Bank of America CEO Brian Moynihan & Senators Klobuchar & Cruz 12/17/24
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Bring in show music, please. This is SquawkPod. Today, what 2025 has in store for the second biggest bank in the U.S., Bank of America CEO Brian Moynihan on the Federal Reserve's next move. I think our team thinks we're going to cut today a couple of times next year.

And in Congress, a bipartisan team takes aim at social media companies and explicit content. Senator Ted Cruz: "Amy and I teamed up together to put a legal obligation on the tech platforms to take that garbage down when they know that a victim is being victimized." And Senator Amy Klobuchar:

With the advent of AI, they're literally making up bodies on the faces of girls or faces on bodies and they are putting this stuff out there and it's destroying lives.

Plus, the other stories that got us squawking, like President-elect Trump's plan for PBMs in healthcare, and former talk show host Carlos Watson was sentenced to 10 years in prison. Some lessons from his questionable business practices. "Don't do it." "Becky, don't do it!" "Just say no." "I won't." I'm CNBC producer Zach Valisi. It's Tuesday, December 17th. SquawkPod begins right now.

Stand and by in three, two, one, cue Anders.

Good morning. Welcome back to Squawk Box right here on CNBC. We are live at the Nasdaq market site this morning in Times Square. I'm Andrew Ross Sorkin, along with Joe Kernan. Becky is reporting live this morning from the Bank of America. Becky, what do you got going on? Well, good morning, guys. We're going to talk about a lot of things here at Bank of America. I'm live here on the New York trading floor. This is all happening as the Fed kicks off its final meeting of the year. We'll be joined by the CEO, Brian Moynihan. We're going to get some views from the Fed.

from the bank and maybe what the future might bring, the new administration that's coming in, what we're thinking about inflation, and what Bank of America, which has a huge number of customers across the country, both in terms of the business side and in terms of what you see from the consumer side, just how the economy is standing up right now, maybe try and get some answers to all of that. Okay, we've got a lot coming up. ♪

In a bipartisan framework bill to fund the government, an averted shutdown has hit some snags. House Majority Leader Steve Scalise telling reporters yesterday that a deal was close to being finalized but not yet completed. A main sticking point has been aid for farmers. Speaker Johnson needs votes from farm district Republicans, but securing billions in economic assistance would likely force him to make some concessions to Democrats.

which could cost him votes from separate blocks of Republicans. Here we go again. Lawmakers have until midnight Friday to prevent a government shutdown. Is it weird that we haven't talked about this at all? Which piece? The government shutdown. I feel like we've always talked about it a lot. You're right, it never really comes up. But this time I feel like we haven't discussed it basically at all. We just assume it's going to get done.

You've got, you know, they're going to figure it out. Probably. Because we write only always we know that we know what the movie is and we know it's like the 11th hour. Then it happens. I don't know. Sometimes it surprises us. It's yeah, it's it's the house again. I mean, now we're saying that the house is going to be different because you got, you know, and it obviously it's not January 20th, the narrower majority.

Yeah. When it finally happened, on January 20th. But you still do have this de facto sort of head of the Republican Party now that probably could put some pressure even on some of the factions, maybe. But Johnson's used Democrats before, and I don't know if he has to worry as much about doing that. Mike Johnson, the Speaker of the House, right. I think you're probably right about losing his job as a result. ♪

Shares of pharmacy benefits managers fell yesterday after the president-elect Trump said that he plans to knock out drug industry middlemen. And we have a thing called the middleman, you know the middleman, right? The horrible middleman that makes more money, frankly, than the drug companies and they don't do anything except they're a middleman. We're going to knock out the middleman. I'm going to be very unpopular after that statement.

CVS Health, UnitedHealth and Cigna each fell by 3% or more. All of those companies own the largest prescription drug, Middleman. These are companies that used to be independent, but they've all gotten wrapped into these pharmacy companies as pharmacy benefits managers. And guys, we've talked to a lot of people, including Mark Bertolini and others, former executives or current executives in the industry who say that these PBMs, the pharmacy benefit managers, are not going to be able to do anything.

have really outlived their time. They used to be there to try and squeeze out costs, get a better price for the consumer, but they've kind of gotten wrapped up, a lot of people will allege, as profit centers for these pharmacy companies. Just think for kind of their own sake. And they went, remember they went, your friends in investment banking, you know, merged, demerged, merged again with all the famous ones, Medco and

Everybody's trying to... They were all trying to take the middleman out by putting them in the middle. I mean, the middleman becoming the main man of sorts. And the PBMs feel to me like they are the new HMOs. You guys remember, this goes all the way back to the Clinton administration, when HMOs were really seen as the bad guys when they were going to try and tackle health care costs. Part of the problem is we just have this...

system that's been built upon system after system and ways of trying to squeeze costs, simplifying things never really come to fruition. But you need transparency. You need to understand how these things work. And you need to find a way to help the private sector make, do what the private sector does, which is try and wring costs out of these things.

