How the Fed Evaluates Inflation During a Shutdown, with the Chicago Fed President

Summary

Morning Brew Daily – Episode Summary Episode Title: How the Fed Evaluates Inflation During a Shutdown, with the Chicago Fed President
Date: October 16, 2025
Hosts: Neal Freyman & Toby Howell
Guest: Austan Goolsbee, President of the Chicago Federal Reserve

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Overview

In this special episode, hosts Neal Freyman and Toby Howell hold an in-depth conversation with Austan Goolsbee, President of the Chicago Fed and voting member of the Federal Open Market Committee (FOMC). The discussion centers around the challenges the Fed faces during a government data blackout, the current state of the labor market, pressures on central bank independence, and a rare behind-the-scenes look at Fed meetings. The latter part of the show touches on business headlines, including bank earnings, OpenAI’s controversial content move, and the rise of “protein-ified” products.

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Key Discussion Points & Insights

1. The Data Blackout & Its Impact on the Fed (03:06–07:27)

• Inflation Data Delays:
  With the Consumer Price Index release postponed due to a government shutdown, Goolsbee describes the predicament as “a mess,” highlighting the Fed’s increased uncertainty in decision-making.

  • Quote (Austan Goolsbee, 03:33):
    “We always have to make a decision with imperfect information. But there's imperfect and then there's imperfect. If you don't have the information, it just adds more question marks, makes it harder to see.”

• Being a ‘Data Dog’:
  Goolsbee likens himself and other Fed officials to “data dogs”—hungry for any information that can guide policy decisions, and frustrated by its absence.

  • Memorable Moment (03:54):
    “Try not giving your dog food for the whole day and see how the dog reacts. You know, that's exactly how I feel.”

• The Rules for ‘Data Dogs’:

  • Know when to keep “sniffing” (collecting data) vs. when to “walk” (take action).
  • Examine every piece of available data, as any could prove vital—especially when traditional signals are murky.
    • Quote (04:14):
      “…sometimes sniff for more information. And sometimes you have the information, it’s time to start walking.”

• Challenges with Labor Market Data:
  Government statistics, including the jobs report, have become less reliable due to poor survey response rates and demographic shifts (e.g., baby boom retirements), complicating interpretation and increasing revisions.

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2. How the Fed Analyzes Alternative Data (05:29–08:27)

• Alternative Indicators:
  When official data is sparse or unreliable, the Fed watches closely:

  • Unemployment rate
  • Job vacancy rate
  • Hiring rate
  • Layoff rate
  • These “Four Horsemen of the Truth” sometimes send mixed signals: The hiring rate shows weakness, but the layoff rate remains very low—a highly unusual combination.

• Quote (D, 08:30):
  “This low turnover is unusual. … If you were running a business and there was a lot of uncertainty, you wouldn't want to get rid of the people you have. … But you wouldn't be bringing on new people. You'd just be kind of waiting it out.”

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3. Effects of AI on Labor Markets (07:27–08:27)

• AI’s Real-World Impact:
  While AI generates headlines about job displacement, Goolsbee contends its concrete effects are limited thus far, except possibly in some edge areas like recent computer science graduates.
  • “The things that AI is replacing so far are nowhere near the majority of the job market, not even close.”

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4. On-the-Ground Insights: Midwest Business Reaction to Tariffs & Policy (09:02–12:38)

• Tariffs’ Local Impact:
  The Midwest, with significant manufacturing and agriculture, is highly exposed to international tariffs—making recent policy moves a major concern among regional business leaders.

  • Initial panic after tariffs was somewhat soothed by temporary exemptions, but Goolsbee notes renewed anxiety as protectionist measures return.

• Interest Rates & Major Sectors:
  Typically, rate-sensitive sectors (business investment, consumer durables, housing) would signal where the economic cycle stands:

  • Business investment is booming, likely due to AI and data center demand (not interest rates).
  • Consumer durables remain strong.
  • Housing construction is notably weak.

