In this episode of FacingForward, Margaret Brennan talks with Sallie Krawcheck, Wall Street titan and founder of Ellevest — a financial company for women, as she unpacks the second largest economic relief measure in American history and breaks down what it means for women and families.
- On parallels between the 2007 financial crisis to today’s COVID economy: “Back in March of last year, it was very reminiscent of 2007-2008, but worse because of course with a pandemic. The difference between last year and then is the stimulus package came in very quickly and the government acted very quickly and in real size, such that you absolutely have had devastation, but it hasn’t been evenly distributed.”
- On changing the way women talk about money: “We need to change how we talk to women about money and we as women need to change our internal dialogue. So you and I were talking earlier about how, you know, in CNBC, ESPN for money, there’s so much male money, media, Crain’s and Barron’s and Bloomberg, that’s all very growth oriented, very positive, very make a lot of money. There’s no real money media for women. And what the research shows you, is it something like two thirds of articles to women about money are negative.You know, financial planning doesn’t have to be really, really hard. You know, buckle your seat belt. And the other third is either patronizing, take this money quiz or guilt inducing. Don’t buy the latte, invest the money, don’t have the facial, don’t buy the shoes, don’t be a Carrie. And nobody’s over here telling the guys don’t buy the T-bone.”
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“Facing Forward”: Sallie Krawcheck transcript
Producers: Richard Escobedo, Anne Hsu, Kelsey Micklas
MARGARET BRENNAN: Sallie Krawcheck, thank you so much for joining us.
SALLIE KRAWCHECK: So happy to be here. Thank you for having me.
MARGARET BRENNAN: So I want to sort of tap into your- your Wall Street brain for a second here and get a sense of where we are a year into this pandemic. I mean, we are surrounded by these horrible numbers in terms of the loss in this country. But then you look at the stock market, it’s doing quite well. Economic growth is trending in the right direction. Is this all the vaccine that’s powering this–
MARGARET BRENNAN: –or is it the 6 trillion dollars that taxpayers have pumped into the problem?
KRAWCHECK: The answer is yes. So, first of all, I love that you said my Wall Street brain, I guess, as opposed to my human brain or my regular brain. But the- the first of all, the stock market is not the economy. The stock market is a forward looking construction that says, what are earnings going to be for, you know, these companies across- really across the world? And so what the stock market is telling us is, you know, the economy remains crummy, certainly not nearly as bad as it was some months ago. It remains crummy but as we get people vaccinated and back out and into the workforce and as we get this stimulus, so money is being spent back into the economy, and as there is this good old American innovation that happens with these amazing companies that get founded every year and some fall by the wayside and others grow and become massive, the stock market’s telling you things are going to be better. And it is not telling you things can be better for everybody, but it’s telling you these groups of companies that make up the stock market are going to have earnings growth going forward.
MARGARET BRENNAN: I’m thinking back to conversations I had with some very prominent economists a few months into this pandemic, who were looking at the wave of what then appeared to be bankruptcies that would be headed towards us and just total financial destruction. Are you surprised that all of this hasn’t spiraled into a financial crisis for banks?
KRAWCHECK: Well, it could have. You know, and for all that- I know, it’s really important that we all complain about Washington, D.C. all the time and give them no credit for anything. A real difference- you know back in March of last year, it was very reminiscent of 2007-2008, but worse because of course with a pandemic. The difference between last year and then is the stimulus package came in very quickly and the government acted very quickly and in real size, such that you absolutely have had devastation, but it hasn’t been evenly distributed. Where there is- now you probably, MARGARET, hear about the K-shaped recovery, because what you’ve seen is, yep, Bank of America looks fine. You know, IBM looks fine. The corner store, the corner retail store, the restaurant, devastation. And we see this K-shape happening in lots of different places. It’s happening in the stock market too where the companies that are doing well, the prices are going up, others are down. We see it, you know, between the genders where men are recovering more quickly than women. We see it, you know, across racial lines as well. And- and really, in general, people who’ve been doing better, who were winning before are recovering more quickly and people who were behind are recovering less quickly.
MARGARET BRENNAN: So do you think that like the banks are now in a safe enough position not to have to deal with mortgage loan losses and financial losses from all those businesses and–
MARGARET BRENNAN: –where the pressure is.
KRAWCHECK: Well, we’ll have to see. [00:06:08] You know, the issue with the big banks is they are opaque and they are highly leveraged, meaning they have quite a lot of debt for every dollar of equity that they have. The markets are telling you, they’re ok. And you know, the markets aren’t geniuses, but the markets pick up bits of information on the economy. If the markets are telling you the economy is going to be stronger than that, by its nature is good for banks.
MARGARET BRENNAN: And the Fed easing capital requirements on banks last year, do you think that it- that should stay in place?
