The International Edition

Summary

Slate Money – “The International Edition”

Date: April 9, 2016
Host: Felix Salmon (Fusion)
Guests: Cathy O’Neill (mathbabe.org), Josh Reich (CEO & co-founder of Simple), Jordan Weissmann

---

Episode Overview

This international-themed episode of Slate Money dives into fintech innovation, banking culture clashes, and the global drama of the Panama Papers. Felix, Cathy, and Jordan are joined by Josh Reich, CEO of Simple, to unpack the realities and hype behind fintech startups, banking regulation, and the implications of international shell companies.

---

Key Discussion Points

Simple: The “Non-Bank” Bank (01:32–19:03)

• What is Simple?
  Josh Reich introduces Simple as a technology company aiming to change how people bank by providing tools to increase financial confidence and ease (01:39).

  “We give our customers a Visa card... But what we're really known for is giving people a real sense of confidence with their money.” — Josh Reich [01:39]

• Origin Story & Acquisition
  Simple began in Brooklyn and eventually moved to Portland, Oregon. It was acquired by Spanish giant BBVA, which promised to keep it independent (08:23–09:28).

  • “They tend to kill their companies with their loving embrace... what they've done with Simple is they've made a very strong commitment to keeping us independent.” — Josh Reich [08:54]

• Product Distinction
  Clarifies that Simple is a fully-featured, interest-bearing checking account, not a prepaid debit card as often assumed (07:10).

  • “We are just a regular now account... an interest bearing checking account.” — Josh Reich [07:17]

• User Experience and Data Use
  Simple focuses on helping millennials manage money—safe spending, real-time notifications, saving goals (goals), and a prominent “Safe to Spend” feature (11:17–18:48).

  • “What we do with Simple is when you swipe your card, we do a lot of cool work. That means it appears on your phone in real time…” — Josh Reich [11:38]
  • “One of the features that we have is a thing called goals. Goals are basically named savings accounts... you can move money in and out of with no liquidity constraints.” — Josh Reich [13:35]
  • “One of the other things we have is a feature called Safe to Spend... By using Safe to Spend... people anchor to that number.” — Josh Reich [17:47]

• Customer Demographics and Behavior
  Average Simple user is 29 years old. Post-crisis, younger users favor debit over credit; saving behavior is a key focus (15:34).

  • “Young people have really shot... credit card debt down... It does seem like there would be a space for something that has a lot of the benefits of a credit card without necessarily tempting people to load it up with debt they can’t pay.” — Jordan Weissmann [12:46]

---

Fintech’s Grand Promises & Skepticism (20:06–39:23)

• Can Software Change Behavior?
  The group discusses whether fintech’s focus on “software that changes financial behavior” is profound or overhyped (20:39–22:54).

  • “There’s a very attractive pitch to be made around using data to inform alternative lending strategies. I think there’s a lot of reasons why these companies could succeed, but we haven’t seen... that data is actually driving outsized returns.” — Josh Reich [22:22]

• Fintech Lending – Risks & Arbitrage
  Fintech lenders like Lending Club and Prosper may succeed through distribution channel efficiencies, but their claimed credit underwriting advantages are unproven; major banks are quietly absorbing fintech-originated debt (23:28–25:48).

• Customer Acquisition “Dials” and Digital Branch-Killing
  Online banks like Simple scale efficiently and cheaply, drastically reducing the need for branches and traditional marketing (26:20–29:33).

  • “We were adding as many customers per month, whereby if we were a traditional bank, we would have needed 850 branches... We did all of that from our small office in Portland, Oregon, with less than 300 heads.” — Josh Reich [28:29]

• Branch Banking’s Future
  Growing digital banking may diminish the physical branch; some will always prefer in-person, but cost and convenience are driving change.

---

Bitcoin & Blockchain: Hype vs. Reality (29:33–39:06)

• Is Bitcoin on the Roadmap?
  Simple has no near-term plans to integrate Bitcoin. "We're about solving actual customer problems," says Reich (29:50).

  • "Bitcoin is super exciting... But... that's not the hard problem when it comes to doing international remittances or payments or other things. KYC, AML... that's hard. Bitcoin doesn't solve it." — Josh Reich [30:25]

• The ‘Blockchain Would Have Saved Lehman’ Claim
  The team is skeptical about claims that blockchain could have prevented the 2008 crash, suggesting transparency and pricing, not ledgers, were the real issues (31:15–33:58).

---

Banking/Tech Culture Clash (34:04–39:23)

• Core System Legacy & Mindsets
  Discussion of how banking’s legacy technology hinders innovation, and the distinct mindsets of banks vs. tech companies.

  • “We are dealing with systems that were designed and built in the 1950s for mainframe batch processing... The attitude that a bank takes about, you know, storing transactional data is let’s keep just what we need... versus... a technology company where everything’s in the cloud.” — Josh Reich [35:20]

• Anthropology of Technology Choices
  Referencing network design (packet vs. circuit switch), they illustrate how historical choices shape today's institutional cultures.

  • “[It’s] a weird loop between the choices that people made... the impact it has on how they think about technology, and then the future choices they make.” — Josh Reich [35:49]

• Legacy Banks Still Dominate Payments
  Even with fintech, old networks (like SWIFT) remain robust and secure for high-value transactions (38:34).

---

The Panama Papers: Money Laundering & Shell Companies (40:14–50:13)

• Mossack Fonseca and the Mechanics of Shell Companies
  The panel outlines how offshore law firms like Mossack Fonseca aid wealth concealment, tax avoidance, and secrecy for the global elite (43:08, 44:35).

  • “It is just about secrecy and opacity, even when it’s not tax evasion. There are other reasons why certain people, like politicians... might not want the world to know just how rich they are.” — Felix Salmon [45:26]
  • “The money quote... is... 95% of our business is creating vehicles for people who want to deal with taxes.” — Jordan Weissmann [45:41]

• The Regulatory Response & KYC Weaknesses
  U.S. authorities are moving to tighten Know Your Customer (KYC) rules to cover the real beneficiaries of shell companies (46:33–49:07).

  • “A lot of banks have been taking the standard... that all they need to know to meet... KYC requirements is they just need to know who set up the shell company. Now, it’s often designed so that the person who set up the shell company is not the beneficiary.” — Josh Reich [46:33]

• Money Laundering Loopholes
  Banks, lawyers, and fintechs sometimes point fingers to avoid responsibility for vetting clients, a loophole regulators are trying to close (49:07).

  • “They both had this plausible deniability of finger pointing–‘I thought you were doing that’...” — Josh Reich, on Payoneer case [48:53]

• Simple’s Own KYC Process
  Josh Reich, when pressed for details on anti-money-laundering:

  • “I don’t think I’m allowed to talk about that.” — Josh Reich [49:24]

---

Notable Quotes & Memorable Moments

• On User Experience over Price:
  “If we build a great user experience for 1,000 customers, it doesn’t cost us 10 times more to scale up to 10,000...” — Josh Reich [16:45]

• Fintech vs. Old-School Banks:
  “The IT budgets at Morgan Stanley or wherever, just stratospheric... And they employ more engineers. Not a technology company.” — Felix Salmon [37:49]

• Felix’s Deep Skepticism about Bitcoin:
  “Frankly, the bitcoin industry doesn’t seem to have fulfilled any of its promise. But that hasn’t prevented a bunch of people from still... throwing a bunch of money at it.” — Felix Salmon [29:54]

• On Customer Data & Privacy:
  “If you can’t find a really good use of your data to make your customers’ lives better, it’s very unlikely you’ll be able to make that data valuable to a third party.” — Josh Reich [13:35]

---

Numbers Round (51:31–END)

1. $160 billion – Value of the failed Pfizer-Allergan deal, blocked by new U.S. Treasury rules curbing corporate inversions [51:41].

