I would love to welcome you, Brian Epps, to the Haydash Berry Oral Video Project 60s in the Haydash Berry. I'm really, really happy that you are here. And I want to ask you a few questions about your early beginnings before we get into the meat of this interview. Sure. My name is Rebecca Nichols and I'll be your moderator. So, I've heard that you're a native Californian? Yeah, I was born at Stanford Medical Hospital when my father was stationed at Moffitt Field when they were still flying blimps out of there. He was a naval blimp pilot, sort of an esoteric kind of thing, you know? They're called the Heli-Mits in the Navy, you know? But he loved blimps and flew them. What year was this about? It was exactly, 1942. Beautiful. What was your father's name? Marion Henry Epps. He was a graduate of the Naval Academy and flew all kinds of aircraft, not just blimps. He was on one of the cruisers during the attack on Pearl Harbor that was out at sea with Halsey's carrier group. Wow. You know, he was a lifer in the Navy. He was a wonderful man. I really, really, really miss him, you know? Yeah. Well, we're honoring him in this video because you wouldn't be here. That's true. And what was your mother's name? Her name was Dorothy. Dorothy and she was quite the gal. She had been, her father was a dentist in Long Beach. And she actually was born in Canada. And Walter, her father, actually adopted father. Adopted she and her sister, Isabel, who was also quite the lady. She was, she kind of reminded me of the, of the Dragon Lady from Terry and the Pirates. Right. She was always mischievous with it, with the long cigarette holder and, you know, she smoked camels one right after the other. Right. She was a wonderful lady though. And I, so it was an interesting kind of family. Sure. Sounds like you had a wonderful beginning. Did you have any brothers and sisters? My sister was living in that Riverside now and her husband is the dean at, one of the deans at University of California Riverside. What is your sister's name? Epi. Epi. Evelyn, there's a real name. Epi is the name that she got when she was in boarding school because she hated Evelyn. So she was Epi Epps. As a reto, actually, now. She's, she's, she married a, I'm just going to long comment. Sure. That's her last name now. Yeah. She's, she's a wonderful girl. She, we went through a lot of things, the big service for us. We went through quite, we had quite a life, you know. We ended up in. You were in touch once in a while? Oh yeah. That's great. All the time.  Well, yeah, that went back to North Beach.  She and I were, we lived together for my seven years and then ended up getting married, which turned out to be not such a good idea since we didn't last wear on, but we had a good life and, and he turned out to be pretty good. And then I did discover, this is the interesting about the internet thing is that I was sitting at the computer doing surfing. I, there was a while there when I first got hooked up to the net where I just, man, I was there all the time. Yeah. Let's go here. Let's go there. You know, what's this? What's that?  I said, yeah, man, that's me. What are you, what are you trying to sell me? He says, no, no, no. I'm not trying to sell you anything. I'm your son. Oh my goodness. And I said, whoa. And then I went through the whole thing. I, did he have some kind of agenda or what was up? He said, no, no, I just want to come down and see you. And when he walked in the door, you know, there was no doubt. It was like seeing myself, you know. Right. And the first thing he said to me is you want to smoke a jay. And I said, that's my son. What's his name? What's his name? His name is Rob. So you have a son named Seen. Seth. Seth. And his son named Rob. And what do they do in their lives now? Are they interested?  Sure.  Let me jump off of a hundred foot mountain on a snow. Right. And he's married and living up in Reno. And I, last time I knew he was, he was being a, being a chef. I don't know whether he's doing that now or not. Sure. And then Rob is a, he's a painter, really an excellent painter. And he's living up in the North country of Arcada. And so he's a happy camper up there. That's wonderful. And I'm living in Marinette. And you're living in Marinette present. I'm sort of in the middle. And here we are in 2005.  And I'm asking you, when do you remember first seeing H Street? Approximately. Yeah, it was, it was probably, I think it was like 1959 or 60s somewhere in there. Because there was like a, there was a tribe of lesbians that lived in the, in the, here in the Hague. And they had, they had LSD, the world's best LSD, the Sandoz kind. You know, there was, there was the, the... So what year did you first start taking LSD? It was... Approximately. Maybe 1960, 61. So wow, that's really... About the same time that Leary was... Experimenting with Harvard. Yeah. And in fact, some of that, some of those experimental things sort of managed to find their way west. Right. Mysteriously, we never figured out why. Right. So it sounds to me you came again to H Street. When did you first start living in Hague, Ashbury? Well, let me see. And, okay, it was kind of a weird story. In 64, 60, I think, 63, I was discharged from the Navy for Muscular Distribute. They gave me a medical discharge. And I saw it was for the LSD for a year. And I went to work for Bank of America, thinking that I was going to be a, I've been coming back here and stuff. And I just got bored to death. And somebody turned me on to some acid one night. And I said, you know, bank things is kind of not much fun. And then, you know, there was like a lot of people experimenting. It was, it was, it was weird. It was like some kind of psychic network where all these people were experimenting with these different light things, you know. And then... Do you remember who some of these people were you hanging out with in the pre-pre-early? Well, in the early days, it was pretty much me and Bob Polum, who was a companion spirit. He'd been up here in 66, and he was trying to find a straight gate. He never found one. Then came back to Stockton. We ran into each other. You know, we were like, like, like spirits, because we were experimenting with all different kinds of things. And then we, sometimes in that period of time, it's all kind of cloudy. Sure. You were remembering more than most. So I think, okay. But... What were the kind of things you were experimenting with, film? Yeah, we were doing film. And one of the... Oh, I'll never forget this. This was... We had this dance. It was called the Dance Studio. It was in Stockton. Right? And I was dating the girl whose mother owned the place. We started... We called it... What did we call it? The Place. Right? That's what we called it. We were having... We had these weekly dances. And we had these two overhead projectors, and we had no glassware, except we took the cover plates off of TVs. Wow.  Right? Well, there was all wonderful. Except one night, while we were doing... Right in the middle of this, while we were doing it, we got so hot that the glass cracked, right? And I'm looking in horror, you know, as part of the glass, and the strobe light is going... Down to the floor, you know? And I thought, Uh-oh. We got to find a better way, right? So it was just like... It was stuff like that, you know? And another thing that was really cool, too, was Bobby invented this... Really wonderful bubble machine, right? It was like a... It took parts of a swamp cooler and put these huge rotors in there that had all those little paddles for bubbles. Sure. And it was just wonderful in the strobe light, except it would get down on the floor. Everybody would... Womp, you know? Slippin'. Slippin'. Slippin'. So it was an early, early bubble machine. Yeah. And it was like... But everybody forgave us, you know? Sure. It was like... Experimental. Experimental, you know? It was like... How did... Do you remember how the idea for the plates that people... Well, that's quite simple. I saw Bill Ham. I came to San Francisco and Bill Ham was doing a show somewhere. Maybe it was at the... I saw him doing it.  Everybody's loving him, and I'm saying... I want to be there. That's it! I want to do that! Right. And, yeah, so it was like... It kind of... That was the inspiration. And then I went on a search all over California to find... Plates. To find the plates. Tell us about the plates, because people listening to this don't know about this. When you do liquid projections, what you have is you can have as many as three plates, but normally what you have is you have a large, like a 16-inch plate that's a bottom plate. You put liquid, you know, which is oil and water and isopropyl alcohol in this plate. And then you have another plate that's probably 12 inches in diameter that you use to manipulate the liquid in the bottom plate. So one goes on top of the other. One goes on top of the other. And on the bottom plate is a mixture of an oil pigment, color, with mineral oil. And then you're using water dyes on top of that. Is that correct? And then the second plate is sandwiched. And by manipulating the second plate, you're able to... Yeah, and when you really begin to understand the liquid, you realize that you can use the surface tension of the plate to actually manipulate the liquid without really even touching the bottom of the plate. We used to do this kind of like Zen exercise to see who could do go through a show without ever touching the bottom of the plate. And if you did, you got five bucks. So I saw that. I heard that light show artists had very strong muscles in their arms because you don't realize what hard work that is to be moving. Yeah, oh man, I'm telling you, it would get you in the shoulders like all night long. Sometimes a dead would play. And I remember in film art one time the dead played so long that I fell asleep standing up doing like a wood side. And it was like they would go on to like three and four o'clock in the morning, you know? And they'd say, okay, just one more song, right?  