Return to Transcripts main page

CNN Newsroom

David Solomon and Jill Bommarito are Interviewed about Small Business; School Board to Decide Police Chief's Fate; Netflix Loses Fewer Subscribers than Forecast. Aired 9:30-10a

Aired July 20, 2022 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

(COMMERCIAL BREAK)

[09:32:43]

POPPY HARLOW, CNN ANCHOR: So more than 2,500 small business owners are meeting with hundreds of congressional offices today here in the nation's capital. It's part of a summit organized by Goldman Sachs. And the goal is to push for policies to help these businesses in this economy in the face of historic inflation and supply chain hurdles. A Goldman Sachs survey of small business owners finds 93 percent of them are concerned about a recession in the next 12 months and more than three-quarters say the economy has gotten worse in just the last three months.

And this morning I sat down with Goldman Sachs CEO David Solomon and Jill Bommarito, the owner of Michigan small business Ethel's Baking Company, and started by asking Solomon what is his message to Washington right now.

(BEGIN VIDEOTAPE)

DAVID SOLOMON, CHAIRMAN AND CEO, GOLDMAN SACHS: Small businesses are having trouble accessing credit. And there are things that we think can be done programmatically to make credit more available so small businesses can have more confidence that they can borrow and invest in their businesses.

Benefits are a big issue. When you think about competitive hiring, big companies have resources to pay benefits in a competitive environment. Can there be programs that can give small businesses added help or support so they can be competitive in hiring.

So, ideas like that, that we think can really help accelerate an investment in small businesses to drive more economic growth and more economic activity.

HARLOW: Especially in this moment, I mean how pronounced is the pain for small businesses right now? What's your message to the Biden administration, the Congress, today?

JILL BOMMARITO, FOUNDER AND PRESIDENT, ETHEL'S BAKING CO.: We're the backbone of the economy. You know, we -- it all starts with small business. And inflation pressures, workforce pressures, a possible recession, we need the assistance of our Congress to help us move forward.

And one thing that's so important to us is the reauthorization of the SBA. It hasn't been reauthorized -

HARLOW: The Small Business Act.

BOMMARITO: The Small Business Administration.

HARLOW: Are you preparing for a recession in the next six months?

BOMMARITO: I think, as a small business owner, we're all - it's been a crazy two years of just constant, what's next, right? So, we're all managing risks every day. And it's definitely a possibility.

HARLOW: Bank of America says, yes, a recession is likely this year. Citigroup's CEO, Jane Fraser, as you know, said she's not seeing anything in the data that saying we're on the cusp of a recession. What do you think? Do you think the U.S. will be in recession in the next six months?

[09:35:00]

SOLOMON: I think it's hard to predict. I think it's uncertain. I think that you have to, at this point in time, recognize that the possibility of a recession is much higher than it's been for quite some time. That doesn't mean it's baked in the cake and it's absolutely coming in the next six months.

The survey said that 93 percent are concerned about the possibility of a recession as opposed to think there's going to be a recession.

HARLOW: Yes.

SOLOMON: And I highlight that difference because it's a period of great uncertainty given the inflation that's embedded in the economy. And I think that you have to be prepared. You have to be a little bit more conservative, a little bit thoughtful about what if. And that's -- by the way, that's advice that we give the biggest companies.

HARLOW: Yes.

SOLOMON: That's the advice you give the smallest companies. Because the probability of economic headwinds is just higher right now. But I'm not good at predicting exactly what's going to happen. Nobody is.

HARLOW: You have said that you believe the chances of a U.S. recession in the next 24 months is high. How high?

SOLOMON: I don't like to speculate on percentages because I'm not a - I'm not a predictor. But if you're a student of economic history, anytime you have high inflation and go through an economic tightening, you wind up having some sort of an economic slowdown. And so I think the chances that we have a recession are high. If it's 50 percent, it's high compared to what we normally operate with. And so I think we've just got to be a little bit more cautious, a little bit prepared. I think all businesses have to be very focused on the resources, how they're allocating them.

HARLOW: On the earnings call your CFO said that Goldman was slow (ph) hiring given the challenging operating environment. What does that mean? Are you look at potentially a job freeze, layoffs?

SOLOMON: When - we've grown quite a bit over the course of the - of the last few years.

HARLOW: Yes.

SOLOMON: Really pretty significantly. And we had a pretty robust hiring plan this year, especially around engineers given some of the investments we're making in digital platforms.

What Dennis, our CFO, said is that we're going to slow hiring. And it literally means what it is. We had a plan to hire thousands of people this year. We hired thousands in the first half. We had thousands more to go in the second half. That pace of hiring is going to slow materially in the second half. But it's not going to zero.

HARLOW: It's not going to zero. Got it.

SOLOMON: So, it's not going to zero yet, at this point.

HARLOW: Yet.

SOLOMON: Now if -- and by yet what I mean is, I can't tell you what the world's going to look like in six months. If the world looks more difficult, we'll adjust accordingly.

