Financial History Issue 128 (Winter 2019) | Page 15

MUSEUM NEWS   life outside of business. He’s a generous philanthropist; a devoted husband, father and grandfather; and, as many in this room know, he’s a spectacular friend. It’s in his DNA. So, the world could use a few more Larry Finks. And, with that, it’s my pleasure to introduce my friend, the chair- man and CEO of BlackRock, Larry Fink. LAURENCE D. FINK Chairman and Chief Executive Officer, BlackRock Before I begin, I want to say it’s a great privilege to be sharing this evening with Janet Yellen. Chair Yellen’s approach to the Fed—with clear communications and data-dependent decisions—was invalu- able to economic growth in the United States and around the world. And her steadiness in the face of great political turmoil reinforced the world’s belief in the independence and strength of US monetary policy. Once again, Chair Yel- len, thank you. And I would like to thank David [Cowen] and Dick [Sylla] and the Museum of American Finance for this award. It is my privilege; thank you. Early in my career in finance I was lucky enough to be involved in a com- pletely new business, creating some of the first mortgage-backed securities and developing a market for them. I’m very proud that in the ’80s, we helped lower mortgage interest rates by over 300 basis points. Before we securitized mortgages, they were locked in as thrifts, and we all know what happened to the thrift indus- try. But, most importantly, it helped drive economic opportunity and more home ownership for more Americans. When backed by responsible underwriting and proper securitization standards, they were fundamentally sound products, and today they remain essential in helping so many millions of Americans to afford housing today. But we saw in 2008 these securities had been underwritten and repackaged in irresponsible ways and contributed in a great way to the global financial crisis. This demonstrated how valuable financial innovation can evolve over time. And, most importantly, as a result, it carries a tremendous responsibility that I think many institutions forgot. And that is why this Museum has such an important mis- sion—by studying what works in finance and what leads to crises. And, hopefully, we can build a system that is more stable and a system that is more dynamic; but, most importantly, a system that creates more economic opportunity for more Americans. And, particularly, we need to make sure that we, the finance industry, focuses more on outcomes and creat- ing better long-term futures for more investors. One of the fundamental problems of our industry is that it’s too oriented towards daily market movements. We are fixated on financial products and fixated on the day-to-day movements of markets and trading. We don’t give enough focus on the outcomes that investing is supposed to create. Let’s be clear. We all like to spend money. Savings is not the most luxurious outcome. We make it hard for people to think about savings and the outcomes that investing is supposed to create. We need a system that prepares more Americans for their futures. The abandonment in Amer- ica of the defined benefit plans that were a whole foundation of our pension system, and shifting to defined contributions, for example, has created much greater, deeper social problems. Much greater problems than we’re all willing to admit. And when that shift happened, we as an industry spent a lot of time focusing on new product sets, but we didn’t give the tools individuals needed to manage their retirement. This is not just a financial problem or a financial services industry THE TICKER problem; it is a corporate problem. They walked away from the responsibility of their own employees’ retirement, without giving the financial literacy of how to pre- pare for that long outcome. So, as a result, many Americans today are unprepared and underfunded for retirement, which is contributing to income inequality, and to so much of the anger we’re witnessing today—to so much of the rise of populism we’re seeing today. We have to rid ourselves of the minute to minute ticker tape mentality. We all have a responsibility to build a financial system that is strong, stable and helps investors prepare for their futures. And, for the young people, where $24 trillion are going to move from the Baby Boom- ers to Millennials and Generation X, it is going to be decades for them. And, if they’re not prepared, we haven’t seen anger yet. That is going to require a change, not just on Wall Street, but in so much of the corporate sector today. The tremendous pressure to deliver quarterly numbers dis- tracts all of us, but particularly companies, from focusing on an approach that would deliver more long-term growth. We have a tremendous responsibility as an indus- try—and at BlackRock—to prepare more clients for retirement and to talk to more companies about these pressures. That is why we said that we need Wall Street to take a more long-term approach. But we also need companies to stand up, to be clear about what they’re doing and what their individual corporate pur- pose is, and how they’re building a future for their employees, for their sharehold- ers, for their clients and, importantly, for every community they operate in. That is how you build a future—by focusing on all of your stakeholders and build- ing your stakeholders to believing in the company and believing in yourself. Clarity and consistency are essential to changing norms and creating the trust that com- panies need to invest for the long term. And that clarity and consistency can lead to more engaged clients and employees. They actually do more for that company. And when they’re more attached to every community where they work and show www.MoAF.org  |  Winter 2019  |  FINANCIAL HISTORY  13