Right. People living a lot longer and they want everything that you can get. They want the state of the art health care, which is expensive. And, you know, the aging population there, there were I'm not speaking personally here, but there are, you know, the population is.

of people over 65 years old is going to swell and swell and swell. And then you get up with chronic diseases that cost so much to maintain. And then you got lifestyle issues too. Again, I'm not speaking personally about being fat or anything, but obesity is an issue. Less weight cures a lot of... Yes.

We should talk about this story because we know this guy. I feel like we were part of this. We had him on the air right after. Explain what's going on. Carlos Watson, the former talk show host, he was sentenced to nearly 10 years in prison in a federal financial conspiracy case. Prosecutors accused him of inflating revenue numbers and touting deals and offers that were non-existent or not finalized and showing other false indications

of his company's success. And I remember we talked about it. Remember they would pick a headline from somewhere that was describing the company and then they'd act like the newspaper was endorsing it. Well, no, it was worse than that. They would buy ads themselves, like in the LA Times. And they would write an article in the LA Times, like in a paid magazine.

premium paid one of those premium paid posts right and they would take that post many would bio billboards somewhere and say you know l_a_ times l_a_ times but that wasn't there was others that was the least of the yeah the issues the bigger issue was there was a numbers were real well even worse than that there was a moment at which he apparently

was on the phone with Goldman Sachs, pretending to be somebody else, using some kind of machine to change his voice so that it would appear that it was a YouTube executive because they were trying to prove that they had a special relationship with YouTube and they didn't have a special relationship with YouTube. Okay, so now the question, which I'm very curious how everybody feels about this. That was wire fraud. Ten years. How do you feel about ten years? Um...

Imagine what he could have done with AI if AI was as advanced as it was today instead of just one of those machines where you change your voice. He did speak to CNBC, I guess, in his regular voice after yesterday's sentencing. Here it is.

What started as a very unfair and selective prosecution and led into a really egregious railroad of a trial has ended up with an incredibly unfair sentence. How does Elizabeth Holmes, with a $9 billion company, a fake product, end up with 11 years while she lives in a $135 million house, and Carlos Watson, who drives a 15-year-old car and eats Chipotle...

and put money in his company, didn't take it out, ends up with 10 years. Even if you believe everything they said, which you should not, the average person for this gets something like two or three years. He does plan to appeal. What do you think? What do you think of the sentence, for real? I don't know enough about the case, honestly. I'm of very mixed views, because I do think, I mean, he's right about this sort of, and I'm condemning the whole thing, but

This is part of this, like, fake it till you make it thing. And I think, like, Elizabeth Warren. Her, too. Elizabeth Holmes. That was one of your best Freudian slips right there. Elizabeth Holmes. A lot of people think that, by the way. No, no, no. Apparently you do, too.

Whoa, I thought you were close. Elizabeth Holmes at 11 years. By the way, I'm going back even, Dennis Kozlowski, whatever you thought of him, I think was seven years. So the actual, I mean, there are sentencing guidelines for whatever the crimes you're talking about. This is federal, so it's very hard for the number to actually go down materially. That's fair.

I mean, there are laws, there are guidelines for sentencing. And, you know, you might think, wow, it's kind of harsh. But look, the good news is if there's not a deterrent out there for folks who are watching this show who run their own businesses or thinking about, OK, you know what, if I could skirt skirt a little thing and if I could fake it till I make it. Yes. I hope that they're watching this and saying themselves that's a bad idea.

It did. He was trying to mislead people about the finances of the company. And then once you go to the point of, oh, yeah, hi, this is, you know, that something's wrong there. That's you know, you've that's a bridge too far. You can't defend that. Right.