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5. Fed Independence & Political Pressures (12:38–14:07)

• Political Attacks:
  The episode discusses political criticism of Fed members and attempts to influence their work. Despite outside noise, markets have not sharply reacted to this uncertainty.
  • Quote (Goolsbee, 13:01):
    “Central bank independence from political meddling … is extremely important. Every rich country of the world has that feature and a lot of poor countries … do not—and that's not a coincidence.”
  • Lack of independence, historically and internationally, correlates with runaway inflation.

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6. Inside the FOMC: Decision-Making at the Fed (16:03–21:13)

• Black Box, Revealed:
  Goolsbee gives a rare, vivid description of the FOMC process:

  • Meetings occur in a “giant room, a huge table, biggest table I’ve ever seen. Shades come down. There's no. Nobody can spy. You can't bring in a phone.”

  • The first day is spent on economic analysis; the second focuses on rates and the official vote.

  • All members—even non-voters—speak their minds; proceedings are formal but deeply thoughtful.

  • Quote (Goolsbee, 16:04):
    “...it’s about the coolest thing in the entire world.”

  • Quote (Goolsbee, 16:44):
    “People take the job extremely seriously. Everybody speaks their piece whether you’re voting that meeting or not.”

• Voting Mechanics:
  Members verbally vote on predefined alternatives (dovish, hawkish, baseline). Dissenters state their reasons.

  • Quote (18:12):
    “They will have outlined three alternatives, Alternative A, B, and C…They just call out whoever are the voters.”

• Vibe in the Room:
  Despite public disagreements, meetings are not tense. Different perspectives are valued, and Chair Powell is credited with maintaining unity and focus.

  • “Chair Powell has been very good … at navigating a course that almost everybody can agree with almost all the time… I haven't detected it to be, to be tense.” (19:22)

• Powell’s Leadership Style:
  Goolsbee describes him as “very data driven," smart, persuasive with “excellent intuition.”

  • “I thought he's the first ballot hall of fame [Fed Chair].” (20:24)

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7. Fed Communication – “Fed Speak” (21:20–22:18)

• Do They Get Training?
  Goolsbee jokes about “Fed speak,” where comments must be measured due to their impact on markets. He maintains a preference for candor:
  • Quote (21:39):
    “Volcker used to tell me, the Fed's job is to act, the market's job is to react, and let's not get the order mixed up.”

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8. Fun Anecdotes & Personal Moments (22:18–23:07)

• Teaching in a Tux:
  Goolsbee shares that he once taught a class at UChicago in a tuxedo—on his wedding day.
  • Quote (D, 22:24):
    “It actually ended up working out okay because there wasn't that much for the groom to do on the morning of the wedding except just get nervous. … There's a picture of me teaching the thing…”

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Notable Quotes & Memorable Moments

• On Data Blackout:
  “If you don't have the information, it just adds more question marks, makes it harder to see.” (03:33, Goolsbee)

• On Tariffs:
  “Their hair was absolutely on fire in April. Freaking out. If the rates are going to be this big, we're going to die.” (09:18, Goolsbee)

• On Central Bank Independence:
  “Inflation comes roaring back and it's easy to understand why if the sitting government can set the interest rate, they have incentives that are different than trying to prevent inflation from, from getting out of control.” (13:01, Goolsbee)

• On FOMC Meetings:
  “…I think that's the, the world's greatest deliberative body.” (16:44, Goolsbee)

• On Fed Chair Jerome Powell:
  “He's…very smart and persuasive and he's had excellent intuition at several points along the way here.” (20:24, Goolsbee)

• On Fed/Market Relationship:
  “Volcker used to tell me, the Fed's job is to act, the market's job is to react, and let's not get the order mixed up.” (21:39, Goolsbee)

