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First Move with Julia Chatterley
U.S. Stocks Approach All-Time Highs Despite The COVID Pain; New U.S. Sanctions Raise Questions About The Smartphone Maker, Huawei's Survival; The Maker Of Fortnite Takes Apple To Court. Aired 9-10a ET
Aired August 18, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:33]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE: Live from New York, I'm Julia Chatterley. This is FIRST MOVE, and here's your need to know.
Records amid recession. U.S. stocks approach all-time highs despite the COVID pain.
Hurting Huawei. New U.S. sanctions raise questions about the smartphone maker's survival.
And Apple's epic battle. The maker of Fortnite takes the tech giant to court.
It's Tuesday. Let's make a move.
Welcome again to FIRST MOVE. Great to be with you this hour, and we have lots of cutting edge science coming right up, including the CEO of Novavax
who will be discussing the testing of their vaccine candidate and some global production deals, too.
And another major test for China's Huawei, as I mentioned. The Chief Security Officer, Andy Purdy will be here later in the show to discuss the
latest U.S. restrictions on their business, too.
Now, speaking of tests, a fresh test for the bulls on Wall Street as well. The S&P 500 flirting with record highs. We closed a couple of points short
yesterday. The NASDAQ, however, achieved it, looking to extend those record gains as you can see in the session today.
The message is clear, it seems, Wall Street, unfazed by the pandemic, the renewed U.S.-China tensions and the collapsed stimulus negotiations here in
the United States as well. Unfazed or just immunized? We'll discuss later on in the show, too.
For now, Tesla driving the NASDAQ higher yesterday. The Musk march continues with the stock soaring some 11 percent Monday, closing above
$1,800.00 a share for the first time ever. It's up another three percent, I believe. Yes, more than three percent premarket today. Wowsers.
Bubbalicious, I think.
Now, home building may be less sexy than electric cars, but that sector is on fire, too. An exchange traded fund tracking S&P 500 home building stocks
hit multiyear highs yesterday as well. Why? Rock bottom mortgage rates.
U.S. home builder sentiment just hit the best levels since the late '90s and what do homes need? Well, they need filling with stuff, shares of
Walmart and Home Depot trading mixed premarket after posting strong Q2 sales results, Walmart's sales spiking almost 100 percent, and enhanced
benefits and stimulus checks supported spending there, too. Much of that, of course, now gone while those negotiations continue, or they don't.
Let's get to the drivers. Christine Romans joins me now and much to discuss. Unfazed or immunized, Christine? Let's start there because one,
the stimulus, at least for now, is not coming as we discuss on a daily basis. Meanwhile, shares making record highs.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: It's remarkable, isn't it? And when you look at these retail earnings in
particular, I see the stimulus in flashing green lights here in these numbers, right?
People stayed home and they spent the money the government sent them, the stimulus checks and the unemployment benefits and when you look at what
they bought from Walmart, for example, home goods, and lawn supply things and electronics. Even Kohl's didn't lose as much money as people thought it
would and that's in part because of all that stimulus that really was a wind in the sail of the American consumer.
But it's gone now, and that's why you've got Walmart shares down a little bit in premarket because the CFO on his earnings call saying that, you
know, look, the stimulus -- the stimulus tailwind is not there anymore in terms of sales, so that will be an uncertainty going forward.
So, what we see in the rear view mirror is all of that epic help from Congress that kept the consumer afloat, but you still don't see that
urgency reflected in Washington right now.
CHATTERLEY: Yes. And Christine, actually, thank you for pointing that out because that did catch me off guard. I was expecting there to be talking
about seeing them making fresh record highs at the open, Walmart and Home Depot, and of course they've turned round and your point exactly.
What happens to spending now if we don't see people, particularly those without jobs at this current moment in time, not getting support,
relatively unchanged?
Christine, also, interesting to point out as well, insiders, corporate insiders are taking money off the table.
ROMANS: That's right, at a rate we haven't seen since 2006. Whenever we're making comparisons to 2006 and 2007, I start to get nervous, right, because
that was an incredibly bullish time when then you started to see some of the insiders begin to sell again and we headed into a recession after that.
[09:05:13]
ROMANS: So the insiders, you know, they have to disclose their sales, the time and how much, but they don't have to say the why.
So, we don't know the why of the sales, we just know the what, and the when. And now, it is billions of dollars in insider sales, which reflects,
I think, a feeling that, if I were to surmise, that this has been an epic rally, some 40 percent for the NASDAQ, more than double digits for the S&P
500 from the lows, and so now it's time to pause and take a look at what the recovery is going to look like.
We also saw a note from Bank of America this morning that said that leaders -- business leaders and chief executives see we're more likely to have
double-dip recession than a V-shape recovery. That's a concern.