Do you remember in those days some of the other people that worked with you, any other people helped you volunteer? Oh yeah, man. Names that we should know about, not be forgotten? Well, Bob Poem, who was my partner in Stockton, and is now in Smart Boy. He's on the big island. Hawaii. Hawaii and doing light shows there. You know, he's living in a real kind of small community, which is great, you know. It sounds like he's managed to find the sixties there. Safe, right. And Mark Maxman, who was one of the who originally had the gig at the straight theater. What was his light show? Do you remember what it was called? It was called Aerial Transit, is what it was called. Aerial Transit. What it was, what it happened is that Mark had been working with Roger Van Meter from North America and Iowa South Chemical. And they had a, they split the sheets, as they said. And so Mark ended up with about eight carousels. And we had overhands, we had run overhands that we put together. And so we came into the straight theater one night and just arrived with all our equipment. Said, we're here. And I can't ever remember being so absolutely terrified in my life, you know. I said, what happens? Here we are. We pulled all the plugs on everything. You know, I've given up my house. I've given up everything. And I've got a little bit of money. Here we are in San Francisco, you know. Oh, boy. When was this about what you... This was 1967. It was actually after the main madness in the summer of love. Right after that. It was right after that. When you appeared at the straight, did they let you go up and set up and... Yeah, in fact, you know, I thought about that is that the timing seemed to be just... You know, I heard somebody describe it. I don't know who it was, but it was like somebody picked up all these rocks. And all of a sudden, all these people popped up. Blup, blup, blup, blup. Okay, let's go. And it's sort of as if we all knew what to do, you know, that we had no clue. Exactly. And it was... So as you see it, do you remember your first lecture with the straight theater? Do you remember sort of one of the first ones? Yeah, we... You were doing oil projection with overheads? Yeah. You were doing slide projectors? Well, actually, we were kind of weak in that department. What did you have? Films. You were doing... Our thing was liquids. Liquid. Because I know in those days they did a 16-millimeter, and they would use a film loop that would play over itself, over and over again. Yeah. Because there wasn't a video. I was just telling movies that we had these machines that they were like these old school-type 16-millimeter projectors. Steve Goldsmith had some too. And they called them choppers or weed because what they would do is sometimes if you did get them threaded, right, and you were trying to thread them on the fly, they would... Oh, but just... Not only would it break, it would like just go all these, you know, these little pieces of cellulite about this long, right? But then, you know, gradually as... And we had these other... I'd love to know what happened to these things, but they were like these theater projectors that had these long snoots on them. They were made by Kodak. And you could extend this lens and you could get it like a 10-inch focal length, which is right on the wall because it had a 1,000-watt bulb in it. Right.  So pretty much when you had either an overhead or a projector, it was really a matter of the lensing and the light. Yeah. If you had good lensing, you would have a good throw and the light would then take whatever you were doing and project it up on the screen sheet or whatever it was. Yeah, so our saving grace was the fact that we had these absolutely stellar machines and we had these two real glass plain old convex lenses, 9-inch, you know, it's back to back. Everything in it was glass and it was built like a tank. It was built. These things were built in 1939, right? Wow. And, you know, they were the most expensive thing to replace is the light bulb, right? No, no, the lens. In fact, right after that candle box tour, I cracked one of my lenses in one of the other old crates and I'd just been frantic. I don't know where to find another lens. I'm sure I want to show up somewhere. Totally. I think that... We'll talk later. Yeah. Totally. But that was it. There was an element because we didn't have video yet.  Mirrors reflected. All the period was filled with experimented... experimenting on every level of light and lensing projection to get it out there. And then there was an element in film. Oh, yeah, film was really... That is very different than... Today we have light shows, 2005. It's very different having video mixing and this is now. But in the 60s, a whole nother feeling of film being projected on on top of oils, layering, overlaying, a soft kind of feeling. I remember seeing dancers dancing over the oils and the loop going on and on where video is a whole nother media. A lot of what I've seen is really hard edged. I mean, it's super appropriate for time. Sure, sure, sure. To me, there's nothing more sensual than really good labels. I mean, if it's bright and colors are clear and we have the right setup it's just like being in another world. Trying not to make brown. Yeah, right, exactly. I mean, I just... What are some of the colors you could get? If somebody was looking, walked in to straight theater and looking up on the screen and you were doing your oils and what you were proud of in the past what were some of the colors that you would see come off of this, on the walls? Imagine a color. Imagine a color. Like ultraviolets and ultramarines and serrations and you know... Fuchsia and short truths. Those kind of colors the ones that really grab you.  So it's an art form. It's a different... Well, it's a different beast too in the fact that you know, if you mix red and yellow well, you're still... on an overhead you'll still get that color but it's like a different kind of thing it's like a reflected color rather than a... a opaque... opaque colors, yeah. But then if you added if you had a blue and a red you'd have a purple. Yeah, depending if it overlaid on a yellow again it would somehow change in certain areas so if you had a double plate or a triple plate you're able to play with so much. Yeah, the problem with a triple thing is you've got to be really good in order to manipulate three plates. Two is really... What difference could you get from three plates than you would from two? They're good for background static kind of stuff where you could get like say you could put a yellow in the top plate and then you'd have like a clear oil and a red and one and then in the bottom would be like blue and clear or blue and red or whatever and as the colors sort of inter-reacted they would like subtract from each other and you get these... It's really impossible to kind of describe it's like describing the northern lines Exactly. Did you ever some of the early lecture artists painted their own slides? Did you ever try to experiment with that a little bit?  Do you remember doing a live show like this, right? Do you remember who might be playing on the stage? Well it seemed like as Hillel described when Santa Ana was there it seemed like we kind of jokingly said well it's great to have a practice band I'm just very curious there was like a wide variety like one I remember really well was this crazy group called Firmius Bandersnatch that was I believe they were headquartered here in the head and then Clover which is the group that used to open for Quicksilver and Huey Lewis was in there That's right, he was long hair and beard That's right Yeah, there were a lot of groups that passed through there and I'm telling you at that particular time in our career we were probably so dosed most of the time it just sort of seemed like this flowing Well just drop a few names this is the place to drop it any of the venues you worked and did live shows Tell me, it doesn't matter where just tell me some names there was Chuck Barrow we even worked with the craziest one was Buck Owens and his Buckaroos they were trying to do a light show to a country western band that was it and the most incredible night that I ever can think of was when Miles Davis played with Grateful Dead there were all these dead ends here and Miles came out on the stage and he had a white bass player and I said he'd be bass player and I said something's up and it was during the bitches brood period I forget what day it was but he came out there and he stated it was right they were just completely blown away by Miles Davis they just went wow exactly it was an incredible gig and then after that me and Ed went on to Mexico for a while and there was kind of like a misunderstanding at the time because we went to take photographs and he thought we were splitting the set you know, anyway I have a question I've heard your name associated with Brotherhood of Light we're closing up right now and I'm going to invite you back for a wealth of information tell me some of the beginnings of Brotherhood of Light we're in the third generation of Brotherhood of Light yeah, no kidding so, somewhat quickly if you could tell me a little bit about Brotherhood of Light well what we did a show me, Mark, and Bob did a show up in in Sebastopol and we had been reading the Brotherhood of Light Tarot book there is a change of light it's like these lessons yes, another book okay so we said duh we're brothers we do light shows why not the Brotherhood of Light? that's it it beat the hell out of aerial transit which was kind of we had this thing about how the molecules of light were being transmitted the aerial you know it's amazing so I know that Brotherhood of Light is still going on right now and I think a relative of yours is involved with it am I correct or not right now it's Peter it's Peter and Chris basically doing it I believe the last time I was from they were working with Almond Brothers they work with the Almond Brothers I don't know if that's true or not they hung in there doing it for like 12 years exactly basically in 85 was Eddie another member of the thing sold it off sold off the Brotherhood without my knowing it but I was up lazing in the hot springs up at Harvard but forever we have this tape as we're closing I want to thank you so much for being here I think a lot of the people watching this in the future don't even know what glass plates are know what light shows are I want to thank you for being here for being part of the scene the scene was a lot of people contributing to make it what it was to make it what it was and just real quickly I'm going to ask you if somebody saw this tape in the future what would you want young people to get about what you live through in one sentence what would you want people to get about the period, the creativity, the family just to look on their bright side be Monty Python be positive be positive yeah I mean it's like come on you know you've got this beautiful thing called life you know live it for every takes you know that's basically it that was what the whole light show thing was about was you know I think you've seen color look at this you know and that was always our you know with music you know it was just like I couldn't remember times of being just absolutely transported you know just being you know I felt like I was bouncing around among them but your work and your contributing to what you did as lifestyles and work whatever made everybody else feel like that and that was the gift that kept on giving through the 60s that what made the whole scene happen with hundreds and thousands of people and we're really honored to have you here today we want to thank you so much for this and we will be asking you back and I just want to thank you so much for being here and sharing and and continuing to inspire and thank you so much Brian well it was a great day I was glad to see those many acts that he'll allow and with her I hadn't seen them and I don't see a time of 69 whenever we film our west open I know it's a historical day and we want to thank you so much thank you so much Brian thank you I'm glad to be here I always love coming to the Hayden especially on a sunshine new day exactly