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Key Timestamps

• 03:06 – Introduction to the data blackout challenge
• 03:54 – How it feels to be a ‘hungry data dog’
• 07:27 – Discussion on AI's real impact on jobs
• 09:18 – Midwest business leaders react to tariffs
• 12:38 – Federal Reserve independence and political pressure
• 16:04 – Detailed description of FOMC meetings
• 18:12 – How the vote is conducted
• 19:22 – Dynamics and tone inside the meeting room
• 20:24 – Assessment of Chair Powell’s leadership
• 21:39 – Explanation of “Fed speak” and communications
• 22:24 – Goolsbee’s wedding day teaching anecdote

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Post-Interview Headlines & Conversations

Earnings & Markets (23:31–27:15)

• Major US banks report robust quarters, yet some leaders (notably Jamie Dimon) express concerns about fragility and “cockroaches” lurking in private credit.
• Jamie Dimon: “When you see one cockroach, there are probably more.” (25:00)

OpenAI’s Erotic Content Controversy (27:15–28:12)

• OpenAI now allows adult users to generate erotica; Mark Cuban criticizes the decision, while CEO Sam Altman argues “we’re not the elected moral police of the world.”

Protein-Fortified Snacks (28:12–30:36)

• Pop Tarts, Doritos, Uncrustables, Starbucks: All jumping on the protein fortification trend as food companies strive to keep up with shifting consumer wellness priorities.
• “Are we entering a protein bubble?” muses Toby, with fiber possibly becoming the next trend.

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Tone & Delivery Notes

• Conversational & Playful: The hosts keep a light, accessible tone with witty asides, even when digging into economic wonkery.
• Insightful but Approachable: Goolsbee explains complex Fed mechanisms plainly, interspersing technical substance with humorous metaphors and personal stories.
• Engaged Culture Commentary: The second half of the episode transitions smoothly from serious macro issues to lighter business and consumer trends.

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This summary covers all substantive content from the episode, focusing on Goolsbee’s insights, the challenges facing the Fed during a data blackout, the real-world impact of tariffs and interest rates, and glimpses into central bank decision-making and leadership culture, as well as headline news.

Transcript

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[B]

Good Morning Brew Daily Show. I'm Neal Freyman.

[C]

And I'm Toby Howell.

[B]

Today a Fed president takes us in the room where it happens.

[C]

Then the gym bros are coming for your pastries. Protein pop tarts are now a thing. It's Thursday, October 16th. Let's ride.

[B]

Good morning. Today's show is going to be a little different, but in an exciting way. Yesterday we spoke to Chicago Fed President Austan Goolsbee in this studio. Thank you for your questions by the way. And while going in, we expected to use that interview for a part of the show. The conversation was so interesting we kept the tape running and are going to bring you about 20 minutes of Austin. Then wrap it up with some final news headlines.

[C]

Of course, a couple of things stood out to me about this interview, Neal. First, Austan does not scream a Fed official. His dream job was actually doing voiceovers for car commercials. Second, he's a data dog through and through. And I tell you what, the dog is hungry amidst the data blackout due to the government shutdown. And finally, it was so cool talking to a voter on the central bank's interest rate setting committee. Just wait until he talks about the size of the table they all sit around. One of our favorite interviews so far, so we hope you all enjoy.

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[D]

Yeah, what a treat. Thank you for having me.

[B]

This is going to be great. So it's Wednesday morning, you're a Federal Reserve official. You should be waist deep in the monthly inflation report that was supposed to be released today. But instead you're here with us because the Consumer Price Index was delayed from the government shutdown. And that is a problem because you and other Fed leaders are huddling up in two weeks to to make an interest rate decision that will determine the fate of the economy. How is this data blackout impacting your ability to do your job? Do you have the information you need?

[D]

It's a mess. I mean, we always have to make a decision with imperfect information. But there's imperfect and then there's imperfect. If, if you don't have the information, it just adds more question marks, makes it harder to see.

[B]

And what is it like for you not having data at your fingertips? Because I remember you called yourself once a data dog.

[D]

Yeah, and I'm one of many. It's frustra of a. Try not giving your dog food for the whole day and see how the dog reacts. You know, that's exactly how I feel.

[B]

And what did you mean by this? You said the first rule of the dated dogs is there's a time for walking and a time for sniffing and knowing the difference between those. What is the difference between us?

