With interest rates on the rise, a scarcity of housing inventory, and the possibility of an impending housing crisis, what are the implications for the mortgage industry?

This panel brings together experts in mortgage, including John Paasonen from Maxwell, Arvin Wijay of Consolidated Analytics, and Chris Whalen of Whalen Global Advisors for a discussion on the state of the mortgage industry today, moderated by Daniel Cohen, Co-founder of Cohen Circle.

The panelists discuss:

• The impact of rising interest rates on commercial and residential mortgages
• The fundamental problems (and potential solutions) in today's mortgage lending environment
• How emerging trends in tech and AI will change the mortgage space
• Long-term impacts on housing affordability

Below are some highlights from the webinar, followed by a replay.

---

On the dynamics in today's mortgage market

You're seeing that the average DTI is dropping, the average loan to value is dropping, while the credit scores are maintaining fairly constant...so all of that sort of indicates tighter credit overall in the market, and makes it much more challenging for buyers to not just find a home to buy, but actually to qualify for that home for a lender to take the risk. - John Paasonen, Maxwell

I'm hoping, with a little bit of technology, artificial intelligence, robotic process automation, we are going to become more efficient. So we can become people-process-technology combined. How we can we be efficient and how we can be stabilize costs, because the lenders cannot carry this kind of fixed cost and lose money.  - Arvin Wijay, Consolidated Analytics

There's not much Refi business out there right now, which tends to be much less expensive and a big part of revenue. So the industry today, it's trying to survive on a very low amount of purchase business...I think we see a lot more restructuring, and a lot more M&A activity in the second half of the year. - Chris Whalen, Whalen Global Advisors

On the opportunities and challenges in new tech and AI

The opportunity to take [mortgage technology] to the next level, to save money on kickouts, save money on defaults, and put backs, save money on processing time and errors. The opportunities for eliminating costs and reducing losses are just enormous. And that's why it's such an exciting time still, for the mortgage industry. - Daniel Cohen, Cohen Circle

One of the interesting things is the new technology companies keep all the data. And I think that's going to become the industry standard. So all of the older tech and the rest of them, they're gonna have to run really fast to keep up with the expectations of the regulators in Washington. And the lawyers. - Chris Whalen, Whalen Global Advisors

Where we see the application for AI in the short term is around being an aid to the different participants in the manufacturing line...We've been testing this tool that automatically generates letters of explanation for a borrower...It produces the letter, but the borrower still has to review it, before they can submit it. How do we enable AI to filter the pipeline to identify borrowers most likely to convert to loans? For the manager, how do we give them natural language reporting? - John Paasonen, Maxwell

On what to expect in the next few years

2024 is going to be a reset year on the people who did deals between four and a half to 6% or slightly above, and there's going to be some reset, and then there's going to be some supply coming through the COVID era policies that's going to move some inventory into the market. So there's going to be some positive momentum, but we'll be cautious. - Arvin Wijay, Consolidated Analytics

There's so many other factors at play right now, whether it's the war in Ukraine, whether it's how much household wealth is held by baby boomers that are still spending and not producing, whether it's inventory, whether it's the Fed funds rate...What we're betting on is lenders will need help across the value chain of origination to get there, and many of them will say, this is the time for us to reassess how we're structured and how we actually do business - John Paasonen, Maxwell

The mortgage company of the future is going to be a repositioned dinosaur or a consolidated dinosaur, that's completely changed their workflow in order to make the whole entire process a lot cheaper. - Daniel Cohen, Cohen Circle

---

Full Webinar Replay: State of Mortgage

Our webinar brings together three prominent voices in banking and finance for a lively debate.

The panelists explore:

• What happened with Silvergate, SVB, Credit Suisse, and First Republic banks
• Long-term effects on financial markets, businesses, and households
• New banking models for the future
• And more!

With:

Below are some highlights from the webinar, followed by a full transcript.

---

If you only needed your telephone in order to take out the deposits, the Treasury the Fed, the FDIC had an obligation to respond with the same alacrity. And they didn't. They didn't give on that first round, the comfort that a solution would follow. A solution did follow. But that moment of pause, I think was a great contributor to the ultimate outflow of deposits. - Betsy Cohen

We have a number of the banking institutions that got into trouble that forgot some of the basic rules of how to be a bank 101, including things like diversification of deposits, diversification of liabilities, credits, but also, they kind of forgot about how to diversify and how to manage their risks. - Abby Joseph Cohen

My view is the Fed did intervene. And they did it several times. And the amounts involved exceed the amount of bank failures in the great financial crisis. So I applaud the action of the Fed. They acted as quickly as they could, they stopped a contagion. And the risk of that contagion to the banking system in the US economy was enormous. - David Kotok

---

The transcript from the live webinar on May 22 has been edited for clarity, and included below the replay video.

Jewelle Bickford 04:35
Welcome to our seminar on the banking crisis and navigating the aftermath. I'm Jewelle Bickford and I will be your moderator today. I was a formerly a partner at Rothschild investment bank, and more recently, a partner in Evercore Wealth Management, from which I retired last year to become the president of Paradigm for Parity, a nonprofit, which partners with corporations to help women achieve gender equality with racial equity by 2030.

It is our pleasure to have a distinguished panel of guests this afternoon. I'll begin by introducing Betsy Cohen, the founder of Cohen Circle. She has had a distinguished career. She started over 40 years ago in banking, real estate and financial law. Her career began as a professor at Rutgers teaching antitrust regulation and government antitrust law and government regulation. I think she soon found that banking could be more lucrative and switched careers. She founded the Jefferson Bank and more recently in 1999, if not the very first, one of the first FDIC-insured, online banks servicing the FinTech industry. Betsy has been described by Forbes as a Most Powerful Self Made Woman. But my favorite description of Betsy was when the Financial Times called her a female banking tycoon. She has served on many boards, including the Asia Society and Metropolitan Opera and the Metropolitan Museum. So she spends many hours giving back.

Our next guest is Abby Joseph Cohen, who is currently a Business Professor at Columbia Business School. Abby was extremely well known as a former partner at Goldman Sachs. She did research on economics, political policy, and the capital markets, and advised all of us as well as several foundations and institutions. But my favorite of Abby is the major baseball league, their endowment. Imagine being so well known in the financial markets, that Harvard Business School has a case study around your life and career, and that you've had your own profile in the New Yorker and your own cartoon. Welcome Abby.

Our next guest is David Kotok, who has had an equally distinguished career. He is the Chief Investment Officer and Founder of Cumberland Advisors. He's a frequent contributor to the financial media, both the New York Times, The Wall Street Journal, Barron's, and Bloomberg. He has written four books, but my favorite is From Bear to Bull Market with ETFs. He's also been in government in New Jersey, he was on River Port Authority, and also on the Treasury transition team for Governor Thomas Paine and Christy Whitman. Welcome, David. So let's get started.

Abby, who is to blame? How did this happen? Is it the fault of the bank managers and the CEOs? Is it the fault of the regulars? Set the stage for us, please.

Abby Joseph Cohen 09:31
Jewell, thank you for what I think will be the beginning of a wonderful discussion. I think it's important to recognize that there has been a confluence of factors that contributed to the most recent banking crisis, and we need to talk about all of them. However, let me in the interest of brevity just mention four of them.

The first has to do of course with Fed policy and the rise in interest rates over 18 months. And it wasn't the rise in rates itself that was the particular problem. But that so many participants in financial markets sort of forgot how to deal with changing interest rates, we became so accustomed to low rates, in fact, rates that were on an inflation adjusted basis, zero or less, and we became accustomed to that low volatility. So when that began to change, many of the banks were not prepared.

The second thing to keep in mind is that there was plain and simple, some really bad banking. We have a number of the banking institutions that got into trouble that forgot some of the basic rules of how to be a bank 101, including things like diversification of deposits, diversification of liabilities, credits, but also, they kind of forgot about how to diversify and how to manage their risks. In one case, for example, Silicon Valley Bank, there was no risk officer for the final several months of that bank's existence.

The third piece is that the supervision and regulation that would normally be provided by the Fed and the FDIC, was somewhat lacking. And a recent report by the Fed indicated that in fact, was partially to blame. Now, there can't be enough regulators to sit on top of every single bank. And in fact, the Fed, the Fed staff did signal to SVB Bank as one example, that they were concerned about some poor risk management techniques. But the bank didn't follow up. Neither did the Fed. And one of the questions is, why not?