   “Pfizer can no longer become an Irish company because the Treasury managed to find a way of preventing inversions. This is like politicians up in arms about something and actually doing something about it.” — Felix Salmon [52:15]

2. 6.6 million – Number of Americans at least one month delinquent on their student loans; the total with paused or delinquent loans is ~40% of graduates [53:31].

3. $203 million – Amount Wells Fargo must pay for ‘cascading overdrafts’ and misleading customers [55:16].

   “Our disclosures were totally deceptive... but none of our customers actually ever read our disclosures, therefore [they could not have been deceived].” — Josh Reich [55:16]

4. 11.4 billion – (Jordan) The net worth of David Tepper, a hedge fund manager leaving New Jersey for Florida, thereby impacting NJ’s state budget projections [56:59].

   “One dude has actually managed to affect an entire state’s budget...” — Jordan Weissmann [57:28]

---

Important Timestamps

• Introduction & Guests: 00:59–03:00
• Simple’s Mission & BBVA Acquisition: 03:00–09:28
• Millennials & Debit Card Use: 10:43–12:46
• Customer Data, Gamification & UX: 13:32–18:48
• Fintech Skepticism & Lending: 20:39–25:48
• Digital Banking & Branch Decline: 26:20–29:33
• Bitcoin & Blockchain Discussion: 29:33–33:58
• Tech-Bank Culture Clash: 34:04–39:23
• Panama Papers, Offshore Shells & KYC: 40:14–50:13
• Numbers Round: 51:31–end

---

Tone & Style

Conversational yet analytical, featuring good-natured debate, inside references, and a mix of skepticism and curiosity—especially about fintech’s promises, the realities of banking culture, and global finance machinations. The panelists keep the conversation lively, personalizing complex topics with accessible anecdotes and a few pointed jokes.

---

For New Listeners:

This episode is a deep dive into how technology is reshaping banking behind the scenes—sometimes for the better, sometimes possibly oversold. It pairs this with timely, international news about financial secrecy and regulation—the Panama Papers—while connecting the dots for listeners curious about “how the money really moves” in a digital, global age.

Transcript

[A]

Slate Money is brought to you by Casper, an online retailer of premium mattresses for a fraction of the price. Casper mattresses come with free delivery and returns within a 100 day period. And get $50 towards any mattress purchase by visiting Casper.com slatemoney and using the promo code slatemoney. And by wonder Capital, invest in large scale solar projects across the US by investing in Wonder Capital's solar funds. Create an account for [e-mail] money that's wonder with a U. Do well and do good. And by Betterment, the largest automated investing service managing billions of dollars for people just like you. Get up to 6 months of investing free when you go to betterment.com slatemoney betterment investing made Better.

[B]

Hel welcome to the international edition of Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon of Fusion. I'm joined, as always, by the one and only Kathy O'. Neill.

[C]

Hey. Hey.

[B]

The mathbabe.org general. Awesome person. And frankly, Kathy, because we've been hanging out for a while, you're a little bit normal here, right? There's someone more exciting than you.

[C]

I know. He's also a math nerd, which is exciting.

[B]

He's also a math nerd. Mr. Josh Reich.

[D]

Hello.

[C]

Hello.

[B]

What do you do, Josh?

[D]

I am the CEO and co founder of Simple.

[B]

What is Simple?

[D]

Simple is a technology company that's changing how people think and bank. We give our customers a Visa card, they can deposit their paychecks into it, they can do all the sort of things you'd expect from a bank. But what we're really known for is giving people a real sense of confidence with their money. We have really phenomenal tools that let people understand how much they can actually safely spend, let them save up for things in the future. I don't want to get too pitchy, but that's basically what we do.

[B]

All right, we're going to talk a little bit about what you're up to. Actually, just after. Should we mention the elephant in the room?

[C]

The empty seat.

[B]

There's an empty seat here which should belong to Jordan Weissman. But because he's a millennial, he's not here.

[C]

And because he lives in Brooklyn and.

[B]

Because he lives in Brooklyn now. Josh simple was founded in Brooklyn.

[D]

It was. It.

[B]

Did you ever find yourself, you know, just simply turning up, not turning up to important meetings? Cause they were in Manhattan?

[D]

No, because there was always the thrill of riding over the B train when you go over the Manhattan Bridge. And this is when Foursquare was still hip and cool. And if you could get that elusive Foursquare check in while you had that little bit of Internet on the bridge. Wow, that always made the trip into Manhattan worth it.

[C]

So you're saying you never got stuck on the N train, which is what's going on with Jordan right now?

[D]

No. Where does the end train run?

[B]

Yeah.

[D]

So is Clinton Hill.

[C]

I see.

[B]

He sounds Jordan at some point. In, in, in, in. In Slate Money Future, we will give Jordan what he really wants, which is an entire episode devoted to his disastrous move and, and, and how bad of a decision it was to move to Brooklyn and buy a house there.

[D]

Brooklyn is wonderful.

[C]

We could talk about co ops in general in New York. That would be fascinating.

[B]

But, but today we're going to talk about a bunch of stuff. We're going to talk about money laundering, we're going to talk about fintech, we're going to talk about bitcoin. We might even get the words fiduciary duty in there if we're feeling extraordinarily nerdy. But, Josh, when you were talking about simple, I'm like, well, simple, you're like, it's a technology company. Once upon a time, you told me you wanted to start a bank.

[D]

I was younger at that point. We had what was, I think was lunch trying to track down the date of this. I think it was about seven years ago. We had lunch and the idea was I was really frustrated with my bank at the time and I was also had just left working, running quantitative strategy at an investment firm. And.

[B]

There was, that was, that was a little silent thing that. What you couldn't hear if you were listening to the podcast was Cathy o' Neill reaching over to Josh Wright and saying, oh, I used to run investment strategy. I used to run quantitative strategy at an investment firm, too. We can bond over this.

[C]

Well, actually, I was just trying to mention that he shouldn't bump the table.

[D]

I'm also very fidgety. I was trying to interpret whether that was commiseration or condemnation. Yeah, no. So the idea was to try and use the financial system to help people better understand what's going on with their financial lives.

[B]

But, you know, you were called bank simple for a hot minute.

[D]

We were called banksimple for a while.

[B]

And then you ran into regulators.

[D]

We ran into regulators. And actually the backstory was, I never thought this would actually be a thing. I started a project like a folder in my source code repository. I had no idea for what to call it. So I came up with the Name Bank Simple. And at the same time, I reached out to the owners of Simple.com on the off chance that this thing would actually happen. And so banksimple.

[C]

I mean, the domain name, it was.

[D]

Just the domain name. Yeah, okay, the domain name. And we ended up getting Banksimple.com first. And then Simple.com came after our series A, when we had a little bit more money so that we could afford it, but they started in parallel.

[B]

So, I mean, so I have a Simple account. It's. I mean, it feels a bit like a prepaid debit card. It's this little white Visa card which I can't spend any money on it if I don't have, if I haven't like loaded it up, if I haven't loaded it up, loaded the account with, with money.

[C]

In fact, can I jump in and say that that's, that's how I think of simple is this through the simple card. And it's known to be a really excellent prepaid debit card, mainly because it's.

[D]

It'S not actually prepaid. So this is a fully featured bank account that you get. The big delineation, like prepaid is not, uh. Oh, we have an intruder.

[B]

Oh, my God. Jordan Wiseman has actually turned up.

[C]

Hi, Jordan.

[B]

Hi, Jordan.

[E]

Did the listeners know that I was just.