[D]

What do you mean what is the difference? Look, that's the when you come to the FOMC meeting and it's deciding. Among the hardest things the central bank has to do is figure out when the transition moments are and try to get the timing right. And that's what that first rule of the data dogs is sometimes sniff for more information. And sometimes you have the information, it's time to start walking. The second rule of the data dogs is sniff every piece of Data that hits the floor because it might be food and times like this where either A, you can't get the data or B, even before there was a shutdown and they stopped sending the data, big tent pole. Important numbers like the monthly payroll jobs number have a bunch of question marks because A, the survey response rates have gone down. So we get bigger revisions now and there's, and there's more corrections and a bunch of other things are happening like immigration policies changing so the population growth is smaller. You got the baby boom in the heart of their retirement and the speed at which that happens is going to affect the monthly payroll number.

[C]

So.

[D]

So go sniff everything. If it's actually a turning point, you should see it in a lot of different series and so far you're not.

[C]

Well, talk to me about some of those other pieces of food laying on the ground. I'm thinking about the ADP Private Payroll Providers report. Where are you looking? If you can't necessarily, if you don't have the government data or if it's not necessarily as reliable as it once was.

[D]

What I would encourage everyone to look at, if you're into this sort of thing, and I feel bad for you, if you're one of us and you're into this sort of thing, that says something about you. But if you are, just be careful with raw numbers, okay? Aggregate numbers, including the ADP we saw in 2023 and 2024 were not accurate indicators of business cycle. You remember there were people saying when we were getting these big jobs numbers, 180,000amonth in 23, over 200,000amonth. There were people saying, you can't be this high. That's so far above the break even point. We must be about to reignite inflation. But it didn't. Inflation didn't reignite. It kept coming down over that whole period. So the answer to your question of what to look at, I encourage you to look at rates. So 23 and 24, the unemployment rate, the vacancy rate, the hiring rate, the layoff rate, those were the four horsemen of the truth. They gave you a much better indicator of where we were in the business cycle. They're a little bit of a mixed picture. Now some of them are worrying the hiring rate is very low. You see that in the data and you see that in college graduates and new entrants to the workforce. Everyone complaining it's really hard to find a job. But the layoff rate is also really low. And it's just worth noting that's unusual. Usually if the hiring rate is Low, they start laying people off and that's the sign that you're going into a recession. Now the hiring rate looks like recession, the layoff rate looks like boom. And now they're not giving us the data. So it's, it's definitely frustrating.

[B]

It's tough. How much of the labor market weakness, especially in the entry level sphere, do you attribute to AI? Is there any way of knowing? I mean, that's, you know, another confounding variable here that we have artificial intelligence sweeping the country and the globe. How much do you think it's impacting the labor market?

[D]

I don't think a ton on a sector by sector basis. The fact that the unemployment rate of computer science graduates went from being the lowest of all the majors to now among the highest of all the majors, there's probably something to that. But objectively, the unemployment rate of computer science graduates remains pretty low. The things that AI is replacing so far are nowhere near the majority of the job market, not even close. It's a edge case. So I don't think that the AI explains the hiring rate for the, for.

[C]

The whole nation, just holistically. One term we've used to describe this labor market is low hire, low fire. Is that something that you would agree with?

[D]

Is that two terms or one term?

[C]

I guess it's a phrase.

[D]

Yeah, I totally, 100% agree with that phrase. Just look at the data. This low turnover is unusual. That's an unusual environment to be in. You know, before we got to this, everybody would say, ah, there's so much uncertainty, it makes gives everyone pause. You would kind of think if you were running a business and there was a lot of uncertainty, you wouldn't want to get rid of the people you have. It's hard to bring them back. But you wouldn't be bringing on new people. You'd just be kind of waiting it out. So that might be contributing to that environment.

[B]

So data dogs, they look at all types of data, like qualitative data and quantitative data. And part of your job is talking to business leaders. You're the president in the Midwest, so what are you hearing from them as you go talk to business leaders across the Midwest?