Wednesday, it's 11 o'clock, October the 14th, can mean only one thing, it's Trump week. I'm Tim Apachele, your host. Today's title is, White House admits COVID herd immunity is best path. Mayo Clinic states 2 million, 200 million cases are needed. You know, a few shows ago we were talking about why we don't get any action out of Donald Trump since February 2020 about COVID and why this pandemic that's killed now over 217,000 Americans, and we still are on a path of doing nothing. And it's come clear to me, and now this recently reported by the New York Times that two White House officials have privately and going on the record with the New York Times that the chosen path of how to handle COVID is through herd immunity. Well, we've talked about herd immunity. You need to let that entails. And the bottom line is, in order to get herd immunity, you need about at least minimally a 60% infection rate. Now, if our country is 320 million, you take 60% of that, you put that at 192 million. And then our current mortality rate here in the country is about 2.97%.  And I find that an unacceptable number. I find 217,000 unacceptable. And why is the White House, why has Donald Trump been taking in with Dr. Scott Atlas's great theory that herd immunity will take care of everything? Well, the answer is obvious. With herd immunity, the concept is that no one has shut her down. The economy is completely open as if it were before COVID. And we go about our business.  So that's kind of where we're at today. And that's why people keep scratching their head going, why isn't anything being done? So let me go to our guests. Good morning, everyone. I'd like to introduce Jay Fidel. Stephanie Dalton, Winston Welch and Cynthia, Lee Sinclair. Good morning, everyone. And Jay, straight to you. I find it really a jaw-dropping that someone or a couple of members of the White House have actually confessed to the fact that that's the path that, and strategy the White House has been moving into. Yes, Habrand. Atlas is Habrand. Trump is Habrand. But you know, you sound surprised. I mean, he sort of telegraphed that to us a month or two ago. He's following through. When he makes these Habrand statements, you really got to worry because it means later he's going to do that. It's remarkable and it's not supported by the science at all. But don't be surprised because so many of his decisions, you know, just picking one out of the air, another one, climate change or immigration. I mean, it's all backward. It's all Habrand. And you know, I don't think we should be surprised. And I think he, it's out of 1984. Remember George Orwell and it's all about, you know, knocking off people who he thinks are not necessary for the economy. It's not just that he wants to build the economy.  He is killing people. He has killed people. It's really bizarre. It's evil. It's nefarious. But it's exactly what he has intended for a while. Well, this dovetails right into his, you know, his new energized election campaign, his rallies. I mean, when he was in the hospital for a brief glimpse, like for about five seconds, he said, and I quote, I understand it now. I get it. He doesn't get it. No sooner did he say that he was off infecting a secret service personnel. But now if we look at these rallies, particularly in Stanford, Florida and Johnston, Pennsylvania, we literally see thousands and thousands of people elbow with no mass. And so these are super spreader events and it's business as usual. Any comment about what your observations were on during these rallies when we see this on TV? Well, I think he's making a calculated, taking a calculated risk. And a risk is the people will not get affected from the rallies and the press won't catch it until after the election. So he figures he'll get votes and he won't pay a price because it'll happen at a timing. It won't happen until after the election or this way until after people have voted. It is insidious. It is obvious. And it is intentional. Well, Jay, that's a pretty ghoulish calculation. Stephanie, your thoughts about the rallies and the recent official admission from the White House, even though it's anonymous, that herd immunity, I almost did a Donald Trump on that. Herd immunity is the path, the chosen path on which how we should treat COVID. Well, the revelation has been our insight, right, for a long, long time.  The do nothing approach. And he's touting that this is the best way to go, of course, because he's using the do nothing approach and the do nothing approach was originally supposed to get us like 2 million debt or something like that when it was talked about, you know, months ago, that if we did a do nothing thing, like a Sweden thing, that we would have just huge numbers of dead people. And now he sees that his do nothing approach, otherwise known as herd immunity, is at working because there are very less numbers of people dead and infected than would be if it had really been one of those. But I mean, he's frenetic at every rally. He's promising everybody everything. He's telling the old people that he's disgusted by them in his ads and then turning around saying, he'll do everything, you know, to make sure they have their healthcare. He's telling the women that, you know, I protected your homes and green grass in suburbia, which would- You know, let me give you the quote on that one because this one's priceless and, you know, it really does show how really desperate he is right now, but here's the exact quote on what you just said. He said this at Johnston, Pennsylvania. I have a favor, women, suburban women, please like me.  What does that mean?  And he's asking them to like a P-U-S-S-Y grabber.  And he's telling them, you know, that he's done something for them, but nobody knows exactly what that is. So that's what he does, the con man. Here's all this good stuff I've done for you and all this good stuff's gonna happen. And there's no grit. There's nothing to it. So he's just doing con man and he's being cute and kind of whining and the dancing at these and the getting into the rhythms and clapping his hands is absolutely terrifying. Like he has on mad. So I think that that's what's driven Nancy Pelosi to just get this 25th amendment up here and get ready because as the numbers keep coming in, even though he has the experience of 2016 to bolster him and keep him on the path to winning in his mind, it made him that this thing, this training has left the track, left the track, not just the station. So it's gonna get worse. Yeah, thank you, Steph. By the way, sun has got COVID, haven't heard a thing about it from him. Yeah, that's been pretty quiet for us. All the White House folks that were infected from the Rose Garden event. So, hey, Winston, your thoughts about what you're seeing on the rallies, some of the desperate pleas or it seems to be desperate pleas to vote for Donald Trump and this kind of admission, not 100% formal admission, but this admission from the White House that herd immunity is the chosen path. Well, it's nice to at least have some admittance that this has been the strategy all along. As I've said, we've given up for a while. I mean, any pretense is just being given up now. Florida is our sort of extreme model where we're just gonna just let everybody go in until every convention center and exhibition hall is filled with beds, people coughing and dying or whatever the max is, they'll tamper down as time goes by, but that's basically what we've done, even here in Hawaii. This plan to open up the state. Let me interject something on your point about Florida and the seniors. Joe Biden at Primbook, Primbook, I think it's Palms, Florida, was appealing to seniors. And what he was saying is exactly what we're talking about is that Donald Trump really doesn't care about the seniors and they're just there for a vote, nothing more. And they have to be shuttered and if they die, well, they're part of that economy that doesn't need them anymore. Who does he care about? I mean, honestly, at the end of the day, he cares about himself and I mean, I wanna think that there's something in there that cares about something else, but at the end of the day, he wants to stay in power so he'll appeal to whoever he needs to. But all of that said, it does matter. The American public has finally woken up at least that elusive 8%, 5%, whatever it was and just said, I don't want this anymore. I don't want the chaos, the noise, the anger, the lies, whatever it is, it beats the other things of us becoming a Venezuela, a QAnon, rules, a state. I mean, it's so ridiculous and I do wanna just throw out a couple of things because we've wondered often, how do people continue to support Donald Trump? And I think it's a question that we ask because it's hard for us to understand there's a couple of really good articles, I think that the Washington Post put out recently that I do wanna appoint people to, which was October 12th by Christopher Ingram. He put out something called New Research Explores the Authoritarian Mindset of Trump's Core Supporters. And it's very interesting because it talks about why people are drawn to what we might call authoritarians. It's a short article, but it's based on research from Oxford University. Another one is written by columnist Max Booth on October 13th in the Post as well. He brings in other sources of information in there about, especially from the Pew Research Center that says that people watching Fox, 86% of them say that Donald Trump's completely right or mostly right. So, and he's 61% right about coronavirus all and most of the time and most disturbing 39% of Fox News viewers say that QAnon is somewhat good or very good for the country. This is actually really scary because this says that absolutely insane theories, you know, we might as well say that half of us walking are Martians unless you got some proof that we're Martians. I was gonna say Calakian, but Martians is working well too. Well, whatever, yes, whatever it is. We're dealing with people that are number one, maybe inclined towards authoritarianism and so that's what's being expressed. It's not gonna go away after Donald Trump and I encourage people to go to that article because it helps us understand why the support is there. The other one is that the sources of information and media that people are getting are not well-rounded. They are so one-sided, especially when it's just coming from Fox or like Fox, it corrupts everything. So to get to your question, doesn't matter what Donald Trump is saying now, enough people have woken up that it's pretty clear where this is going. We just have to be concerned about the follow-up in the aftermath and I'm sorry, the death toll is just gonna keep going up and up and up when Biden and Harris take over because this is on a train and they're gonna do as best as they can but basically I'm not sure that they're gonna be able to abandon the free-for-all that's happening. They may be able to help with some controls or federal assistance with PPE and that sort of thing but I don't know what they're really gonna be able to do about this. All righty, well thank you very much Winston. Say Cynthia, I'd go back to Jay's comment about fatigue, Trump burnout. Is that starting to rear its head during these rallies and throughout the nation? Do you think people are just, I get it, I agree with Jay. There's something in the air and it's an intuition there. It's just something, it's not fall because we don't get seasons here but there's something in the air that this smells and feels like Trump is on the way out. Your thoughts and your thoughts about the rally and your immunity approach. Well, I think this wishful thinking I think that Trump is on his way out. I believe that the consensus of the majority of our country wants him out, is trying to vote him out. Whether or not the votes will be counted safely and in the right way is my question and my big worry. There's a lot of people voting on electronic voting machines that are not really safe and there's no backup to find out down the road. You can't do a recount, right? And say, oh yeah, these people. But the herd immunity thing, I'd like to read a quote from Fauci that he just put out. He said, maybe 50% of you have ate me because you think I'm trying to destroy the country but listen to me for six weeks or so and do what I say and you'll see the numbers go down. So, I mean, we've got the top scientists saying, listen to me, don't go with this. That probably won't happen because I think Donald Trump either is going to fire Dr. Fauci for his standing up against being used in a campaign ads or there's a doctor named Dr. Irwin Redliner who in the Daily Beast Tomorrow is gonna do an opinion piece asking for Dr. Fauci, Dr. Bricks and three other, you know, the head of the FDA to step down and protest on this approach that we're taking, this