No, the whole thing is indefensible. What was the voice? Where do you buy one of those? Can you buy something with... Some machine that changes your voice? Yes, I think even your phone will do it. You can buy them for like 20 bucks. Like, they... I mean, I want... They sound like Batman? I don't... No. No, no, no. It just changes the voice a little bit. And I don't know, just to be 100% clear, I don't know if they ultimately determined...

That it was him doing it. Just that it was not the executive from YouTube and that the speculation from the folks at Goldman Sachs at that time was that it was potentially him. Yeah. It's just a general rule that there's things you know that you're doing wrong that can not be good. Don't do it. Don't do it. Becky, don't do it. Just say no. I won't. Tease will be next.

Next, on SquawkPod, Bank of America CEO Brian Moynihan on the Fed's next rate decision, plus what he's expecting from Donald Trump's next administration. President-elect Trump ran on a position that there was too much regulation and too much had to be dealt with. Obviously, inflation, immigration, regulation. And you have that, obviously, for people who've been in this industry a long time, like myself, we got to get the thing back to the middle. And he's been clear about that.

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This is SquawkPod with Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Here's Becky. We are here at Bank of America's New York trading floor this morning, and joining us right now is Bank of America's CEO, Brian Moynihan. Brian, I want to thank you, first of all, for hosting us here today and doing it on a day when there's a lot of market activity that's coming. I didn't realize until I got here this morning that this is actually 15 years since last night

uh... since you were named ceo you took over in january of twenty ten but you were named just last night fifteen years ago what a long strange trip it's been huh well no it's it's been it's been great it's been honored to lead this great company and all these talented mates out here it was fifteen years ago yesterday that the board met and announced it announced it that i had my first town hall with everybody

today, 15 years ago. And, you know, it's been great to see this company take its position as a leader in all its businesses with great scores from those customers, great scores from the teammates, delivering for shareholders, helping what you can do to help society. It's a great company. It's an honor to lead it. And I'm very proud of what we accomplished. Yeah, the stock price has more than tripled over the time that you've been here. And I know this year has been a good year, too, up 34 percent, I think, year to date, maybe 36 percent over the one year.

There's been a lot of enthusiasm very recently about financial stocks in general, just given what we're seeing with a new administration that is poised to take over. Why don't we start talking a little bit about that? I heard you say in the last week or so that you thought it was very rational to see these stock prices taking off like this. You want to explain? Well, that's part of the thesis that the banking industry's valuation relative to the other valuations you all spend all the time talking about is still lower than usual. But

But, yeah, in the end of the day, we had a swing in regulation that probably went too far, and there's hope that it will come back for the smaller banks, the ability to

to merge together was slowed down. And as an investment banking firm, you know, we can't buy anybody because it's not legal under the rules, hasn't been for 30 years. But as an investment banking firm, we like that activity. And the belief is the economy is going to grow. And that belief in the economy growing while the markets are up, the activity among our customer base and stuff, the enthusiasm for potential deals for non-banking clients getting through and

and and and happening you know there's there's a lot enthusiasm so it's it it be completely rational at the bank stocks would follow the economy in the optimisms come out what what did you hear edgy tie this back to the election with the with the regulatory oversight that's coming or the room changes in the regulatory oversight that are coming well the the the president like Trump ran on a position that there is too much regulation and too much had to be dealt with obvious inflation immigration regulation in you have that obviously the

for people who've been in this industry a long time like myself, we got to get the thing back to the middle. And he's been clear about that. And I think the appointments he's had so far, which is really Treasury Secretary, haven't gotten to the bank level appointments, are clear that they're going to try to maintain stability in the operations of Fed on the monetary side, but push hard on the regulatory side to get

balance back in the system. Scott Besant is the choice, the incoming president's choice for Treasury Secretary. Have you spoken with him at all? I've spoken to him. I know him. He's terrific and he'll be great. And he knows our industry. He knows what goes on on these desks. He knows what goes on. But, you know, at the end of the day, one of his challenges is he's got a big budget deficit and we've got to get that more, our eyes and stomach aligned, right? We're running a $1.8 trillion deficit last fiscal year. That's in

equal to the entire GDP of Australia, to give you a sense of size, $30 trillion in debt and growing. So we've got to get that aligned, and he's going to have to be a leader in figuring out the balance of all the ideas to see how they all work. I mean, it's a tricky task, especially when you listen to everything that incoming President Trump has had to say about things. On the regulatory...