CHATTERLEY: Yes. Christine, are you daring to suggest that we actually have to look at the fundamentals here rather than just ride the wave of
stimulus? Wow.
ROMANS: It's hard with $12 trillion of stimulus all around the world. It's hard to sort of parse out where the fundamentals end and where euphoria
begins and unintended consequences, also, of stimulus.
CHATTERLEY: Yes. We'll keep bringing it back to the real economy and real people. Christine Romans, thank you so much for that.
ROMANS: You're welcome.
CHATTERLEY: All right, Beijing lashing out at the Trump administration as it tightens restrictions on Huawei. The Chinese Foreign Ministry says the
U.S. has generalized the concept of national security, abused national power, imposed various restrictive measures on Chinese companies such as
Huawei, and bullied without providing any evidence.
Sherisse Pham is live in Hong Kong with more. Well, Sherisse that was being pretty punchy there from the Chinese Foreign Ministry. A lot of people
here, though, saying this is a lethal blow to Huawei's smartphone business.
SHERISSE PHAM, CNN BUSINESS REPORTER: This is a deadly blow for Huawei's business altogether, actually. This could be the final nail in the coffin
for the company.
Analysts are saying that without access to this vital technology, Huawei will be really hard pressed to build its smartphones and its 5G network
gear that it sells to clients around the world.
So let's dig in a little bit into what these latest U.S. restrictions are. They dig further than the restrictions that were imposed on the company in
May. Back then, Washington was pretty much cutting off access for Huawei chip design subsidiary companies, a company called High Silicon from
manufacturing chips -- contract manufacturing chips and then powering Huawei's devices.
This time around, the restrictions that were announced overnight are that Huawei is now cut off from any foreign chip designers, which means that
they do not have any access now to advanced semiconductors for its 5G phones, for its high-end smartphones, for its mid-range smartphones as well
as its telecommunications networking gear.
And this, of course, is all part of Trump's campaign against Huawei. Washington has long alleged that Huawei poses a national security risk,
that the company could be used to spy on Americans.
These are allegations that Huawei has repeatedly denied. We haven't heard from the company yet. I will say this is an unusually lengthy time for
Huawei to be silent on such broad, sweeping restrictions against the company.
I know, like you said at the top there, you'll be talking to Andy Purdy later in the show and we will really be watching to see what he says about
what this means for Huawei's business.
CHATTERLEY: We absolutely will, and Sherisse, I was going to tease that again, but you've done it for me. So thank you so much for that, and we
shall see what the company says about this.
Sherisse Pham there, brilliant to have you with us, and as always.
And as Sherisse says, the Chief Security Officer for Huawei in the United States is coming up on the show, so we'll ask him what this means and
perhaps how China responds, a critical question here, too.
All right, let's move on. An epic battle against Apple. Epic Games says Apple is a bully that, quote, "retaliated ferociously against its entire
business." That, according to court documents filed Monday.
Last week, Apple removed the hugely popular game, Fortnite, from its store after Epic introduced its own in-app payment system in violation of Apple's
App Store policies.
Clare Sebastian joins us now. Wow. When I read this, I thought, this is bold from Epic Games. There are a lot of people, app developers that say
Apple is too powerful in charging the money for access to the App Store. That this is Epic literally flouting the rules here and saying, okay, bring
it on.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, so, Julia, this is unfolding pretty rapidly. Last week, we have the removal of Fortnite" from
the App Store and Google Play and a sort of separate issue and then Epic filing that court case, that blockbuster court case against Apple,
basically asking for an injunction to stop Apple from being able to exert so much control over its App Store.
[09:10:08]
SEBASTIAN: Their particular issue is with the 30 percent commission that Apple charges on both app downloads and also in-app purchases and the fact
that Apple requires developers and app makers to use their own proprietary payment systems.
Well, Fortnite, of course, triggered this by giving users a choice that they could go directly to Epic and save some money.
Now, this week, we have a new issue. Epic now says that Apple has not only removed Fortnite from the App Store, but they are threatening to cut off
access to Epic Games. That includes not only Fortnite but also their Unreal Engine, which is their game engine, which developers, hundreds of
developers use to make games -- to cut them off from the Apple developer program.
They say this represents an existential threat to their business, so they have filed an injunction to stop, not only the removal of Fortnite from the
App Store, but this next round of what they call retaliation.
Now, we do have, Julia, a response from Apple this morning. They say they want to keep the company as part of the Apple Developer Program, but the
problem Epic, they say, has created for itself is one that can be easily remedied if they submit an update of their app that reverts it to comply
with the guidelines they agreed to and which applies to all developers.
They say, we won't make an exception for Epic because we don't think it's right to put their business interests ahead of the guidelines that protect
our customers.