administration is taking to COVID and why play along at this point? Just step down and resign. Absolutely. And you know, when Jake Tapper was interviewing him about this when he was used incorrectly and without his permission and out of context in a Trump ad, when he was asked, you know, if it's going to happen again, what would you say? And he said, well, that would be terrible. Might actually come back to bite them on that because that would mean they're playing a game that we don't want to play. So basically he was saying, you know, they better not try to use me again or I'm gonna come back. Yeah, no, that was a line in the sand and I haven't seen that ad so maybe they're taking it seriously. One last point before I move on to Jay, did you happen to see, again, I think the poll numbers are reflecting that 65 and older demographic is moving on. Even the Republicans, it's moving away because they don't feel like Donald Trump has their best interest in mind. I think it was yesterday there was a tweet with that was Photoshopped of Joe Biden in like a senior home environment with other seniors in wheelchairs. And Joe Biden has been Photoshopped in one of the chairs, wheelchairs. And it said Biden for president but the P has crossed out and said resident. The bottom line is how does that get him votes when he's mocking people in wheelchairs, seniors in wheelchairs and saying that Joe Biden is one of them? Yeah, I don't think it does get him votes. I think it shows how crass and low he's willing to go to try to get votes or try to make it look like he's getting votes or to try to just distract us from the stuff that's really important to look at. And that's the part that I see is that instead of talking about election security we're all talking about what he did with Fauci or this or that. And I think it's important to not lose sight of that. And to Jay's point about the fatigue, that is a real thing. I make sure I don't watch news on the weekends and still it's not enough. I have that feeling of dread when I first turned the news on Monday morning. And I think that's something that's affecting a lot of people that I talked to. And unfortunately, just taking the weekend off isn't really gonna work as we get closer and closer to election. So I think we need to follow what Stephanie says often. Don't look at the shiny objects, right? Try to stay focused on the important things and then we won't get so filled with dread, right? Okay, thank you so much Cynthia, as always. Hey Jay, day three now for the confirmation hearings for Amy Coney Barrett. There's certainly been a lot of questions and some of her answers have been really kind of surprising well, not surprising, but so vague and over such questions that doesn't require a vague answer. I think one in particular was with Corey Booker about the insurance of a peaceful transference of power to the next president. And she just said, well, I can't get involved with that that answer because Donald Trump's currently involved with that issue. What planet do we deal with not having a peaceful transference of power and a potential Supreme Court justice not be willing to opine about that? Jay? She wants the job. Every lawyer, every judge wants that job. You're written into history as soon as you get that job and people will do extraordinary things to get that job. Remember Kavanaugh. But Kavanaugh hasn't yet played out. I mean, we know what kind of a guy he is, we know. We knew from the hearings and we've seen some of his opinions but the critical ones haven't been written yet. And talk about confirmations.  So you can't have a lot of confidence in answers they give in the confirmation. This is really a play for the public. It's a play for the voters. Democrats wanna make their points and the Republicans wanna make their points. At the end of the day, they will confirm her. But what troubles me to answer your question is that she belongs to Trump. That's clear. He said she belongs to him and everything she's done really on those issues before this hearing and at this hearing confirms in my mind that she belongs to him. She's gonna vote for his stuff and that includes all the issues that have been discussed. So it's really tragic that we really don't have a Supreme Court anymore. Let me put it, we have a show on Fridays. Chuck Crumpton runs this show and it's about the rule of law. They have a bunch of lawyers including lawyers who are outside of Hawaii and they talk about the Supreme Court and they talk about other courts and the general takeaway evolving in this show is that the courts have turned. Think of the court that agreed with the Texas governor about the drop boxes, wasn't it, Texas? Oh yeah, yeah, one for county. The governor ordered one drop box for each county, I think it was. And there's one county in Texas that has 4.7 million people and they all share the same drop box. Are you kidding me? And he said, oh, this is to avoid fraud. Well, the federal district court disagreed with him and required him to put the drop boxes back but the court of appeals, all Trump appointees disagreed and they turned it around. And there's no good reason because there is no fraud. So what you have is a corruption in the federal judiciary. And it's not beyond understanding and belief that we also see a corruption in the Supreme Court of the United States which has held the mantle of all our values, all these years. And now we really have to question it. And she's part of that. She's not the only part of it but certainly she's gonna be a Trumper. And that is very troubling for a part of that. Do you think she should commit to recusing herself if there is an election protest and the Supreme Court gets involved to try to decide its way out of some of these legal maneuvers from the Trump administration? Do you think just out of the gate she should recuse herself from all votes? She's not gonna do that. She's not gonna do that. She's not gonna recuse herself. When's the last time you saw a judge on the Supreme? Well, I guess it does happen. It happens because they own stock in a company or something like that. Financial. Yeah, but she's not gonna recuse herself. Forget about it. And so she's gonna vote on whether the election is valid. There's no significant reason she should recuse herself just because he said he owns her. Doesn't mean that she should recuse herself. So I think we got a real problem here, Houston. And I don't know what can be fixed about it. Well, what can be fixed about it is you, the Democrats take the Senate, they keep the house and they have a Democratic president and you legislate many things that the Supreme Court is getting wrong. I'm concerned about the Affordable Care Act. I'm concerned about the Roe v. Wade and I'm certainly concerned about gay marriage and how that's now at risk. And don't forget appointing, creating new judges, new judge jobs on the Supreme Court. Good point, yeah. I mean, whatever Biden says now, the reality is if she gets confirmed and they turn all the way right, which I think will happen, that's one strategy that he could and should adopt, change the mix on the Supreme Court. All in all though, this is not promising. And when you think of the other confirmations, when you think of Kavanaugh, how they made it so political and it resulted in a guy who really shouldn't have been confirmed, getting confirmed. And then the judge that Obama put in never even getting a hearing, she was. I mean, it's become so politicized that it shouldn't be a surprise that the court itself has now become politicized. Okay, thank you, Jane. Hey, Stephanie, should they make a rule that no speeches during the confirmation hearings from anyone? No opinion on that. I'm just getting tired of the speeches for both sides of the aisle. I have hope and a fix. And I think that we need to be aware of what I heard not too long ago on NPR, shared with some of you that Ted Cruz was asked about the records and he also offered that he had researched the records of the various justices who are recommended by conservatives versus progressive presidents. And he said that within his research, he saw that all of the Republican-ly appointed justices, they stayed on course in their conservative, excuse me. He said that all of the liberal judges, when they were appointed, they stayed on course and were progressives throughout their tenure. And it was the conservative justices that swayed from their original... Well, John Roberts in his Affordable Care Act vote was a prime example of that. And he said, this is what Ted Cruz was getting to, the reason he brought it up, was because he said it was because these judges were seeking the approval of the journalists, like the journalists from the New York Times. And he said even Jay's sister-in-law, that Linda Greenhouse is the kind of writer that can influence these people to change their ways. And he mentioned other writers on the New York Times staff too. So I think that there is some hope here that once in and even though she is his creature, so the creature sometimes can start scrambling around the cage in a different direction. But let me just say one more thing about what I understand happens, okay, addressing some of the points that were made. How long have we had a civilization? Do we usually think about it as 15,000 years from the Sumerians or something like that? But Babylon, I mean, but in 15,000 years, there has been authoritarianism and dictatorship right up until like about the last 20 minutes. So it's only in the last 20 minutes in America got this genetic miracle of Jefferson Madison and the rest of them to do something different and be, and so here we are working on something different that the humans have never done before in case the Martians are watching us. They must be pretty proud that we actually were trying something other than dictatorship and authoritarianism. All right. I think we need to bear that in mind. And remember Britain since the Magna Carta in the 12th century with King John, they didn't get to any democratic stuff and end of Victoria after... Well, that's why the United States is a history and democracy we haven't seen before. So... We're worried about it and we... All right. We are out of time. I wanted to go around the panel and say one word for next week and I'm gonna do it. Winston, one word next week. What do you see? Next week. Well, I just have to say, you know, we've got a lot coming down the pike in the next three weeks. So just keep your eye on the ball, folks. Remember, we are that great experiment. We can come back to it, whether the court gets conservative or not, they're losing the Congress, they've lost the hearts of the people. So there may be some balance that comes out of it anyway. We have hope. PBS has a great series on religion in America. I encourage people to go there. Amy Barrett is no doubt a very fine person she'd be a wonderful neighbor. I don't know that she's represents the will of the majority of the people, but we'll see what happens. And I don't... She only has to submit to her husband. I don't know that she has to submit to Donald Trump. Thank you. So let's see what happens. We really are out of time. Cynthia, I'm going to you. I want you to... One word very quickly next week. Voting and it's two words security. All right. Thank you so much. Jay? Battle, a battle between shenanigans and fatigue. All righty. I like that. Stephanie, for you. Take naps, so you have some energy. Naps, okay. And with that, a nod of the head to my longtime and missed favorite news anchor, Walter Cronkite. That's the way it is. 2020, October 14th. I'm Jim Appichella. Join us next week, Trump week and Wednesday at 11 o'clock. Aloha, everyone.


