mission. and the question was whether that-- when is that lawful and under what conditions is that even in war, if someoneption surrenders and it's feasible to accept that surrender, you can't shoot them at that point.

but it's okay in war to go in, trying to kill your enemy and so the first two lawyers who do are the cia lawyer and then the national security council lawyer. and for a long time they were the only two lawyers who had been in on the secret because the white house was desperately afraid of a leak that could enable bin laden to escape again. so for the first four or five months the focus is on can we get more intelligence who is in this compound. by the spring of 2011 it shifts to what are we going to do about it, what are the courses of action. at that point they read in the top two uniformed and civilian lawyers at the pentagon and these four lawyers are the only ones who know at the policy making level, until almost the very end. and they are working through all these issues. can we bomb the compound. can we bomb it with a big bomb that basically takes out the whole neighborhood. how much collateral dadges of civilian bystanders is acceptable given the, you know, give inthe military value and so forth. >> is the essence of what are you telling me that obama came

in with certain reformist ideas and then saw the hard reality of what the nature of the conflict was about? and he went a different direction. >> i think that he came in, well, he came in with a rule of law mindset. >> right. >> he accepted which some of the left do not accept, that this was war. >> that terrorism was war. >> that the war against al-qaeda was a real war, aya an warmed conflict. the reason he accepted that was because congress had said it was a war and the supreme court agreed it was a war. so even if it is ambiguous in these 21s century situations don't map on, he was satisfied. that said, he wanted to wind things down. he had in his first year you could see, you know, he wanted to ratchet things back and normalize as much as he could. and then the christmas underwear bombing a tack which to me say pivotal moment in his presidency. christmas 2009 a terrorist from ghie ger ya sent by al-qaeda yemen branch almost succeeded in

bringing down a plane bound for detroit over america soon with you. >> the shoe bomber. >> underwear bomber. sheer luck that the bomb doesn't go off. had nothing to do with our defenses. everything failed. and the political fallout-- first of all, that itself is gut wrenching if you are the president or the national security team. but on top of that, the political fallout which i map out in chapter 3 then, which includes scott brown, a republican winning in massachusetts and ted kennedy's deep blue seat, suggested that if there was an attack that succeeded, he would be a failed one term president. he would not be-- they would not be able to do any of the things they wanted to do way beyond national security, health-care reform, et cetera. the whole thing would collapse. just a year after his historic sweeping victory which included democrats getting a fill buster majority in the senate. everything looked totally 180 degrees different. and from that point on this ambiguous, ambivalent first year

we're going to keep some of this but use it sparingly and ratchet back some of that, shiftd both in their internal delib raitionzs as i showed one-story after another, becomes much more of a hard line. we are going to do what it takes to prevent that from happening. >> rose: where do you think the president has come on the question of this balance between security and privacy and freedom? >> well, i definitely think that the obama that ran for office found a very different than the obama who is president. the epigraph at the front of my book captures that contrast as vividly as can i see. obama in 2007 as a senator, he is giving his big national security speach, as he is trying to present himself as someone to be taken seriously running for president and denounces the bush administration for prentding a false choice between our security and our ideals. we can live up to the institution and-- constitution and still be secure without sacrificing

either. then in to 134 after edward snowden reveals the nsa has been keeping records of all americans domestic phone calls, a program that he decided to keep, and i document in great detail the meeting at which he was told about and decided he was going to keep it. this comes out because of the snowden leaks and he gets up to defend himself and say look, we have to make choices in society. we can't have 100 percent security and a hundred percent privacy and individual rights, that's not reality. you know, it is almost like he's talking to himself six years earlier and saying that was either polit qual or naive but that's not the world as it is unfortunately. >> we'll find out when he writes his memoir after he leaves which will probably be one of the more interesting memoirs only because of his ability to write as well as to think like a lawyer. >> indeed. i mean his lawyerly thinking is i think one of the keys to understanding how a lot of