So, Apple is saying there's an easy way out for Epic, just go back to the rules, don't put this alternative payment system in the Fortnite app and
everything will be fine, but of course, neither side is budging at the moment.
CHATTERLEY: Yes. And let us keep taking our cut. I can see both sides of this. It goes back to the big argument in Congress, of course, of anti-
competitive behavior. It's going to be a fascinating one to watch.
Clare Sebastian, thank you for giving us the details on there and making it so clear because it's quite complicated, this story. Thank you.
All right. Let me bring you up to speed with some of the other stories making headlines around the world.
Democrats held the first of four nights of their virtual convention with a few small technical glitches, but no major ones. Speakers including
Democratic heavy hitters, voters, and even some Republicans.
Former First Lady, Michelle Obama closed out the night with a powerful criticism of President Trump's leadership. CNN's Jessica Dean has the
details.
(BEGIN VIDEOTAPE)
MICHELLE OBAMA, FORMER FIRST LADY OF THE UNITED STATES: We have to vote for Joe Biden in numbers that cannot be ignored.
(END VIDEO CLIP)
JESSICA DEAN, CNN CORRESPONDENT (voice over): Former First Lady, Michelle Obama wrapping up Night One of the Democratic National Convention with an
impassioned plea to Americans.
(BEGIN VIDEO CLIP)
M. OBAMA: Donald Trump is the wrong President for our country. He has had more than enough time to prove that he can do the job, but he is clearly in
over his head.
He cannot meet this moment. He simply cannot be who we need him to be for us. It is what it is.
(END VIDEO CLIP)
DEAN: The Former First Lady pulled no punches.
(BEGIN VIDEO CLIP)
M. OBAMA: Whenever we look to this White House for some leadership or consolation or any semblance of steadiness, what we get instead is chaos,
division, and a total and utter lack of empathy.
You know that I tell you exactly what I'm feeling. You know I hate politics. But you also know that I care about this nation.
If you think things cannot possibly get worse, trust me, they can and they will if we don't make a change in this election.
(END VIDEO CLIP)
DEAN: A source tells CNN, Obama practiced her speech for weeks and while a speech writer helped her draft the speech, she knew exactly what she wanted
to say. Obama imploring Americans to think of the next generation.
(BEGIN VIDEO CLIP)
M. OBAMA: They watch in horror as children are torn from their families and thrown into cages and pepper spray and rubber bullets are used on
peaceful protesters for a photo op.
Sadly, this is the America that is on display for the next generation.
(END VIDEO CLIP)
DEAN (voice over): Another top speaker, Senator Bernie Sanders. Biden's staunchest opponent in the primaries gave a full-throated endorsement,
speaking out to his supporters.
(BEGIN VIDEO CLIP)
SEN. BERNIE SANDERS (I-VT): Joe Biden will end the hate and division Trump has created. He will stop the demonization of immigrants, the coddling of
white nationalists, the racist dog whistling, and the religious bigotry.
To everyone who supported other candidates in the primary, and to those who may have voted for Donald Trump in the last election, the future of our
democracy is at stake.
(END VIDEO CLIP)
DEAN (voice over): Four Republicans also endorsing Biden, including former Ohio Governor John Kasich.
(BEGIN VIDEO CLIP)
JOHN KASICH (R), FORMER OHIO GOVERNOR: I'm a lifelong Republican, but that attachment holds second place to my responsibility to my country.
(END VIDEO CLIP)
DEAN (voice over): President Trump's handling of the coronavirus pandemic playing a big role throughout the evening.
Kristin Urquiza spoke about losing her 65-year-old father to the virus, saying he contracted the virus after visiting a karaoke bar once Arizona's
lockdown was lifted because he believed President Trump that it was safe.
[09:15:18]
(BEGIN VIDEO CLIP)
KRISTIN URQUIZA, LOST FATHER TO COVID-19: My dad was a healthy 65-year- old. His only preexisting condition was trusting Donald Trump and for that, he paid with his life.
(END VIDEO CLIP)
DEAN (voice over): But in the end, it was Michelle Obama's speech, laying out the stark choice all the night speakers presented.
(BEGIN VIDEO CLIP)
M. OBAMA: If we want to be able to look our children in the eye after this election, we have got to reassert our place in American history, and we
have got to do everything we can to elect my friend, Joe Biden as the next President of the United States.
(END VIDEOTAPE)
CHATTERLEY: One thing that jumped out to me about that speech, just look at her necklace. You don't often see that, but look at that. Whatever your
political persuasion -- Republican, Democrat -- wherever you are in the world, the importance of voting. I liked the necklace. Yes.
Okay, over the weekend, thousands of party goers packed out this pool at a water park in Wuhan, China. Social distancing and masks were out while
music and dancing were in.