KRAWCHECK: Well, not for forever, but to get us through to the other side- for, you know, yes.
MARGARET BRENNAN: So one of the big achievements for the Biden administration in just their first few weeks of office is this huge 2 trillion dollar legislative package. It’s got all these social programs that target low-income families. Do you think that these programs will become permanent?
MARGARET BRENNAN: Like are we watching–
MARGARET BRENNAN: –the reshaping of US society?
KRAWCHECK: I hope so. I hope so.
MARGARET BRENNAN: What do you mean?
KRAWCHECK: Well, so, first of all, I spent- well as you know, I am the CEO and co-founder of Ellevest, which is a financial company, started as an investing company, now is a fuller financial company that was built for- for women. And so I spend my life, MARGARET, thinking about women and money, women- and I dream I wake up at 2:30 in the morning thinking about women and money. And what we- you know, you and I, if we’d been speaking a year ago, would have been talking about the advancement of women in the economy. We would have said it’s not fast enough, but gosh, you know, women are moving forward and that gender pay gap that exists, 82 cents to a white man’s dollar, is moving slowly in the right direction. In this downturn, what we have seen, there’s a quote from a sociologist called- named Jessica Calarco, who I’ve never met, but I’m saying her name everywhere, that it’s going to stay with me forever, which is what we have learned in the pandemic is other countries have social safety nets. The US has women.
MARGARET BRENNAN: Yup.
KRAWCHECK: And particularly women of color. And so what we’ve seen is decades of progress are getting wiped out in months. And women have been- have had to leave their jobs. Have been fired at a rate greater than men, in part because they’re more in the service industries, restaurant workers. They’ve risked their lives to a greater extent than men have, more front line, more nurses, etc. For women who are privileged enough to work from the home, they have lost productivity, tens of percentage points of productivity. Men have become 50% more productive working from home. Men are being promoted at three times the rate of women right now. As these old- you know, in the homes, the old gender roles are coming back in full force. You know, you look at this and you say, how did we revert to 1954 so dang fast? And so when you look you say, well it’s because when things got rocky there wasn’t that- that safety net for women. And so we, you know, we live in a country of pull yourself up by your bootstraps, here’s your friggin self-help book. And this past year has shown that the richest country in the history of the world, right, but yet we aren’t supporting our families. We aren’t supporting our women. We aren’t supporting people of color.
MARGARET BRENNAN: And so this will, according to the Tax Policy Center, this whole package will provide a 20% boost in after tax income to the lowest earning 20% of households. That’s with all these- essentially paying families who have children making 150,000 dollars a year or less. But all the other things that- that we just rattled off that in the developing world are kind of standard fare, paid leave, things like that. That’s still later on the calendar for the–
KRAWCHECK: I know.
MARGARET BRENNAN: –administration. Do you think that in this environment it is possible to sell the American public on- on adopting that more European style? Because obviously, you know, here in Washington, it’s- it’s described as- by conservatives as this liberal wish list. And yet there’s also this populist movement within the Republican Party that says, hey, maybe if we’re pro family, maybe we should be doing some of these things. Like, are we in a period where this is all changing?
KRAWCHECK: Well, I hope so. And so- so a couple of things. First of all, that money that’s going to the poorest folks, that’s terrific because- and terrific from a human- using my human brain, you know, to help these families is also terrific for the economy, because guess what they do? They spend it. If you give it to a wealthy person, they save it. Right. This money will be spent. It will go into the economy. In terms of things like mandated paid parental leave, I hope that the time has come, and I hope that people look with their heads as well as their hearts, because we have mischaracterized mandated paid parental leave as an expense for too long. What we’ve really missed is it’s an investment because if you- if you provide this investment for these families, she is more likely to come back to work.
MARGARET BRENNAN: So you are often introduced as having been one of the most powerful women on Wall Street, and I wonder if you like that. Do you like having your gender mentioned or do you hate it? Because I have conflicting feelings about this myself in my own role.
KRAWCHECK: I- I actually, no, I don’t- well you know, it’s funny. I was going to say I don’t think about it. I think about being a woman every day, probably every minute. I would like to be at a place where we no longer know who, you know, who- there’s so many powerful women on Wall Street or in technology or in science that we don’t know who they all are. Right? What- what I don’t love is, you know, Jane Fraser- I mean, I love Jane Fraser and I think she did a great job as the CEO of Citi. I’m a real fan, but I don’t like it that we all know that she’s that one. I want it to be- I want no more most powerful women in whatever conferences because there would just be too many women there.
MARGARET BRENNAN: And do you think the gender title diminishes the accomplishment?