And one final factor that we have to keep in mind is that in some ways, what happened several weeks ago, was a bank run. There have been bank runs in the United States for centuries. Not that we're such an old country, but you can go back to the early 19th century, and find other examples of bank runs. This was a 21st Century Bank run, you didn't have to go to the bank to ask for your money, you just had to pull out your phone and transfer the funds somewhere else. And so much of what happened, happened very, very quickly. Social media played a role as well. And it didn't really give the banks or the regulator's an opportunity to take care of this perhaps in, let's call it a less panic kind of manner.

Jewelle Bickford 13:08
Well, thank you. This gives us a lot to build on. See. I have always thought one of the major strengths of the US banking system is the broad range of regional and community banks throughout our country. What is the impact on them? And also expand a little bit on what Abby said is this crisis self inflicted?

Betsy Cohen 13:35
It's self inflicted in that the bankers did not really act as bankers, they were acting as marketers as growth company CEOs, etc. But managing a bank is managing risk. And I think they took their eye off the off the ball, I do agree with you. That one of the strengths of the US banking system is the localness of the banks, the ability to respond to a particular community, which has characteristics that are different from those that are national. And so the understanding of community needs has always been a great strength, which we haven't seen in countries that have very concentrated banking formats. But I think this will impact the community banks because the essence of this is the element of trust, as it is in big banks and small banks, but trust by depositors, by borrowers in fidelity, and the professionalism of the bankers and the bank regulators.

And so if we go back to what Abby was saying about a run on the bank, whether it be electronic or in person. I think the funding mechanism which has been traditional for community banks, which is primarily local deposits, has to be unsettled. At this point, we see a great movement from deposits into treasury bills, and that's yet another story. But if in fact, the funding is not there, then the lending will not be possible. And that is a circle, which is not virtuous.

Jewelle Bickford 15:38
That's an excellent point. David, you heard Abby say the Fed even said themselves, that they have some responsibility here. Is it fair to criticize the Fed and talk a little bit about the cost that is ensuing as a result?

David Kotok 15:59
Well, Abby opened remarks with four factors. So one of the factors was the Fed, and Betsy demonstrated factors, which were not the fear, but the behavior of bankers. So if we say was the Fed at fault, yes. But it's a very interesting debate, to say, you're going to make a policy that is going to affect an entire system. And you're going to do so coming out of a long stretch of zero interest rates and Pandemic fighting, and then an inflation surge, all of which can be criticized with a retrospective, but in real time as a policymaker are very, very difficult to deal with.

I think the Fed did a reasonably good job with what it had to deal with. And then when it came to the run on the bank that Abby described so well, with SVB, the Fed intervened to stop a sequential contagion in the banking system. And it did so in a very unusual way. It developed a method to lend to the FDIC as a federal agency. Once that happened, it was able to support the deposit structure. So we didn't have depositors lose their money and trigger sequential collapse. The Fed acted quickly, it had to wait for the FDIC to cease SVB. And then it had to go through a process and that process was enshrined in 2018 in law, so it's falling quickly. Now it's a counterfactual to make the argument I just raised. The we don't have a counterfactual, the counterfactual would have been what happened if the Fed didn't intervene. And we can speculate about that.

But my view is the Fed did intervene. And they did it several times. And the amounts involved exceed the amount of bank failure in the great financial crisis. So I applaud the action of the Fed. They acted as quickly as they could, they stopped a contagion. And the risk of that contagion to the banking system in the US economy was enormous, in my opinion. That's I think Fed did a good job here.

Jewelle Bickford 18:53
Okay, well, they'll that's a wonderful point to be made. And I'm sure they'll be very happy to hear. Abby, I'd like to go back to you again, please. How do we know when this is over? Are we through with the banking crisis? If the Fed has done such a good job, as David described, is it over?

Abby Joseph Cohen 19:15
That is a very difficult question for you to answer with any humility or confidence. But let me follow up David's comment, and that is to say, the Fed admitted that there was some mistakes that they made prior to the collapse of SVB and signature, but I agree wholeheartedly that they've done a terrific job since and this is part of the answer to your question, Jewel, which is they are now paying very careful attention to other institutions where there may be similar problems.

Also, keep in mind that one of the things they did was make it pretty clear to everybody is that there is no limit upward limit. In terms of that FDIC insurance. One of the reasons we saw money flying out of some financial institutions, including at First Republic, is that many of the depositors were nervous about whether their funds would be protected. And I think that the Fed and FDIC have made it clear that those funds will be protected in whatever institution they're in. And that's something that should, I believe, have a calming influence on on what's going on. You know, the Fed learned lessons from previous crises, and one of the most important ones was 1930, where the Fed made some huge mistakes, there was a very large commercial bank that was viewed as a regional bank, at that time called Bank of United States. This is a bank that was illiquid, it was not insolvent, and the Federal Reserve, and the bank and the Federal Reserve Bank of New York took the position that they couldn't do anything about it. And when the other commercial banks at that time, basically refused to provide any assistance, Bank of United States closed shop.

Now, the consequences were enormous. It was actually the largest commercial bank in the United States, in terms of size of deposits and number of accounts, and it basically was responsible, according to scholars, Ben Bernanke, who's a Princeton study, the Great Depression. Milton Friedman, Anna Schwartz, and they believe that it was the failure allowed by the Federal Reserve in 1930, of this bank that turned the recession of 1929, into the Great Depression of the 1930s. And this is a Fed that learned its lesson in that regard. We certainly saw it in the 2008 and 2009, GFC, when Mr. Bernanke was in charge, and I think we saw it again. Now, when the Fed moved in quickly. Whatever the risk factors weren't leading up to the crisis, this is a Fed that has shown it's willing to step up when there's a problem and try to take care of it to reduce the likelihood of contagion. So my response to your question, is it over? I don't know for sure. But I think that they will continue to play whack a mole, if they need to.

And I think that we have already seen some calming down. But that he makes a good point, we have seen that money has flown out o,f float out rather, of some of the regional banks that's gone into some of the very large major banks, the so called G-SIBs, the globally systemically important banks. And what's happened is the concentration of our banking system has increased. So whereas originally, we might have told ourselves, our banking system is best served, by having lots of institutions, we now see that the money is being concentrated in a very small handful of very large institutions.

Jewelle Bickford 23:17
Well, that's an interesting question for Betsy. I mean, Betsy, do you think as a result of what's happened that Abby's talking about, JP Morgan acquiring 30 billion of assets from First Republic and all this consolidation, do you think that means we're going to end up like the Canadian system? Are we going to have, you know, a few mega banks and no more community banks? And And also, if you can add to the question, or your answer, is there anything anybody can do, the Fed can do to help the community banks get these deposits? Again?

Betsy Cohen 23:51
I would like to begin by taking issue with my co-panelists. So on the question, the Fed, and we're using that as the term I think for the overarching governmental regulating bodies really did quit. And I take issue because just as it was mentioned, that if you only needed your telephone in order to take out the deposits, the Treasury the Fed, the FDIC had an obligation to respond with the same alacrity. And they didn't. They didn't give on that first round, the comfort that a solution would follow. A solution did follow. But that moment of pause, I think was a great contributor to the ultimate outflow of deposits. I think the community banks will recover from that, because there is a much more direct communication mechanism. But I do think that we, the sequence of events, has moved us toward a much more lopsided and concentrated banking system than we might have envisioned even five or 10 years ago.

Jewelle Bickford 25:30
Well, that brings me to the question that I asked David, and I'm going to ask all three of you. What are the costs going forward? I mean, are the banks going to have to pay all kinds of new fees? Or is the consumer going to have to pay a great deal more, I'm not just talking about interest rate costs, although that's a huge cost. So David, let me start with you. And then I'd like everybody to weigh in on this topic.

David Kotok 25:57
We know there's a cost. Because we know the FDIC now has a plan to replenish the Deposit Insurance Fund. So we know a cost will be levied, we know there'll be a cut off point at 5 billion in deposits. We know what the fee will be, roughly two basis points of months. And we know what it will take, two years. And those are estimates. But they are pretty refined. That's cost that's coming. That's coming on every midsize and larger bank in the United States, every one of them. That's our system.