[C]

Yeah, we made a whole thing about it. Oh, I said N train. Sorry.

[E]

Oh, no, it was the queue. Sorry, everybody, for the late appearance. I'm still adjusting to life in deep Brooklyn and the erratic train schedules that involves.

[B]

We have no sympathy for you, Jordan.

[E]

Can I get some slack for my birthday? Because it is my birthday. Happy birthday.

[D]

Yes, you get slack, you get a.

[B]

Train delay for your birthday.

[E]

Yeah, that's basically my gift on a rainy day.

[D]

That's the way New York says Happy birthday. It's an authentic way of doing it.

[E]

Anyway, nice to meet you.

[D]

Nice meeting you too.

[B]

So, okay, so now, now that, now that Jordan Weissman has turned up, Josh was in the middle of explaining that although it might feel like a prepaid debit card because you have to put money into this account before you can spend it.

[D]

Well, same with the checking account. Like a regular checking account, you can't spend money unless you have money. Unless you want to get overdrafted.

[E]

Right.

[D]

So we are just a regular now account is the technical classification. It's an interest bearing checking account.

[B]

And you can, and, and you can spend money. And the difficult thing that I always find with prepaid debit cards or online accounts or whatever you want to call them is Putting money onto into it. Like if I have money, like cash, physical cash, it's not that easy to put that money into the account.

[D]

It's actually not that hard. So you can get cash in like digital cash in super easily, like ach or cheques or whatever. Just take a photo of a check. If you have cash, you walk to the post office and you get a money order. And by law, money orders have to be deposited into bank accounts within 24 hours. So if you take a photo of a money order that you've made from your cash, it's super cheap and it'll come into your simple account the next day.

[B]

Okay, Simple.

[D]

Basically the same as walking to a brand.

[B]

One of those lovely financial technologies which makes you go to the post office more often. I'm not excited about that one somehow, but okay, so. And. But now, weirdly, you are a bank or you're owned by a bank?

[D]

We are owned by a bank. So we started working on this six, seven years ago here in Brooklyn. We moved out to Portland, Oregon in 2011, launched in 2012, grew very quickly, and we were acquired by BBVA about two years ago. A little over two years ago.

[B]

Now BBVA being a huge Spanish international banking financial services giant.

[D]

Absolutely.

[B]

Yes, you are, you are.

[D]

Started the show with Hola. I can't do that authentically.

[C]

I'm sorry.

[B]

And you're off to Madrid soon.

[D]

Off to Madrid. I'm going there about once a quarter to check in and see what's going on there. They've actually made a pretty wise decision with their acquisition of Simple. Obviously I'm biased saying that, but they have done it. Large number of technology acquisitions in the past. And like a lot of banks that have tried to get into the technology space, they tend to kill their companies with their loving embrace. Like technology companies and banks don't tend to work together very well from a cultural perspective. And so what they've done with simple is they've made a very strong commitment to keeping us independent. So I am not the executive vice president for digital channels for North America. I am the CEO.

[B]

Is that an actual job?

[D]

There are probably seven people with that job in multiple banks around the world right now. I'm the CEO of Simple. I report into a board of directors. We have an independent chairman who chairs up our board. We run with the same governance model and corporate model from before we were acquired till after we were acquired. It's really important.

[B]

So I'm fascinated by this. You're a technology company, you're not a bank, you're owned by a bank. But what does that mean in terms of regulation? Do you get to avoid a bunch of banky regulations?

[D]

No, no. So we're fully compliant with all the sort of regs and laws. The accounts are fully FDIC insured. We go through audits on a frequent basis. We just went through our PCI audit a couple of days ago.

[B]

What does PCI stand for? I feel like I know.

[D]

Industry. Yeah. It is a industry defined set of law. Not laws, guidelines for what you have to do in terms of having security protocols to ensure that you keep card numbers safe.

[B]

So, and so the thing I want, the thing I'm mainly interested in is I know a bunch of people who have simple accounts, but I, to my knowledge, don't really know anyone who only has a simple account. Do you have a lot of people who just basically use your account as their main account?

[D]

That's the primary use case we're designed for. So in this room here, I can speak to at least one person who has at least their simple account as their primary account. We see for our customers because we have the ability to deposit checks, ability to sort of pay your bills and do all the things you can do with a regular checking account. That's what it's designed to do. So for our customers who are using their card at least once a week, they are using it at multiple times a day levels. So that's the real experience we optimize for. So we have tens of thousands of customers who are using it as their.

[B]

Primary bank account and they generally don't have a credit card if they're using it multiple times a day. That would be instead of a credit card rather than.

[D]

We may have to turn to our resident millennial because there's been a fairly big shift.

[B]

Jordan, do you have a credit card?

[E]

I do have a credit card, yeah. I milk that thing for points as much as possible and then I pay it off at the end of every month or at the beginning of every month.

[D]

So there's been a big shift in how younger generations use credit. After the crisis, we saw a big shift away from credit to debit cards as the primary spend vehicle. And what we've seen with simple is a shift away from cash to using the simple card. So the thing that makes simple different, apart from the fact that we don't have fees and we have a pretty ui, is we really want to help people save up money. We want to help them understand their financial lives and get to a better financial spot. So many people are graduating college with Huge student loans. They're graduating with this presumption that they don't have the mental fortitude to save. They don't have the right skill set. The banking system has sort of taught them that if you make mistakes with your money, you're going to be penalized. So they're shy of doing the right thing with their money. So what we do with simple is when you swipe your card, we do a lot of cool work. That means it appears on your phone in real time. And then you can attach a photo to that transaction, you can attach memos and hashtags. We automatically clean the transaction and geolocate it. And so customers can develop a much more emotional connection with their transactions and really understand the ebbs and flows of their cash flow and change behavior and do cool things when they actually use the product fully.

[E]

Yeah, I guess just to kind of dovetail that, if you look at what you're saying about the kind of shift away from credit card use among the young, you actually see that in like Federal Reserve statistics now, young people have really shot. I mean, that's credit card debt and revolving debt in general is one area where the under 35 demographic has really shifted away, has just cut it down. I think it's partly out of kind of coming out of the crisis and just a fear of what debt can do. And so there are there. It does seem like there would be a space for something that has a lot of the benefits of a credit card without necessarily kind of tempting people to load it up with debt they can't pay off later. Because people are very self conscious about that now, I think, or at least that's what the statistics are suggesting.

[C]

What do you do with all the data that you have connected to purchases?

[D]

So I actually wrote this blog post a couple of years ago where a lot of technology companies would come to me and say, hey, we have all this data, how can we monetize this? And the blog post I wrote was, if you can't find a really good use of your data to make your customers lives better, it's very unlikely that you'll be able to make that data valuable to a third party. So our approach with data is how can we use that data to better understand how our customers behave and design our product to get them to save more? So one of the features that we have is a thing called goals. Goals are basically named savings accounts that you can move money in and out of with no liquidity constraints. So you can speed a store, you can see a pair of shoes that you like. You can create a goal to buy those shoes. You can move money in and out of them freely, and we'll put money every day towards you getting those shoes. We will use data to work out what sort of behaviors customers demonstrate that lead them to achieving their goals faster. So I'm actually doing some interesting research right now looking at the impact of volatility on people's daily balance and their ability to save. There's this.

[B]

What kind of volatility?

[D]

So the volatility that you. So at the start of the month, you get your paycheck and you feel rich. You're going out, you're buying drinks for your friends at the bar. At the end of the month, you see your balance being very low. You're bringing in lunch from home and you feel poor. People learn to live at this average income level if you sort of take the weighted average day of any day in their year, but at the start of the month they feel great, at the end of the month they feel horrible and they go through these cycles. And so what I'm looking at is how much of the cyclicality of their balance impacts the cyclicality of their spend. And people who have a lower correlation between how much they spend as a percent of their balance tend to be better savers. They tend to be less impacted by the psychology of looking at their balance, go up and down every day. And this is really interesting stuff.