HARLOW: Yes.

What does inflation mean for your business? How difficult has it been for you?

BOMMARITO: As a baker, we bake dessert bars. We manufacture and we distribute all over the U.S. And every single input that we have, from butter, to our cases, to our film has gone up exponentially. So, instead of a typical 5 percent increase, which would be big, we have that baked in typically, we're seeing 20, 30, an additional ten on top of that, an additional five.

One of our most recent things that we purchased, and haven't purchased for nine months, had 20 increases since the last time.

HARLOW: (INAUDIBLE).

What specific things do you think the Biden administration can do, outside of the Fed, we'll talk about that in a minute, but the Biden administration could do right now to help on the economy and specifically inflation?

SOLOMON: Well -

HARLOW: Because you've talked about policy action.

SOLOMON: I think there are big policy actions. You know, unfortunately, when you get an economic situation like this where there's meaningful inflation, you know, in the economy, you have to tighten monetary conditions to affect demand. You also have to do things to affect and improve certain supply dynamics. And the disruptions to supply chains because of the pandemic are kind of unprecedented and we're working through that. But that takes time. And there are - you know, there aren't specific actions that necessarily speed up some of that supply chain disruption.

HARLOW: Right.

SOLOMON: I think the big policy issues that would be quite constructive here around energy policy and around immigration policy. And I know these are big, big issues that are very, very --

HARLOW: Can you specify for us?

SOLOMON: I - sure. I mean I think we need energy policy that encourages more energy security here and investment in our energy resources.

HARLOW: Does that mean more drilling, more refining, more pipelines?

SOLOMON: It's - it's an - it's an - it's an and, OK? We need to - we need to be independent, use the resources we have in the short-term, and invest and create incentives to put more risk capital into the acceleration of technologies that can help us transition and make our energy system more green. But we're almost in a debate where we're focused on "or." And at the moment, in the short-term, to support our communities, we have to have better energy independence. And we've got to give people that have the resources the time to make investments consistently without worrying that somehow the rules of the road are going to change.

HARLOW: And on immigration?

SOLOMON: On immigration, we -- population growth drives economic opportunity. And, you know, for example, one of the things I think that would be terrific is temporary work visas, OK. We need more labor in the United States. We have huge job, you know, openings. To make it easier for small businesses.

[09:40:01]

A program of temporary visas so people who want to come in and want to work on a temporary basis to fill that gap potentially can.

But none of that can happen until we secure the border and there's a clear border policy. So these are - these are big picture issues that are not easy to solve in the short-term.

HARLOW: And one thing the Biden administration can do today is eliminate most, if not all, of the Trump era China tariffs. Good idea?

SOLOMON: Um, I -

HARLOW: Many people are pointing at that and saying that would bring down inflation.

SOLOMON: I - I - I am a fan of directionally hat. I'm not going to say all.

HARLOW: All right.

SOLOMON: But directionally.

HARLOW: Directionally.

SOLOMON: Directionally for sure.

(END VIDEO CLIP)

HARLOW: A lot of recommendations there for the Biden administration.

SCIUTTO: No question.

HARLOW: What they could do on the economy.

So, next hour, we hear from him on inflation. Does he think that we have hit peak inflation in the U.S.? Also, his thoughts on the role corporations have on speaking out on issues like guns and abortion.

SCIUTTO: Interesting to see his views on recession, no question.

HARLOW: Yes.

SCIUTTO: Still ahead this hour, the fate of embattled Uvalde School Police Chief Pete Arredondo now in the hands of school district leaders. We're going to be live in Texas with just how soon that decision could come. That's coming up.

(COMMERCIAL BREAK)

[09:45:43]

HARLOW: In Uvalde, Texas, sources tell CNN Pete Arredondo, the school district police chief, could know within days if he'll lose his job over his role in the response to the tragic mass shooting there.

SCIUTTO: A scathing report revealed a whole lot of blame to go around. Nearly 400 law enforcement officers responded to the scene, waited more than an hour to confront the gunman - goodness -- despite hearing screams from inside that classroom.

CNN's Rosa Flores is live in San Antonio with the latest.

So, Rosa, how soon will this decision come down?

ROSA FLORES, CNN CORRESPONDENT: You know, Jim, according to sources who are talking to my colleague Shimon Prokupecz, Uvalde school officials have informed Pete Arredondo that they're planning to meet on Saturday to determine his fate. And further that the school board actually plans to vote to terminate him. Now, again, this is according to sources who are talking to my colleague Shimon Prokupecz.

Now, I reached out to Arredondo's attorney to see if indeed Pete Arredondo has been notified about this meeting to ask for comment, to see if either Pete Arredondo or his attorney are planning to say something. We haven't heard anything. Remember, he's only done that one interview with "The Texas Tribune," but I have not heard back.

Jim. Poppy.