So we know that Betsy made a point about community banks to new banks are under more scrutiny. They are the supplier of credit and banking services to small and independent businesses, and in some places in the country to the agricultural businesses. And they are under a contraction in the ability to extend credit that to cost with to transfer to the small and independent business, or to the agriculture sector or other sectors. So that's the second derivative costs, but it's a big one. The third cost is hard to estimate, in my opinion. And that's uncertainty premium, the definition of an uncertainty premium, is you can't estimate what it is, you know it's there. But you don't know how much it is. And Betsy makes a point that I think is very valid in the initial pause, the initial pause, scared the hell out of everybody. And the repair of that pause. Trigger of uncertainty premium may be underway.

But if I might, it's being exacerbated by the debt ceiling debate, which means two things: we have simultaneous problems in the financial sector, and then they apply to the banking sector. And at the same time, we have no resolution of clarity on either one. And if I may, a good example that applies to banks and banking this morning. This morning, the difference between the normal relationship between a one month treasury bill yield, and the federal funds rate, which is the policy rate was out of whack by 58 basis points, that's over half of 1% in cost. That is a cost that's being directly or indirectly imposed on every bank, every bank deposit, every business, every money market fund in the United States. That's this morning. Why? Because the uncertainty of the banking system is in play. And we don't know how to measure it. But we do have a way this morning to put an estimated price on it. And at the same time, the debt ceiling debate is raging. And we have a way to estimate the combined price. And it's almost 60 basis points, six tenths of 1% and an interest rate on the entire country and all of its businesses and financial system. So there is a cost. And that cost is being applied right now today to you and me and everybody on this call.

Jewelle Bickford 29:46
Well, that brings me to an interesting point. Going back to Betsy, how do small businesses deal with the economics of this? What advice do you have for founders, especially in the startup world?

Betsy Cohen 30:04
I think it's very serious. And I think it will cause the failure of bankruptcy of a number of companies that might, if they had had access to credit, over the interim period in which they were building a business, to fail. I think we saw just a foreplay of this in the in the pandemic, when the PPP was being administered. Small businesses that did not have access to the lending mechanism to tide them over -- whether it be restaurants or other consumer businesses that are generally small businesses-- and did not have any customers because no one could come out. We saw those that got access to the PPP were able to survive, and many that did not survive. And we will see this accelerated in this next period. Because of the lending contraction. I think the way to at least work at the issue for small businesses is to reinforce their communication with community banks if they have them already, or to develop them if they don't.

Jewelle Bickford 31:51
Is there any on the flip side of this? Is there any strategy that you can suggest that banks can implement to restore customer confidence so that they start depositing again in the regional banks, and so that they have money to lend going back to this circle?

Betsy Cohen 32:10
I think it's going to take time. I think that there is no instant viewer for lack of trust. And so I think that over time, whether it's one month or two months or a longer period, that trust is going to have to build up again. And if communication is part of that development, or redevelopment of a trusted situation. That's what I think small businesses are going to have to work at.

Jewelle Bickford 32:48
I know that you started your career with a lot of experience in real estate, don't these community banks often lend in real estate?

Betsy Cohen 32:57
Well, I think they've been shocked, so to speak, by the fact that one of the major elements that needs to be managed is the duration of loans, vis a vie the duration of funding mechanism that deposits. And I think that banks like First Republic, which made a significant number of longer term, real estate loans, and it's inherent in real estate, that the loans be longer and not on the same cycle as the demand deposits. You know, may shy away from that. So I think real estate, it's not only the cost of the borrowing, it's the availability and the borrowing, which may in fact impact the development of ongoing Real Estate projects.

Jewelle Bickford 38:06
Do you expect there to be new regulations on behalf of the government? Because the banks didn't do what they were supposed to do? Or do you just think it's a matter of better enforcement?

Abby Joseph Cohen 38:28
I think the discussion thus far is really more along the lines of better enforcement, internal enforcement, making sure that risk control systems are in place. But let's keep in mind that even though we have many fewer financial institutions, many fewer banks than we used to, there are still a lot more financial institutions than regulators. And you can't expect each of the regulatory authorities be at the Fed or the FDIC, or the comptroller of the currency, to actually have enough people to be sitting with the auditors at each financial institution. So it really becomes a question as it often is of self policing.

And I do think a number of these institutions have learned some lessons? One of the things to keep in mind is that the damage that has occurred with regard to many of these institutions hasn't been to the depositors. And I think that's a good thing, because the depositors were protected, but there has been significant damage to the shareholders. In some cases, the shareholders were wiped out. In other cases, shareholders have lost a significant percentage of the value they thought, and we've been so damaged to the bond holders. And I think that managements of many of these companies in response to their outside shareholders. Some bondholders are just going to have to learn to be more careful. And as Betsy put it, they need to worry about internal risk controls.

Jewelle Bickford 40:10
David, what do you think? Do you agree with Abby? Or do you think we're going to have the new government regulation?

David Kotok 40:18
Yeah, I agree with Abby. And I think we'll see more government regulation. If we look at history, starting with 1930, and the failure of the Bank of the United States, every time we reach a point and have a financial crisis of some type, two things happen. One, it is followed by more scrutiny, more regulation, and more intense restriction to avoid a repetition. You could criticize that and say yes, but they come in and fight the war that's already been fought and lost. And that's part of our system.

The other thing we do is we go through an intellectual debate about moral hazard. But moral hazard in our system changes every time we have a crisis. I had clients who said to me, we should have let the depositors fail of SVB, we should have let the depositors lose money, it would have helped the system. Don't you agree? I said, No. Tell me what benefit it has to bankrupt. Many other companies fire those employees, destroy their capital structure. So we have the moral hazard debate. It's an intellectual debate, I happen to agree with it. I wish everybody were more responsible, but they're not. So our system is changing. We'll have more rules, more scrutiny, more regulations. This time, we're going to see more clawback on management. The management of SVB will be defending themselves in court for a while. There is an issue here of management responsibility, responsibility to the public, to shareholders, and behaviors. And the scrutiny this time, because of the size of these events will be enormous. And that's a probably a good thing, because it's in favor of integrity as a manager.

Jewelle Bickford 42:45
I saw in the paper that the CEO did not wish to give back his bonus, which was huge, many millions of dollars that had been given to him just shortly before this crisis exploded. Do you think that he will be made to give it all back?

David Kotok 43:02
I can't say what he will be made to do or not to do. But what I can say is, there is a desire to see discipline imposed on management decisions, which certainly don't seem to be within high integrity standards. Maybe the United States needs South Singapore law, instead of US law. And things might be different. I see Abby smiling at that one week, we're gonna see it in the public domain this time after this crisis.

Jewelle Bickford 43:48
Okay, Betsy. What's your view?

Betsy Cohen 43:53
I agree with everything that's been said, but would add just a bit to it. I think management will be punished, so to speak, during this next period of time, because there's a build up of anger, that management was not punished in the last financial crisis. So that will carry over. I think it's probably well placed. Because, in fact, even if it's not management's fault, the profile of a successful bank has really changed during this recent period. It went from being well managed in terms of profitability, to being growth oriented. And those two things don't always coalesce. So management has a lot of responsibility. And it may be convenient for management to be more in the limelight in terms of what I'll call punishment. But it really is, I think, a healthy thing in that if it can be kept in balance, that management, reimagines the bank as a group of assets that have to be risk managed. And that is the essence of banking. And it would be a good thing to have that be the measure by which management is judged.

Jewelle Bickford 45:45
This panel has presented a rather grim picture, if I'm going to summarize here, management will be punished, banks will lend less in their communities, because it's going to take time to build back faith with the depositors to get the deposits to build up the money to lend. And we're probably going to see some new regulation and hopefully better enforcement. Is that fair?

And when you overlay on top of this, that we have this crypto currency? Do you think the government is going to regulate what I look at as a sort of shadow banking system?

Betsy Cohen 46:37
I'm happy to start, I don't know where the end is. But I think cryptocurrency has been a mystery, in terms of its management, to regulators for a period that extends beyond or that of the recent crisis, I think it is a very difficult area to come to conclusion on. But I also think that it is a symptom of what was growing unease with the banking system in terms of looking for alternative mechanisms for the transfer of funds. So it doesn't stand alone, it turns and it isn't necessarily a result of this recent crisis. But we'll have to be dealt with over the course of the next years, in maybe a wholly different way.