[D]

Running April 2 came Liberation Day. They announced the tariffs. The district of the 7th district that Chicago Fed is the, is the base of is most of Iowa, Wisconsin, Illinois, Indiana, Michigan. It's like heart of the Midwest. We have the highest manufacturing intensity of all the districts and by far the highest autos. There was a ranking of all the states tariff exposure and of the seven Most exposed states to tariffs. Four of the seven are in the seventh district. Because we got a lot of agriculture, we got a lot of manufacturing. Their hair was absolutely on fire in April. Freaking out. If the rates are going to be this big, we're going to die. What are we going to do? It exceeds our entire margin. They just did not know what was going to happen. Then we sign a couple of deals, we exempt USMCA compliant goods. They kind of phase down the rates and the biz. A lot of the businesses were less freaked out than they were in April. They said it'll probably be okay. Now we're coming back to the beginning where we're inching them back up. And as I always say, it's worth remembering imported goods are only 11% of GDP in the US so if it stays in its lane, it doesn't have to be a macro massive the impact, but how it jumps out of its lane. One of the ways is if you start applying big tariffs to intermediate goods and parts and supplies and components and stuff like that. Now you just transformed a tax on imported goods into a tax on domestic production. That's kind of started happening. We're going to up it on steel and aluminum, we're going to get in a bunch of retaliation on rare earth metals and magnets and, and things that go into the supply chain. Feels like a lot of business getting back nervous again. And normally if you're trying to figure out are you where are you in the business cycle, you would kind of go look at the rate sensitive sectors and say hey, if restrictive interest rates set by the Fed are driving slowdown, then the people who are most interest rate sensitive they will probably be suffering. The most kind of the three big ones are business investment, consumer durables and housing construction or those are three of the. The most rate sensitive business investment is booming now that probably because of this AI and the data centers and stuff that has nothing to do with the interest rate. So that one's confusing but it doesn't look like trouble. Consumer durable, surprisingly resilient. And so one of the things that when we're out talking to the auto companies, there was a bunch of front running of the tariffs and they thought then it was going to drop off, but it kind of hasn't dropped off. Consumer spending as you know, has just kept chugging along and then housing construction has been weak. So of the three rate sensitive ones, two of them don't look like there's much trouble and one looks like there is some trouble. So again it's a little confusing.

[C]

You got a tough job. There's a lot of, a lot of variables there. Shifting gears a little bit. One of the other big storylines of this year has been about the pressure the administration has put on the Fed. From going after Lisa Cook to calling on Jerome Powell to step down. Fed independence has long been kind of the bedrock of the US Financial system. Why hasn't the market reacted more to some of these threats?

[D]

You got to tell me why the market reacts the way it does to all kind of stuff. I've been in the Fed a little. It's going to be three years in January before I was ever at the Fed. I agreed with the virtually unanimous of all economists that you will ever talk to that central bank independence from political meddling and interference when setting the interest rate is extremely important. Every rich country of the world has that feature and a lot of poor countries of the world do not have that feature. And that's not a, that's not a coincidence. The unanimity of economists in favor of central bank independence from meddling is rooted in just look at the places where they don't have it, or times even in this country where they don't have it. Inflation comes roaring back and it's easy to understand why if the sitting government can set the interest rate, they have incentives that are different than trying to prevent inflation from, from getting out of control.

[C]

We're going to take a quick break and come back with more Austin right after this.

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[D]

What it is.

[B]

Yeah. What we.

