tv The David Rubenstein Show Peer to Peer Conversations Bloomberg October 27, 2018 9:00am-9:30am EDT
♪ david: when you're the head of the imf, i will recognize you. how did you get to be the head of the entire firm? ms. lagarde: it's often in those situations that a woman arises. david: with synchronized swimming, you became a member of the national team of friends. ms. lagarde: headed european championship and then international events. david: did you experience a lot of discrimination? ms. lagarde: and i interviewed with law firms where i was told back in those days i would never make partnership because i was a woman. >> will you fix your tie please? david: people would not
recognize me if my tie was fixed. let's leave it this way. i don't consider myself a journalist. no one else would consider myself a journalist. i began to take on the life of being an interviewer even though i have a day job of running a private equity firm. how do you define leadership? what is it that makes somebody tick? many people don't know what the imf actually is. ms. lagarde: the international monetary fund was set up 75 years ago by 44 men -- david: no women? ms. lagarde: no women in those days. 44 men in 1944 on the eve of the second world war end with the , view of avoiding major economic crisis, major instability in the world, which
in their view led to the war. that's the intention. david: where do you get your money? ms. lagarde: from membership. every member country contributes to the financing of this common pot. david: it seems to be an informal understanding that the world bank would be headed by an american, the imf by a european, and that has been the case ever since then. am i correct? ms. lagarde: i want to believe it would be headed by someone who has the competence to do the job. the observation that it has been a european, i think that is how they cut the arrangements in the early days. at the time, the world looked a lot different. david: the world looks different today. for example, asia is much more significant. did the people from japan or china say what about us? ms. lagarde: china has a representative on my management team. there is the managing director, that's how i'm called.
there is the first deputy managing director who is an american and i have three deputy , managing directors. one is chinese. one is brazilian, and one is japanese. there a lot of diversity on the management. david: let's go back to how you came to this position. you grew up in france, i assume? ms. lagarde: yes. david: what did your parents do? worldpay educators or government? educators or government? ms. lagarde: they were both professors. my father was a professor of english literature at university, and my mother was teaching french grammar, latin, and ancient greek. that is the universe that populated my childhood. a lot of literature. david: when you are growing up with parents like that, i guess you are really good at language? i guess they made sure you know all those language. ms. lagarde: no, i was hopeless. i was really bad, actually. david: i doubt that. i assume you were a good student.
you were also interested in synchronized swimming. can you explain what synchronized swimming is and how you came to be on the national team of france? ms. lagarde: the athletic activities had to do with the riots we had in france in 1968. students were taking the streets, and my parents were terrified i would do that, too, so they allowed me to go to the swimming pool of the club. i could skip school and spend all my time by the pool. i enjoyed swimming at the time. gradually, one day after another i became really interested in , synchronized swimming, which brought together girls -- so it's teamwork -- that required music and a liking of music, and i had always liked music, and discipline and methods, so i joined the team at the time. david: with synchronized swimming you became a member of , the national team of france. were you on the olympic team as well? ms. lagarde: no, because it was not an olympic sport at the
time. i did european championship. david: you still do swimming? ms. lagarde: yeah, including this morning. david: how do you have time for that? ms. lagarde: i get up at 5:00. david: that probably helps. let me go back -- ms. lagarde: the pool does not open until 6:00 so i have to do a bit of gym before that. david: what did you study in college? ms. lagarde: i had a very classic education. i studied the basic subjects everybody studies, which is french, math, english, geography, history, chemistry, and physics, plus some sports, which were not so important in those days in france. david: often, leaders in france go to certain schools, they go to very prestigious schools. did you go to one of those schools? ms. lagarde: no, i failed miserably. david: because? ms. lagarde: the first time, i was in love with someone who was going to become my husband and i did not study very hard. the second year, i did study very hard with a group of others
who studied equally hard, and i totally missed the date of registration to take the various exams. david: so you became a lawyer. what propelled you to want to be a lawyer? ms. lagarde: the death penalty. i wanted to participate in abolishing the death penalty. when i started law school, the death penalty was one of the tools of criminal law, and for personal, religious, and other reasons, i wanted to participate in eradicating this penalty in the legal arsenal of france. unfortunately, when i finished, my law school and when i graduated, i could have joined that group, the death penalty had been abolished. david: you nonetheless became a lawyer. did you practice in france? ms. lagarde: yes, i practiced in france for several years. like so many young lawyers in those days, you had to do tax,
corporate, antitrust, labor. luckily, the french president to terand, ad was mit socialist, and that government came out with lots of very hard labor laws to benefit the union, federal workers, and all of that. most of our clients were international corporate or american companies that had invested in france, and i was really busy. david: were there many women lawyers in france in those days? ms. lagarde: no. no. one of the reasons i joined was because the managing partner of the paris office was a woman, and she was a role model for me. david: for those who do not know baker mckenzie was for years one , of the largest law firms in the world. ms. lagarde: the largest. david: it was based in chicago. at some point, how did you get to be the head of the entire firm? you are a woman. it is a male firm, more or less. you are from france.