The city was the original epicenter of what became the worldwide coronavirus pandemic just months earlier. The city was under a strict
lockdown that lasted 76 days. Wow. We've forgotten what those kind of things feel like but that is Wuhan, well and truly back, it seems.
All right, still to come here on FIRST MOVE, an update on the race for a COVID vaccine as one of the U.S.-backed candidates enters a new trial in
South Africa. We're joined by the CEO of its producer, Novavax.
And China criticizing President Trump's newest restrictions on Huawei. As we discussed, we'll be talking to the company's U.S. Head of Security about
being caught in the cross fire. What next? Stay with us. We're back after this.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE on what looks to be a pretty strong day for global stock markets. We've got Wall Street futures in the green
following the tone from Europe and much of Asia.
[09:20:07]
CHATTERLEY: Cautious comments, though, let's be clear, from Walmart on its sales outlook, injected a little bit of caution premarket. That said, the
S&P 500 will be trading close to record highs at the open.
A record close for the S&P 500 today would be a key psychological milestone, I think, for the markets. Some see it as the true end to the
bear market that began with the COVID-19 lockdown, swiftly leaving those, it seems.
Stocks have made a late summer leap, but the dollar, meanwhile, in the doldrums, falling for a fifth straight session. It reflects continued
concern I think about the pace of economic recoveries as we await the longer term fix.
And in that vein, there are more than 30 COVID-19 vaccine candidates in clinical trials. One of the few backed by the U.S. government is Novavax.
The company has gone broad in its bid for a vaccine. Its productions agreements in India, a deal with the U.K. to supply millions of doses, and
it just started a new study in South Africa, too. We've got lots to discuss.
Joining us now is Stanley Erck, he is the CEO and President of Novavax. Stanley, fantastic to have you on the show. Let's start with that trial
specifically. Talk to me about what you're going to be doing in South Africa.
STANLEY ERCK, CEO AND PRESIDENT, NOVAVAX: Well, thanks for having me on. It's an important trial. It's designed to be -- it's called a Phase 2-B
trial so it's an advanced Phase 2 trial where we'll be actually looking not just for safety and immunogenicity, which you normally do in a Phase 1 or a
Phase 1-2, but we're also looking for efficacy.
And so the trial is designed to show efficacy in a country that has had a very high level of COVID disease recently.
CHATTERLEY: One of the big challenges that we've been discussing in the last two days from Moderna with their Phase 3 trial where they're trying to
get thousands and thousands of people is that they're not getting enough people from minority backgrounds, African-Americans, Latinx people that
have suffered so cruelly, disproportionately as a result of what we're seeing with COVID-19.
Does doing trials in other countries outside of the United States perhaps address some of those concerns.
ERCK: Well, it does, and you know, we look at this as -- this is a global problem, and so we will be doing trials in late stages in several countries
in parallel with each other, this one in South Africa. It will be primarily South Africans, black volunteers, and the U.S., we'll try to be as diverse
as possible.
You know, there's diversity of race, but also of gender and age, and so we're going to be going into older adults for the first time as well.
CHATTERLEY: Yes. Two of the other subset of groups that obviously are going to be key when regulators are looking at approving this.
Stanley, do you think that will allow you some degree of catch-up in getting this vaccine if it's successful to market, simply because you're
getting a lot of the diversity in the trials that you're undergoing now?
ERCK: Well, I think we will. I mean, it's hard to predict who is going to be able to show the first efficacy data. We've got Moderna and others who
are -- who have started their Phase 3 trials already, and it's hard to predict because it really depends upon what the rate of viral infection is
in a particular location that you started with.
So we're all working toward the same goal of getting efficacy data as soon as we can. We all expect to be able to do that this calendar year, and that
would precede our filing of most data with the various agencies.
Our goal will be to file with the F.D.A. and with E.M.A. in Europe and possibly South Africa and India.
CHATTERLEY: And I want to talk about that, because if I look at who you're making agreements with, the U.K. government has asked for doses, you're
obviously operating as part of Operation Warp Speed here in the United States.
There's an agreement with South Korea. You're working with the Serum Institute of India. Who gets what when? How do you prioritize? Because as
you pointed out, this is a global problem.
ERCK: Yes. Well, we're doing something that is unprecedented. We are trying to get manufacturing, transfer to seven or eight different
manufacturing sites in seven or eight different countries all at the same time, and so you have to show -- you have to develop an assay system that
allows you to show comparability in all of these different locations that you're making exactly the same vaccine.
And we're doing it for a reason, because we need to get diversity, to get speed, to make sure that we have places where we have the best chance of
showing efficacy in a high attack -- what's called an attack rate where we have a high rate of virus.