[E]

Question.

[D]

Yeah.

[E]

Do you, I mean, I'm sure you do have a sense of what the typical income of a simple customer is right now. Like, what demographic are you serving?

[D]

So our average customer is 29 years old. They're sort of all across America. So if you imagine a prototypical 29 year old, that's what they're like.

[E]

Okay, so like 29 year old, like maybe some college or college educated.

[D]

Yeah.

[E]

Okay, like professional kind of thing.

[D]

Then we don't gather a lot of stated data, so we have to imply a lot of this stuff. So some of our income data comes from like survey data coming from the census and using zip codes. And it's not super accurate, but we get to see how much money they're putting onto simple and how much money they're spending, which you can sort of infer income from. But again, it's not completely accurate. Yeah.

[B]

And then when you said that in terms of using the data, you just want to use it for things which make your customers better off. I remember going to a panel once with the founder of Mint who was really excited about getting all of the spending data and selling it to hedge funds who would be able to tell when people stopped going to Home Depot and they could then short Home Depot stock because they would have like a heads up that spending at Home Depot was going down this week or this month. Is that a red herring? Does that just not work?

[D]

It does not work for two reasons. One is, prior to Mint, the hedge funds already had access to that data. Credit card companies would sell it. I've seen that data when I was back in those days. And two, that's so counter to what we want to do. Like, the fundamental hypothesis at simple is that we compete with user experience. Most banks, at least retail banks, compete using price mechanisms. Price mechanisms scale linearly with the number of customers that you have. If you have a teaser rate, if you're giving out free toasters, whatever it is, for every additional customer you have, the more it costs you. If we build a great user experience for 1,000 customers, it doesn't cost us 10 times more to scale it up to 10,000 customers. So whatever we can do to use data to improve that user experience that pays massive dividends.

[C]

It sounds a little bit more like you're doing a gamification of the whole baking experience.

[E]

I was worried about, I was thinking about that word and then I was.

[C]

Like, well, I mean it has some, some negative connotations, but if you are setting goals and like, you know, giving each other.

[B]

You win little time.

[C]

Yeah, yeah, you got your shoes. Good job.

[D]

You know, I wouldn't go as far as gamification, but it's really subtle stuff. So one of the other things we have is a feature called Safe to spend. And Safe to spend is supposed to answer, how much money can you safely spend today without hurting yourself tomorrow? It's super simple mathematics. It just takes the amount of money you actually have, so your ledger balance, and then subtracts out any pending transactions and then subtracts out the things that you've told us about like upcoming bill payments or golds that you may have. So you could be in a position where you have $1,000 in your account, but you know your rent is due tomorrow for $600. You don't want to spend more than $400 today anyway. By using Safe to spend and making that number larger than available balance, just making it the more prominent number that you see on the mobile app or on the web, people anchor to that number. And so people who have more goals end up smoothing their daily spend because they're anchoring to the. Just from a design perspective, the physically Larger number on the screen. And that little tweak, that little nudge, if I will, sort of gets people to have better outcomes when it comes to saving.

[B]

Okay, so I want to expand this to not just simple but fintech more generally. So this, because this is a, this is not unique to what you're doing by, by any means. First of all, Kathy, I need to ask you to tell me about our sponsor this week.

[C]

You know what you want to do? You want to buy a really great mattress. In fact, it's an obsessively engineered mattress at a shockingly fair price from Casper. It's just got the right sink, the right bounce, and it contains two technologies, both latex foam and memory foam for better nights and brighter days. And guess what? There's a risk free trial and return policy. If you try sleeping on a Casper mattress for 100 days, you'll get free delivery and painless returns. If you don't like it, but you will like it, these mattresses are made in America and they're not expensive. It's only $500 for a twin size mattress and $950 for a king size mattress. If you compare that to industry averages, it's an incredible outstanding price point. So, special offers to listeners of Slate Money. This is the exciting part. You get $50 towards any mattress purchase. All you have to do is visit www.casper.com slatemoney and you should just use the promo code slatemoney. Two words, slate. Then money. 50 off. Terms and conditions apply.

[B]

So, Josh, I have been to a handful of fintech financial technology conferences. You, I'm sure, have been to about a million. And you're just that you can't ever bear the thought of seeing another one. But this kind of language about using software to change behavior and using data on consumers to improve the way that they're served. I feel like this is more or less every single fintech startup out there. Is this actually a big thing?

[D]

I think it is a big thing, but I think it depends which sector you're looking in. Where probably the most interest is happening in fintech right now is in the alternative lending space. And my background is a data person. I understand a fair amount about consumer behavior. I can see how the pitch to venture capitalists of we're going to use alternative data sources to better underwrite consumer credit can be a compelling pitch, but I'm skeptical. We have not seen a credit cycle. What we are seeing is a few unique opportunities in the market whereby banks aren't doing consumer credit. Right now. We're seeing arbitrage opportunities in the student loan space that's been probably providing more of the returns to the fintech companies than any leverage that they have from alternative data.

[B]

So your goals is basically a way of saving up for something. And I guess the flip side that the sexiest consumer credit startup right now is probably Max Levgin's shop, a firm, they kind of do the opposite of that, right? That you get your mattress today and then you pay it off in installments rather than just putting it on the credit card and then God knows when you'll ever pay off that credit card.

[C]

Right. Wait, what's this called?

[B]

It's called Affirm.

[C]

Affirm. Okay, so it's like a layaway, a techno layaway firm.

[B]

It's actually not a layaway because you get your item immediately, but you pay for it in installment rather than just having some big fungible mess of debt on your credit card where you can't really say, oh, that is the amount I owe on my mattress.

[C]

Got it.

[B]

Is. Are you saying, Josh, that that's. That they haven't really managed to sort of nail it?

[D]

I don't know. I haven't seen their internals by any means, but I think a lot of the right now are coming from a very low cost funding environment, coming from venture capitalists and hedge funds who are looking for yield. I think there's a very attractive pitch to be made around using data to inform alternative lending strategies. I think there's a lot of reasons why these companies could succeed, but we haven't seen, I haven't seen categorical evidence that data is actually driving outsized returns or better underwriting capabilities for these firms.

[B]

Okay, so I mean, I agree with you in principle. I'm also skeptical that, you know, some wonderful big data set is going to allow a whole bunch of formally excluded people to get credit, that kind of thing. A lot of people have been talking about it. Many fewer people have been doing it. But if that's not the great white shining hope of the fintech universe, which is raising billions of dollars in, in investment capital every year. What, what do you think is or is the whole area?

[C]

I'm just going to ju. Because I mean, I follow lending club and prosper pretty carefully. This, I actually have a chapter in my book about it, about the, the model. And one thing I, I mean, first of all, they're. They've been doubling every year. Maybe not the most recent year, I haven't seen the data, but they've been doubling. Obviously they're not huge have you seen.

[B]

What'S happened to their share price recently?

[C]

Their share price has been unstable.

[B]

I think the technical term is fell off a cliff.

[C]

Yeah, yeah. Come. Some of the people were defaulting at higher rates than they were expected to. But one of the things that, and we kind of went by this point earlier, I want to go back to one of the things that's happening is that these, the big banks are actually taking on this debt, the consumer debt that that has been offered on these platforms in the, in the form of securitization, which is interesting. So in some sense it's, you know, technology companies doing lending outside of the sort of finance industry. But in another sense it's actually funneling right back into the finance industry.