[D]

Yeah. Okay, look, is it like I had never been there? Okay. But you, you guys, I'm like you. I'm an econ nerd my whole life. I got to tell you, it's about the coolest thing in the entire world. You go in, there's giant room, a huge table, biggest table I've ever seen. Everybody sits around this table. Shades come down. There's no. Nobody can spy. You can't bring in a phone, you can't bring in. It's like being back in the Situation Room or something in the White House. And first day is about the economy. Second day is about the rates and the vote. Jay Powell's gonna be like, here's what I think about the economy. And Governor Waller, he's gonna say, here's what I think about the economy. And they're gonna go around the table and you can see the background of the people sitting around the tables. Very different business people, economists, lawyers, market people. There are a bunch. And it's fascinating. It's really fun to hear their view of the economy. I try to bring a little, I don't know, a little regional taunting to the things. So I'll usually start by here's why the 7th district is the greatest district in the, in the nation. Eventually you'll be able to see word for word where they will release that not just the minutes, but the actual transcript of what everyone said. And you'll see it is a little formal, but it's extremely. People take the job extremely seriously. Everybody speaks their piece whether you're voting that meeting or not. Voting, it's all about the economy, the economic outlook. And what do they say? They see the world. It's not about elections, it's not about politics, not about outside pressures. Everybody takes that job really seriously. I say in this, in 21st century, I think that's the, the world's greatest deliberative body. It's. You could judge for yourself. People are very thoughtful.

[C]

How does the actual voting mechanic work? We were kind of joking that everyone puts their head down and put their thumbs up.

[D]

Yeah, no, I should see if we can innovate that. What happen happens is on rates day everybody gives their opinion and then they call the question that there will be. They will have outlined three alternatives, Alternative A, B and C. And they're loosely kind of a dovish alternative, a hawkish alternative and then the alternative B, which is what we vote on. And they just call out whoever are the voters. They'll be like Governor Bowman and they say yes or no. President Goolsbee, yes or no. President Daley, you know, and they, they call out the 12 and that's, that's the mechanic. And if somebody dissents, they'll just say no. And then I think there's some process of, of giving a rationale if you dissent it.

[B]

Have they been more tense recently? Because there has been sort of disagreements between the Fed officials about whether there, how much we should cut rates, whether we should not cut rates at all. There was a double dissent a few meetings ago. So has that translated to maybe some more tense meetings recently than in your three years in this position?

[D]

The vibe of the room is not tense. It's like I say, people are there, have historically taken the job extremely seriously. And it's all about content. And if people disagree, I mean you can see just from the public comments that the, that the members of the, of the committee make. They're, they're coming from very different places. You know, they're of different worldviews. But Chair Powell has been very good at is it diplomacy, it kind of navigating a course that almost everybody can agree with almost all the time. And that's pretty, it's pretty impressive in an environment where we've had a lot of major things happen to, to be able to do that. I haven't detected it to be, to be tense.

[C]

And what's, what's he like as a leader? Like, is he someone who's more vocal or is he just. You just kind of understand where he's coming from. Is he very data driven?

[D]

I have found him very data driven. I didn't know him that well before I got to the fomc. I've been really impressed. I mean, I, I said I thought he's the first ballot hall of fame and I have pretty high standards because I was. Paul Volcker was my friend and mentor and I worked through the financial crisis in 2008, 2009 with him. I'm not the rules of the FOMC communications policy. I'm only supposed to speak for myself on monetary matters. Not for the Fed, not for the. For anybody else or what they think. But I'll just say the guy's very, he's. I found him very smart and persuasive and he's had excellent intuition at several points along the way here.

[B]

Seems like a Tim Duncan kind of guy.

[D]

Yeah, just Tim Duncan.

[C]

Fundamental.

[B]

I would agree.

[D]

The big fundamental, the big fun. I was. I grew up a Lakers fan, so I can't. Sorry, I can't praise somebody that much for being a Tim Duncan.

[B]

Like, speaking of Fed communication, Fed officials have to be very careful with their wording because what they say or even hint at has the power to move trillions of dollars in markets. So you're forced to adopt this Fed speak, where you say something, but not really. Do they teach you how to speak Fed before you join?

[D]

No. I probably get myself in trouble anyway. But it can be overblown a little bit, especially the closer the argument gets to, well, the Fed needs to do X because that's what the market expects and you can't disappoint the market from their expectations. Volcker used to tell me, the Fed's job is to act, the market's job is to react, and let's not get the order mixed up. And I kind of agree with that. I usually try and just say, here's what I think, and I'm just one of 19 people sitting around the table so the world can make of that what it wants.