The Governor-elect of Benio State, Reverend Father High St. Alia of the All Progressive Congress, has described his victory in Saturday's governorship election as remarkable and historic. The Catholic person, his victory speech shortly after being declared winner, acknowledged the enormous support he got from the people to emerge victorious, promising to meet the expectations of the people. I would like to congratulate my opponents from the other parties to making it an interesting contest. The anxious period of politicking is over. Now is the time to unite and face the challenges of development. Our state, Benway, is a total recent. Governance in our state has hit a historic low. This election is a mandate to reform and recalibrate governance in Benway. We need our hands, all good and ready hands to be on deck. We need men and women whom the spoils of office cannot buy. We need all who believe that a new Benway is possible. I believe there is an even greater obligation on me, in fact, on us all, to tell the Benway people very clearly the difficult choices and challenges that we have faced and how we will work our way through them.


So when you first started, how did you go about getting it out there? Was it just hashtag heavy? What was sort of the strategy? Lots of hashtags. And then I was just on it all the time. Like I personally was just, Were stories a thing on Instagram? You didn't use Snapchat just five years ago. Okay. No, I, we didn't, I didn't even really know what stories were when they first came. I didn't do stories for a long time. Yeah. I was just posting and going back, like it's fun to like scroll all the way back down. We've archived a couple things, but like, I know some accounts archive like their whole past. Like you can still, if you have time and just scroll to the beginning, it's like embarrassing some of the stuff I posted. Like I would be like at Starbucks and like eat a bagel with like avocado spread and was like, this is vegan and like post it. And it was like my crappy like camera phone at the time. So we've evolved there. And I think that's so important because people are like, I want like this awesome Instagram account. And it's like, you just have to like start somewhere. Like we recently, like within the last half year started putting a little bit of money into, um, Instagram ads when people do like paid ads with us, we take a portion and like put it toward advertising. What is that?  Yeah. Yeah. So we'll do like giveaways or just like a promotion, you know, go by this product online or go to this restaurant and use this coupon code, whatever. And have you found that that to be successful? Like a lot of people go and use the code or there's two different types of advertising that we do. There's ones like flat rate and then one's affiliate, which, uh, we get a percentage is just commission based of whatever we sell for a company.  Um, currently, yes. That's a lot. Yeah. Yeah. But my, my background's in marketing. So I actually like love that portion. Okay. Um, but yeah, I'm still doing that. I need to grow that side of the team. We have a ton of creatives, but I need to grow like more on the business side. Yeah. So affiliate marketing through Instagram, I think again, I think it's like super oversaturated now because in the beginning it worked really well and we saw success, but I think now there's like every influencer out there like use my code for like this skinny T or like whatever it is, right? Um, and it just kind of loses like the authenticity because it doesn't always fit the person, right? Exactly. And so now we're, we're trying to transition. We still do affiliate on social media, but what I'm excited about is when we launch our new website, we're going to do a lot more of that through our website and just like tie it in really organically. And you know, we don't promote things that like we don't use ourselves and, um, this is stuff that like people, sure we get a cut of it, but I'm very transparent. It's like we need, if you want free content, like we have to like feed ourselves and like we have to monetize somehow, right? So it's like, you can support us by, if you want to buy this product, just use our code anyway, you know? And when you just started just to give people a sense who are, let's say sitting at home thinking like, all right, I'm going to start my website right now. I'm going to launch it. I'm going to launch my Instagram. Yeah. What was your growth like on these platforms? And so for every hundred Instagram followers, you might get two website visits or what did that look like? I don't, yeah, I don't know about like the followers to like website, um, but as far as like Instagram followers, I remember like last November, we were at 50 K and then, okay, now we're like, about 30 K like this past year. Um, but it's been like all we're getting like very little advertising dollars, um, mostly organic. So at some point it's just snowballs. It sounds like, yeah, I've heard it at 10 K. People just, it just kind of goes, it does. Um, but yeah, like I'm on it less. I have someone managing it now or helping me manage it. And so I'm on less, but in the beginning I was, that's what I was going to say. I was literally on there engaging with people coming up with like creative ways to just start conversations and like get people involved and like really feel like there was like community on the digital platform that I was creating and just build that, build that community. Like looking back, I spent so many hours on Instagram. It was insane. That was all, like all my free time was just on Instagram, like liking people's like photos.  But at the time I was just, I was just on Instagram all day every day, just messages, everything.