[E]

Yeah, I mean that in a way that sort of makes sense. Right? Essentially in a way that would work out great for everyone if you think about it just like a profit perspective because the banks are getting rid of all that front office work that they don't really want to do anyway because that's low, that's sort of low margin and they're going straight to the securitization end.

[C]

And the other thing they're doing is that they're sitting back and waiting for a bunch of Silicon Valley venture capitalists to try and fail and then they're going to take the ones that seem to be working and they should buy them up.

[D]

Maybe, maybe not. I think Jordan's hitting on the point here though, which is you could argue simple is in a very similar position. Like all the deposits that we gather go to our partner bank's balance sheet. We are not experts in treasury management. That's not what we do. We outsource that to the banks. What we are doing though is because we're competing using user experience, we can attract customers at a much lower cost than the banks can. If a bank wants to get a 29 year old with some college education to sign up for a checking account that's a couple hundred bucks in marketing costs. We are paying nothing near that because we have a better product. We have made the investment in that user experience. Lending club is being successful because they have a completely new channel that banks can't afford to operate or they just don't have the know how, how to operate. And so whether or not they have a unique advantage with underwriting, that's still to be seen. But they definitely have a unique advantage in their distribution channel which is much more cost effective than that.

[B]

Let me ask you about customer acquisition because this is, this is fascinating to me. Lending Club famously basically just has dials that can twiddle. If it wants more customers, it just twiddles the dial and out. You know, it can get more customers, and when and when it wants fewer customers, it can. It can scale that back according to how much money it has to. To lend. Do you have a similar dial for customer acquisition? If you, if you suddenly. If you woke up tomorrow and said, I want another thousand customers, is there like a button you could press and get that?

[D]

Yeah, yeah. I mean, the digital acquisition channels that exist today are so different to sort of traditional marketing efforts. So we can sort of turn dials up and we can track people throughout the process. We can look at ROI per channel, per click. This is stuff that's sort of the normal way of operating for most technology companies that large banks haven't really found out how to do.

[B]

So how do you do that?

[E]

Okay, that's exactly what I was going to ask because I'm not familiar with this process. I'd love to hear that in more depth. What button are you actually pressing?

[B]

People to open up a checking account is notoriously one of the hardest things that any bank can ever try to do.

[D]

If you look at where we've invested a lot of our time over the past year, traditionally opening up a checking account online is a really horrible process. Typically there's this web form that was designed in 98 or something, and it feels like it was designed in 98. And then it'll bump you to an offline process where you have to fax something and then you have to speak to a bank or go into a branch to drop off a signature card and you'll get it notarized. Yeah, it's crazy. So this is one of the things I tried to do when I was starting simple was trying to opening up banks accounts online. Like, all the large banks let you do it, but they all want you to come into a branch so they can cross sell you something else. So with simple, our new application process, it's just a couple of minutes from like beginning to end.

[B]

You're still not, how do you turn the dial?

[E]

How do you get the dial?

[D]

So it's how we turn the dial. So most of our customers come through word of mouth. And we don't have a lot of dials that we can turn there, but we do advertising. We have, you know, Google Ads and Facebook ads. And that's just a dollar in, dollar out situation.

[E]

So the phrase coming in the door actually brought this to mind for me. But I was just Looking at this report that was from Citibank, and they were talking about how they expected Fintech to actually kill off about 30% of the jobs in banking over, like, the next, you know, 10 or so years or several years. And part of that was largely the decline of branches, a lot of it. And it seems like a company like simple would be trying to contribute to that. And so I'm curious, do you. I mean, is this the direction you think the industry is actually heading? That branches are going to sort of become a relic? That the idea of going to a bank is going to kind of fade away, in a sense?

[D]

Let me answer your question with a stat. So for a couple of months last year, when we had the dial turned up, we were adding as many customers per month, whereby if we were a traditional bank, we would have needed 850 branches. Those 850 branches would have each employed six, seven employees, let's call it 6,000 employees across the branch network. Those 6,000 employees would have had a payroll of just shy of $200 million. We did all of that from our small office in Portland, Oregon, with less than 300 heads. There is a lot of scalability in growing online. The digital channel is a really interesting channel for servicing customers. Now, it doesn't speak to everyone. Right now there are a lot of people who really like walking to a branch, and we're not going to be the right bank for them. But for a lot of people who've grown up with smartphones in their pocket, who've grown up with the Internet, who are much happier to chat with their bank digitally and know they can call if they want to call, we're a great solution. Like, who wants to walk to a branch between bank hours, waiting a line to get an answer to a question when you can just do it on your phone?

[B]

All right, next question, because we've got a bunch of ground to cover here. Is there any point in the foreseeable future that along with the dollars I have in my simple account, I can also have Bitcoin?

[D]

Deep sigh.

[C]

No.

[B]

I ask this because a huge proportion these days of the money that's being invested in financial technology companies is going into Bitcoin and blockchain ventures? And I've been a very vocal skeptic of all things Bitcoin for many years. But. And frankly, the bitcoin industry doesn't seem to have fulfilled any of its promise. But that hasn't prevented a bunch of people from still, you know, throwing a bunch of money at it. So is. Is it a Thing.

[D]

It's a thing. It exists. I've seen it. It's. I haven't touched it physically, but it definitely exists. Whether you'll be able to get simple Bitcoin accounts, very unlikely in the near future. It's not a priority for us. And the reason why it's not a priority is, is we want to solve actual customer problems. As a technologist, Bitcoin is super exciting. It's a really interesting solution to a distributed systems problem. But when you think about, when you're a technologist and you think about payments, you think about. One sec. We have the Internet, we have computer science. It's really easy to move information around the world. Why shouldn't it be that easy to move money around the world as it is to send an email or whatever? That's not the hard problem when it comes to doing international remittances or payments or other things. Kyc, aml, a bunch of other stuff that's been in the news of late.

[B]

And we're about to move. This is a perfect segue to what we're about to talk about.

[D]

That's hard.

[B]

Bitcoin doesn't solve it now, but okay, so the reason I. One of the other reasons I ask is because Christopher Giancarlo, who's a commissioner at the Commodity and Futures Trading Commission, came out in a speech a couple of weeks ago saying, well, if the Federal Reserve had access to the blockchain and the blockchain had all of the information of all of the trades that were going on within Lehman Brothers, then the Federal Reserve could have seen this whole crash coming and could have. Or maybe not. The Federal Reserve, maybe the CFTC or someone could have seen this whole train wreck coming and could have headed it off at the pass, as it were. Now, I went on Twitter and said this was completely bonkers, you know, and got into a bit of a fight. Where do you stand on this?

[D]

Me personally? Yeah, I'm on the bunker side as well. It depends. What do you think was the cause of the Lehman crash?

[B]

Okay, we do not have three hours.

[D]

I mean, so if you, if it was sort of the. I think they were doing like these weird repurchase agreements whereby before each quarter they'd move their bad stuff off the balance sheet and then move it back on. Maybe if they were doing all of their accounting with blockchain and someone at the regulators had basically real time access to their accounts, maybe they would have noticed that. But I think the fundamental issue was people didn't know how to price and didn't know the value or some people certainly knew the value of the assets were pretty horrible. But if you didn't believe they were horrible, everything was great. It doesn't change. Ballarity.

[C]

Yeah, I mean, I was at D.E. shaw during that and we were 20% owned by Lehman. So you better believe that we were keeping our eyes on Lehman Brothers. And you know, there was plenty of advanced, advanced information that there were problems and we could look to the credit default swaps for Lehman. We looked at the overnight lending markets, which is exactly what you were just mentioning. Where other banks were like, what the hell's going on over there? So it just, it doesn't make sense. I'll say one thing though. There is one thing that happened in the crisis that really would have been improved with a better ledger system. And it's not Lehman exactly, it's mers, if you don't mind me mentioning this.