And so we're doing all of those at the same time, and I think it's a strategy that ultimately reduces the risk that we would be able to show
efficacy.
[09:25:23]
CHATTERLEY: What is the greatest challenge here, beyond just getting to the point where we have a vaccine that we're comfortable with and that is
approved for use? Because you have talked about stepping up manufacturing capabilities all over the world. It's a global problem.
But even just on a micro level, the glass vials, the rollout of this, fridges, the capacity of fridges to keep the vaccine cool until you
distribute it. Are we doing enough work globally in order to address some of those challenges too?
ERCK: Well, there's -- yes. Yes. And so, that's a really key point. And so, we have a vaccine, and to make a good vaccine, a viable vaccine, it
needs to be safe, and so everybody is showing various levels of safety of their vaccine.
It has to work. It has to be able to neutralize the virus so you don't get infected. But importantly, you raise a good point. It has to be stable and
I think it has to be -- it's better if it's stable at either room temperature or refrigerated, and if it's -- if ours, it turns out that it
is, and so there's a whole established, what they call a cold chain, globally, not just in high-income countries. But it's a global vaccine
distribution chain that's there.
So as long as you can store it at refrigerated temperatures and maybe leave it out for a day or two while it's being used in a clinic, that's fine,
then I think that our product fits that profile.
CHATTERLEY: Stanley, very quickly, for an ordinary person that doesn't have preexisting conditions, isn't operating on the frontlines like a
healthcare worker, how long will we likely be waiting for this? Should we be thinking middle of next year? Back end of next year?
ERCK: Yes, I think it's a practical matter, that's probably right. I think that we and other companies are trying to get product in the warehouse, on
the shelf by the end of this year that would align with when we think we might be able to get regulatory approval, but all those are being scaled
up.
For instance, what we're doing is we're trying to get as much as a hundred million doses produced by sometime in the early first quarter, but then we
want to be at the scale where we can make a hundred million doses every single month, and we think we can be there in January or February.
But just the logistics of getting it out means that probably, as you point out, the frontline workers are going to be first in line, but I think the
non-frontline workers, regular folks, it's going to be more in the second, third quarter by the time it really gets out there in masses -- to the
masses.
CHATTERLEY: Yes. A reality check. Stanley, great to chat with you, and thank you for all your work and for the team's work as well.
ERCK: Sure.
CHATTERLEY: We'll keep in touch. Stanley Erck there, the CEO and President of Novavax.
ERCK: All right.
CHATTERLEY: All right, the market opens next.
(COMMERCIAL BREAK)
[09:16:39]
CHATTERLEY: Welcome back to FIRST MOVE. U.S. stocks are open for trading this Tuesday. Let me give you a look at what we're seeing.
The S&P 500, which briefly traded in record territory last week will try once again to close at record highs today. The NASDAQ meanwhile on track
for its 34th record close this year. Yes. I mean, that tells you everything.
Tech stocks posting the biggest gains in early trading this morning, too. The first of the big U.S. retailers to report Q2 results this morning as
well. Home depot and Walmart trading pretty mixed as we've discussed after reporting strong sales.
Walmart's e-commerce business almost doubled from a year ago. We can call that a jobless benefits bounce, stimulating spending, but of course, with
the negotiations in Congress stalled, that may not be repeated any time soon, and with millions of Americans suddenly dependent on benefit
payments, the pandemic has presented a somewhat antiquated banking industry, to say the least, with a pretty huge challenge.
Our next guest, Brian Brooks, the new head of the U.S. National Banks Regulators says they all need to innovate to keep up. He's granted a
banking license to a Fintech company, which has raised a few eyebrows, but he has also opened a new avenue for existing banks, allowing them for the
first time to hold cryptocurrencies -- digital assets -- for safekeeping.
And perhaps, it should come as no surprise as he is the former Chief Legal Officer of Coinbase Global, the biggest U.S. Exchange for cryptocurrencies.
Brian Brooks, the acting U.S. Comptroller of the Currency joins us now. Brian, fantastic to have you with us. I'm really excited to have you on.
You sort of have a 21st Century view of what the banking sector should look like, and I said it's raising a few eyebrows. It's raising a few more. Give
me a sense of what your vision is.
BRIAN BROOKS, ACTING U.S. COMPTROLLER OF THE CURRENCY: Well, Julia, thanks so much for having me, and these are really important questions to ask in a
time like this.
You know, this is a time when Americans are depending on their banking system more than they ever have before.
When we made a decision, collectively in this country to shut down the economy very broadly, back in March, we depended on the banks to deliver
payment benefits in the form of Paycheck Protection Program loans and checks sent from the Treasury Department and the problem is we were sending
those across 19th Century banking rails.