SCIUTTO: Yes.

HARLOW: Rosa Flores, we appreciate it very much. Thank you. We'll see what happens.

In the age of streaming, it's all about subscribers. Despite news that Netflix lost nearly a million of them last quarter, investors are optimistic about the company's future. We'll explain why ahead.

(COMMERCIAL BREAK)

[09:51:44]

HARLOW: Nearly a million subscribers said good-bye to Netflix in the most recent quarter, but Wall Street's seeing the overall numbers as a win. This comes after a rocky stretch for the streaming company. That is for sure.

I think we have our Brian Stelter with us.

SCIUTTO: Yes, Brian Stelter here.

So, Brian, explain to us how Wall Street is looking at this number, which to you, me and Poppy might look bad, as a good thing.

BRIAN STELTER, CNN CHIEF MEDIA CORRESPONDENT: Right, don't you love Wall Street logic?

SCIUTTO: Yes.

STELTER: Isn't it amazing? They only - they only lose a million subscribers and that's why the stock is up this morning. But that is because Netflix was projecting to lose 2 million subscribers in the springtime. So only losing a million is actually good news. Or as the CEO - co-CEO (ph) Reed Hastings said overnight, it's less bad news and he says the company is set up very well for the future.

This has been the talk of the business world because Netflix has suffered this massive correction the past six months. The stock was up near $700. Now it's around $200. So, the story about Netflix, the story that's being told about the entire streaming sector has changed markedly. Why? Well, there's a number of reasons. A saturated marketplace. There's lots of competitors. There are rising costs that every household's feeling and maybe some people are cutting the cord as a result. The proverbial cord. In fact, most of the subscriber loss for Netflix last quarter was in

the U.S., Canada and Europe. The company is still growing dramatically, quickly, in Asia. But in the U.S. and Canada, having a hard time. So, it's promising some changes. And in the coming quarter, the third quarter, they say they'll gain about a million subscribers worldwide. That's why the stock is likely up this morning.

HARLOW: Big changes, right? Advertising, which I think is something they said they'd never do.

STELTER: Never do.

HARLOW: So that changes. Folks changing passwords to their account with other folks, they're going to get charged for that, is that right?

SCIUTTO: Yes.

STELTER: That's right. Never say never I suppose. Netflix had always said that they were going to stay advertising free, commercial free. And that was nice for a while, and it certainly is a nice preference for some consumers to watch a drama like "Stranger Things" and not have any commercial interruption. However, Netflix believes it can grow by adding an ad supported flavor. So what they're going to do is add an option to pay fewer dollars a month and see some ads in between. That will come out in the first part of 2023.

So will a crackdown on password sharing. The company is already testing this in some Latin American countries, making it harder to share your password with family members and friends, et cetera. They're testing some ways, they call it page sharing offerings. Basically a way to pay a few more bucks and then I can share my password with my brothers or then I can share my account with other friends. You know, that's the idea. We'll see how customers react. But in talking with Netflix executives, they are confident that there are tens of millions of households out there that if they were just encouraged to pay, they actually would be willing to pay and not just share passwords. We'll see.

SCIUTTO: How do they track password sharing? That's what I'm curious.

STELTER: Well, yes. So they actually announced one of these new tests this week where they can tell if you're viewing in two different homes.

SCIUTTO: Right.

STELTER: So, I think they're going to sometimes go after people with two different homes, try to get them to pay for both homes. They can see, based on your IP address, your internet protocol address, where the viewing's happening.

SCIUTTO: Right.

STELTER: Look, I - you know, I'll be honest, I gave my passwords to my brothers in Maryland. They know we're watching in Maryland and New York at the same time. I have a feeling that a year from now I'm going to have to pay a little more for that privilege.

SCIUTTO: Yes.

STELTER: But look, as long as the content is great, as long as the shows are worth watching, Netflix, HBO Max, Disney Plus, they're still going to be in a strong position in the future.

[09:55:02]

SCIUTTO: You just got a little electronic tag on you.

STELTER: I did, didn't I.

SCIUTTO: The Netflix police, they're going to drop in. Like, they're going to like, fast rope out of a helicopter right now.

Brian Stelter, we wish you luck. Thanks so much.

STELTER: Thanks.

SCIUTTO: The U.S. Secret Service in the hot seat after CNN has learned the agency only turned over one - one text exchange from the days surrounding the January 6th insurrection, and many dozens of Secret Service officers. How is that possible? We're going to have more on that in our next hour.

(COMMERCIAL BREAK)

SCIUTTO: A very good Wednesday morning to you. I'm Jim Sciutto.

HARLOW: And I'm Poppy Harlow. We're glad you're with us.

We are following several major stories this morning. First, the U.S. Secret Service under heavy scrutiny after providing one, just one, a single text exchange to the DHS inspector general following a request for a month's worth of records.

[10:00:06]

This is according to a letter sent to the January 6th committee and obtained