Highlights from SIFMA’s 2024 Annual Meeting

In this episode of The SIFMA Podcast, we highlight just some of the conversations that took place at SIFMA’s Annual Meeting. Our discussions with industry leaders like BlackRock’s Larry Fink and Edward Jones’ Penny Pennington include top-of-mind issues including:

  • The expanding role of the capital markets and their potential to positively impact society and contribute to economic growth;
  • SIFMA’s priorities on behalf of our members, including critical issues like mandated clearing of U.S. Treasury securities;
  • And more

Podcast Host:

  • Kenneth E. Bentsen Jr.

SIFMA Annual Featured Speakers:

  • Rostin Benham, Commodity Futures Trading Commission
  • Ken Cella, Edward Jones
  • Laura Chepucavage, Bank of America
  • Larry Fink, BlackRock
  • Josh Frost, U.S. Department of Treasury
  • Gary Gensler, U.S. Securities and Exchange Commission
  • Lorie Logan, Dallas Federal Reserve
  • Penny Pennington, Edward Jones

Transcript

Edited for Clarity

Ken Bentsen: I’m Ken Bentsen, SIFMA President and CEO – welcome to our latest episode of The SIFMA Podcast.

On October 21, SIFMA hosted our Annual Meeting which gathers our members for discussions with the most influential voices shaping the capital markets from a cross-section of public policy and finance. We spent the day exploring the issues and opportunities that matter most for the markets, the industry, and the economy.

One of the highlights of the event was the conversation with BlackRock Chairman and CEO Larry Fink. He talked about why capital markets are an asset, and how other jurisdictions around the world look to the U.S. capital markets as a model they want to emulate. We discussed the expanding role of capital markets, and how private capital can finance new opportunities in infrastructure, AI, digital assets, and more. Here’s a clip of what he had to say:

Larry Fink: In the year 2000, after 223 years as a republic, as a country, we had an $8 trillion deficit. And we said it was too large then. And now 24 years later, it’s at 36 trillion, $28 trillion of added debt in 24 years. To put another statistic around it, this year’s deficit is 1.8 trillion. The economy’s growing at about 3% right now. But if you take out the excess spending by the federal government, the 1.8, that is equivalent of 6% GDP. So the growth is on the back of debt. The growth is not on the back of equity.

Now, most countries have the same burden, but that’s why we have a debt crisis in all the, let’s say the G7 countries. And I don’t know if it’s going to be, what, June 15th, 2025 or ’26, but we are going to have a crisis. And this is why I wrote editorials. I’ve been speaking in Europe quite a bit recently on the only way we can tackle this deficit is to grow the economy above trend line. And the only way we’re going to be able to grow the economy above trend line is to unlock capitalism.

Through the capital markets, we could be really accelerating investments in infrastructure and AI. I mean, just on AI alone, it is estimated by the US government, we’re going to go from 2% of the utilization of our electricity to 8%. That’s 100 gigawatts of power, and that is going to be financed all by the private sector, if they allow it, if we could unlock permitting. And so I’m not frightened of this deficit, but it’s pretty cautionary, if we don’t find a way to unlock growth, and this is my message to every politician, we need to be unlocking growth from the private sector. And the US is in the best position of any country in the world because of the scale of our capital markets.

And, you know, after spending two weeks of the last three weeks in Europe, the fact that they don’t have a banking union or a capital markets union, it’s going to be a lot more daunting there in Europe. And so I look to the US as a great position, but we can’t take that position for granted. We need to be unlocking the capital markets, unlocking the opportunity we have in the private sector to really grow above trend line. If we can’t do that… And it doesn’t matter who is in office, because both parties are guilty of this deficit. And what I’m frightened of, it’s not even part of the conversation, in this presidential election. And more so both candidates are talking about it enhancing the deficits and growing more, giving more things for free. And I don’t know how we’re going to be paying for that, unless we find a way of growing the economy faster than it’s growing. So that’s going to be our dilemma.

Ken Bentsen: Penny Pennington, Managing Partner at Edward Jones, spoke to the impact that the capital markets have on a positive society and called on the industry to think about how our organizations can expand our impact.

Penny Pennington: I am a capitalist through and through. I know that when money and innovation flow toward good ideas, when those ideas turn into better ways to live and work, and when more people have the ability to buy those ideas, and the companies that develop them, we all know that good things happen for advancing our economy, our society, and the prospects of future generations. The capital markets fuel that kind of possibility that every firm here can contribute to.

Ken Bentsen: Penny shared so many insights – from the great wealth transfer to artificial intelligence. I also had the pleasure of chatting with our outgoing SIFMA Chair Ken Cella of Edward Jones as he reflected on what we have done as an industry this year and our impact on investors and savers. Listen here:

Ken Cella: I like to articulate that in three words. So the first one is advocacy, and you’ve heard it here this morning. We talked a lot about how SIFMA does sit at the intersection of retail financial advice, capital markets, and asset management. And so that advocacy to make sense of rule proposals and policies that impact the end individual investor is paramount. SIFMA shows up on Capitol Hill in a way like no other firm can. And as we advocate for what clients need and what our firms need to run efficient and effective organizations, that is essential.

The second word I would focus on is action. We are an organization about action, taking bold and swift action in many cases. Sometimes it’s reactive, Ken. And I think one of the things that we’ve done as well is to imagine what’s on the horizon. We’ve shifted our board agendas to really focus on our purpose and that action that we need to take, thinking about future topics, like AI and cryptocurrency and lots of different things and what the implication can be and how we need to begin planning now.