Jewelle Bickford 47:50
Abby, what's your view of what I call the shadow banking system?

Abby Joseph Cohen 47:56
The shadow banking system is far broader than just crypto. I'm not a huge crypto fan. One little factoid, of course, is that Bitcoin itself is incredibly energy wasteful. So I don't quite understand the enthusiasm for it. But the shadow banking system is very, very broad. It's not just banking institutions that we became accustomed to, but you look at hedge funds, private equity funds, etc. Many of them have been stepping in through things like private equity, but also private credit. And when we think about, where could there be a points of stress over the next year or so I think private credit is clearly one of those areas. A great deal of institutional money went into that category, a lot of foundations and endowments and so on. And the question is, was it priced properly, when interest rates were so low, particularly inflation adjusted interest rates, and now that nominal rates have have risen, and real rates have risen, a lot of that private credit, may turn out to be not quite so well structured? And this to me is a potential problem.

Jewelle Bickford 49:16
David, do you have any comment on this, please?

David Kotok

I would make two quick points. We saw a cryptocurrency dealer blow up in a bankruptcy. And we will be litigating that for a while. And it was a shock. It was not a banking, systemic shock. It was a shock. People lost money. They complained, I remember the clamoring for the FDIC to extend $250,000 worth of coverage to a Bitcoin investor that lost money. Now, there are words for temerity in various languages. But that's temerity. And that's exactly what distinguishes the banks, the banking system, the Federal Reserve, the FDIC, the US dollar, as a reserve currency and all its institutional history and legacy good and bad, from these others.

The second point is when you have a banking crisis, and you have lending contraction, at the margin, you move some customers away from the banking system, because they are without choice. So they are then more vulnerable to the private side, which is not reported and not observed. A lot of loans have a phrase attached to them, the little letters EBITDA, there is no generally accepted accounting principle. Definitely definition of EBITDA, different strokes for different folks. That's a warning for those who want to play. We are very careful. In our firm, we do reviews of portfolios for banks and for our clients, we stay within the mainstream and avoid the other shadow side. That's our choice. That's why we have clients who come to us. So different strokes, different folks. What I fear is this banking crisis will shift some of that activity into this murkier area.

Jewelle Bickford 50:34
That's a sobering point. I'd like to close by talking about the elephant in the room, which is the debt crisis, raising the debt ceiling. We briefly discussed it. But I'd like to start by asking each of you the probabilities. So Betsy, why don't you begin, what is your feeling about the raising the debt ceiling? Do you think Congress is going to do this and 10, 12 days that are left?

Betsy Cohen 54:36
Well, I've been so pessimistic that I feel that I have to be optimistic someplace. And I guess maybe I'm pollyannish on this, but I do think that despite all the political pressures, that there is recognition of the importance of coming to a positive, or an agreed upon conclusion, with respect to the debt ceiling, and so I would say, because there is no other choice in my mind that it will get resolved. I know that sounds uncharacteristically optimistic for me. But I'm gonna stick with it.

Jewelle Bickford 55:23
Well, I'm happy to hear that. Abby, what is your feeling?

Abby Joseph Cohen 55:28
Well, let's begin with the observation that the debt ceiling itself is absurd.

Jewelle Bickford 55:35
Glad you mentioned that.

Abby Joseph Cohen 55:37
To basically have a situation where, let's say, an individual has used their credit card. And at the end of the month, that individual says, "To show you my fiscal rectitude, I'm not going to pay my credit card." That's exactly what's going on here. The Congress has already approved these expenditures, a lot of the money has already been spent and so on. We are the only country that has this debt ceiling process. It's absurd. And what's going on now is the theater of the absurd in my view.

Since 1960, the debt ceiling has been raised, if I remember the data, 78 times, two thirds of those occasions were under a Republican President, one-third under a Democratic president. So to think that this is a Democratic issue, or a Republican issue is also not quite correct. What I do worry about, though, is that Mr. McCarthy, who has to be running the process now for the house, as speaker is very beholden politically, to many of the extreme elements in his own party. There are many people who have said they're never going to vote to raise the debt ceiling. Now, hopefully, they'll change their mind.

And I think that we have a situation where there may also be some in the Republican caucus who think it would be okay to mess up the the economy a bit, particularly to benefit their candidate for 2024. So I find myself somewhat pessimistic. That doesn't mean the debt ceiling situation won't be resolved, it has to be resolved. The question is, when, and how much damage will be done in the interim. As we discussed earlier, there's already damage, we've already seen credit default swaps being priced as if there's a big problem. In the United States, we've already seen interest rates rise more than we think they probably would have done. Other than that. And I'll just remind everybody that the last time this happened, which was 2011, again, Republican Congress, a Democratic president, the rating agencies downgraded US Treasuries. But the market downgraded US Treasuries days before the rating agencies actually did. So as David suggested, at the very beginning of this discussion, keep your eye on what interest rates are actually doing. And what this tells me is that there's already concern about what's going to happen in the United States as a consequence of this.

Jewelle Bickford 58:33
David, what's your view on raising the debt ceiling?

David Kotok 58:36
I agree with Betsy, it'll eventually be done. And I like her optimism. I agree with Abby, and her concern and the risks she's articulated. I agree with her pessimism. And I ask one question- has no answer. Is our political system so fragile? That the only way we get a resolution in matters like this is to have a TARP moment on the stock exchange when we wake up the country? We haven't had the TARP moment. SVB could have been one. It's a good thing it wasn't. And if there were TARP moment tomorrow, which would be one of the great market opportunities for those of us who would be willing to take it? But which shocked the country and jolt the politicians and leave them then no choice? Maybe? Maybe Janet Yellen has to say, "I can't send you your social security payment this month, because Congress won't let me." Maybe that's what it'll take. We'll see.

Jewelle Bickford 59:50
Maybe we should suggest to Janet Yellen that she not send any money to anybody in Congress in any capacity. Maybe if they didn't get their paycheck.

David Kotok 1:00:02
Jewelle, when you say that, I'm ready to vote for you for any office at the federal level you want to run for.

Jewelle Bickford 1:00:08
Thank you very much. Well, this has really been fun for me. And I want to thank everybody in the audience for attending. And I want to thank our panelists who are certainly among the most knowledgeable people that I know on this topic.

In honor of Women's History Month, Cohen Circle held an intimate fireside chat with Co-Founder, Betsy Cohen, and CEO, Amanda Abrams, moderated by Emmy and Peabody winning journalist, Jan Hopkins on Friday, March 31.

Here are some key highlights from the discussion, followed by a full transcript.

---

Tips on making your voice heard

If you're sitting in a board meeting, you may not realize that people aren't soliciting your input as a woman, you may be the only woman in the room. And people may be participating, not calling on you, not asking your opinion. And in those situations, it's important to speak up, to be assertive, but assertive in the right way. Make sure that you are actually a part of the conversation at those types of meetings and in those situations. - Amanda Abrams [9:08]

Overcoming sexism in the workplace

I think each of us has to know ourselves. And we have to find our own voice. Just remembering what it is that you were trying to achieve allows you to slough off this ridiculous situation in which you find yourself and just move forward. I mean, you just keep going. - Betsy Cohen [11:11]

Thoughts on the current investing climate

People are looking for happy news. They're looking for a reason to invest. There's a lot of cash on the sidelines. There's a lot of uncertainty in the world. And although a small positive downtick in inflation is not the answer, it makes you feel that maybe the solution is on the horizon. - Betsy Cohen [18:41]

I think there are a lot of different factors that are converging now that makes [ESG impact investing] really interesting. You have a a significant transfer of wealth. That will be ongoing through this decade, and the transfer of wealth to this next generation that has a real vested interest in putting dollars to work and allocating money to investments that have an impact focus. - Amanda Abrams [25:26]

What's changed for women in the workplace

Everybody comes to the table with their own baggage. And you have to get many generations into the process before there's an acceptance of a new set of facts. - Betsy Cohen [43:42]

What I'm really interested in seeing going forward is for more women networks...to grow to also include men. So men and women are helping women move forward. I think that'll be an interesting next step. - Amanda Abrams [45:42]

On what is was like being a SPAC pioneer

We had to go into a meeting with a client and actually spell SPAC. I mean, we started there. We thought we had made great progress when they could spell it and had heard of it. So 45 minutes of an hour meeting would be talking about what was the SPAC and how did it work and all the rest of it. And then maybe phase three was talking about why we provided a better lens as we had deep, deep knowledge of the capital markets and the investors. -Betsy Cohen [54:12]

Words of wisdom for rising leaders

I would say that you can look at being in the weeds as being an opportunity, all of those very detailed things that you get into as a junior person. And all of those interactions you have with people trying to figure out all the little details, those are the building blocks that your career gets formed on. - Amanda Abrams [55:42]

Look broad, follow your curiosity and seek out new opportunities all the time. Stay curious. Stay curious. - Betsy Cohen [56:59]

---

To download the full video replay, please submit your details in the form below.