[B]

Yes, and you're absolutely right. If only every single real estate transaction had been on the blockchain, then we might have avoided a lot of.

[C]

So the blockchain is what's it good for? It's keeping track of ownership and like, from, from the get go, like a beautiful record of everything that's happened to a certain contract. And what we saw in the fallout after the crisis is that we had no idea who owned what mortgage in this country and it's still affecting mortgage owners. It's really bad. So, yeah, let's use this technology. But I don't think that exactly in the way that this guy said.

[B]

Excellent, we're going to leave this fintech subject behind now.

[C]

Can I just ask one more question?

[B]

Yes, Joshua, leave one, you know, question.

[C]

I'm. Since I've worked both in finance and in technology, I, I have my own opinion about the sort of culture clash that you were discussing, but I would just love to hear what you think is, is going on there and like how it, how is it to bring a technology company under the umbrella of a bank?

[B]

And when someone like Goldman Sachs comes out and says, we are a technology company, I mean, is it, does anyone take that seriously?

[D]

I don't take it seriously.

[C]

Well, I do take that seriously. I mean, I mean, I just had to say, unless you were. If you're ignorant of culture, like, the truth is finance companies are of course heavily involved with technology, but we have a, we have our own definition of tech. Anyway, it's like, it's part of the.

[D]

Question actually, I think, you know, it depends which sector you're looking at. If you're Looking at retail financial services, there's been such a critical underinvestment in the core technology that real technologists get excited about that. I think it's really hard to make the case that retail banks are technology companies. We are dealing with systems that were designed and built in the 1950s for sort of mainframe batch processing that throws out a lot of data. That data people find crazy because it's costly to store bytes of data.

[C]

Right, right.

[D]

And like the attitude that a bank takes about, you know, storing transactional data is let's keep just what we need to solve, you know, to solve accounting problems, versus the approach that we take as a technology company where everything's in the cloud. It's like, how can we add more data to each transaction? If you want to upload a 2 megabyte, 3 megabyte photo to a transaction, great. The marginal cost of storage is nothing for us. The marginal cost of storage at banks is still a lot of money just because the poor technology choices.

[C]

So is the cultural conflict coming from this perspective or is it something else?

[D]

It's really closely intertwined. I think what happened is there was this great article written in Wired by Steve Steinberg a number of years ago looking at packet switch technology versus circuit switch technology, sort of. This was the big debate that was happening in the late 90s as to what the future of the Internet would be. And you had the baby bells who came from a telephony mindset, and they said, circuit switch is the way to go. It works great for voice networks. This is how the Internet should work. Then you had a bunch of Unix hackers who were like, packet switch is the way to go because it's more robust and theoretically it's interesting and it's cool and geeky and whatever. When you look at the anthropologies of those two different groups of people, the technology choices that people have made, there's this sort of weird loop between the choices that people made, the impact it has on how they think about technology, and then the future choices that they make. And by looking at the two groups of people at that point, you can see that, you know, packets, which was going to win. This is getting way off topic for a finance partner.

[B]

But this is this. I mean, talking about great magazine articles, there's also the famous Michael Lewis article about Sergey Elenikov at Goldman Sachs, who in a weird way can be thought of as the packet switch guy going into a circuit switch institution. And he was building programs and knowledge within Goldman Sachs, but just with a very different attitude. And it was not a malign attitude, but it was an attitude which got him thrown in jail and cost him his marriage. And it was a, there's a. And I can see how when you talk about this, these, this sort of culture clash between bankers and technologists, it's, it's that kind of thing that you're talking about rather than anything, sort of any failure of banks to spend unbelievable amounts of money on technology. The IT budgets at Morgan Stanley or wherever, just stratospheric and they employ more, more and they employ more engineers. Not technology company.

[E]

I think you were referring specifically to consumer banks. At first it seemed like when I was, when you were talking, that's what.

[D]

That'S, that's the sphere that I know about. But you know, you can look at projects that are going on like Citigroups doing this project called Project rac. They started a number of years ago to consolidate their global core processing systems and they started this in 2006.

[B]

Is Project Rainbow a unicorn?

[D]

They've spent a lot more than a billion dollars on it, so unicorn status guaranteed. But they started this project and they're consolidating their core processing systems and they're going to end up with maybe three or four core processing systems that are still batch based. So it's going to launch sometime in 2020 x and it's going to be a brand new shiny batch based processing system, which is bonkers to use your phrase.

[B]

Although I mean, I have to say one of my most admired technology companies, if you can call it that, is the most boring and old school and bankery company you can think of, which is Swift, the international payments company who can transfer hundreds of millions of dollars around the planet in the blink of an eye for the cost of 10 cents. So I don't know, there's something to be said for the old school, right? I mean it's certainly much more secure than anything that you can do over the Internet.

[C]

I think security is a huge part of it. You know, when you work in a, in a banking, old school banking place, like a lot of that IT money goes to just making sure you never do anything improper as an employee. Whereas startups don't care about that.

[D]

We definitely care about that.

[C]

Just kidding.

[B]

All right, so we are going to move on just as soon as Kathy tells us about sponsor number two.

[C]

What would you do if you could help combat global climate change and make double digit returns at the same time? Does it sound too good to be true? Well, with Wonder Capital you can do it. You can do both. Wonder Capital is the leading online investment platform that allows individuals to invest in large scale solar projects across the United States. Your investment with Wonder goes directly to helping healthy United States businesses install solar PV panels. As those businesses repay their loans to Wonder, you receive steady monthly cash flows in the form of interest payments. And best of all, Wonder doesn't take any fees for investing your money. Learn how you can begin earning up to 11% [e-mail] money that's wonder with a U capital.com money we have to.

[B]

Talk about this this week because it's a fusion story as well as a story from like a hundred, two hundred other news organizations around the world. The Panama Papers, Mossack, Fonseca, this law firm in Panama, which I can more or less guarantee that no one listening to this podcast had ever heard of before last week turns out to have had hundreds, hundreds of thousands of shell companies which they created around the world for, you know, billionaires and politicians and celebrities. And why is this such a big business, Josh? Like what is, Is it mostly criminal?

[D]

I think the interesting point for me is sort of tying it to the previous conversation which was around culture. And there was that piece, the Panama paper piece today about sort of the relationship the banks had. And I think it was a UBS executive who wrote in an email, you know, Mossack is clearly violating international law. I'm seriously considering reporting them. Good. Right. Why don't you? And that's actually a really important question. Teresa Curran, who's the head of supervision from the SF Fed, gave us a speech earlier this week. I've heard her speak on this topic in the past about sort of the risk taking culture within banks. It's really hard to underestimate the power of the people that you work with on the actions that you take as an organization. And so that's why it's really important for us at simple that we behave much more like a technology company than a bank. But it's, it makes this problem really hard to solve. When you think about the banks that are involved, like lo and behold, hsbc, ubs, Credit Suisse were involved in this. I mean, we knew this six years ago.

[B]

And, and what's more, it's not necessarily the corporate headquarters, but if you look at the list of the top 10 banks which were using Marsack Farmseca to open up shell companies, four of them were based in Luxembourg and another three were based in the Channel Islands. So, so it's the branches of the banks which are based in the tax havens and who have that mindset to begin with.

[C]

Yeah.

[E]

I mean, I want to kind of clarify your question. When you're saying, why is this such a big business? Are you saying why are there so many people who are willing to facilitate this, even though it's just over the edge of legality most of the time? Or are you asking why is there a demand? Because, I mean, the demand seems obvious.