The third A, and the third part of our purpose, is access. You heard it this morning, throughout Penny’s talk and Larry’s talk, a lot of what we do as an industry is providing access to better financial futures and financial wellness for more people. And we sit at the intersection of that as well. So, as we do our work at SIFMA, we do advocate for efficient and effective capital markets on behalf of our clients. And I like to say too, that it’s nice to be in an industry where our clients increasingly value what we bring to the table as an industry, and that is advice. And there’s no shortage of uncertainty in the world today, with regulatory pressures and geopolitical matters. AI, you know, we’ve talked about it a lot this morning. There’s a certain level of excitement that comes with that. There’s a certain level of anxiety that comes with that as well, and what it means for all of us. And I thought we did a good job of highlighting that.

One stat that I wanted to share is that 57% of Americans value having a financial advisor as a guide. We talked about it this morning. But we believe at Edward Jones that we’re, over the next 10 years, we’ll be 50,000 financial advisors short of what we need to actually provide the level of advice that will be demanded, giving, growing advice. And so I think SIFMA being a, you know, a steady voice for the industry, a reassuring guide, and helping to navigate both the short and the long term, is really essential.

I think we all have a collective in interest in making sure that there is continuing greater access across the wealth spectrum to financial advice. That’s what it really comes down to. Advocating for efficient and effective capital markets is something that’s at the core of SIFMA, we’ll continue to do that. I think elevating the role and the importance of the financial advisor in a fiduciary world is going to continue to be, you know, a journey for this industry, especially when we look at a generational transfer of the talent that started in this industry happening as we sit here today.

And I guess finally, Ken, what I would say is, we’re all about championing the interest of the individual investor. And I’m looking forward to partnering with every one of you to do that.

Ken Bentsen: I also sat down with Laura Chepucavage, Chair-Elect of SIFMA’s Board of Directors and Head of Global Financing and Futures, Global Rates and Counterparty Portfolio Management for Bank of America for her thoughts on a big project for SIFMA and the industry (Treasury Clearing):

Laura Chepucavage: It’s a very large project. It’s extremely important. And I don’t think anyone in the industry would take a step back and say, we shouldn’t be clearing. I think everyone sees the benefits of clearing. It’s really how we get there. And we’ve actually, you know, we’ve been clearing repo on a voluntary basis through the sponsored member model for probably three or four years now. And that was really broker-dealers with hedge funds trying to optimize the balance sheet.

So now we go to a mandatory environment. And you’re really, your whole operational system has to go to the next level of sophistication. So documentation, which SIFMA’s helping with, client onboarding, reporting, your trade processing, margin processing, you’re taking it from somewhat of a bespoke model that ran off of repo desks and now you’re making it industrialized, it has to be scalable. So that operational work is quite a task. And I think a lot of the broker-dealers are focused on that in 2025, particularly as it relates to the done-with models because we know how to do that, at least from a sponsor member perspective.

I think there’s still outstanding questions that SIFMA can take a lead on as it relates to the various access models. I think we’re going to probably eventually have multiple CCPs. What does the margin framework look like? What does the haircut structure look like? Said another way. Is it mandatory, is it not, in terms of minimum haircut thresholds? And then of course the unbundling of execution and clearing. And that’s a really big conversation point, and it was a conversation point at the Treasury Market Conference, but really it’s a bit secondary at the moment to people just trying to be operationally ready for done-with.

So there’s a lot of nuanced things out there that I think the industry still needs some guidance on both the sell side and the buy side. And I think SIFMA can continue, through Rob’s group, to take a lead on some of those outstanding questions. And I think that like, it’s just a phased-in approach. I think we all say clearing’s a great thing for us. We know, we’ve seen it in the other products be developed and adopted. I think it’s like, how do we do it in a phased approach that we do no harm to the treasury market and to the liquidity in the treasury market? And that it’s rolled out in a really understandable and approachable way.

Ken Bentsen: We also discussed emerging issues, such as the need to embrace the electronification of markets:

Laura Chepucavage: All of that is reliant on data accessibility, data accuracy, the speed at which you can get to that data. And electronification and automation are built all around those concepts. So, you know, that’s not stopping, the train has left the station. We’re going to continue to be more automated and more efficient because it helps us with our clients. But we also have to, to be more efficient downstream. And again, how we’re moving collateral around, how quickly we’re settling. So it’s actually, it’s really exciting. It’s going to continue to be a push. You know, we talked about US treasuries and credit, you know, we’re looking to digitize, you know, repo, munis, mortgages. It’s really going to continue through the fixed-income product offering.

Ken Bentsen: We also had the chance to hear from our top regulators about top-of-mind issues:

  • I spoke with SEC Chair Gary Gensler about equity market reform, off-channel communication enforcement, and the need to move to e-delivery
  • My colleague, SIFMA Chief Operating Officer, Joe Seidel, sat down with Josh Frost, Assistant Secretary for Financial Markets at the U.S. Department of Treasury who talked about current issues in the treasury market.
  • We heard from CFTC Chair Rostin Benham on where regulations stand in the derivatives markets.
  • And from Dallas Federal Reserve President Lorie Logan, on the factors she considers as she watches how monetary policy feeds through financial markets and influences overall financial conditions.

These sessions are all available to watch on demand on our website, sifma.org/annual. I encourage you to dive into each one for more important perspectives from our regulators and industry leadership.

Kenneth E. Bentsen, Jr. is President and CEO of SIFMA. From 1995 to 2003, he served as a Member of the United States House of Representatives from Texas. Prior to his service in Congress, Mr. Bentsen was an investment banker specializing in municipal and housing finance.