---

The transcript from March 31 has been edited for clarity, and included below.

Jan Hopkins 00:03
Welcome, everyone. I'm John Hopkins, a former CNN, business news anchor and correspondent. I won a Peabody and an Emmy when I was there and am also a former president of the Economic Club of New York, where I met Betsy Cohen. Betsy was the Audit Committee Chairman when I was the President. I now serve on a number of boards, Franklin Templeton Mutual Fund boards and also several SPAC boards led by Betsy, including the first all woman board that was listed on the NASDAQ.

So I'd like to introduce both Betsy and Amanda. We're going to talk about current events. We'll talk about careers. We'll talk about mentorship and leadership, because this is the end of Women's History Month and so we're looking at women leaders.

Betsy Cohen, is a legend. She was the second female law professor on the East Coast after Ruth Bader Ginsburg. She founded three banks, including Jefferson bank and also Bancorp Bank, which was the first virtual bank. She was on the 2022 Forbes Most Powerful Self Made Women list and is a serial FinTech investor.

Amanda Abrams is the CEO of Cohen Circle, where Betsy is the Co-Founder and Chairman. The two of them obviously work together. Amanda joined the team at Cohen Circle from CardConnect after she and the Cohens took that payments company public in 2016. Amanda was formerly a lawyer, Betsy also a lawyer, and moved into the FinTech and the entrepreneurial space. Amanda has been named a 2022 Inspiring FinTech Female Leader by New York City FinTech Women.

Welcome to both of you. I wonder how how you met? Amanda, where you Betsy's lawyer?

Amanda Abrams 02:36
Initially, yes. While I was a lawyer, I started working with Betsy in that capacity. I worked with various companies, including the Bancorp when Betsy was there. And one of the first major transactions I did with Betsy was the CardConnect acquisition. It was the first SPAC Betsy and Daniel [Cohen] had launched, I served as a lawyer on that transaction. And when that transaction closed, I switched sides.

So I left my position at a law firm and I joined the company that Betsy and Daniel took public, CardConnect. I always joke that it was my shortest lived job because the day after I arrived at CardConnect, they received a bid to be acquired by another public company. At that time, Betsy was on the board of CardConnect. And she and Daniel were really starting to build out Cohen Circle in a more institutional way. So after speaking with with Betsy, I decided to come over and join them and help them in this journey of building up the company. And it has been a fantastic journey so far.

Jan Hopkins 03:42
Betsy, what did you see in Amanda that you wanted her to not only be your lawyer, but also work with you on deals and managing a company?

Betsy Cohen 03:52
We say about the CardConnect sale to First Data that we not only got the money, but we got Amanda as well. What I think we all saw in Amanda was not only her enormous competence, but her ability to solve problems, and be a real force in terms of her conversations and resolutions of issues, not only with other lawyers, but as a negotiator in a business context. And that was what we were looking for.

Jan Hopkins 04:37
Amanda, Betsy is a mentor to you but also a boss, right?

Amanda Abrams 04:44
Betsy is both a fantastic mentor and a fantastic boss. When I joined Cohen circle, one of the things I was interested in doing professionally was transitioning from a lawyer to a business role. So Betsy, also having had that similar transitional experience was a great mentor in the sense of being able to help me take the skills I learned as a lawyer, but change the perspective I have and the lens I use to look at issues.

It is a bit of a process. And I actually still think it's an ongoing process. But it has been very helpful having Betsy as both a mentor and a boss in that capacity, asking me questions and leading me to think about something in a different way and make my own decisions.

Jan Hopkins 05:52
Betsy, how do you choose people to mentor?

Betsy Cohen 05:55
I really do choose people not to mentor, my standards are very high. Amanda is one of the few that met them. You just have so much time, Jan. And in order to create the kind of relationship that Amanda and I have now, in which just because of the duration of my opportunity set, as we say, I've been able to be in many more transactions than Amanda, I can bring something to the table. And so that I think is a value.

Sometimes I have the ability to step back, because I'm not as much on the front lines as Amanda is. That's the nice thing about being Chairman, someday Amanda will know that. It allows me to be both an onlooker, and a third person in the conversation, and therefore to be able to elicit from it some of the elements that when you're in the heat of negotiations get lost. So we each serve a role.

Jan Hopkins 07:26
Betsy, when you started, there weren't mentors for you. How did you make your own way? Were there were male mentors that were helpful?

Betsy Cohen 07:44
I would say the male mentors, were not all that interested in being helpful, and there were not any women mentors. So I just made it up as I went along. And so far, so good.

Jan Hopkins 08:00
There's something to say for that, the making it up as you go along. Amanda, you've had to do that too in your career.

Amanda Abrams 08:08
Yes. And even on the mentor side, prior to working with Betsy, I spent a long time as a corporate lawyer, there was a formal mentoring program in place where I was practicing. But what I've found throughout my years is that it's not the people that are assigned to mentor you that really matter. It's more important to find the people that you have a personal connection with, that you form a relationship with, where their best interests are really what they want to move forward. And I think that kind of making up as you go along applies there in terms of you don't have to stick with the program that's given to you, you have to find what really works for you on a mentor sense.

Betsy Cohen 08:51
I think Amanda told me and I'll just prompt her to this. Once that she had a very valuable lesson that came from either an assigned or unassigned mentor, about participating in conversations. I know everyone would love to hear that.

Amanda 09:08
Yes. So as a corporate lawyer, and especially 15 years ago, it was a very male heavy practice. And my informal mentor, not the one that was assigned to me, that was also a woman I had a very good relationship with. As I started to grow in my career and attend more board meetings, more high level type negotiations, which were heavily dominated by men, my mentor gave me a really great piece of advice.

Be very aware of your situation and proactive in how you participate. If you're sitting in a board meeting, you may not without paying close attention, or realize that people aren't soliciting your input as a woman you may be the only woman in the room. And people may be participating, not calling on you, not asking your opinion. And and in those situations, it's important to speak up, to be assertive, but assertive in the right way. Make sure that you are actually a part of the conversation at those types of meetings and in those situations.

Jan Hopkins 10:12
Right. And make sure that people are are hearing you. Betsy, you certainly have had that experience where you've said something and then, you know, a male says the same thing, and they pay attention to him.

Betsy Cohen 10:23
It is emblazoned in my mind. I can see myself today sitting in the boardroom of a bank holding company in Western Virginia, where the rest of the board was made up of silver haired, Southern gentleman. And I would say something, and there would be dead silence. And then Bob next door to me would say exactly the same thing. And everyone would say, with enthusiasm, 'Bob, that was a great idea'. I mean, I can't even begin to tell you the number of times that happened. It's as if you were invisible.

Jan Hopkins 11:08
But you have to keep going, right? How did you overcome that?

Betsy 11:11
I think each of us has to know ourselves. And we have to find our own voice. I think Amanda's story is an important one, because really what her mentor was telling her is to find your way to be part of it to have a seat at the table. But, I think that keeping one's focus on what the end goal is, which is to be, in a law firm, an important contributor in terms of the thinking process, in terms of business to be able to have, offer and execute on solutions. You know, just remembering what it is that you were trying to achieve allows you to slough off this ridiculous situation in which you find yourself and just move forward. I mean, you just keep going.

Betsy Cohen 12:16
You actually have another kind of funny story about going to a conference when you were CEO of a bank. Can you tell that story quickly?

Betsy 12:41
Sure. I was named the CEO of a bank in Washington, DC. And there was a tri state conference for CEOs of banks in Maryland, Virginia, and the district. And I was invited, and I was really very excited. I thought, boy, are they going to just say, isn't this terrific? And so I went to the conference. And as I was walking into the hall, a gentleman tapped me on the shoulder, I thought, terrific, he knows who I am. And he's gonna say hello. Which would have been very helpful, because I didn't know anybody in the room. But when he tapped me on the shoulder, he said, would you get me a cup of coffee?