It allows me to pass on to the next paper. So, yep, indeed. So the speaker is gonna be Anatoly Segura from Bankad Italia and we're turning to the cross-border banking and the ring fencing. And it's very nice to see that this is a paper that not for you this time, you have exceeded that age, but there was sponsored by us for under the Ranfalusi Fellowship Program for your young co-author, Ying Zhang. So that's very nice to see the success of this paper. Close yours. 20 minutes, please. Thank you. Thank you very much to the organizers for inviting us to present the paper. We are particularly delighted to present the paper in this institution, in this Euro Tower, as opposed to the other big tower. And as for reasons that will become apparent from the very first slide. So this is joint work with Ying Zhang, who, by the way, is sitting there physically and also joint work with John G. Lawrence, who is sitting virtually somewhere at the Webex platform. So let me stress that the usual disclaimer applies. These are not necessarily the views of the Bank of Italy nor the Euro system. So let me motivate the paper. So as you know, cross-border banks frequently use an organizational structure that is operating through subsidiaries. And that gives them a lot of flexibility when it comes to the allocating internal capital within them. That flexibility in particular means that they can let fail a subsidiary that is in distress. And they can also voluntarily decide to support it from the parent. Now, national authorities don't like so much that flexibility. And sometimes they tend to limit those cross-border capital flows, particularly during crisis times, in order to defend what is called national interest. And people usually refer to those actions by the authorities as ring fencing. Now, during the global financial crisis and also the European debt crisis, there were many, many episodes of bank distress and there were some examples, both of voluntary support and of ring fencing. So this generated a vivid open, and I think to some extent, still open ring fencing debate. And basically the overall idea is that ring fencing somehow constraints the efficient capital allocation within a group and tends to lead to some suboptimal resolution of banking crisis. But at the same time, we've seen that despite the awareness that ring fencing can create problems, that is little progress in supervisory coordination to remove local ring fencing powers. And this applies even to the Euro Area Banking Union as is highlighted by the very frequent speeches by Andrea and Ria and the Elkaconic, in which they kind of complain that ring fencing is still an issue in the Euro Area Banking Union. So given this motivation, what this theory paper tries to answer is the following questions. So we want to understand when that ring fencing arise. And what our answer and something very important, we are going to be emphasizing and it's not very surprising, but we think it has been somewhat overlooked by the policy debate and also the literature is that correlation between the assets of the cross-border bug units is very important. Well, we find this that for large correlation and under national authorities, there is going to be ring fencing when a cross-border bank is in distress. Now, a supranational setup with very strong powers is going to remove ring fencing, but in the end ring fencing is affecting the capability of the cross-border bank to share risks between units. So affecting that those research impossibilities through the supervisory setup is going also to have an effect on the cross-border bank restaking. So our answer, so we ask ourselves what is the effect of different choices of supervisory setup on cross-border bank restaking? And our answer is that it depends and we will emphasize different channels. And finally, all this to get to the final and more important question is when is the supranational authority beneficial from a welfare perspective? And our answer will be that not always, but yes, when there is large correlation, positive correlation across the assets of the cross-border bank and this cross-border bank is also risky. So in a way, we will say maybe the Euro Area Banking Union was the right response through the centralization of decisions to address a ring fencing problem that would have been important in the case of the Euro Area. But then we have the flip side of the answer is that since not always it's beneficial, in particular, there is no need to care about ring fencing or supranational coordination when there is negative correlation between the assets of the cross-border unit. And this is precisely the case when the cross-border bank is going to create more value. So in a way, this is a reassuring message that when cross-border banks create more value, then ring fencing is not a problem. So let me get to the model. There are three dates and there is universal risk neutrality. This is a very stylish model. And there is a cross-border bank and there are some authorities, supervisory resolution authorities. The cross-border bank has two subsidiaries located in two countries and each unit has a risky asset and some deposits that are insured by a national deposit insurance fund. And the structure of the bank is a pure bank-holding structure. So you have a pure bank-holding company and two subsidiaries and the bank-holding company holds the equity of the group. Now, the assets of the bank, they have some payoffs, an interim payoff that is free-slash at equal one, which is small r and a risky payoff at the final date, which is capital r in case of success and zero in case of failure. And now, the successful probability as of T equal one can be high. In that case, we say the unit is healthy and or can be low. In this case, we say that the unit is in part. Now, as I said, correlation across the units is important. It is captured in the model by the correlation parameter rho that captures both the correlation at equal one and the correlation at equal two. And just after some normalization that you have to bear in mind, rho equals zero means independence, rho positive is positive correlation, and as you get to one is maximum positive correlation, rho negative is negative correlation. So now, let's start with the interim date and let us think about what national supervision is. So the way we model national supervision is what we say that is one national authority that curves about each unit and that at the interim date can intervene in order to minimize the on deposit insurance costs. Now, the important interesting case is when that authority sees an impaired unit and she can take some sort of early intervention that we call liquidation, but it's not necessarily that. And it's an action that for the impaired unit is going to produce the deposit insurance costs. So these are the deposit insurance costs in case of early intervention on an impaired unit and this would be the deposit insurance costs in case of no intervention where you see the probability of default and the loss is given default because these losses are costs for the deposit insurance fund. Now, what we assume is that the early liquidation or the intervention reduces the deposit insurance costs. So this authority would like to intervene. Intervention destroys some asset value. So it is something from a welfare perspective and also from the perspective of the bank, the bank is not going to like. So what the bank can do is in order to avoid the liquidation of the impaired unit is to recapitalize it. And there are two ways of recapitalizing the unit, either with some issuance of equity, external equity that is costly, both privately and socially, or with what we call the internal capital market from which is or support in case the other unit is healthy. Basically, the other unit can inject some funds in the form of an intra-group loan. Now, the bank is going to prefer cross-unit support in order to save on the external cost of capital. But that is the other authority, the authority that is responsible for the healthy unit that might not like that transfers of resources from the healthy unit to the impaired unit. And in case she introduces some limits to the support, we will refer to as a reinfencing action. So in terms of modeling, how we are modeling this game between the bank and the two authorities in the interesting case in which one unit B is important and the other is healthy. So the cross-border bank is going to propose a recapitalization plan that consists of how many units X of external capital are going to be raised and injected in the impaired unit. And also the cross-unit support, which is a loan that transfers small s of units from the healthy to the impaired unit against of a junior promise capital s at the final date. Now, each authority says yes, I agree, going forward or not. And if there is unanimous approval, the plan, the recapitalization plan is undertaken, otherwise there is the liquidation of the impaired unit. So now let us look at the approval decision given a recapitalization plan. So now the authority responsible for the impaired unit is going to say, okay, if the plan is not approved, I am going to liquidate. This will be my cost of liquidation. If the plan is approved, this will be the expected cost. There won't be default today, but with some probability there will be default tomorrow. The injection of capital, both external and internal capital is going to reduce those costs for the depositational cost. So if the injection of capital is sufficiently large, no matter whether external or internal, that authority will say yes, I agree. Now let us look at the other authority, the authority of the responsible for the healthy unit. And here and everywhere in the paper, what is blue, in blue we highlight things that are good from the perspective of who is taking the decision and in red things that are not so liked. And what you see again, that authority is going to look at the deposit insurance costs under no recapitalization and deposit insurance costs in its own country under recapitalization. And the authority responsible for the healthy unit, this likes the injection of funds from the healthy to the to the to the per unit. This is because in case of default tomorrow of the healthy unit, which can happen, there will be less resources in order to repay deposits. So that is why this is in red. But the authority realizes that the support is not just a gift, it's against a loan. And the loan whose promise repayment is capital S will be repaid in some contingencies. That is why it enters with the blue. Now correlation matters and it enters with the red because when correlation is high, it is going to be more likely that the two units fail or succeed at the same time. So from the perspective of the authority that cares from the deposit insurance costs, the value of the intra-group loan is going to be very low because the intra-group loan with very high positive correlation, the intra-group loan will only be repaid upon success when the two units are succeeding and then the value of the loan will be appropriated by the shareholders of the bank holding company, not in a way the deposit insurance fund which is the creditor. So this gets us to our first result when we have national supervision, the outcome of this resolution of an input unit when the other is healthy is low correlation. This means independence, some slightly positive correlation and very negative correlation. Low correlation, the recapitalization will be fully via cross-unit support. High and positive correlation, there will be some reinforcing and some limit on how much support the healthy unit can give to the input unit and the bank will be constrained to issue at the parent level or the holding company level. Some step-by-step. Let us now think of what the strong supranational authority that is responsible for the two units would do. Now, the mandate of this supranational authority, we assume is that of minimizing the overall deposit insurance costs. So it cares about the average or the overall deposit insurance costs. It doesn't care about potential redistributions between the two deposit insurance funds. So it is going, the supranational authority is going to approve a recapitalization plan if when adding up the two authorization constraints, we were seeing in the previous slide on average or on aggregate, that constraint is satisfied. And let me highlight here, again, blue, good, red, bad. Let me highlight again how this authority is seeing the support from the healthy to the input unit. So she realizes that support is good in terms of reducing deposit insurance costs in the input unit. But she also realizes that it is bad in terms of increasing the deposit insurance costs in the healthy