December 11, 2019

Today’s show is a bonus episode, giving a glimpse of an important project that’s underway. The Bill and Melinda Gates Foundation have funded an initiative to think through the future of central banks and how they will, and should, advance the goal of financial inclusion. To lead the work, the foundation selected two leading thinkers in the space. Michael Barr is the Dean of the Gerald R. Ford School of Public Policy at the University of Michigan. He was previously Assistant Secretary of the Treasury for Financial Institutions, in addition to being a law professor (I’ll link in the show notes to our earlier episode with him). Adrienne Harris is a professor at the Ford School and a former Special Assistant to President Obama for Economic Policy at the National Economic Council in the Obama White House. They have teamed up to undertake a deep reimagining of central banks, decades and even a half century out.

In pursuit of this effort, they convened a remarkable conference this fall on the University of Michigan campus. For me, this was an extra delight since my undergraduate degree is from Michigan-- there’s nothing like Ann Arbor in the fall.

The conference brought one of the most diverse ensembles of global leaders I’ve ever seen. We had central bankers from all over the world, other financial regulators, academics, policy experts, and think tanks. The group spent a day and a half grappling with questions that most of us never think to ask, much less try to answer, as we toil away in the “weeds” of our work, so rarely rising up to take in the enormous forest around us.In that vein, step back and think about the core idea here. The Gates Foundation’s work in financial services focuses solely on building financial inclusion in the developing world. So, why have they put a top priority to work on modernizing financial regulation and central banks? Many people don’t find that to be an intuitive link. If you ponder it, though, you can see that we’ll never get high quality financial services to everyone, unless we modernize the regulatory system. The heart of that problem is that financial regulation is expensive, and compliance with regulation is expensive. Developing countries won’t have the resources to bring hundreds of millions of lower income people into the system, rapidly, unless they leverage technology to do more with less. And financial companies won’t serve these customers, despite being able to reach them inexpensively through the mobile phone as a delivery channel, unless they can cut their compliance costs. At the conference, the Gates Foundation’s Michael Wiegand (I’ll link to our past show with Michael in the show notes) gave an example. Today, it costs $30 to do the Know Your Customer, or KYC diligence, in order to onboard a financial customer in compliance with all the regulatory requirements, especially the rules, on anti-money laundering. With new technology, we can get this down to 6 cents. That makes it profitable to serve vastly more people. Regulators will need new tools like these -- better data, AI, chatbots, and much more -- to oversee a system changing so rapidly, both to keep it stable and to protect consumers.

I’m sharing this short conversation to whet our listeners’ appetite. The project will produce its work by January of 2021, and we’ll do a full show on it then.

Meanwhile, I’ll let Michael and Adrienne tell you about the project and about their remarkable conference.

More on Michael:

Michael S. Barr is the Joan and Sanford Weill Dean of Public Policy at the Gerald R. Ford School; the Frank Murphy Collegiate Professor of Public Policy; the Roy F. and Jean Humphrey Proffitt Professor of Law; and Faculty Director of the Center on Finance, Law, and Policy at the University of Michigan. He is also a senior fellow at the Center for American Progress and, previously, at the Brookings Institution. He served from 2009-2010 as the U.S. Department of the Treasury’s Assistant Secretary for Financial Institutions, and was a key architect of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. He received his J.D. from Yale Law School; an M. Phil in International Relations from Magdalen College, Oxford University, as a Rhodes Scholar; and his B.A., summa cum laude, with Honors in History, from Yale University.

More on Adrienne:

Adrienne Harris is the Chief Business Development Officer and General Counsel of insure-tech company States Title, Inc. She previously served as Special Assistant for Economic Policy to President Obama at the White House National Economic Council, focusing on issues including financial reform, financial technology, and housing finance reform. Adrienne also served as Senior Advisor to the Deputy Secretary in the U.S. Department of Treasury, and represented financial institutions and other corporations as an Associate at the law firm Sullivan & Cromwell LLP.  She sits on the Board of Directors for the Center for Financial Services Innovation (CFSI), as well as on the Advisory Board of Bank Director’s FinXTech. She was appointed by President Obama for a four-year term to the President’s Advisory Committee on Trade Policy and Negotiations. She advises and invests in several fintechs globally.

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We have great episodes coming up. We will have a fascinating conversation with Congressman Bill Foster, who chairs the House of Representatives Task Force on AI — and who, by the way, is a physicist. I talked with Lamine Zarrad, CEO of Joust. We have a show with Jeff Dyer of BYU about his book, Innovation Capital. We recorded a show at Money 2020 with Richard Teng of Abu Dhabi Global Market. We have one with Greg Becker, CEO of Silicon Valley Bank, and one with David Reiling, CEO of Sunrise Banks. And I’m excited to say we’ll have several shows with heads of US federal regulatory agencies.

In December I’ll be at the ABA Financial Crimes conference in Washington, sharing the stage on AI with Gene Ludwig and Gary Shiffman. And then I’ll be at the Paris Fintech Forum in January. Meanwhile, my AIR colleague David Ehrich will be at the FDATA meeting in Edinburgh, Scotland.

Come to the show notes for more details on all of it, and David and I will hope to see you along the way!

Remember, if you would like to book me to speak to your group, contact

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