And I really was at the fork in the road. I could have said, What? What do you mean, would I get you a cup of coffee? But what I did rather was to say to him, how do you take it? And I went, and I got the coffee, brought it back to him. And I said, if I may, I'd like to give you something. And I showed him my card. At which point he almost dropped the coffee. But he said to me, Oh, my God, this is just terrible. And I said to him, I'll tell you, you can make amends. And there are two things that I would like. One is that I have a portfolio of loans. I'd like to participate with your institution. And secondly, I'd like a cup of coffee and I take mine black. So it diffused the situation because really, I wanted to connect with this guy. Because I did have a portfolio of loans that I wanted to participate and we became good friends thereafter.

Jan Hopkins 14:50
And being angry was not going to help you in that situation.

Betsy Cohen 14:55
No, it was not going to help me. It was not going to move my situation forward. And although it might have given me a moment of feeling good, it really wasn't a long term solution.

Jan Hopkins 15:15
So Amanda, have you had any experiences like that? Or how have we moved beyond that kind of thing?

Amanda Abrams 15:20
I think we've come a long way. I think there's still probably a way to go. But I have had a few more decades for society to develop. And for things to change. I had a similar situation to Betsy's when I was a very junior lawyer, where in a meeting, someone asked me to get them a cup of coffee. I had a very different reaction to say, why don't I introduce you to the assistant, I'm part of the legal team. But I think that part of my reaction is a reflection of the changing times where I think people expect when that happens now for women to be more assertive in explaining that perhaps the situation didn't pan out the way that that one would professionally expected it to.

Jan Hopkins 16:12
Interesting. Let's look at some of your experiences. Betsy, as someone who has started banks, then Chairman and CEO of Banks, let's look at the Silicon Valley Bank situation. And what do you see there? What did they do wrong, besides a mismatch of their assets and their liabilities?

Betsy 16:43
Well, Jan, it's not a small thing. I mean, there are two basic principles that you're taught in banking 101, which they apparently failed. One is that you don't have concentrations of customers. And they were very concentrated in a single industry, which should have given them greater understanding of their situation than they seem to have, because they should have known that.

Companies were having difficulty raising their next round of capital, therefore, they would be looking to their current funds, which were on deposit with Silicon Valley Bank, to use to tide them over. But apparently, that did not penetrate. But concentrations, and also duration matching, they were in a situation where interest rates were low. They were reaching for yield, they weren't focused on the fact that their funding sources were short term and on demand, and their loans were 20 to 30. And they're not their loans, and primarily, their securities, the securities were fine quality, but they were all just too long. By the time they recognized the problem, which was 18 months into this a very steep rise in interest rates, it was too late and they had wiped out a substantial amount of their capital.

Jan Hopkins 18:28
The market now is moving higher. And maybe it's gone beyond that crisis. And maybe we're gonna see lower interest rates sooner as a result of it. What do you think of that?

Betsy Cohen 18:41
I would be surprised. I would not be surprised to find that interest rates inch up more slowly than they would have otherwise. But you know, it's a complex question, which involves the behavior of the economy, as well as anything else. And I think we saw in today's inflation report, that inflation had been lower than anticipated. People are looking for happy news. They're looking for a reason to invest. There's a lot of cash on the sidelines. There's a lot of uncertainty in the world. And although a small positive downtick in inflation is not the answer, it makes you feel that maybe the solution is on the horizon.

Jan Hopkins 19:41
Amanda, are you seeing any activity that's starting in the mergers and acquisitions space or the SPAC world or is it too soon?

Amanda Abrams 19:53
I think we are in a period now where people would typically refer to it as the IPO window being closed, meaning that it's just much harder to access the public markets for many companies. We think of reverse mergers, essentially SPACs as being a vehicle that gives us a unique opportunity to access the public markets or a unique route to the public markets in times when IPO windows are closed or open. It's a tool that's unique and very appropriate for some companies, beneficial for some, but doesn't work for all.

For those that are in this market, very close to profitability, and looking for a last round of capital to to get to profitability, and perhaps struggling in the private markets, which are quite difficult to fundraise in these days, it can be a good option. Especially if it's a business model that perhaps needs some incremental investor engagement benefits from a longer marketing process and more engaged discussions with investors, and benefits from a SPAC sponsor partner that knows the capital markets and can help a target company navigate the capital markets. And for companies that have those types of qualities and characteristics. I think it can be a route that allows them to circumvent that closed IPO window.

Jan Hopkins 21:16
Do you think it will open again?

Amanda Abrams 21:19
Everything is cyclical. I think, yes, we'll get there at some point.

Betsy Cohen 21:22
Yeah. But as Amanda was saying, the the outlook of CEOs of these companies is very different than it was 12 months ago, it's not only that the investor doesn't want to come in, but the CEO doesn't want to go out. And they don't want to go out because not only the valuations are lower than their wildest dreams used to be. But also because the volatility makes it unpredictable. And the SPAC vehicles that are currently in the market were designed, you know, a SPAC is only a legal vehicle intended to, as Amanda said, provide capital to appropriate companies with a lot of bells and whistles around it so that it's it's often more beneficial than an IPO in the traditional sense. But they were drafted, you know, 12-15 months ago with a very different external environment. So if you ask, are the existing vehicles that are currently listed all going to close? The answer is no. But if you look forward, as we try to do and think about what would be an appropriate vehicle today, and therefore provide you with an opportunity to engage with companies over the next 12 to 18 months? That's a very different answer.

Jan Hopkins 23:13
I've heard you say that you are there to help companies throughout the capital structure. So there are other vehicles that you're looking at at this point?

Betsy Cohen 23:25
Absolutely. As Amanda said, we have been investors over the last three years, up in lower ranges of the capital market. So we're up and down the capital market. Because we do companies, less mature companies. We too, are looking to what is the right thing as fiduciaries to do for the investor and for our investors. If it is to look for companies that are public ready, and therefore, both the investors in the company will have good experience, you know, we have one answer, and if it is to prepare that company, for that eventuality with a round of capital, that is, you know, meets their needs. That's another answer.

But people are much more realistic today. I mean, look at what Stripe did. Stripe moved its valuation from 95 billion to 50 billion. You might think--what are they out of their minds? Why are they raising money? They raised it for a very specific reason. But the fact of the matter was that they wanted good mid term investors in that business, not only so the investors could make a profit, which is certainly a motivating factor, but also so Stripe would remain at the top of their list when investment opportunity came at 75 billion or 90 billion, or whatever the number happens to be. So it's ever changing, you're always reading the tea leaves. And it's an always ever changing set of considerations. I mean, that's one of the joys of Cohen Circle. We specialize in thinking, we do a lot of thinking, and not always come out with the right answer, but more often than not.

Jan Hopkins 25:53
Amanda, what are you seeing?

Amanda Abrams 25:56
On the investment horizon, one area that has been of interest to us, and that that we think has a really broad opportunity set is the ESG impact investing space. I think there are a lot of different factors that are converging now that makes this really interesting. You have a a significant transfer of wealth. That will be ongoing through this decade, and the transfer of wealth to this next generation that has a real vested interest in putting dollars to work and allocating money to investments that have an impact focus.

So they're thinking more about the disconnect between intention and alignment and how to invest it in a way that corrects that disconnect. I think that push is something that will make impact investing even more mainstream in the coming years than it already is. On top of that all of the recent advances in technology, like AI, is making so many services and products more accessible to underserved and under resourced persons and populations, that it's really broadening the opportunity set just generally.

Jan Hopkins 27:10
But there has been pushback on ESG first. First, it was a wonderful thing that everyone embraced. And now there's opposition that ultimately, if it takes a different form, it's not as widespread. I mean, what's the result?

Betsy Cohen 27:34
There has been what they call greenwashing, right, to put a layer of ribbon around the not so attractive box. But I think that what we're trying to do is beyond that, it's not only helping younger companies with setting up their governance in the proper way, you're helping them to look at the environmental impact of what they're doing. But we're really looking for companies that can make a difference primarily in health and financial services, which are two areas that we know and find other companies to which we can be additive.