things happened. i talked earlier about how he had all of these lawyers around him and one man manifestation on that is civil liberties versus rule of law, they were rule of law focused. there are other ways in which that played out in his governance style. if you think how lawyers are trained to think, they are incremental, they really have to grapple with the best arguments of the other side and be prepared to rebut them. there have rigorous add hearns to process and that is so different from how george w bush and dick cheney ran their administration. this prec.e.o.s, they were deciders, they made decisions and moved on. they didn't second guess them sefs. the lawyerly mindset is really engaged with what can go wrong with this thing in front of us. what is the possibility second and third order consequences, so his critics will say are you ditterring. why aren't you just going to do whatever you will do about arming the rebels in syria, or send a surge. but he sees-- he gets almost paralyzed. >> if you look at those two

examples, bush cheney, obama biden, is one obama-biden, more likely to be looking for all the alternatives and trying to choose among the best alternatives, on the one hand, versus another, i'm asking, another bush-cheney which pretty much knows what it wants to do and doesn't want to hear other alternatives. >> well, i mean t is sort of a harsh way of putting it. i might put it a different way. there san element of what are you getting at which is when the bush people decided they needed to do x, we're going to have military commissions, they just did it by fiat. there was not a lot of-- . >> rose: they didn't seek legal just if i kaition. >> not at first. the first term especially, not only did they not seek normal legal justification, they didn't even run the traps of the normal executive bureaucratic process. >> rose: my impression is that in the cia, for example, my

impression is in the bush administration, that they were very careful to make sure they had some, what they thought was legal justification to do what they did. >> they wanted to make sure they had a memo from the justice department saying you can do this. >> rose: right. >> so that -- >> rose: did they get that memo. >> they certainly did and that is the formal. the justice department checked the box that say little different than is what is written in this memo something that most legal scholars would recognize as, you know, mainstream understanding of how the law works. and it was sort of that formal need for a, you know, a get out of jail free card and the former justice department lawyer put it, that they were seeking. >> some of those guys, they would basically, men and women, who would say, we just, we worry about sort of thinking that we have authority to do things and then somebody calls you in and wants to prosecute you. >> the justice depts cannot prosecute someone for doing something that the justice department said was legal. later says we changed our mind about that.

that was very important for them, some of the great crises of the bush years were when justice depts lawyers like the one i just mengd, jack goldsmith started pulling back those memos. that is just one element of the legal process. the obama years and its ironies lawyerliness is that it's tremendous adherence to process. it's making sure that everyone who had a steak inside the executive branch in a proposed change in policy had a chance to weigh in on it and if there was any disagreement, it would get kicked to the next level in contrast to the bush years where they just sign off on military commissions and only late the national security advisor find out it is happening. this has a status quo bias, the obama approach. it means it is very hard to dislodge the new status quoa that bush created by process fouls. should we release this that the detainee doesn't get,. let out. so that is one of the ways in

which you have these two administrations that are so different in mindset, ironically having more continue out than the expectations people had when they came in. >> congratulations. >> thank you so much. >> power wars inside obama's post 9/11 presidency. thank you for joining us. see you next time. for more about this program and earlier episodes advicity us online at pbs.org and tharl c.e.o. rose.com .

>> finds for charlie roases is provided by the following: and by bloomberg, a provider of multimedia news and information services worldwide. >> on tomorrow's pbs newshour, as the u.s. ramps up the fielt against isis, a consideration with secretary of defense ashton

>> announcer: this is "nightly business report" with tyler mathisen and sue herera. >> skittish markets, stocks fall and took another leg lower midday after a mass shooting in southern california. breaking $40. oil prices settle below that key level for the first time since august. on track. federal reserve chair janet yellen making her clearest signal yet that a rise in rates may be just two weeks away. all that and more tonight on "nightly business report" for wednesday, december 2nd. good evening, everyone. i'm tyler mathisen. sue herera is on assignment tonight. well, the day began routinely enough, some economic news, a speech by federal reserve chair janet yellen and the release of the so-called beige book. that's the fed's periodic report on regional economic conditions. markets