it is a chicago-based american firm. how did you get to be the leader of the entire firm and moved to chicago? ms. lagarde: i would love to think it was a merit thing and based on the quality of the work i was doing. i became managing officer of the paris office. gradually, i was doing a decent job. i was picked up by the nominating committee, who selected me to join the executive committee, and i was the first woman to be on that executive committee. and then i went back to practice, happily but they came , back to get me. by that time, it was a mess. the i.t. budget was completely out of order. the knowledge management system was a complete disaster, and management was not really trusted. the nominating committee had a tough time selecting somebody, and it's often in those
situations that a woman arises, so i was selected as chairman of the fund. david: an imf managing director position opens up. did you really want the job? ms. lagarde: so many things in my life happened out of the right timing, the right people, and my sense of, "all right, let's try it. let's do it." let's do it." ♪
♪ david: so you are head of baker mckenzie, living in chicago. was it like a foreign situation? you are living in the midwest of the united states. you are from france. ms. lagarde: chicago is a fantastic city. i had lots of friends. i still have many of them today and i truly enjoyed our time in , -- my six years in chicago. david: you were doing that, and suddenly, nicolas sarkozy gets
president of france. did you know him? ms. lagarde: it was two years before that. chirac was still president of friends. he is the one who called me. david: he called you to be minister of trade and you went back and served as minister of trade for a couple of years. how did you like that job? ms. lagarde: i loved it. i really loved it. it was a massive change in my life geographically, socially, financially as well. david: i assume the income was not the same as you had in law. ms. lagarde: it was, like, divided by 10. but i loved it. i think it was a job i most enjoyed in government, actually, because i was studying france from around the world, and president chirac knew i was this strange animal coming out of private sector or and private
life, hecorporate respected me and i had great respect for him. david: sarkozy does get elected president of france. ms. lagarde: minister of agriculture, which i had no clue about, but i was prepared to learn. i did that for two months, but then i became minister of finance. he knew it was going to be a hot wto potato and he wanted someone who was acquainted with international politics. david: you did such a great job that you were promoted after two months or you did such a bad job that they said, give her another job. it was probably not that. ms. lagarde: there was a reshuffling caused by elections. david: were you the first woman to be a finance minister of a major country in western europe? ms. lagarde: yes, i was the first minister of the g-7 country and of many countries, actually. david: you were a lawyer by training, and suddenly you are in charge of the finances for france.
did you have any background? did you worry about having a background or did your job as minister of trade help you? ms. lagarde: i think i had a good background, but i recognized immediately i was going to learn enormously from the team. from the treasury department. i had to work very hard. david: you did a very good job there, by all accounts and the imf managing director position opens up. did you really want the job or did you have to be persuaded to move back to the united states? ms. lagarde: so many things in my life happened out of the right timing, the right people, and my sense of "all right, let's try it. let's do it." when i returned to france as a minister, i had not thought for a second about my pension, my compensation, the reporting lines, how it would work out. i just wanted to do it. i wanted to help the country. as finance minister, i don't think that i anticipated at all that two months into the job,
the beginning of the financial crisis would loom as a result of the closure of the two bnp accounts. but you just roll your sleeves and work and team up with people who know what they are doing and who have a good moral compass. i think it is a combination of all that. david: you have done a very good job at the imf by all accounts. one of the things you have to worry about is not just countries that are not doing that well and need money, but the economy of the entire world because your job is to promote stability and development and employment. how do you think we are better prepared around the world for another financial collapse than the type we had 10 years ago? ms. lagarde: i think we are better prepared. better prepared because at least in certain areas, we have learned the lessons. when you look at the banking system, when you look at the ring of supervisors, when you look at the set of regulations that apply, i think in that particular sector, we are much
better prepared. the banks around the world, capital ratios, liquidity ratios, leverage, on all those fronts i think we have made significant progress. there are areas, though -- because risks tend to sort of travel to the fringe, and if you look at other areas -- you know, asset management, pension funds, fintech development, those are areas where i'm not sure we have the same added security that we have developed in relation to the banking sector. there are other numbers that are much more worrying. when you look at debt, the weight of debt on corporate, sovereign and household has gone by -- gone up by virtue of the stimulus and the indebtedness that developed as a response to the crisis. david: when the euro was created, it was thought by some
it might become a reserve currency. why do you think it has not? ms. lagarde: i think because the job is largely unfinished. it's very advanced, and i think the great financial crisis has moved the euro and its institutions in the direction of consolidating with a stronger backstop, with a stronger set of institutions, and with more unity amongst the 19 members of the euro area but the job is not , finished yet. the banking union is not yet completed and there is still too much uncertainty in the fiscal policies that should be common to all or at least should share the same objective. david: what's talk about brexit for a moment. when do you think that will be resolved? ms. lagarde: i think we will know on march 30, 2019 because that is the cutoff date when either there is a brutal exit, which would be extremely costly and detrimental to both the u.k., particularly, and the eu to a lesser degree, or there is