So we've always done this in financial services, where we will network with a company to broaden their distribution capacity, just because we know the field, we know the ecosystem, we know what will work and what won't work. And there are areas of impact that we can identify where we can actually be helpful. It's not only the capital, but it's really the experience and networking opportunities that we bring to the table.

Jan Hopkins 29:13
With Bancorp which was an Internet bank, you saw a lot of FinTech companies that were growing up. And you were able to tap them when you went to the next part of your career, which was SPACs, right?

Betsy 30:27
It's really advising and mentoring, but very specifically coming out of your own experience.

Jan Hopkins 31:04
Talking about how one's career goes in directions that you maybe don't expect, certainly at the beginning, you didn't expect to be at this point and have done all the things that that you've done, right?

Betsy Cohen 31:19
I'm a person with a limited attention span, I guess. But I like to reinvent myself. And in this field, it's every couple of years, every 5,6,7,8 years. And it becomes possible here. Not only is technology moving, we're just in a field, which is dynamic, technology's moving consumers and small businesses are moving in their capacity to access that information. AI is taking over the world. You know, so there's so many variables, so many things that are changing the landscape that we had even a couple of years ago, that it's very possible to look at this field in a different way.

Jan Hopkins 32:15
Amanda, same question for you. When you started out, did you have any idea that you were going to be taking the road that you've taken?

Amanda Abrams 32:30
That's such a great question. No, definitely not. I think that if at any point in my career, you asked what I would be picturing myself doing 5-7 years from now, and I answered you, I probably would have gotten it wrong. So I think it's a unique perspective into the way your career can have twists and turns with the different opportunities that are presented to you. And if you're open minded and willing to kind of take advantage and shift with those twists and turns, you can end up in a really interesting place. So not only in terms of who you intersect with on a personal level, but also the way the market shifs and the opportunities that get opened up, and being able to identify those, kind of are what have directed my path.

Jan Hopkins 33:20
Also, using a skill set in different ways, the lawyer skill set as an administrator or an investor. So let me switch directions, a lot of people in the audience are concerned about how to balance work and life. And Betsy, you had children, and worked and a husband. And all of you, I mean, you and your husband, were both setting up companies. And now you actually work with one of your sons. I mean, how did you learn to balance? Or did it just kind of happen? Any words of wisdom?

Betsy 34:03
I guess the only word of wisdom I can say is that if you think of your life in in phases, as opposed to thinking of it is one single linear continuum, or the same thing every day, I think you have an advantage. There was a time when it was very important for me and Ed, we set up a law firm together, to leave the house at 9:30 and get back by 4:30. There was no zoom, but there were two children under the age of three that required attention. But each phase is different. And you know, you really have to think about it. You have to think about what's up appropriate for maybe this next couple of years, and be able to say that there will be no moment in which it will all be perfect.

I remember I was Chairman of the board of this bank in Washington, DC, sitting at a board meeting and having a moment of panic that is with me today. And this happened probably 40 years ago. It was my day to do carpool. And there I was in Washington, DC, and carpool was in Philadelphia, these little kids who were depending upon me to pick them up at school, something would happen to them. I mean, you know, it's that kind of thing. It has to happen. It happens to everyone, and it happens more frequently, at certain points in your life. Things are complicated. And you just have to keep thinking about what you're doing and know that it won't be this way forever.

Jan Hopkins 36:12
Amanda, do you have any words of advice about how you're managing work life balance and what you've learned through the years?

Amanda Abrams 36:21
It's a good question. I think that my biggest piece of advice is it's always an iterative process. You're never going to say, I found the right work life balance. Things are always changing. Even with COVID and everyone being home, and now meetings being on Zoom, and people seem more accessible 24/7 has even changed the shift of how you think about work life balance, and how you think about maybe shutting things off more when you're at home. I think it's always just a moving goal, that you always have to be changing your perspective on how you're managing things, and never expect to actually reach that goal, just be happy that you're always improving.

Betsy Cohen 37:04
I think also, in addition to the goals changing, we change, our own needs change. And we get satisfaction out of different things. And our personal lives evolve. So finding the right connection between the two is, as Amanda said, an iterative process.

Jan Hopkins 37:33
Betsy, you work very closely with Daniel, one of your sons, and your husband Ed works with Jonathan, your other son. How did you decide which son works with which parent? Or did it just kind of happen?

Betsy Cohen 37:50
I think it more or less happened, but it was the right thing to happen. If I was working with John, who's very hands on, we would be at each other's throats every day. You know, there's just no question about it. Not that we don't have a good relationship, but we have many of the same characteristics. Ed and Daniel also share characteristics, which is that they're able to stand back and let us do all the work [laughter]. No. That they're able to stand back, and, you know, be thoughtful and have big picture and all the rest of it. Not that both of them don't work hard. But it's a different way of doing things. And so I think the match of having one each within each pairing was a good thing. And Daniel and I have always had a good relationship. I think we have a lot of mutual respect, and a lot of trust. And that makes a good partner.

Jan Hopkins 39:05
So Amanda, you work with both of them. What do you see about this relationship? And do you end up getting in the middle?

Amanda Abrams 39:14
I have the utmost respect for both of them individually, and the utmost respect for the way they work together as a mother - son team. I adore my family but I don't think I could work with them. A lot of people say the people that you're closest to are the ones that can often get under your skin. I've never seen that on a professional level between Betsy and Daniel. They both bring different perspectives, different ways of looking at things, in different working styles. And it works really well. I think they both have a a very high level of respect for one another and treat each other like partners instead of like with mother and son, when they are in a professional experience.

That blend of perspective and respect is something of a secret sauce. Relationships and strength of relationships is a really critical underpinning for how we approach everything, and Daniel and Betsy's relationship is really a building block on which the organization is built. And it's important to us culturally. It has set a really great tone for how we approach our business dealings as partners and partnerships rather than transactions.

Jan Hopkins 40:35
Betsy, are there some things that you depend on Daniel to do, because it's within his skill set, closing deals, for example? And some things he depends on you to do?

Betsy Cohen 40:53
Daniel has an an incredible depth of knowledge. Across the board, it is very deep, but he has a real depth of knowledge of the insurance industry, of complex transactions of capital markets in a way that I, because I was on the other side of it for many years and not in the field, really can't match. And you're right, that there are relationships that I might carry forward. And skill sets of that sort. And analysis not only on a technical basis, but on a non technical basis. So my EQ is pretty high.

Jan Hopkins 42:06
Amanda, how do you fit in? Do you rely on on Betsy for some things, and Daniel for other things?

Amanda Abrams 42:19
I think just as Betsy described, each of them has their own set of strengths. Betsy has an amazing affinity for understanding personal interactions and what motivates people. And if I'm thinking about how to handle an interpersonal situation, or how to even approach negotiations, I think many times Betsy is my go to for those types of questions. And Daniel has a different set of strengths. They overlap in many ways, but there there are certain topics where I would prioritize talking to Betsy or talking to Daniel, depending on the topic.

Jan Hopkins 42:59
Let's kind of look over time. And look at women's issues over decades. What's the biggest change that you've noticed in women in the workforce in the last 20 , 10 or 5 years?

Betsy Cohen 43:26
Even just real numbers are extraordinary. When I went to law school, there were six women in a class of 200. Amanda, when you went to Harvard, how many women were there in the class?

Amanda Abrams 43:39
I think we were probably pretty close to 50-50.

Betsy Cohen 43:42
So I mean, that's a measure. I think that women started out in maybe the 1970s and 1980s, making their way through. And I'm talking about the financial side, in financial industries, in areas that were measurable. So in Portfolio Management, in things where at the end of the day, you had an objective measure and you weren't measuring how good a woman was versus a man you were measuring whether the portfolio of X performed better than the portfolio of Y.

And then another step might have been around, I don't know another 10 or 15 years later, I mean, things just don't move along that fast. And women began to find their place in a broader sense and moved I think, in the early part of the 2000s into a much more strategic set of positions. And now we see emerging. I mean, one of the women that I mentored who's now the CEO of one of the Fortune 500 companies. So it's a long process. Because everybody comes to the table with their own baggage. And you have to get many generations into the process before there's an acceptance of a new set of facts.

Jan Hopkins 45:35
And Amanda, what have you seen over a couple decades?