Many people said that it took days or sometimes weeks to receive their payments, and my vision is that we need to get to a place in this country
where payments can be transmitted virtually instantaneously, where errors can be eliminated, and it turns out technology exists today that can help
us do that, so we need to get there, I think, sooner rather than later.
CHATTERLEY: You've talked about a new payment charter. What does that mean, and what is the technology that we have today that exists that
circumvents, to your point, the 19th Century rails that the train has been running on so far?
BROOKS: Well, it's really interesting, Julia. If you look at the payments business over the last 30 years, there was a time when all payments
happened through the banking system, and in the last 10 or 15 years with the rise of Fintech, largely dominated by a bunch of Silicon Valley firms,
it turns out that technologies exist, whether they're based on block chain or other kinds of networks that allow payments to go much faster.
And as a result of that, what's happened in this country is that millions and millions of daily payments no longer are principally processed by
banks. They're run by companies like PayPal and Stripe and Square.
The question for the payments charter is, do we think it's a good thing or a bad thing that all of that activity is now happening outside the banking
system where the examiners who work in my agency can look at them and make sure that there's fraud being prevented and make sure consumers are
protected or do we think it would be better for them to run entirely outside of regulation?
I think the best solution, which you see in other parts of the world, including the U.K. today, is to have faster payments that are innovated by
private companies, but are supervised by Federal watchdogs like us. That, I think, is what the future looks like.
[09:35:33]
CHATTERLEY: I mean, the pushback that you're getting on getting here is from existing banks, whether the state level or those that are federally
regulated. I mean, they have existing businesses, I guess, to protect. The problem is, they don't best serve the customer.
BROOKS: Well, that's the thing, Julia, and if you look at what the reason is why so much payments activity has moved outside of the banking system,
part of it is because consumers want to receive their services in a different way.
I mean, let's face it, there was a time when we all used to buy our clothes in department stores where we could also get our oil changed and have
lunch. The world changed on the high street shopping market, right?
Now we all go to boutique stores. We buy our computers at Apple, our jeans at the Levi's store, et cetera. Banks are sort of the last bastion of the
amalgamated comprehensive supermarket, if you will, of financial services. But that's not the way consumers shop anymore.
The other thing that's really important is markets look at these companies very, very differently. So it turns out the return on equity for start-up
tech companies is far higher than the return on equities for banks, which is what creates strong market incentives for these services to move into
specialty platforms and outside of comprehensive banks.
All of which means that if we don't rethink what the bank charter is and find a way for the bank charter to be broad enough to encompass services
that were historically provided by banks, we're going to have a problem.
CHATTERLEY: SWIFT. Some people will recognize this term, others won't but it is the way right now that the system works and the information, the
money is passed between banks and the last thing with this SWIFT, it is clunky. It's slow.
Those outside of the industry, particularly in the Fintech sector, know there are better options. Brian, is this the plan, to replace, improve on
the existing infrastructure that SWIFT is at this moment?
BROOKS: Well, Julia, you make a great point that SWIFT is one of the most ironically named organizations in the world. The joke in my world is that
if you wanted to move money from America to Australia, the fastest way to do that is to load it in a suitcase and put it on an airplane, which is a
little bit crazy, right?
So, to me, what has to happen is thereby faster solutions and they exist in other parts of the world. So, the U.K., Singapore, China and many of our
global competitors have adopted real-time payments.
In the U.S., that seems to be still years away unless we allow existing technologies to do the work for us, and I think that's very possible.
CHATTERLEY: Brian, how quickly can you do this? How quickly can you achieve this given, as we've discussed, there are existing resistant points
and they're pretty powerful in this country?
BROOKS: Well, they are, Julia, but in the world, there's nothing more powerful than markets because markets represent what millions of consumers
want every day, and so my job is not to build new payment rails. My job is to identify impediments that make it harder for people to get what they
want and need.
And at the OCC, we have an ability to do that. So, among those include the questions of, should banks be allowed to participate in the cryptocurrency
market at all? Should banks be allowed to connect to block chains? Should we have Central Bank digital currencies perhaps issued by private
companies, but backed by bank deposits?
I can identify what the impediments to that are and try to solve that so people can get what they want as they express through markets. I think
that's very possible.
CHATTERLEY: Brian, very quickly, I've read recently that 15 percent of Americans now own some form of digital asset or a cryptocurrency. You also
want to tackle this and make sure that banks can provide services as far as digital assets are concerned. You're trying to protect consumers again.
BROOKS: Well, look, in a world where 50 million Americans do hold cryptocurrencies and many, many millions more outside of this country do,
to me, we can't ignore that phenomenon.
So I am not a crypto bull nor a crypto bear, but I recognize reality. A lot of people have this stuff. They have it for good reasons. And we need to
make sure it's accessible to them in the same safe and sound way that they can get their checking account. So that's our role, it is to innovate as
people change the way they consume financial services in the future.