obviously that's gonna be great for growth big deal for a lot of businesses who are here but they've been a lot of fears and concerns about uh... tariffs for example what happens with some of those talks what happens with trade had had you balance it all out i've seen what bankers said but what do you think if you really see

the regulatory relief and other activities increase the profit margins of companies and the tariffs come through, they will eat more of it. So the effect of the inflationary side of the tariff will be lower because the companies will be willing to eat it because they're making more money and they never want to change price. It's a very competitive market out there. You raise price for whatever reason, even with the pass-through goods prices, people seek alternatives. So I think people feel it's relatively balanced in the range of tariffs that are being talked about. At the end of the day, I think the

I think this discussion went on during President Trump's first administration. It will go on again. It's already started up in advance of even the inauguration. And it's about a fairness. You know, we buy a lot of stuff from other people. We have the largest consumer economy in the world. We have the largest economy in the world, so we buy a lot of stuff from other people. Why aren't they buying our stuff? And the reality is they're trying to get balance to that. And so that creates jobs and more opportunities for American companies. So it's hard to argue with that. But the question has to be balanced against the impact on inflation, the impact on slowing down the economy.

and also what we realistically can do in this country. You know, there's things that are made in other countries that...

have been made there for many years that are so inexpensive. The American consumer, you have to think hard about whether you actually can bring in this country and create the kind of jobs that you want to create. It sounds like I think the bank's official policy has been that it's going to be a wash between the two sides on this. It sounds like you are a little more positive about things, though. Well, I'm more positive than enthusiastic. America, if you think about what was coming in, coming through last summer, you saw every time our teammates played

put out their economic projections of consequence and they really changed them. It was always increasing the GDP growth rate for this quarter and into the early part of next year. So, in fact, you've gone from where if you and I were sitting here last year, we would have said this year is probably like 1% plus this quarter. Now we're at

you know, 2% plus. Next quarter, 2% plus. That was only a few months ago was 1.5%. So they keep increasing that. That was building all the time because consumer spending was solid, employment levels were solid, companies were making money, companies were investing. But as you came through the summer, then you had to kick

of well maybe there's more ahead and so now those economic projections are literally gone up by almost a point to point uh... half of to a point that's what's leading to the more optimism rather than whether the inflation will whether the tariffs will cause a little inflation if the economy is growing everything is a lot easier you made some comments very recently i think in the last week maybe at the goldman sachs conference where you said you're expecting for the fourth quarter twenty five percent rise in investment banking fees about a twenty percent increase in wealth management fees and record trading level uh... revenues

Those numbers, again, how much of that is tied to the growth that you're talking about? How much of that is tied to either consumer confidence or company confidence that has built post-election? I'd say it was tied to the trends coming in and those trends are expected.

to continue more strongly, right? So that's creating something that you don't have investment banking fee booked for an M&A transaction this quarter that wasn't already signed up. Sure. You know, just because of the time frame. So what we're sort of pro forma conversations, people would have you in the summer and they'd say, we've got to take this company public of a financial sponsor. We've got to get this company out when the window opens and when valuation is right.

A strategic buyer would say, hey, look at those companies. Yeah, that looks interesting. We'd want to buy those companies. But it was more pro forma. The pitch was here's a bunch of ideas. Oh, yeah, it's great. Let's talk later. Now it's like get in here now. Is this later? This is later. It's get in here now. We're going to try to hit the windows. We're going to try to sign this deal up. We're going to move. That's really bookings for next year, honestly. But what's coming off this year is just that stronger economy coming through from the summer into the fall. So what do you expect come January? I expect you'll see deals.

I mean, I expect you're seeing more deals signed up now and you'll see more deals. Even since just in the banking field, you've seen like three or four deals announced recently. And I think the pace will pick up because the biggest issue for a board when someone's making a proposal to buy you is what's the certainty of getting it done? The price is there. It's obvious. The question is, what's the certainty? And then what's the duration of that and how destabilizing is to the company that's selling prior to getting it done? If it's a year's process and it should be a three-month process, that's

that's tough. If everything gets looked at two or three extra times, and not everybody has the staying power to sit on a deal for two years, it's hard. So that certainly moves people ahead. If you look at the markets, it was more the market rose based on all the enthusiasm and all the things that you've talked about every day, and so the activity of volatility kicks up. And if you look at the consumer, though, the consumer is more fundamental. What's happened is

In the middle of summer, I think we were talking various things. The consumer had slowed down, and I was getting concerned that the Fed was going to get behind a bit on cutting rates.