unit. But the overall effect of this is not a pure redistribution because the cross-unit support reduces overall deposit insurance costs. And this is because in a way, funds are flowing from a part of the bank holding company that is safer to a part that is riskier. So those funds will contribute to pay the deposits with higher likelihood when they are in the input unit. So in a way, by providing voluntary support, the bank holding company is foregoing some of the limited liability protection that it has. The supranational authority is aware of that and it is going always to when there is such authority, we will have that the outcome of the game is that the input unit is always fully regapitalized through cross-unit support. There is never reinfencing. But importantly, this is going to give rise to some redistribution across deposit insurance funds as a solution to the crisis. Now, for local relation, national and supranational supervision is the same. Because there is no reinfencing, but for high and positive correlation, the outcomes are different. And the cross-border bank is going to get more value from the resolution of the input unit when there is supranational supervision. Why? Because there is no need to raise external capital. So this takes us or takes me to the second question, which is okay. We've seen that the different supervisory setups are going to give rise to different ways of solving this stress at the interim date, different resharing possibilities within the cross-border bank. What are the restaking effects of this? And in order to address this question, what we do is to endogenize the risk of the units. And we assume that the state of each unit at equal one depends on something endogenous, that is some costly effort, that the manager of the cross-border bank exerts at equal zero in each of the units. And it depends also on some exogenously on something that we call the strength of the fundamental riskiness of the bank. And we focus on large correlation because it is when there is a discrepancy between the two supervisory setups. And basically, in this expression, what you have is what is the value that the bank-holding company is generating from the possibility of support. And it is this, with some probability there will be cross-unit support and the cross-border bank will appropriate some gains from being able to provide support. And these gains will depend on whether there is a national regime in which those gains will be lower because there is a freelancing or a supranational in which those gains will be maximized because there is no freelancing. And what we find is that, I know I'm running a bit out of time, but there is a buffer, a time buffer from the previous paper, which should be usable because we have a stress that buffers have to be usable when needed. And not just... Okay, so there are two effects. I won't spend too much time, but by removing re-infensing through supranational supervision, the cross-border bank realizes that there are more support gains. And this has two counter-valuant effects. There is a nice and within novel effect that fosters incentivizes effort, which is what we call the Charter Value Effect. If I know I can give support to a distressed unit, I have more incentives to be in a position to provide support. This effect, for this effect to arise, it is necessary that the decisions are taken at the bank holding company level. It's someone that internalizes the value at the entire group of taking good actions at the unit level. And then there is also a more standard, like free-riding effect when you have some, the more resharing possibilities that are, the more incentives that are to take risk. But the two are pushing in opposite directions. What we show is that depending on how risky for fundamental reasons the bank is, one is going to dominate or the other. And this, once we take into account what are the exact risk-taking implications of the different supervisory setups, we can address the last question, which is when is beneficial one setup or the other? And what we find is that for weak banks, these are like banks that are fundamentally risky, the Charter Value Effect dominates. This is the effect that was, when you introduce a supranational supervision, it's going to push towards more effort, so less risk. And so there will be less risk with supranational supervision. So this is good ex ante. And also exposed removing, re-infensing is good. So ex ante good, exposed good. So we will have that welfare is going to increase and deposit insurance costs are going to get reduced when we introduce the supranational authority. Things could be different when the banks are very safe. So somewhat paradoxically, you'd like very safe banks not to be supervised centrally. But I mean, this is a very simple model, very stylized by my, we had to say where the Euro area banking union seats probably we are sitting here or we were sitting here over the past decade. And so supranational supervision is something good. And then to conclude, just let's get back to the issue of the correlation. High and negative correlation that is not going to be re-infensing exposed. And from an ex ante perspective, there will be many situations in which an input unit will be able to be supported by a healthy unit because of negative correlation. So in these cases, the cross-border bank creates a lot of value through that internal capital market and re-infensing does not arise. So national authorities, there is no need of coordination when resharing within the group is more important. And for the higher positive correlation, there is this tension. When re-infensing is exposed very severe, it will be from an ex ante perspective kind of unlikely. Okay, because that is very high correlation. So in a way, the gains from supranational supervision are somewhat limited. Because tensions exposed mean from an ex ante perspective, those tensions will not arise. So it's not so likely that they will arise. And let me conclude. Let me conclude. Just very simple framework of financial restructuring and history of cross-border banks in which we in the generalized cross-unit support, the possibility of re-infensing and restricting how it depends on different supervisory architectures. Contribution to literature, which is contribution to the paper most related to our paper is the paper by Martin M.K. and Patrick Bolton on the resolution of global banks. We stress the important role of asset correlation in financial restructuring. Policy takeaways, the most important one, in the Euro area banking union, supranational supervision is goes in the right direction, in the direction that the model predicts welfare will increase and the deposit insurance costs will decrease. In other, for other cross-border banks that have operations, more global operations so that correlation could be lower or even negative, maybe re-infensing is something we don't have to care so much about. That's it. Thank you, Anatoly. You used your liquidity buffer to the last drop. Discussant in Washington, DC is Angela Madaloni. Angela, can you hear us and see us and speak? 10 minutes is your time budget. Okay, I made it. Sorry, Philip. I couldn't unmute myself. Hello to everybody. It's very nice to see a lot of friendly face and I'm really sorry I cannot be there with you. I hope you see the slides well and I hope you can hear me well. Okay? Yes. Okay, great. So, I mean, of course, the usual disclaimer apply because I mean, we all work in policy situation. Since we don't have enough, a lot of time, let me start. So what does this paper do? Well, they provide a framework to analyze basically different supervisory architecture and it is important that this framework, to emphasize that this framework compares national supervision and super national supervision in a very focused dimension, which is when considering intervention in cross-border banks. I mean, as Anatoly very well explained, I mean, there are cross-border banks that are subsidiary into different countries. And the other main point, which I think, and it was also said by Anatoly, I mean, the main inspiration to this approach is to look at the issue of ring fencing of assets. And a lot of us that have been working in central banking for a long time know exactly what happened during the great financial crisis. I mean, there were a lot of instances and a lot of talks about the consequences of this ring fencing of assets across subsidiary of the same group. I mean, the model is very complex. I think you have seen it and there are a lot of implications. In terms of ring fencing, I think the important point, which was also emphasized is that with sovereign national architecture of supervision, generally there is no ring fencing. And then there is, and here I use maybe a bit of a terminology that I see in the paper, there is this increase in this convergence of bank assets. And then ambiguous impact on this taking. I mean, Anatoly talked about this. I think it didn't stress so much this implication on the convergence in the area that is supervised by the Supernational Authority. And there is this idea instead that the Supernational Architecture would induce this convergence of the default risk among cross-border banks. Okay. Why is this important? I mean, just want to mention it. I think this idea of ring fencing is something, I mean, this was also mentioned also in previous talk. I mean, there is this idea, even now in the Euro area, with a somewhat sovereign architecture, which is the SSM, there is the idea that there are a lot of limitations to how much capital and liquidity can be transferred across a sub-series. And indeed, I took this chart from a speech, a previous speech of Andrea a couple of years ago. And here, I mean, he really talks about non-transferable liquid assets. I mean, in non-domestic subsidiaries in Europe as trapped liquidity. And this is like very important because there is this idea that this trapped liquidity is somewhat inefficient in the system. Okay. So I'm having some issue. Okay. What are the key features of the model? And I hope you realize as I said before that the model is very complex, but I'm gonna talk and focus on two main points. One is the riskiness of the assets. So the riskiness of bank assets was the parameter gamma in the model. And then there is the risk-taking aspect, which of course in the model is linked to the bankers' efforts, which is induced by a certain setup in the supervisory architecture. And then there is the correlation of assets payoff. And then Natalie talked a lot about this, which is generally exogenous in the model. Okay. I want to say that these models provide a framework to analyze the implication of different supervisory architecture in a context, in a very specific context, which is the context of recapitalization and resolution. So resolution is not mentioned so much in the paper, but at the end, I mean, if there is no recapitalization, banks are resolved. And this is why all the implication are actually linked to of course the existence of the national deposit insurance. However, I was thinking that, I mean, supranational supervision has a lot of other dimension. It is not only this dimension that basically is important when there are decision of recapitalization to be taken. And I think this model, and this is not a critique, it's just a fact that does not provide insights about the role of supranational supervision, especially in any, as an institution to increase resilience exactly. And this is, then I went to why the SSM was established a bit in the Euro area. And just to be clear, I mean, the three reasons why it was established, I copied and paste from the website of the SSM is the objective of the SSM are ensure the safety and soundness of the European banking system, increase financial integration stability and ensure consistent supervision. So you can see there is a lot of emphasis on the ex-hunteries taking and resilience of ensuring the resilience of the financial, the banking sector before. And this is something that, I mean, I think the way the setup of this model cannot really tell us much, okay? This is important to take into account. Now, let me talk about the restaking aspect. Now, as Anatoli explained, of course there is this sort of ambiguous effect of supranational supervision on restaking the aspect. Now, the point here is that on this, actually this is an aspect on which we have a lot of empirical evidence right now. We had evidence in other regions, like in particular in the US, but more recently we have a lot of evidence for the Euro area linked of course to the implementation of the SSM. So we know that when the SSM was implemented, banks decreased their exposure, decreased their lending, decreased