[B]

Are the rumors true? Did you actually teach a class at UChicago on your wedding day in a full tuxedo?

[D]

I did. It was a Saturday. I had a Saturday glass. They made me. They made me. They assigned me the class. It was really low. That was. I was only my second year. It actually ended up working out okay because there wasn't that much for the groom to do on the morning of the wedding except just get nervous. There's a picture of me teaching the thing and I always say, you can tell who's the university, Chicago people from. Not a normal person looks at the picture and it's like you're teaching class in a tuxedo. And the Chicago people are like that's the monopoly markup formula because that's what the, that's what this was like the learner index, you know, formula. And we had a real class like we on Saturday.

[B]

Well they say you Chicago's where fun goes to die. But I did go there for one weekend and I had some of the best nights.

[D]

It's where fun was born at least anymore group of the small group of.

[B]

People that that I was hanging out with. So Austin, thank you so much for joining us.

[D]

What a treat.

[B]

Thank you for learning so much and good luck with everything on in this data blackout and we'll be following the rest of the Fed officials movements over the next few weeks right to see it.

[C]

Well I never met someone as married to the game as Austin. I tell you what, I will not be potting in my tux on my wedding day. Hope you all enjoyed that interview as much as we did. Now let's spin to the finish with some final headlines. Up first, big banks have clearly been hitting the gym because amidst all the uncertainty around tariffs and in the economy, they just keep getting swollen. Across earnings calls from JP Morgan, bank of America, Goldman Sachs, Wells Fargo and Citigroup, the through line was clear, we're doing all right. The investment banking divisions of Goldman had a great quarter because higher policy volatility can actually accelerate the sort of corporate wheeling and dealing that earns it fees. Citigroup had a 16% increase in profit. As it said, the spending habits of consumers is holding up strong. Morgan Stanley had an especially standout quarter thanks to its stock traders, with revenue from that division jumping 35% to $4.1 billion, topping Goldman Sachs in the business that it traditionally dominates. Finally, Wells Fargo reported a 9% boost in profit on the backs of increased spending among its most affluent clients and lower income customers. But two truths can coexist here. Quarterly profits can be strong as stock trading and dealmaking resurges, but risk lights can also be blinking under the surface. Neal, Some bank leaders are feeling uncomfortable with one, the sheer length of this bull cycle and to some of the shenanigans going on in the private credit world where we've seen a couple of high profile collapses.

[B]

I think I know what bank leaders are talking about and it's Jamie Dimon, JP Morgan CEO, who's always ruffling some feathers. So the context here is we had two major blowups in the credit markets recently. Two auto companies, First Brands and Tri Color. And there's been a little bit of spookiness around whether this portends further collapses or some shakiness around capital markets. So Jamie Dimon, during JP Morgan's earnings call, goes up to the mic, goes up to the earnings call and says, my antenna goes up when things like that happen. And by that he's talking about these two big blow ups. I probably shouldn't say this, but when you see one cockroach, there are probably more. And this mention of cockroaches within the financial system attributed to private equity companies got a lot of pushback. And you saw asset managers and private equity giants from Apollo to Blackstone to other smaller companies push back on Jamie Dimon's comment, saying, look, you guys were involved in the deal too. I think you need to look at your own books and not ascribe blame to us if you want to squash more bugs. So Jamie Dimon always, you know, creating conversation. He always has a pretty dour outlook compared to the rest of the big bank CEOs. But overall, besides the cockroach comment, the six largest banks raked in almost $41 billion in profits in the past three months, which was up 19% from a year ago. They say that everything's pretty much smooth sailing on the economy, besides perhaps a few cockroaches we need to kill. All right, over in the AI world, everyone is talking about OpenAI's announcement on Tuesday to allow, quote, erotica for verified adult chat GPT users, essentially meaning they can sext with the chat bot. People like Mark Cuban blasted the move, writing on X this is going to backfire hard. No parent is going to trust that their kids can't get through your age gating. Sam Altman, OpenAI CEO, responded on Wednesday that he was very surprised by the backlash, saying OpenAI is, quote, not the elected moral police of the world, and clarified the erotica point was just one example of the company being able to safely relax more content restrictions because it has the tools to verify ages. Altman said this is, quote, very much about the principle of treating adult users like adults.