[B]

Well, no, tell me, tell me what's obvious about the demand.

[E]

I mean, in Europe you have, you know, a culture of tax exiles. Among other things, incredibly wealthy people in Europe have, you know, do face high tax rates and do. Some of them at least, are willing to give up their citizenship or all but give up their right to live in a country in order to avoid that. That's been the case for a long time.

[B]

Well, the great thing about all countries in the world, except for the United States is you don't need to give up your citizenship.

[E]

Sorry, when I say you give up.

[B]

Your residence is all you need to do.

[E]

Exactly. David Bowie moves to Switzerland or whatnot. And so. Or, you know, David Bowie lived in.

[B]

New York, but yes, in principle, he.

[E]

Was in Switzerland, New Zealand for a while too. But so anyway, my point being that, you know, you have this culture of tax exiles. It's a lot. So if you do have some regional personal attachment to where you're actually living, in some sense, it's going to be simpler for you to actually, you know, set up a legal arrangement that's pretty well hidden in a. Essentially a secret lockbox in Panama.

[C]

So this is basically. Let me get this straight. People who lived in, say, France but didn't want to pay taxes and they somehow got this money outside, how did they get the money that they put in these secret accounts and these shell companies? I guess that's a stupid question, but it's.

[B]

So if you're. Take the example of Lionel Messi. Yeah, right. You're an international footballer, you're Argentine, you what, your day job is in Barcelona. You sign a contract with some big sponsor to pay, you know, who. Who wants to pay you a bunch of money to use your image to sell widgets of some description. And the sponsor might be in Korea. And you, you know, do you need that person to pay you money in Spain? No, you can probably get that person to pay money to a shell company in the Cayman Islands where it just never hits. It never hits your residence.

[C]

I see.

[E]

So.

[C]

Because it is pretty hard to take money that you made inside a country.

[B]

And yeah, the trick is to make sure you never make it in the country to begin.

[C]

So it's international. It's always international laundering.

[E]

Richard Branson is famous for this. You know, the Virgin founder, he has this. I mean, Virgin is made up of hundreds and hundreds of shell companies. He has his own island, Necker island, that he. I think he's actually is a resident there now. And so he makes sure to avoid that money, you know, ever keep that money from touching England. And so, yeah, I mean, it's. You have lawyers and you have money and you. And one of the things about the Panama Papers is showing the way people use intermediaries, trusted friends, to kind of spirit money out of the country. You have your buddy open an account. That's what Putin did. Essentially. He had his musician friend open accounts for him. And then, you know, you don't know who the actual beneficiary is. Things along those lines, a lot of.

[B]

It is just about secrecy and opacity, even when it's not tax evasion or tax avoidance. There are other reasons why certain people, like politicians, for example, might not want the world to know just how rich they are. So they create these shell companies and put their money in there.

[E]

That's true. But the money quote from the Mossack Fonseca investigation is that I think they say 95% of our business is creating vehicles for people who want to deal with taxes. So it seems like that, I mean.

[C]

How do they know who is trying to avoid taxes and who just wants privacy?

[E]

That I didn't get that deep into, But I'm sure we're going to find out more.

[B]

But Josh, tell us a little bit about. You were mentioning these lovely acronyms like AOL and kyc. Tell us. I mean, we've seen. And it seems like it was almost in reaction. I mean, it's very recently almost in reaction to these Panama Papers. News the KYC laws, know your customer laws have been beefed up a bit to the point at which banks have to know who the beneficial owner is of the companies that they're dealing with.

[D]

Yeah, I thought that was really interesting. When the banks came out with their statements in response to the Panama Papers, they always had a sentence in there saying, we knew who the beneficiaries were for these accounts. And the statement that I think FinCEN made today or yesterday. FinCEN is the financial Crimes Enforcement Network from the Treasury Department. They're responsible for enforcing money laundering crimes or money laundering laws. Have come out and said that a lot of banks have been taking the standard with a shell company that all they need to know to meet sort of Patriot act and KYC requirements is they just need to know who set up the shell company. Now, it's often designed so that the person who set up the shell company is not the beneficiary. So you'll have Putin's cellist friend, but the beneficiary is really Putin. So FinCEN is proposing. I haven't seen the proposed rules, but I' ones I think you're referring to, that they want to tighten up to ensure that they know who the beneficiaries are for these accounts. But we've seen this sort of happen over the course of years. I'm reminded of this case, Payoneer, that happened in 2010. Do you remember when Mossad killed that Hamas agent in an elevator in Dubai, or am I the only one who saw that? There was web video that came out. It was kind of gruesome, or you got to see spycraft in action, but Mossad went out and killed someone in a hotel. And it turned out they were using a prepaid card issued by an American prepaid company called payoneer. And a lot of that story reminds me of what happened or what's happening or coming out right now with the Panama Papers, whereby you see these interchanges or exchanges between lawyers and banks saying, I thought you were responsible for the kyc. And they were saying, no, I thought you were responsible for the kyc. Because what happened in the payoneer case is payoneer is a prepaid program. They are supposed to know who their customers are. They assumed that their bank partner knew who the customers were. The bank partner assumed that the program manager was doing. They both had this plausible deniability of finger pointing. Say that I thought you were doing that. And so the Office of Thrift Supervision came in when they used to exist and found this floor and found a bunch of other flaws and had a consent order. But as a consequence of that, in retail banking in America, there's now much tighter third party risk control. To say that you can't just say, I thought you were doing that. So we have to audit the third parties that we work with, the third parties that depend on us audit us. There's now this chain of control and command for particularly around KYC and money laundering, because terrorist financing is a thing in America, but it doesn't necessarily exist.

[B]

So where do you. So if I'm a drug dealer in America and I open up a simple account or try to open up a simpler account, like how do you work out that I'm not legit and say you can't open up a bank account with simple.

[D]

I don't think I'm allowed to talk about that.

[B]

Really?

[D]

Yeah.

[B]

Wow. Are you like, under.

[C]

Of course he's not allowed to talk about that because then we would game his system.

[B]

Wow.

[E]

Right now there's somebody listening very closely.

[D]

In fact, technically asking that question.

[E]

Peru.

[D]

It's a problem.

[E]

Yeah. We have no interest in the answer whatsoever.

[B]

I will try. I will officially say so. I want to find out now. Any minute. Any. I'm a journalist anytime.

[D]

I'll give you some things that are public. So the Department of Treasury, through the Office of Foreign Asset Control, publishes a list called their ofac. List of Politically Exposed Persons. So when you're looking at international things, you'll look for names on that list and you'll cross check and look for aliases and do all those sort of things. When it comes to domestic issues, that. That's harder to talk about.

[B]

Wow, that's fascinating. Okay. Kathy.

[C]

Yeah.

[B]

Can I impose upon you one more time?

[C]

Absolutely.

[B]

Tell me about one more sponsor.

[C]

My pleasure.

[B]

Thank you.

[C]

If you're anything like me, you have no idea how to save for retirement or college funds for your kids or anything involving money. And it's really scary. Plus, you have this feeling that every time you talk to somebody who's in charge of helping you that they're just lying to you and taking your money because it suits them to do so. Notwithstanding the most recent decisions of making it a fiduciary duty. We'll put that to the side and we'll talk about this new amazing thing you can do, which is given to.

[A]

Us by betterment.com Betterment is the largest independent robo advisor. This automated investing Service serves over 150,000 customers. They manage over $4 billion. For people just like you, it's never too late to save for retirement or other financial goals. And Betterment has changed the industry by making investing easier and cheaper. You can get more information and up to six months of automated investing free when you go to betterment.com slatemoney that's betterment.com slatemoney betterment investing made Better.