KRAWCHECK: I think we are in a patriarchal society, you know for sure. And- and I’ve had those feelings. You know, so founding Ellevest, a financial company built by women for women, when people said to me, MARGARET, you know, you ran Merrill, you worked at Smith Barney, why don’t you go do one of these firms for women and help women invest? And MARGARET, I got to tell you for quite a while, I’m like, that is just it’s junior varsity. It’s going to have to be this sort of, you know, less than robust and how dare you? And women don’t need their own thing. We can hang with the men. And I had all that. And when we launched, by the way, 40%- 35-40% of women, when they saw our ads were like, for women? How dare you? That’s offensive. Right, and it’s going to be dumbed down and it’s going to be not as good and it’s going to be junior varsity–
MARGARET BRENNAN: And pink.
KRAWCHECK: And pink- and pink. And then they went in- they go into what was then the investing algorithm, the only one that takes gender into account, which doesn’t matter if you’re man, because you earn more money and you die sooner. Matters for retirement planning for a woman. When you earn less, your salary peaks sooner and you die later, right? You run out of money. But when they would go in and look at the algorithm, they’d come out and say, actually, it’s more sophisticated than what- what else is out there.
MARGARET BRENNAN: I want to talk more about your business and the wage gap after this quick break.
MARGARET BRENNAN: So Sallie, you’ve held some of the top positions at very prestigious firms on Wall Street. Then you go and you found this boutique firm and as you were just explaining, it- it tailors products to women. If money is gender neutral, so why do you need a tailored platform?
KRAWCHECK: Yeah, so first of all, I hope it’s not boutique for very long. I hope it’s going to be massive. The reason that I hope that, beside that that would be fun to build, is that money is women’s number one source of stress today. But the act of saving and investing, taking action around it is the number one driver of confidence-of her confidence in her future and her ability to achieve her future goals. We never really talk about the gender wealth gap, which is 32 cents to a white man’s dollar, and is driven in part by the fact that she doesn’t invest as much, that she has higher interest rate debt than he does. The Wall Street view is, well, women don’t invest as much as men do because they’re risk averse. In other words, it’s sort of their fault–
MARGARET BRENNAN: Right.
KRAWCHECK: –and they just need to change. Another hypothesis is that men built an industry for themselves, just as, by the way, is the case in medicine, right? And in other industries. And so you look you say, huh, CNBC and, you know, CNBC is sort of ESPN for money–
MARGARET BRENNAN: Totally.
KRAWCHECK: –and this trading. And Bitcoin and GameStop and buy low and sell high. Maybe that sort of sports-like atmosphere appeals to men. Maybe we can build something for women. And so maybe it’s not their fault. Maybe it’s that the product hasn’t fit them.
MARAGRET BRENNAN: I wonder, you know, in this environment right now, how hard is it? Because cash is tight for the women you’re talking about, right? So who is your average customer? Who has money to put into the market right now on the retail side?
KRAWCHECK: Well, so we- we started out investing only and we tried to be as inclusive as possible. We have no investing minimum. And investing minimums, by the way, to be a little sparky, are by their nature, sexist and racist because, you know, these- you have to have money $5,000, $250,000 to get these professional services. We said we’ll do it at, you know, a penny. You know, the people who are investing are those who have gotten the credit card debt paid off, who have saved up the emergency fund, who are investing in the 401k. Those are the ones who are ready to invest. So we started with investing in part because it’s the hardest problem to solve, we thought, and where there was real need for innovation because the industry algorithms of the digital advisors have tended to default toward, you know, an average person, i.e. a man in their view.
MARGARET BRENNAN: And I think you made an earlier point that was so important, which is just looking at the demographics, women live longer and therefore not having that cushion saved away, that nest egg. It just comes at a greater cost of their, you know, future.
KRAWCHECK: Oh, so, you know, there’s- there’s research out there saying 80% of women die single. Women live six to eight years longer than the man in their lives. When women outsource the management of the money in their household to their partner, which is still what is traditionally done, and that money comes back to her, 74% of women have a negative surprise. And I’ll tell you the other thing. You know, we don’t in this country talk about our retirement problem. I wouldn’t say crisis yet, but problem that we don’t have enough money saved up for our population for retirement, we never talk about it being a gender issue. But it’s a woman’s issue. And- and what’s even scarier is, you know, you can borrow money to go to college. You can’t borrow money for retirement.
MARGARET BRENNAN: And that so what- what would be your top two things for young women in particular, starting out in their careers to think about?
KRAWCHECK: It’s – get yourself as straight on your money as you can as soon as you can. And so, number one in that first job, work on getting the credit card debt, then work on getting an emergency fund. At the beginning, one month of take home pay, three months, up to six months and from then on begin to invest in the four- in your 401k or an investment account.
MARGARET BRENNAN: Is there anything that you see coming out of this pandemic that creates real progress for closing the pay and the wealth gaps? Or is it all going to have to come from individual choices like you’re talking about?