CHATTERLEY: Yes, I have to say, I find you a breath of fresh air, but I can see you're going to be a whirlwind to others.
Brian, we will continue this conversation. Thank you so much for describing your role and what your plans are. We'll continue this conversation soon.
Brian Brooks, acting U.S. Comptroller of the Currency. Thank you for that.
All right, coming up on FIRST MOVE, Huawei's reaction after the U.S. imposed new and tough rules against the Chinese telecommunications giant.
What does it mean for the company? Find out next.
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[09:40:58]
CHATTERLEY: The Trump administration tightening restrictions on Huawei, making it harder for the company to access foreign chips made with American
technology.
Beijing says it firmly opposes what it calls, quote, "The deliberate smear and suppression of Huawei and other Chinese companies."
Andy Purdy is the Chief Security Officer for Huawei in the United States and joins us now. Andy, great to have you on the show as always.
This is consistently being called a lethal blow to your business. Is that what it is? A lethal blow?
ANDY PURDY, CHIEF SECURITY OFFICER, HUAWEI-UNITED STATES: Oh, I don't think so. The full impact and the time it's going to take for us to adjust
is not clear, but what is clear is that tens of thousands of American jobs are at risk and that's really my primary concern.
CHATTERLEY: Andy, you mention this a lot and I hear you, but where do you get semiconductors or chips from if you can't use any now of the avenues
that you were using?
PURDY: Well, one thing we did last year, as you may recall, we ramped up our research and development up to about $18 billion, we're going to about
$20 billion this year, so we are working hard to develop the capabilities to build ourselves and we're exploring hard around the world to find
capabilities that can help us meet the need, and we're quite confident that we will be able to do that.
We're not a publicly traded company. We're privately owned. We have time, and if we take a hit in revenue, that's fine. We can bounce back as we
continue to do.
CHATTERLEY: Richard Yu who is Huawei's Consumer Device Business Head, said on August 7th that the current smartphone chips will cease production as of
September 15th. It's a real loss, a very big loss, he said, for the business.
Is that the case, that, as of middle of September, you can't produce even your own chips?
PURDY: Well, as I said, we don't have a full assessment of the impact and timing of the disruption of our supply chain, the disruption of the ability
of nearly 300 American companies to sell non-sensitive technology to Huawei, and we're working through it.
And you know, as I said, we took a hit of about $12 billion in 2019 in our revenue, and we may take a hit again. But we are committed to the long-
term, and we have the capabilities and resources to adjust over time.
[09:45:24]
CHATTERLEY: So, the message is, whatever happens, Huawei will survive this?
PURDY: Well, we will survive, but as I said, I'm particularly concerned about -- I'm particularly concerned about two things. It is the tens of
thousands of American jobs that are at risk and the impact of American policies on the competitiveness of the U.S. and the ability to bring
internet connectivity to the underserved and unserved, both in American rural areas and in -- to the three billion people around the world that
don't have connectivity.
We do a lot better when there's one global common set of standards where governments don't control. It's a free and open exchange of information and
systems, and that's worked well over the history of the internet, and it can work well in the future, but it's definitely at risk right now.
CHATTERLEY: It's a cost that this U.S. administration is seemingly willing to accept. Is there a fix here, Andy? Because you've said to me many times,
look, we're opening for communication, but this administration is saying, we simply don't trust you and when you say you're not a risk, you're lying.
Do you need administration change in order to improve this relationship, or do you think even that might not make a difference at this stage?
PURDY: Well, a lot of experts in the United States and elsewhere recognize that when we look at the long-term, we need to build on some of the
guidance that came as long ago as 2005 with the World System on Information Security, the WSIS, the Tunis agreement that called for the kinds of
standards in testing.
And more recently, this year, the Department of Defense 5G strategy and the U.S. government 5G strategy. The U.S. is ignoring what's required in those
documents to make sure their objective standards, independent testing, we have to be able to deal with an untrusted set of suppliers.
We have to have a zero trust environment, and that's what the experts are saying, and even if you want to block Huawei, the U.S. and our allies, we
need to work towards implementing those kinds of agreements, implementing the actual terms of the Department of Defense and the U.S. 5G strategy.
We have to address these risks. We can address them.
So, rather than simply saying, as a general proposition, do you trust Company X or Country Y, there need to be mechanisms in place that allow
each company, each third party supplier to provide independent evidence that they're worthy of trust, and we are prepared to do that, and if we
don't get to participate, it's still of paramount importance that the U.S. and others work toward that kind of standard so we all have a basis for
trust as we become increasingly dependent on information and communication technologies.