As soon as they said they were going to cut and reach, you saw consumer enthusiasm pick up a little bit. You saw a little more activity because they realized in the future the rates are coming down. And that started happening in the September time frame. And so you started the spending picking back up. And right now, for the two weeks around Thanksgiving, it's 5% plus of all kinds of spending over last year. And that's stronger than it would have been last year or the year prior to that. So that means the consumer is in the game. Now, interestingly enough,

more on cosmetics and clothes and less on real luxury goods, more on experiences and travel and things like that, which is all good. That means the breadth of the economy is strong. The only segment that's still, you know,

fighting to get along is because the higher rate structure is sort of the housing and housing related projects. And so I speak into it. But is that the higher rate structure or is that the supply that's out there at the time? The supply of housing is one question, but even the higher rate structure, even on the home equity lines, our home equity lines are still 30 percent below they were pre-pandemic. The person has the right to borrow. The rates are relatively inexpensive. It's all the facilities all set up. So if you want to put a new bathroom, it's just that

They're saying these rates are high enough. I don't think hard about this. That will change over time, just because people get used to the roads and the wage growth has caught up to the rate structure. We don't expect the medium-term rate structure to move down a lot. We expect it to sort of sit around this level, which is more normal.

We expect the front end to come down. As the consumer just gets more used to that and the wage growth and stuff catches up, you'll see that be activated. So if you were worried around the summertime that the Fed was maybe behind the curve in terms of cutting, what do you think now? We've had a lot of people questioning whether they should be cutting rates at this point. I think they've got to get to...

I think our team thinks we're going to cut today and then a couple of times next year. But think about what they're really saying is the end state of Fed funds rate will be in the 3.5% to 4% range, not in the 2.5% to 3% range. That was a big change over the last six to nine months. That's because inflation still doesn't get down to sort of lower twos they have until 26. So with that...

length of time they've got to stay higher than they'd otherwise be. It's a real rate strike. It's very restrictive on small, medium-sized businesses because that's who, they were borrowing a

300 basis points over 50 base. So for 50, then they went to 300 basis points over five and a half. Now they're back down to 475. That's still a lot more interest costs. They've slowed down, quit using their lines as much. The activity year over year is okay. It would be a lot stronger as rates come down because then it's just cheaper to borrow. And that's where the real restriction, the real rate structure is there. So they have to come down a little bit to get more normalcy in the system.

Brian, 15 years ago when you came in, you inherited a bit of a mess stepping into this place. You spent the first year trying to make sure that the bank had enough capital on hand, because we're talking back at 2010, just after the financial crisis hit. Part of what you did was take $5 billion in cash from Warren Buffett. He has a huge position in the bank.

He's been the largest shareholder for quite a while. But we did see in the third quarter that he's been cutting his stake in the company. I think he sold something like 200 million shares. He still, the last we've seen on the public filings, had 9.99 percent stake in the company. Still a major holder. Do you know why he's selling and have you spoken with him about it? I have not. And that wouldn't be sort of right. But, you know, there's been a lot of speculation. You can ask him. That's your job. But look at him today.

he made two investments a company that was a little hard for people to state he made one in in two thousand eleven and for the first time he told me the first time is a bunny made another major investment eighteen nineteen in yet that's a higher basis he sold that down but he he

He came to us in 2011 and called me up, and you've reported on it, and said, I want to put $5 billion in the company. And I said, we don't need it. And he said, I know you don't. That's what I want to do. I want to stabilize the company. From that day, if you would invest in our common stock at five and change, it was that day, you'd be up as much or more than he is, frankly, in terms of economic value.

he did it to stabilize a company at that point we had 260,000 people whatever it was they all came back to work said the best investor put the money behind that endorsement allowed us to keep just driving the company forward and the rest is history so he's done very well he's been a great shareholder and you know at the end of the day he owns a lot of investment in this company and we have to keep producing for him. Yeah I think it's still around 35 billion dollars that the stake is in this company. When you started

in in twenty ten i i think bank of america america had a cost structure that was in the high sixties maybe it was seven to two weeks okay so seventy two where is the cost structure today and i am thinking of this from the perspective of hearing what does is planning on doing with federal government uh... you on musk and the background swami really wanna make sure that they're more efficient and effective uh... with the u_s_ government you you've got some experience with this what would you tell them that's so uh...