their asset side, their reliance on also funding, they increased the risk-weighted assets. And also, I mean, during the pre-SSM period, banks that were around the threshold of the assets to be supervised by the SSM or not, I mean, some of them decreased their assets in order not to be supervised by the SSM. So what I'm saying here is that there is actually quite evidence that banks perceive supranational supervision as tougher supervision and therefore somehow they are taking action in order to deal with this, new tougher supervisor. I'm also mentioning here some new work in progress than I'm doing, which is related to the TRIM, which is the internal review of, sorry, the SSM review of the internal model that was done a couple of years ago. And here again, the announcement of the review, I mean, we find that banks increased the risk-weighting of the risk-aid exposure, land to safer borrower and recover more from defaulting entities. So overall, I think there is quite some evidence that supervisory, I mean, supranational architecture is linked to a general decrease in the risk of the asset, which of course is a bit difficult to square with whatever you have on the paper. I mean, this is a point that I wanted to make. The second point that I wanted to make is the implication on payoff correlation because as you said, I mean, this is a key parameter of the model, the correlations of the payoff. And when the national supervisors, sorry, national supervision and supranational supervision is more or less efficient or optimal is linked to the correlation of the assets. And okay, here, you said it only at the end, but I think you mentioned these results, which in a way really struck me. In general, if the correlation is high, I mean, this is my second point, these are the results from the paper. Supranational architecture maximizes aggregate welfare, okay? However, these welfare gains are home shaped in asset correlation and they are limited. And Nanatoly mentioned this at the end of his presentation. And something that really struck me is that in the paper, the authors write, so avoiding the infencing does not per se justify supranational supervision. So the idea is, if we just have in mind to avoid the infencing, maybe we should consider that there are limits to the benefits arising from supranational supervision. Now, I've been thinking, what is affecting pace of correlation? Since correlation seems to be so important, okay, what are the factors that are affecting the correlation of payoffs? And I've been thinking that definitely convergence of supervisory criteria, increasing integration of banking market, increasing possible MAE cross-border, of course, are all factors that are likely to affect the correlation of payoffs of assets of banks in different areas. Now, let me skip here. Europe banking markets remain very segmented. I mean, these are charts that I took from the latest financial integration report. And they're also, as was mentioned also before, I mean, there is this general call from policymakers to try to achieve and to increase integration in banking market. So there is a general call to remove barriers, legal and prudential that creates obstacle to the freedom of movement of capital and liquidity within banking group. And also there are general call to increase standardization and the consistent implementation of regulatory standards. So I've been thinking that these calls are gonna have consequences on the correlation of payoff of bank assets. And therefore, I mean, the way we can look at the distinction between national supervision and financial supervision in the context on the model is gonna be affected, but what is really going on, for example, in Europe. Okay, so I've discussed basically these two aspects, which I think are particularly important, the risk of the assets and the correlation of payoff. Now, let me conclude with a couple of points that I wanted to make, which are not directly related to the paper, but I think they are related to the issue of national supervision and super national supervision, which I think they're important. So the first one, which is that, as I said before, there are a lot of other dimension to super national supervision, which are not taking into account because the model looks at a very specific dimension. And one thing that I was thinking is actually important also in the current environment that we are now living through, I would say, is that super national supervision may make it easier to assess the interaction spillover between regulatory policy and other macroeconomic policies. And this is not something that is just conceptual. This is something that, for example, happened during the COVID-19 pandemic. Okay, that said, it was like crisis management mode, but I mean... We need slowly to conclude because there's not a fortune... I'm concluding, I just have two points. So we have taken unprecedented supervisory decision quickly in close coordination with monetary policy measures. That was said by Andrea in a previous speech. And this is, as I said, seems to me very relevant also in the current financial and economic environment. And the last point that I want to make, and in this I close the circle and I go back to the re-infensing. Of course, we think about re-infensing in the contents of the model and in general, when we look at the assets of banks and transfer of liquidity, for example, from banks to another bank subsidiary in the same banking group. However, I think maybe we should start thinking more in the future what we think about re-infensing of assets when we consider possibility of transfer to other non-bank intermediary in the same group. Because there could be instances in which, it may be optimal from a financial stability point of view the transfer of certain assets of liquidity to support other non-bank intermediaries, but these may, of course, be not something that is not allowed by supervisors in general. Okay, so very interesting paper, a lot of food for thought. And with that, I conclude. Thank you very much. Thank you, the floor is open again. David, please use the previous practice to introduce yourself. Yes, Davy Żachowski from the European Central Bank. Thank you very much, very interesting paper and the discussion. I have one comment and a question. So the comment would be on the interpretation of the pay of rates and the increase correlation. When you presented the paper, I was thinking that it might be during the systemic crisis that pay of rates tend to correlate more. And I think this is exactly the periods when re-infensing arrangements are more likely to appear. Right, and now I think about Vienna initiatives when you wanted to break those re-infensing arrangements. So that's, I think, a nice interpretation to this extended correlations during systemic crisis. Now the question is also Andrea showed that, Angela, sorry, showed that one of the reasons to set up the SSM was a possibility of further financial integration. But still in spite of the common supervision framework, in spite of the common resolution framework and common deposit insurance framework, we have barely seen over the last couple of years cross-border mergers or acquisitions. So how does it square? Can you shed some light on this through the lenses of your model? And if not, maybe you can try to ask those questions via your model, thank you. Yana, and then there was a third question in the back. So, and Natalia, so you, so in the paper, you have either a national supervisory authority that minimizes the national cost of deposit insurance or a super national one that minimizes the overall cost of deposit insurance. But in your area, we still do not have the complete banking union, right? With common deposit insurance. So what is the objective function of the super national authority in that setting? I jumped the question from the right there. So maybe we go zigzag to the left afterwards. Daniel Groh, European Central Bank, supervisory arms. So a very practical question. Do you feel linking to also to the previous paper on cyber risk, do you think incidents such as those that we have been seeing in the cyber risk paper. So sudden liquidity shock due to infrastructure, unavailability or any other such shocks that we see now. For example, in the Silicon Valley bank, the Twitter bank runs as they call them. So depositors withdrawing deposits much more quickly due to panic involving social media. Are those elements something that somehow makes the discussion about the removal of ring fencing a bit more relevant and a bit more calling for action? Thanks a lot. That's the last question in the back there. Hi, Jeremy Bassani from the assistant. You seem to pay a lot of attention.  You pay surely a lot of attention to this change in supranational supervision, but the issue here I think unfortunately in parallel regulation has not changed. So even all this aspect about ring fencing that again in Andrea's pitch has been highlighted several times are not due to the fact whether there is national supranational supervision, about the fact that we have a regulatory system which is pretty much a national based and that's why we don't basically have cross border integration. There's been some benefits from supranational supervision, but without an attendant change in regulation, we have already an embedded ring fencing in the system for which supervision can do nothing. So thank you very much for the many questions. And I will answer selectively. So I will answer what I think is more important than I can give an answer to. So in the model, the supranational authority has a lot of powers and has all the powers or many of the powers Andrea and react to complaints about the SSM or the Euro area banking union framework not having. The supranational authority in a way can induce redistribution of costs between national deposit insurance funds. This is something I think the single resolution board or cooperating with the SSM in solving a cross border bank will have problems with because of the reasons that you were saying in the current Euro area banking union is as opposed to that very stylist set up in the model is incomplete. So the supranational authority in the model is what the Euro area banking union may achieve at some point when the three pillars are completed. And this when it comes to the deposit insurance or the lack of completion of the banking union. And then when it comes to some people that were saying we don't see that cross border integration. So maybe the model would tell you because that potential value that cross border banks would create if the supranational set up the institutional set up were truly supranational with all the three pillars completed are not still there. So many of the banks anticipate that there will be frictions that in the end we are still in some somehow national set up and part of the of those potential gains from cross border banking cannot be materialized because in other things ring fencing. Then when it comes to some of the comments by Angela and I think something that is interesting and it is and you need a model and you need a model. You were saying the SSM was going to be was created to be tough and being tough with banks is something good. Our model says something different. Our model says the SSM will be more lenient with banks when it comes to providing voluntary support with across units and being lenient, more lenient than a national set up. Banks anticipate that allows them to preserve value and then they might be willing for this charter value effect. They might be willing when fencing with this more lenient supervisory authority in this particular aspect too, they might be willing to take less risk, not more risk. And then regarding the mandate of the way we are modeling our mandate of our authorities is minimizing expected deposit insurance costs. So in a way these authorities dislike financial instability, dislike bank risk because when there are bank problems, this turns out showing up as costs for the deposit insurance. So in a way I think we are capturing some in a stylized manner and very concrete and focused manner some of the part of the mandate of the SSM. Thank you very much. Obviously the big elephant in the room is the fiscal arrangement in the union. So maybe I wonder whether there's another game going on that deserves its own model where that is actually fully taken into account where there are spreads that can go up and down and so on and change the fiscal position or their starting positions are different. But I'm looking forward to the next step of this research where that pattern which we all learned over the years is so important is also addressed.


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