Welcome back to Global Insider’s Friday feature: The Conversation. Each week a POLITICO journalist shares an interview with a global thinker, politician, power player or personality. Today, Politico’s financial services editor and Morning Money co-author Zach Warmbrodt talks to Citigroup general counsel Brent McIntosh about how the bank is adapting to geopolitical conflicts.

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The Conversation

Brent McIntosh helped lead the Trump Treasury Department’s response to the economic fallout of Covid-19 as under secretary for international affairs. Now, as Citigroup’s general counsel, he’s helping the global lender navigate U.S. banking system unrest and a growing list of geopolitical headwinds.

McIntosh was among the executives in demand at this week’s Milken Institute Global Conference in Beverly Hills, where top financiers and policymakers were searching for answers about risks looming in the economy. Just as the conference kicked off, JPMorgan Chase announced its emergency takeover of beleaguered bank First Republic and Treasury Secretary Janet Yellen warned that the U.S. could run out of money to pay its bills on June 1.

I sat down with McIntosh Tuesday at the Beverly Hilton, where we talked about U.S. banking turmoil, the future of globalization and U.S.-China policy.

This interview has been edited for length and clarity.

Have you learned anything surprising at the conference this week?

It’s been an eventful conference, not because of what’s happened at the conference, but because on early Monday morning we found out what happened with First Republic. And then Secretary Yellen wrote a letter about the debt limit.

Lots of people had prepared remarks they were ready to make and they had to adapt on the fly.

My panel was supposed to have a Treasury official, and that didn’t happen for understandable reasons.

I’ve been to this conference several times, and this time there’s a sense of people really trying to figure out what’s going on. There are times when they’re worried, and there are times when they’re not worried, and this time feels like people are wondering whether they should be worried.

Is there any kind of consensus?

I don’t think there is consensus.

The thing you do hear about the financial system is we don’t see banks that are in the position that Signature [Bank], Silicon Valley [Bank] and First Republic were. So we’re hopeful that phase of what’s going on has been put in a box.

There are headwinds and challenges that the economy is facing. The rate environment is still challenging. There are asset classes that are going to be challenging. Parts of the commercial real estate space are going to be difficult over the coming year.

On the other hand, you do hear people looking at the financial system more generally, and saying that these problems are not pervasive.

This does not to me feel like prior financial crises in the sense that you have a bunch of parts of the banking system that actually are very sound right now.

The other big U.S. risk is the debt limit. How does Citi prepare for that?

We spend a lot of time internally thinking about how we would approach a situation where there was a default. There’s a lot of planning internally. Second, we use our voice to urge a bipartisan solution to the debt limit.

How are geopolitical tensions impacting Citi’s operations and where you’re looking to invest?

We still see a lot of great investments outside the United States. We regard both Japan and India as bright spots.

But, more than that, our clients really still are doing business in a lot of places, and we aim to be the preeminent bank for people doing international business.

There is still a need to move money around the world rapidly and with great confidence. That’s not going to change.

There may be realignments here and there in the geopolitics, but, fundamentally, that part of the business is not going away. It will morph over time, depending on geopolitical hostilities and alliances and partnerships, but that is an enduring part of the global economy, for as far out as we can see.

So you’re not as concerned about deglobalization?

I don’t see any empirical evidence of deglobalization.

There are places where different countries are looking at, for example, putting supply chains in countries that they regard as hostile. Inevitably, in certain sensitive sectors, there is going to be some amount of pulling back on that sort of cross-border activity.

But the vast majority of cross-border activity — upwards of 99 percent of all of it — just continues apace because it’s not affected by those tensions.

What makes Japan and India such bright spots?

India has so much potential economically. It’s now, as of this month supposedly, the most populous country in the world.

There is so much opportunity there. You have an educated workforce, and you have democratic governance.

For Japan, you see a stable democracy, highly educated workforce and a place that, over time, has had some economic struggles demographically, but it’s our sense that there’s a lot of interest in investing in Japan at this point.

How would you describe the U.S. posture on China right now? Secretary Yellen gave a speech a few weeks ago that indicated she wanted to cool things down a bit.

My sense is the Biden administration believes that there are sectors where the two countries are not going to want to rely on each other. And their interest is in the United States not relying on China.

But it is their belief that a complete decoupling is unlikely to happen, given the extensive connections between the two countries.

I think it’s also their belief that a complete decoupling is not necessary or in the interests of either the United States or the global economy.

Is that a good thing?

It’s a realistic thing. It’s hard to imagine we would actually do a complete decoupling between the two countries.

A view that is discriminating between places where the United States does not want to rely on China and places that it’s perfectly fine to have supply chains running through China is one that I think the administration has adopted for reasons that are consistent with economic reality.

Thanks to editor Heidi Vogt and producer Andrew Howard.

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