We had 285,000 people the day I took. We went up to 305,000 people, and now we have about 213,400 as of last week. And so that is all made possible by digitization, efficiency, eliminating work. And when we do that, it sticks to the ribs. So this year we'll end up with expenses $66, $67 billion, whatever. Which is below when you took over. It's below where it was in 2016.

Well, where it was in 16 with inflationary pressures. Nominal. And by the way, far more profit that you all have kicked off. Our compensation expense is almost 30 percent higher than it were pre-pandemic in the total. And so where'd the cost come from? It's all compensation. Yeah. Yeah. It's it's we're 60, 70 percent compensation. So at the end of day, it's all these talent teammates.

getting paid more for more activity and more active. But the way you did that was eliminate work. And that's the key is to make it stick to the ribs, as we call it. You have to eliminate work. And we constantly engineer the company, take one to two percent of the work out, the heads out, and then replace it with three to four percent spending and inflationary growth. And that grows net two now. And that's what we're shooting for. It's the adjustment out of the pandemic. Obviously, it took a while to settle in. We're starting to settle in. But

But my advice to them is eliminate work. There's a lot of things that people say, "This is waste, that's waste." Those are obvious. But if you don't eliminate the work and automate the work and digitize the work or get rid of the work because it's duplicative, it's not going to stick to the ribs. They'll just creep back in. So that's what we learned. So think about it. 280,000 people, 285,000 people.

213,000 people. This company's consumer base is twice as big since then. The customer experience scores went from 60 up to the 90s. The teammate scores went from the 60s up to the 85, 86. So you have happier teammates and happier customers, and you've been able to reduce the headcount that much. And that's for all digitization. The customer's behavior has changed. But you can't, you got to eliminate the work. You can't just wish it away.

There was a report in the New York Times this past week. I want to ask you about it. They saw a congressional memo that suggested that they were looking into SARS reports, two SARS reports, suspicious activity reports that the bank made for transactions from Leon Black to Jeffrey Epstein.

The report suggests that those came much later. They were after Jeffrey Epstein killed himself, not in the same timely manner. Why did the SARS reports come later? At the end of the day, believe me, we comply with the law and do everything. And it's been out there, and we're examined heavily on this. I'm not sure all the facts that came out of all that were right. But you should rest assured that we have a lot of people looking at everything we do in BSA and AMO all the time. Okay.

Last year, you came back into a position at Brown University and took over as chancellor at your alma mater. People kind of speculated at the time, that's a big job. There's a lot to do. What are you thinking about your job here 15 years in? What are your plans? Just to be clear, the chancellor is the chair of the board. It's not a job. Chris Paxson, the president of Brown, has been president. I think this is her 13th year. She's terrific. She runs the place. Our job is...

be the chair of the board of directors. So I dropped other chairpersonships. I had other nonprofits, NGOs, trade groups to make room for. And so Chris does a great job. So my job is the 53 board members. I've been on the board since 2010. But at the end of the day, I went there, my wife went there, two of my kids went there, their spouses went there, my brother went there, their spouse went there. I owe that university a lot. That's why I'm sitting here today. And so my job is just to help that board govern the place.

I've told the board I'm still stay here as long as they need me to stay here. I have great enthusiasm, the great prospects this company has. It is amazing what these teammates do for the customers every day, whether they're consumers, wealthy consumers, small to medium-sized business, the biggest trading, investing firms in the world, the biggest companies in the world. And you watch that go on, it is just unbelievable. And every day I get up and see some of that go on and see what happens, get to know from a customer.

shows you what a great company this is. And so with that enthusiasm, I can go as long as they want me to go, but it's up to them.

What do you think of markets next year? What's your expectation? Well, you've had our teammates on. You know, they expect the markets to keep increasing. But we had a big bump now. So I think, you know, 6,000, the S&P, you know, everybody's talking about 6,800 next year. If you went back and said what happened three months ago, they would have been a little different. So I think we've got to be careful about getting ahead of ourselves. But it's very constructive right now. Earnings are growing. If earnings are growing, the market ought to grow.

Brian Moynihan, I want to thank you, first of all, for joining us and second of all, hosting us on the floor here at Bank of America today. We really appreciate it. Happy holidays to you. Thank you. Coming up on SquawkPod, two senators advocating for legislation that mandates social media platforms to remove explicit content and make its publication a federal offense. Senators Amy Klobuchar and Ted Cruz on where they agree and disagree on regulating A.I.,

And so a real priority of the Senate Commerce Committee is going to be to ensure that America leads the world in the development of AI and the jobs and productivity that come with it. We only can lead the world if we have some rules in place so that we don't have rampant scams going on.