[C]

Yeah, the comparison he drew was how society handles R rated movies. They're not banned. That content is not necessarily banned. They are just age restricted. And he's saying we're doing the exact same thing here. We have the technology in place to verify users age. So we are not going to be this paternalistic figure and tell you how you can or cannot use his chat. But maybe he also sees what Elon Musk is doing with Grok and how it already allows explicit material and said maybe we want to be in line with that as well. He said it's not a growth hack. We're not doing this to get people addicted. We just don't want to be the moral police of the world. So we'll see how one the technology actually performs and if it can effectively age gate because Mark Cuban is probably right. Kids find a way they know how to get around these types of things. And then we'll also see if it is actually something that is a free speech kind of path that he is taking or if it's something that he wants to have a stickier user base which obviously, you know, explicit and erotica content can lead to stickier users.

[B]

Finally, the protein Ification of America shows no signs of letting up. This week, Pop Tarts maker Kellanova announced Pop Tarts Protein, a new version of the product coming in November that will contain 10 grams of protein per serving and come in three flavors, brown sugar, cinnamon, strawberry and blueberry. Don't worry, there will still be plenty of sugar, 30 grams per serving, about 60% of the recommended daily intake. This is by no means a suddenly healthy snack, but with demand for processed foods slowing down dramatically, Pop Tarts is hoping that infusing Gymbro approved protein into one of more indulgent pantry staples will bring consumers back into these sprinkly frosted fold. Other food giants are thinking along the same lines. Last week, Pepsi announced plans for a higher protein version of Doritos containing about 2 grams per 11 chips. Companies are trying to not get flat footed as the protein craze reaches new heights. According to Grandview Research, the global market for foods fortified with protein is expected to top $100 billion in the next five years, up from 67 billion in 2023. Toby, what in the world? Protein Pop Tarts, protein Doritos Snack makers want to have their cake and hope you eat it too.

[C]

Yeah, I think this is the path forward for snack makers because as we are entering into a healthier era of snacking, the easiest way to keep the brands that people love but make them not feel as bad about it is just injecting little protein. I did see my timeline light up with some people loving this rollout because as a runner this is a great thing because I used to eat Pop Tarts before almost every single run. Now if you add a little protein, you feel even better about doing it yourselves. They're not the only ones doing it either. You mentioned Doritos, but also Smuckers just released a high protein version of Uncrustables that I am very excited for. That's got 12 grams of protein. So we're seeing a little war breakout here. Even, you know, Khloe Kardashian rolled out her own protein popcorn with a little bit of protein in that as well. So clearly this is the playbook that these brands are running. I also think about Starbucks adding its protein cold film. Basically just you just add protein to everything these days. It begs the question, are we entering a protein bubble? And I have been hearing some inklings of that. So what is the thing just around the corner? Fiber might be the next thing where we see everyone re injecting their foods with that. So the snack cycle just continues to turn. Right now we're in our protein era. Maybe the next era is fiber.

[B]

That is all the time we have. Thanks for starting your morning with us. Have a wonderful Thursday. You missed Neil's numbers today. So did I. Got bumped by the Fed. But we'll do a special Friday edition tomorrow. If you have any feedback on today's episode, send a note to Morning Brew Daily at Morning Broadcom. Let's roll the credits. Emily Milian is our executive producer. Raymond Lu is our producer. Our associate producers are Olivia Graham and Olivia Lake. Hair makeup is protein maxing. Devin Emery is our president and our show is a production of Morning Brew.

[C]

Great show today Neil. Let's run it back tomorrow.

[B]

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