an arrangement that deals with the period of transition into this new regime, which can be a variation of free trade agreement between the u.k. and european union, which can go from the norwegian model to the swiss model to the canadian model, and which will have to respect one thing which is a big red line for many, and that is the irish border, which was agreed in this good friday agreement. david: if great britain does get out of the eu, do you think that will deteriorate the european economy in a significant way? ms. lagarde: i think it will be net negative in all cases. the variability of net will depend on the variability of the exit. the more brutal, the more negativity. i think it will be in all cases, more severe for the u.k. than it will be for the rest of the
european union and within the european union, you have a few countries that will be more exposed than others. david: have you noticed that when there is a very difficult problem, sometimes the men do not want to do it so they give it to a woman to do? ms. lagarde: you said it, not me. david: the prime minister of great britain is a woman. none of the men seem to want to take the job because it is a no-win situation. ms. lagarde: they are probably prepared to come and take the job afterwards. david: you're the head of the imf. do people come up for selfies or bother you? ms. lagarde: they ask for selfies. it is very nice. it is a lot of ego food, which i take and store for the holidays. ♪
♪ david: let's talk about another part of the world -- china. do you worry about chinese growth going down? do you have to worry about chinese debt? ms. lagarde: chinese growth has been going down for the last 10 years or so. you remember the days when it is double digits. chinese growth has gradually come down, and every time it has come down, there has been trepidation. i have heard many times that china was going to collapsed. it has not collapsed. it has helped a great deal the global world economy at the time of the financial crisis because it was certainly one of the first, if not the first country to come out with a huge package of stimulus in order to kickstart the economy. so yes, it is heavily indebted. yes, they are trying to rein that in, but at the same time, it is a country that has a huge
population which has massive transition issues to deal with, and where the necessary reduction of growth we are seeing has to be monitored, has to be under control in order to retain any risk of conflict. that is how i see it. david: what about the tariffs? president trump has talked about imposing tariffs and has imposed tariffs on china and other parts of the world. do you think that is a plus for the global economy or you think it is not? ms. lagarde: i think tariffs are not a good idea in general. if the impact trade to the point that trade no longer plays a key role as an engine for growth. what do we see in the last 30 years? years, we have seen trade growing faster than growth, so it has been a driving engine. we see lots of people taken out of poverty.
we see the cost of living in advanced economies, including in the united states, lower by virtue of cheaper refrigerators, cheaper television sets, cheaper telephones and so on and so , forth, because they are made in countries where costs are much lower. there has been huge benefits -- not only benefits, but huge benefits, and i don't think we can dispense of those going forward. my take on that is fix it, don't break it. because trade needs fixing. there's no question about it, and i think president trump has put the finger right where it hurts. there are issues about the trade rules and organizations that need to be addressed and dealt with. david: let me ask you this -- you have spoken about the fact that women should be on corporate boards more than they have been, or board rooms and ceo's perhaps. do you think you've made a lot of progress? why do you think women should be
represented in these positions? ms. lagarde: i think there's a clear economic case now that more women on the board, more women on executive committees and management teams actually generate better returns, better results, and better profits. even if you have a very, very cold heart, no moral imperative, and no sympathy for women and for the principle of inclusion, even if you were that person, you have to consider including women and bringing them to the table and to all the tables, and have we made progress? some, yes. when i look at numbers, it tells me we have made progress altogether. do we still have a long way to go? yes, as well. david: did you experience a lot of discrimination because you are a woman as you rose in your career, and do you feel you are still experiencing it today?
ms. lagarde: i did experience discrimination, from the first day when i interviewed with law firms where i was told in those days that i would never make partnership because i was a woman, or when i was regarded by japanese clients, for instance, in those days as a woman who can serve coffee when i was actually a practicing attorney drafting contracts and negotiating for them. and there are still instances when i walk in a room full of men, and i can just tell that there is this little smile about their face, which is either , "here she goes again, she's going to talk about women," or "wonder what she has to say." it is less so the case, but when you are in the minority, that is what you experience. david: what is your greatest pleasure working with the imf?
ms. lagarde: working with a team. david: what's the worst part? ms. lagarde: having to sit through meetings which endlessly repeat the same thing and end up nowhere. david: at least you did not say interviews that ask the same questions. you were nice enough to say that. i'm sure you've heard these questions before. before we wrap up, you have said you will finish your term here. when you do finish, you will still be relatively young by most standards. have you thought what you might do when you finish your term at the imf? ms. lagarde: no, i will come and talk to you. you will give me some good advice. david: when you are ahead of the imf and when you go to have lunch or breakfast and a restaurant in weddington or other famous cities, do people come up for selfies, bother you, or do you kind of go where you want to without being bothered? ms. lagarde: no. david: people recognize you? ms. lagarde: people recognize me. they ask for selfies. most of the time, they are very nice and flattering and
♪ jonathan: from new york city for our viewers worldwide, i am jonathan ferro with 30 minutes dedicated to fixed income. this is "bloomberg real yield." ♪ jonathan: coming up, junk debt a shelter from the global equity market storm. the fed indicating a market correction will not be enough to shape policy. the optimism supported by strong u.s. gdp. a better than expected 3.5%. we begin with the big issue the , riskiest part of fixed income, a bastion of stability in a volatile world. >> credit conditions and lending standards remain extremely generous.