Amanda Abrams 45:42
From when I started as a lawyer to now, I see many more women in more senior roles. As a junior lawyer, I could see a very significant drop off from the amount of women that were in junior roles compared to senior roles, and especially as women or women lawyers had children, it would really significantly narrow the funnel at that point. I think there have been a lot of movements towards more flexibility around work arrangements, more awareness of creating environments and flexible scheduling to help address that disparity at the more senior level, as well as many more networks and initiatives that have been put in place to help women advance to those more senior levels and qualified women, women that are as qualified as men in those counterparts.

What I'm really interested in seeing going forward is there's many women networks that are women for women. Women connecting with each other and moving them forward. But to see more of those networks grow to also include men, so men and women helping women move forward, I think that'll be an interesting next step.

Jan Hopkins 46:54
The reality is that it does need to be a team. And the team is men and women. Women can be supportive of each other. And, and often women are competitive with each other. I mean, it's not all a friendly kind of situation.

Betsy Cohen 47:13
Oh yeah. And as this was emerging, there was what used to be called the queen bee syndrome, which was a woman who had been the only woman in a position and now she's there's another woman, and she was in a competitive position, and she was not happy. But I think we move past that, because the numbers are big enough. No one expects to be the only woman doing X, Y and Z. You know, but it will take time. I mean, pay equality will take time. Today 80%. Now, I'd say it's another 100 years before it gets to 100.

Jan Hopkins 48:10
Well, and women on boards, same thing, that number is increasing. It's not at parity, but many of the new board members are women and minorities. You know, there's a real emphasis in that direction. I was on a board where there were three women, and that made a huge difference. I'm also on a board with two women. And on board with one, it's a very different dynamic. If you have half, or maybe even more than half the dynamic is gonna change. Anything to add to that, Amanda, that you've seen?

Amanda Abrams 48:57
I agree with everything you just said, Jan, I think we, as an organization have been and Betsy especially have been forward thinking in this respect. And I think we've seen a lot more people follow this type of dynamic where there have been pushes not only to have one one woman on a board, but to have more equal representation, multiple women.

I know you mentioned you are part of the first all women board SPAC. And that effort on our part was actually prompted by the regulation that came out around that time that said, public companies had to have one, one woman on the board. And we had set out really to show everybody that you could get not only one qualified woman, it was actually entirely possible and quite easy to find an entire board full of qualified women. And I think more people trying to push that forward, currently and that'll be important for equality.

Betsy Cohen 49:59
I'd say it was Daniel's idea, actually, give him credit for it. But I can remember the first meeting that he came to, that had an all woman board. I think he was terrified. I mean, it was very good on the theory, but when it came to the reality, it was a little bit testy.

[AUDIENCE QUESTIONS ARE TAKEN]

Jan Hopkins 50:41
The first audience question is: The Cohens pioneered US SPAC creation and fintech space. Was there any blueprint which was followed?

Betsy Cohen 51:09
Both Daniel and I come from a lot of public company experience. I took eight companies from an idea to the public markets. Daniel's been in the public markets for many, many years in very sophisticated ways. And for us, it was really a natural next step. It was a reformation of opportunities that we had been involved in before. So I think we benefited from the fact that we had this cohort of FinTech companies at the Bancorp and we could see their growth. But we did already have the public company knowledge.

So I think it was something that we thought very early in the game, I guess, maybe 2014, we started to think about this 2015 was the issuance of first SPAC. So you know, we've been at it a long time, and I think, came to it by building on skill sets that we already had.

Jan Hopkins 52:48
It's different, right? In the sense of not having an exact blueprint.

Amanda Abrams 53:00
I think that when we think back to that first SPAC transaction, there was a blueprint, in terms solely of structures, facts existed, there was a known way to set us back up. But what the team did and was really unique is it took that structure and applied it in a way and and executed it in a way that used all of those skill sets that Betsy just described. So this was the first SPAC that had ever even had a FinTech focus, the first FinTech company that went public via SPAC.

And I recall, in the early phases, people thought of that as very out of the box. SPACs had been historically used for manufacturing companies or companies that were in dire straits looking at a bankruptcy and used to restructure them. So taking this, this blueprint was only a small piece of what made that so successful, it was really all of those skills that were applied in a way of thinking about how to use that structure in a unique way.

Jan Hopkins 54:09
And you know, some of them haven't been successful.

Betsy Cohen 54:12
No, but we had the challenge of having to go to a meeting with a client and actually, spelling SPAC. I mean, we started there. We thought we had made great progress when they could spell it and had heard of it. But we then had to describe it. So 45 minutes of an hour meeting would be talking about what was the SPAC and how did it work and all the rest of it. And then maybe phase three was talking about why we provided a better lens for them as Amanda said we had deep, deep knowledge of the capital markets and the investors and all the rest of it, we just started with what is simply a legal structure. And so we're innovative to that extent. But I don't think we could have done it without the cumulative experience and knowledge that we had had previously.

Jan Hopkins 55:25
Actually, I'm going to close out with a question that kind of goes back about that knowledge. What advice would each of you give to your younger selves about building your career? Amanda, you first.

Amanda Abrams 55:42
I would say that you can look at being in the weeds as being an opportunity, all of those very detailed things that you get into as a junior person. And all of those interactions you have with people trying to figure out all the little details, those are the building blocks that your career gets formed on.

As a younger person, so many people are eager to leapfrog that stage and get to the more senior stage where they feel like they're really adding value, or they're doing something critical, and they don't realize that that's really the building blocks for your career, that that's where you're going to form a lot of the relationships that take you throughout your professional career and all of the knowledge and what makes you really good at what you do later on. I think it's hard to have an appreciation for it when you're in it. But once you're past it, you really, really can see that.

Jan Hopkins 56:39
So Betsy, what advice would you give your younger self

Betsy Cohen 56:43
Always continue to look for opportunities. Maybe not a career, a linear career, you know, but really opportunities and be flexible.

Jan Hopkins 56:56
And that's still the case? Is that right?

Betsy Cohen 56:59
It's still the case for me, because I'm ordinary, but I think it's even more important for a younger person to be willing to insert in their search for what they enjoy doing. Because unless you enjoy doing it, please don't do it. You know, the lens of going beyond their particular niche, and thinking broadly and having broad experiences, which they can bring to the table and enrich the conversation but also not to think about them as career ladders. I mean, going one step at a time, up and up. I mean, it's just, there are so many adjacencies. So look broad, follow your curiosity and seek out new opportunities all the time. Stay curious. Stay curious.

Jan Hopkins 58:18
Thank you both Amanda Abrams, and Betsy Cohen, and all of you who have joined us today for this webinar on women who lead. Thanks, and have a great day everybody.

How FIs can invest in the right partners to meet customer demands for embedded finance.

• What are the biggest opportunities in embedded finance for FIs?
• What are the strategies, business processes, technologies, and skills your FI needs to take innovation to the next level?
• How do smaller banks play to win – given all the competition?

Hear from panelists at Maxwell, BillGO, and FinTech Masala as they answer these questions and discuss the biggest opportunities (and challenges) in BaaS for financial institutions.

With fintech and banking pioneers Betsy Z. Cohen, John Paasonen, Ken Salazar, & Dan Long, moderated by Daniel Cohen.

Watch the full recording here.

Highlights

We're at a point now, both in consumer awareness and technology in support, where the banks can actually take back the customer. That's the real benefit of embedded finance. - Betsy Cohen, Cohen Circle

Today's consumer is frustrated with the fragmentation of what what it takes to manage their personal financial lives, and their well being...The majority of Americans are living paycheck to paycheck, they are literally managing their cash flow on a daily basis, and prioritizing when bills need to be paid. And FIs have not updated that experience and made it easy for the consumer to manage and pay their bills. - Ken Salazar, BillGO

I love the ATM example. Banks were afraid of losing touch with their customer. But in fact, what it did was create another touch point with their customer, where they could have another experience and engage that consumer  as the consumer mindset was shifting and how they wanted to interact with their bank.- John Paasonen, Maxwell

We've seen a lot of large FIS focus on data, how to how to gather data, and use that data to create better products and services. A lot of investors on a strategic basis look at what kind of products they want to integrate upfront that really drive revenue, and how they want to expand their margin. - Dan Long, Cohen Circle

If you have one product with a customer, the customer might move, if you have two products, they're less likely to move. If you have three, you touch them in three ways. They'll never leave. - Betsy Cohen, Cohen Circle