[B]

Okay, so with. With Mossack, Fonseca and the Panama Papers out of the way, that basically brings us to the numbers round.

[C]

Yes, it does. I have a number.

[B]

What's your number?

[C]

Ooh, this is my. I sort of finagled us to. Let me talk about this. $160 billion. That is the failed deal. That was the value of the failed deal with Pfizer and Allergen. This week due to the Treasury's new rules around inversions.

[E]

Yeah, the Treasury's gotten.

[C]

This is not that different from. Remember when we heard about the Connecticut had come up with a new tax law just for Yale. This is kind of like treasury came up with a new law just to stop this acquisition.

[B]

Pfizer can no longer become an Irish company because the treasury has managed to find a way of preventing inversions. I mean, this is like politicians up in arms about something and actually doing something about it. It's almost unheard of.

[D]

But it's not politicians.

[E]

Yeah, it's regulated. So what's interesting is that the treasury has looked at the situation and said, we have all these countries that are deporting themselves to save on American taxes and we have a Congress that won't do anything about it. And so they're playing. I mean, they're playing Whack a Mole. Basically, each time they see one of these big inversion deals come down the pipeline, they go, hmm, how can we tweak the law within the regulations that are or within the framework that already exists to prevent this from happening? And I think cumulatively, this is an extremely smart strategy because now all these. Basically the pharmaceutical industry especially has gotten the message that if you try to do one of these deals, we are going to find some way to mess with you significantly enough that you're not going to want to do it, and it's going to be a lot of wasted effort. So I think that actually this is highly effective. It's. Even though it is Whack a Mole. It's one of the best games of Whack a Mole. It's like a. It's like a high score on Whack a Mole High school.

[B]

Okay. I have a very Jordany number this week.

[E]

Okay.

[B]

Which is 6.6 million.

[E]

All right.

[B]

Which is the number of Americans, according to the latest quarterly report, who are at least one month delinquent on their student loans. And in fact, if you add it all up, the proportion of graduates who are not paying anything on their student loans, either because they're delinquent or because they're in deferment or something, is 40%.

[E]

Yeah, it's a huge number. Although some of that. That's a little high because some of those people are still in school, but it is a large percentage. I will say the good news here is that the Department of Education is realizing this is totally crazy. And not all of it is people being unable to pay their loans. Some of it is just people not realizing they have to pay their loans or not getting contacted by their loan servicer in a reasonable way. So what they're doing is they're forcing all the servicers now to start working through a single web portal, and they're trying to simplify this.

[B]

Josh, you deal with millennial finances on a daily basis. The general understanding out there is that people are much more likely to make their car payments, their credit card payments, or just about any debt in the world before their student loan payments. Because if you default on your student loan payments, you know, so what is this what you see?

[D]

No, it's a huge concern. Student loan payments, healthcare payments are the two biggest causes of worry amongst our customer base. These things hang on you for life. And while there's different treatment of student loan debt, people don't want to be in a position of debt, particularly students who are coming out of the financial crisis, who are coming out of 2008 and sort of seeing what happened to their families. They have this big aversion to debt. And we were talking about this earlier with their attention or their attitude toward credit cards. It's something people want to be debt free.

[B]

So do you have a number?

[D]

I do. It's a very Josh number, surprisingly enough. 203 million. So this was the amount of money that Wells Fargo has to pay for their practices in California of doing these cascading overdrafts. I'm sure you guys are familiar with this. The reason why I think this number is really interesting is this is a case that made its way all the way to the Supreme Court, with the argument being that they were being deceptive in how they were offering their overdraft protection services. The Supreme Court refused to hear it, but the argument that Wells Fargo was making was, yeah, totally. Our disclosures were totally deceptive. If you read them, it was really hard to understand, and you wouldn't have understood the amount of exposure that you had if you. If you were in an overdraft situation. However, none of our customers actually ever read our disclosures, therefore.

[C]

Oh, my God.

[D]

Yeah, this is great. This is really beautiful legal argument.

[E]

This is like a sleep pitch at the Supreme Court.

[D]

It was wonderful. It was like, if our customers. If customers have not read it, they could not have been deceived. And therefore, you cannot form a class of people who have not done something and not been deceived by not reading something. I know I should have accepted that.

[C]

Just so they could slap those people in the face.

[B]

I need to. Actually, since you mentioned the Josh number, you're one of the Few people I know whose Twitter handle is a number.

[D]

It is.

[B]

So what is your Twitter handle and what is the number?

[D]

My number is i2pi, so e to the power of i2pi.

[B]

So take e, E, the natural logarithm.

[D]

Natural logarithm, I the complex number two times PI. So you go around the circle and you get one. It's, it's, it's, it's very nerdy and cool.

[B]

It's nerdy and cool. Jordan, you're last up on the number front.

[E]

Yep. So in, in keeping with tax avoidance, My number is 11.4 billion, which is the net worth of David Tenor. Say David Tepper. Tepper, Sorry, which is the network.

[C]

I was gonna say David. Isn't he the Doctor who?

[E]

David Tepper, he's a. Oh my God.

[B]

Imagine how much.

[D]

Before you continue, let me say I'm.

[B]

A very travel back in time. Doctor who has to be the richest person in the world.

[C]

That's how we know who it is.

[B]

Anyway, David Tepper, he's, he's finally leaving New Jersey.

[E]

Yeah. So David tepper, he's worth $11.4 billion. He is a very, very successful hedge fund manager. I think like Forbes is felling that he was like the most successful money manager of his generation or something. But the fact that he is now moving to Florida from New Jersey is actually throwing off the budget estimates for tax revenue in New Jersey. The state, like the state treasurer or the state officials said they are the. There's more forecast risk now in their estimates because this one guy is leaving the state. They're not sure how much money they're actually going to have on hand, which is just amazing to me. One dude has actually managed to affect an entire state's budget and not a small state. I mean, we're talking New Jersey. It's a fairly wealthy large state with a big tax base.

[B]

Nonetheless, David Tepperman, now a resident of Florida, which has no income tax. I'm sure that's sheer coincidence. I'm sure he's just moving there for the sunshine.

[E]

Yeah.

[B]

Okay, that is it for us this week. Thank you for listening to Slate Money. Thank you to Audrey Quinn, Steve Lichti, everyone else at the Panoply Network, which is [e-mail] Panoply to Andy Bowers. But most of all, thank you to Josh Reich who's flown in all the way from Portland just to drop some knowledge about everything except for how he can, how he can identify drug dealers. We'll have to find that out from someone else. We will talk to you in a weirdly experimental and awesome podcast next week on Slate Money, where I'm going to try and do Slate Money live on stage. We'll see how that goes. So we'll see you then. Thank you very much.

[D]

Hi, this is Josh Levine from Slate's sports podcast, Hang up and Listen. I'm here with Stefan Fatsis. Hello, Stefan. Hello, Josh. I'm here with Mike Pesca. Hello, Mike. Hi. And we, all three of us, will be on the same stage coming up on April 25th, Monday night in Washington, D.C. for a live show at the Woolly Mammoth Theatre. It's very rare for us all to be together. It's gonna be fun.

[B]

Both of those.

[C]

It's rare for us to have fun.

[D]

And it's rare for us to be together.

[C]

So that's good.

[B]

I'm glad we're getting both done at once.

[C]

To be together and have fun at the same time. Yes, that's right.

[D]

So if you want to be with us, if you want to have fun, you can shoot that gap, thread that needle, be there. April 25 at the William Emmett Theatre in Washington, D.C. to buy tickets, you can go to slate.com live. April 25, Washington, D.C. hang up and Listen.