CHATTERLEY: Do you think you can have a different conversation with a different administration, Andy? Or do you think the U.S. now, as a nation,
as a Congress, is that set against China, you're caught in the cross fire, nothing will change this?
PURDY: Well, the question of what might happen if there's a new administration has been often asked. I don't think one can say with
confidence what will happen with a new administration.
I do assume there will be a little greater predictability. I think there's a chance that the U.S. would then treat our allies with a little more
respect and work on agreements -- bilateral agreements that provide value to both sides.
But the kinds of issues that I'm talking about in terms of what's necessary for organizations and citizens around the world, for an objective and
transparent basis for knowing which products are worthy of trust, I think that's going to get greater attention than some of the policies that are in
place right now.
But the importance of those difficult security measures, those measures outlined in the DoD and U.S. 5G security strategies, those are going to be
very important regardless of which administration is in office.
CHATTERLEY: Do you think there's any perceived difference in risk as far as data is concerned between Tencent, Alibaba and Huawei?
PURDY: Well, I think each country looks at the risk situation in a particular way. I think the experts have a tendency to look in situations
in the same way.
So, I think when one looks at whether it's apps, whether it's major manufacturers of semiconductors, whether it's manufacturers or network or
other 5G equipment, to look at what is the situation, what is the evidence, what are the standards? How do we make sure there's proof of the standards?
So in this case of, for example, apps, one needs to make sure that one knows where the data is held. One needs to make sure that there are
security measures in place to make sure the data isn't abused and it isn't sent where it shouldn't go.
And the U.S. has been lagging, frankly, in developing national privacy standards. These kinds of standards that are necessary to protect the
privacy of Americans, those kinds of standards that we've seen proliferate in Europe.
So we need to make sure these objective kinds of standards are used to evaluate whether it's Alibaba, Tencent, Microsoft, Huawei or any other
company.
[09:50:35]
CHATTERLEY: Or a Facebook indeed, Andy, you do raise a great point there, but it takes us off in a completely different direction.
Always great to chat with you. Thank you so much for joining us on this and no doubt we'll speak again soon.
PURDY: You're welcome.
CHATTERLEY: Andy Purdy, Chief Security Officer for Huawei, USA.
All right, coming up, big surprises in store for Walmart and Home Depot. E- commerce sales are soaring, and giving even Jeff Bezos a run for his money. More after this.
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CHATTERLEY: Welcome back to FIRST MOVE. A quick look at the markets once again. This might be the day, stumbling over my words in my excitement,
that the S&P 500 does it. The benchmark U.S. index trading in record territory once again and on track for its first record close since
February.
The NASDAQ, of course, already there, too. All this as earnings from the all-important retail sector start coming in.
Paul La Monica joins us with more. Paul, if someone had said to me five months ago we would be back here in this short a space of time, I probably
would have laughed at them, but hey, stimulus lifts the aggregate if not the whole.
PAUL LA MONICA, CNN BUSINESS REPORTER: Exactly. You wouldn't have been the only one laughing, I'm sure, Julia, but you're right.
What you have is a combination of government stimulus really boosting consumer spending. Consumers also, to their credit, are doing a better job
of saving in this higher savings rate, I think, makes a lot of customers feel more flush and willing to spend on certain necessities like the types
of things they get at Walmart, especially since they can now get that online.
Walmart's, you know, digital sales nearly doubling, so obviously, as you pointed out, giving Amazon a run for their money, but then you look at Home
Depot, people are nesting. You know, when was the last time you went to a restaurant or a movie theater? You're staying home, so people are doing
these DIY projects, even if they're not looking to sell the house, which a lot of people are looking to do to go to the suburbs, get a bigger space,
that's definitely good news for Home Depot, and I suspect Lowe's, which reports its results tomorrow morning.
CHATTERLEY: And yes, these stocks are trading at or around record highs, but there was some cautiousness that filtered in when the executives of
these companies sort of said that a lot of this was stimulus money driven and given that Congress can't agree on more stimulus here, the outlook,
perhaps, for spending is a little bit less clear.
Can we continue to make fresh record gains when the fundamentals tell a very different story -- Paul.
[09:55:10]
LA MONICA: Yes, that is a great point. I think there are growing concerns about what will happen to the U.S. economy and a lot of these stocks that
have boosted the markets to all-time highs, if you don't get another round of stimulus because also, maybe not so much with the retailers, but if you
look at the big tech companies that are leading the market, their valuations are back near 2000 levels and I remember covering 2000, it
wasn't a heck of a lot of fun when the bottom fell out.
CHATTERLEY: Yes. Absolutely not. Paul La Monica, great to have you with us as always. Thank you for that.
All right, that just about wraps up the show. You've been watching FIRST MOVE. I'm Julia Chatterley. Stay safe and I'll see you tomorrow. Have a
good day.
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