KRAWCHECK: Well, it can’t. You know- you know it can’t. So there are, of course, individual choices up by the bootstrap decisions we can make. But if you are saddled with student loan debt coming out of college, that’s tens of thousands or hundreds of thousands of dollars that’s crushing to you, you are so far behind the starting line to begin with, that- how can you build wealth when you’ve got this big rock on your back? And so this generation has been saddled with- with things like that. And by the way, I’m just getting- just to be clear, I’m getting more and more liberal as I get older. I’m like just- just forgive it all. Let’s give those kids- for goodness sake, you know everybody’s been in the home for a year. Everybody’s, you know had their careers impacted. Can we just give these kids a break and move on as this? The other- the other thing, I think, which isn’t going to come out of any- any bill for women is we need to change how we talk to women about money and we as women need to change our internal dialogue. So you and I were talking earlier about how, you know, in CNBC, ESPN for money, there’s so much male money media, Crain’s and Barron’s and Bloomberg, that’s all very growth oriented, very positive, very make a lot of money. There’s no real money media for women. And what the research shows you, is it something like two thirds of articles to women about money are negative. You know, financial planning doesn’t have to be really, really hard. You know, buckle your seat belt. And the other third is either patronizing, take this money quiz or guilt inducing. Don’t buy the latte, invest the money, don’t have the facial, don’t buy the shoes, don’t be a Carrie. And nobody’s over here telling the guys don’t buy the T-bone. And so for men today, money is a source of strength. And you know, you say money, they say strength, power, independence. And for women, you say money and they say loneliness and isolation, uncertainty.
MARGARET BRENNAN: It’s- you know, you talked earlier- you spoke earlier about changes at the top that we’re seeing that are positive in terms of leadership. And I was looking back at some of your interviews and you had said something that I think is interesting, which wasn’t so much about the glass ceiling, but the glass cliff. And that in times of crisis it’s women and minorities who are given opportunities that they’d previously been denied. So are you saying at this moment when we see, you know, a female Black CEO, female CEO, that we should also go, oh gosh, because they’re being set up for failure, or is something different this time? What do you mean by glass cliff?
KRAWCHECK: Well, so, you know, I’ve- I’ve been on the glass cliff a couple of times in my career. You know, when I was brought in to Citi to run Smith Barney after the research scandal in the early 2000’s it took- to clean it up. I knew full well that it was- I never would have had that job if everything was going well. It would have been the next man in line. This a very male dominated culture at the time. You know, when times are good, just keep the conveyor belt going, right? Just keep the people coming in who worked there for their whole lives. But they were giving me a broken business. Same thing when I was brought in to run Merrill Lynch after Bank of America bought it. The attrition rate was massive amongst the financial advisers. The challenges are so few women and people of color in these senior jobs. So you’re brought in to fix something which by definition isn’t easy. If it was easy to have fixed it, it would have been fixed already. So you’re given a higher bar and if you fail, which you’re more likely to because it’s broken, then it’s sort of like, I told you. I told you, right? Nobody ever got fired for promoting the next person who looks just like the person who just left. Right? But you do get fired for taking a big risk. And so, yeah, I- when women- when people of color are brought into troubled businesses, you have to say an extra- you have to send extra good wishes their way.
MARGARET BRENNAN: Do you think there should be quotas and corporate boards like they have in Europe?
KRAWCHECK: I’m getting there.
MARGARET BRENNAN: Really?
KRAWCHECK: You know, I wouldn’t say I’m there, but I am- I’m starting to get there. That- I guess by the time I die, if we haven’t reached full parity– because the research is clear, it’s clear that more diverse boards, more diverse leadership teams, only good things happen. Higher returns on equity, lower risk, greater innovation, greater client engagement. Diverse teams are so powerful that they outperform smarter, higher IQ teams. And I like what I see coming from the Goldman Sachs, et cetera, who are saying we’re not going take companies public without having diversity on the board. So I like the way that it’s moving. But I- you know, ten years ago I was like MARGARET, no quotas. That’s- you’re a socialist. And now I’m like, yeah, maybe, maybe.
MARGARET BRENNAN: Did you worry, though, that it sometimes leads to other people being set up for failure? Kind of another version of the glass cliff you’re talking about where people are just like, oh, check the box, push this person into this role.
KRAWCHECK: Yeah. Yeah. I–
MARGARET BRENNAN: I mean- can it backfire?
KRAWCHECK: Well, look, I would actually say would be the opposite, which is the research tells us that white men in the majority are today promoted based on potential. Women, people of color, women of color are today promoted based on achievement. If you are going for people who are in- or underrepresented, then you’re actually taking your average up. And so you get people who have been held to a higher standard and you’re having the positive impact of diversity. What you need is the best person for the team, right. The best person who rounds out the team, not the person who reminds you so darn much of yourself.
MARGARET BRENNAN: Sallie Krawcheck, it’s been great talking to you.