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You're listening to Squawk Pod. Up and Andrew, cue. The bipartisan legislation Take It Down Act would force social media companies to remove graphic deepfakes and criminalize the act itself. Joining us right now is Senator Amy Klobuchar of Minnesota and Senator Ted Cruz of Texas. Two folks on two sides of the aisle agreeing. Something we like to see, Senators. So let's talk about this. Let's talk about what this bill would do.

But also, let's talk about how, when you say we criminalize it, how would that work? Well, it's a growing problem. We're seeing this happening all across the country. Number one, non-consensual intimate images that are real images. So a boyfriend and girlfriend are together. They take a picture or video, and they have an ugly breakup, and one or the other decides to make it published to the world.

published it to the world, which is a grotesque violation of privacy. We see that happening with increasing frequency. And then there's a new problem with the advent of AI, which we see particularly targeted at teenagers. We see teenage boys frequently that are taking images of teenage girls, innocent pictures from social media,

using AI to create a deep fake of what appears to be either a naked picture or a naked video and then distributing it to all their classmates. And this is happening, this has increased 3,000% in the last year. 95% of the victims are women or teenage girls. And so Amy and I teamed up together to pass legislation to address this problem. To number one, make it a criminal offense to post non-consensual intimate images.

But number two, critically, to put a legal obligation on the tech platforms to take that garbage down when they know that a victim is being victimized. Don't leave it up right now. Far too many of the platforms leave the images up and won't respond to the victims when they ask to have it removed. So, Senators, and I'll go to Senator Klobuchar, in terms of how long can it remain on the platform before...

They would either be fined. I would imagine that's how you would be dealing with this. I don't know. And do you have any penalty for the folks who are making the tools to allow for the creation of such things?

So there are time limits, but to be very clear, this is a criminal penalty, right? The people that put it up, this makes it a clear federal crime and then also requires that these platforms, and you and I, Andrew, have talked at length about the platforms before and some of the reasons that we might want guardrails and some new obligations here with the new world we're in to take it down. That's why it's called the Take It Down Act. We got this through the Senate unanimously. Yep, 100%

And I know you don't really expect the two of us to be together on your show, but here we are at the end of the year here trying to get it through the house. And as Ted was saying, one in 12, it's one in 12 Americans have experienced something like this because with the advent of AI, they're literally making up biographies.

on the faces of girls or faces on bodies. And they are putting this stuff out there, and it's destroying lives. The FBI director testified in front of the Judiciary Committee on which we serve that 20 suicides occurred in just one year of young kids. Why?

The boyfriend or girlfriend puts the image up. The kid is very young. They think, "My life is over," and that's it. And they kill themselves 'cause they don't know who to turn to 'cause they think their parents would not believe they did such a thing. These are statistics from the FBI in just the incidence of death. So you cannot imagine how big this problem is in the real world. Senator Cruz, how much pushback has there been from the big social media companies about the --

the provision to criminalize leaving it up or not taking it down fast enough? Well, in terms of the platform, it doesn't make it a crime for the platform itself if they're not the ones that created the image and posted it. It's for the individual. What it does is we actually borrowed from a different federal law, the Digital Millennium Copyright Act.

So right now, Joe, if you tweet out a song from the Lion King, within an hour or two they'll pull it down because that's required by federal law. And so every tech platform has offices that deal with requests. You can't tweet out copyrighted material. We use the exact same mechanism. And I'll tell you, one of the victims is a 15-year-old girl from Texas. Her name is Elliston Berry, and she came by my office, she and her mother.

telling me her story about how in ninth grade when she was 14, a teenage boy took images of her, created deep fakes and sent fake naked pictures of her that appeared real to all of her classmates. And she was horrified, she was crushed,

But her mother told me how she had spent nine months trying to get Snapchat to pull the pictures down. She sent emails, she made phone calls, and they just wouldn't respond. I'll tell you, I turned to my staff in the office and I said, I want you to get the CEO of Snapchat on the phone right now. I want those pictures down today.

They pulled them down within the hour. Now, frankly, it should not take a sitting senator making a phone call to get that kind of garbage down. The victim ought to have a right. And so this bill, it's bipartisan legislation to empower the victims and prevent them. Not only are they victimized when it first happens, but they're victimized every time someone else sees those images. This gives them a right to take it down. And some of them here, you know, years later that the image has come back, right? It is...

We have to do it right away, and that's why we called it the take it down bill. So, Senators, I know you're agreeing on this. I don't know if you would agree on what I'm about to not suggest, but maybe ask, which is, no, no, it's an AI question because we've had large conversations about AI.

whether AI needs to be regulated and whether, you know, obviously there's individuals who are going to use these tools in nefarious ways, one of which may very well be this. And the question is whether the AI companies that are developing these tools should have any liability at all or should be prevented from allowing their tools to be used in such a way. I know that's not part of this bill, but I'm very curious about how you think about it, because

I know there's a lot of talk and conversation in Washington about regulation as it relates to AI.

So I believe we need rules and regulations. You know, when you've got Elon Musk himself saying there should be some rules of the road when it comes to AI, maybe we should be listening. And those can break down into making sure that people can own their own images. And Senator Coons and a number of us on the Judiciary Committee have, Senator Tillis, have worked on a bill that makes it very clear that you own your own images and you can't steal people's images in some way.

Senator Thune and I have a bill that sets some standards for how this is going to be regulated for non-defense uses of AI. And then finally, when it comes to democracy, I have a bill with Josh Hawley. Just to show you, these are bipartisan efforts that says you should be able to take

down some of these deep fake political ads or at least have labeling on them. So there is a lot of work to be done on a bipartisan group led by Senator Schumer and Senator Young and Senator Rounds and Heinrich have been bringing all of us together. And I hope that is a

really on the agenda at the beginning of the year and Senator Cruz is going to be chairing Commerce. So we'll be in a good position to move some of this along. Well, and I'll say on that question, Joe, Amy and I have some common ground here, but we also have some differences.

I agree it's important to protect privacy, to protect children's privacy. Amy and I have worked together on children's privacy legislation. That's going to be a major priority for the Senate Committee on Commerce, Science, and Transportation. I'm the incoming chairman. Amy is a senior Democrat on the Commerce Committee. We work together on a lot of matters. I do think AI has incredible potential.

potential impacts on productivity. I think AI is as transformative a technology now as the internet was three decades ago. And I think it's very important that we don't have the federal government come in with a heavy hand, with a prior approval regulatory approach. I think that would effectively

seed leadership of AI to foreign nations, I think that would be a tragic mistake. And so in my view, the right way to approach AI is actually what Amy and I are doing on Take It Down, which is focus on specific narrow problems that need to be solved, but don't create a system, don't create a system, frankly, like Europe created for the development of the internet that resulted in stagnation. I'll tell you an amazing stat, in 1993,

Bill Clinton was president. He put in place an executive order with a very light touch on the Internet. It proved to be exactly the right policy. At that time, the economy of the United States and the economy of the EU were virtually identical.

Europe went down the road of prior government approval. Today, the American economy is 50% larger than the EU. And I think the growth of tech in the United States and the shale revolution are the two main drivers of this. We can't screw up AI. And so a real priority of the Senate Commerce Committee is going to be to ensure that America leads the world in the development of AI and the jobs and productivity that come with it.

But we only can lead the world if we have some rules in place so that we don't have rampant scams going on and we don't have people losing their intellectual property because there aren't any protections. So we hope to find common ground on this. But we do have to put some rules in the place where I'm afraid, as David Brooks once wrote, is this going to...

take us to heaven or hell. It has to take us to heaven. Okay, Joe. What about Tulsi Gabbard? I'm going to get this going. That was Andrew all along, Senator Cruz, with those really good questions. Now, if I'm going to get in, I'm talking about Hegseth or something to get you guys going. I've had enough of this. Amy told me she's voting for all of Trump's nominees. Stop!

The last time I voted for half his nominees on the cabinet because I carefully reviewed each one and made decisions. And I just don't think you should give a president a blank slate when in fact we are supposed to have advice and consent and have an oath that we take ourselves to protect the Constitution.

I thought I should get on camera just for a second. It's the holidays. Everything was going so well. Everything was going so well, you decided to join the party. No, I did that in jest. We were saying Merry Christmas, and you jumped in and said Bahumba. There you go. Happy holidays, guys. Senators, thank you for joining us this morning. Appreciate it. Thank you. Take care. Thanks.

We are clear. Thanks, guys.

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