Lead Bank CEO Jackie Reses

Auren Hoffman (00:00.906) Hello, fellow data nerds. My guest today is Jackie Reses. Jackie is the co-founder and CEO of Lead Bank, a leading commercial bank. Prior to Lead, she served as one of the top executives at Square, which is also called Block, where she built Square Capital from launch to a multi-billion dollar lending business. She's also the former chairman of the Federal Reserve Bank of San Francisco's Economic Development Council and the Kansas City Fed's Community Depository Advisory Committee.

Jacqueline Reses (00:27.67) Yeah, a lot of words. A lot of words. Yeah, although I will tell you, one of the things I'm most proud of that doesn't come up there is that I wrote a book called Self-Made Boss, which helps really micro businesses start running grow, like the food truck, the hair salon. Like to me, that's like, that's the group of people that I really wanted to help. And so like, it wasn't a commercial endeavor. Like I made zero money off of it. was, but.

Auren Hoffman (00:28.52) Long, long words. Jackie, welcome to World of Dazs.

Auren Hoffman (00:39.318) Ooh.

Auren Hoffman (00:43.38) Okay. Ooh, that's cool. Okay. All right. That should be required reading for many people. Yeah.

Jacqueline Reses (00:57.674) I think it's super cool to help this group of people who I am forever grateful for. Yeah, it's good.

Auren Hoffman (01:03.11) I love that. Okay. I'm going to, I'm going to check out the book. now we're seeing this kind of fascinating shift right now where lots of FinTech companies are becoming banks and tech companies are trying to become FinTech and every bank is becoming a tech company. Like which of those transformations are actually working? Exactly.

Jacqueline Reses (01:20.426) Yeah, what the heck is going on? Why does everyone have FOMO? You know what? I think the idea that you want to become a bank is a really nice thought because usually fintechs and tech companies believe that they could do anything. can trounce through any prior history of what's been done before. No problem. That's at least the way I started when I was at Square and we started a bank there.

It complete naivete. And what I had not quite appreciated was that you have to wake up every morning and say, I want to be the CEO of a bank in order to truly run a bank. And my bank is a financial infrastructure company. Like it's a little bit different than a typical consumer bank, but I still understand who I'm beholden to with regulators as one of my most significant stakeholders.

in a way that is infinitely more extreme than when I ran a tech company. And so I think FinTechs...

Auren Hoffman (02:27.675) in some ways almost like they're on your board, the regulators, right?

Jacqueline Reses (02:30.95) they're like part of my company. And so I think fintechs like the idea of control, controlling their own opportunity set, having to operate at the speed that they want. And before LEED, they never really had that option. Now that fintechs, consumer companies, embedded finance companies have the option to work with LEED, I'd say the appreciation for what we do.

Auren Hoffman (02:33.077) Yeah, yep.

Jacqueline Reses (03:00.726) and the infrastructure we provide and the fact that we can work with them in the same way they like to work has mitigated some of that frustration that you suffer at a FinTech where you think you need to own the rail, but in reality they could work with someone like us and have someone outsource the depth of regulatory controls that we need to do while they get to operate in the way they want to operate and build their products the way they want to build. And so

I think as much as that's true, think people like us have kind of changed the dynamic of that market. And I think we're opening up people's eyes towards the opportunity that they can actually have a good partner who is a bank to build their infrastructure.

Auren Hoffman (03:44.79) Now you bought lead in 20, you bought lead in 2022. How does one even like go buy a bank? Like, can I just buy a bank if I have enough capital? how does that, how does it work?

Jacqueline Reses (03:51.073) Weird, right?

Jacqueline Reses (03:55.406) So like, historically banks have been the purview of like very wealthy families in a community. Some of them get really big. But if you look across the country, it's always like some wealthy family that owns like all the local banks or like, many families and they just stay in the family for generations. And I think that's worked for a long time up until the technology that's involved has become more important. And so for a bank and we'll put a pause on that.

But when I went to go buy LEED, I bought it having already started a bank. And so I already knew what I needed to build and what I needed to find in order to build a FinTech infrastructure company. And so I went on a path to find a very successful bank, incredibly A plus charter, in a great state, great regulatory framework, right employee base, right forward leaning.

right forward leaning group of people to start from. And so I had to buy something that was midsize. So I bought a bank that had about $700 million in assets. So it wasn't a tiny bank and

Auren Hoffman (05:10.326) It was a public company at the time?

Jacqueline Reses (05:12.098) It was private, was owned by a family and...

Auren Hoffman (05:14.294) Okay, why are so many of these banks public? Like there seems like there's so many small cap banks out there in the US. Every time I look up like my local bank that drive by, which I've never even heard of, it's actually a public company, which kind of floors me.

Jacqueline Reses (05:21.08) There are.

Jacqueline Reses (05:29.944) Well, that's because earnings are steady. It's like steady, Eddie, that, you know, the business doesn't turn over, the employees don't turn over, they generate, you know, strong ROI quarter after quarter.

Auren Hoffman (05:40.832) But their market caps are 25 million, 30 million, 50 million. They're just tiny. They shouldn't really be public. Why are there so many these public companies? Yeah.

Jacqueline Reses (05:49.278) I agree, they shouldn't really be public companies. They probably wanted the capital because balance sheets and banking matter. And so you have to have a strong capital base in order to actually pursue your business. so unlike tech, for example, where the income statement and your operating metrics matter in a bank, having a handle on how you manage your balance sheet really matters. And so they might've gone public for the sole purpose of increasing their capital base.

Having said that, we've taken our bank from being a tiny private company to being one of the largest banks in Kansas City, one of the largest fintech banks in the US. We hit a high watermark of about $2.5 billion in assets a month ago.

And so we're rocking and rolling from having started with $700 million in assets when we bought the company in August of 2022. We've added a lot of clients and we've totally changed the nature of how we do business.

Auren Hoffman (06:52.334) How does, how does one might like, if I want to like, okay, so like there's a local bank, if there's a local bank with 50, there's a public company, it's like 50 million market cap. If I want to bid 70 million for the bank or something like that, I have the money in my bank account. want to buy it. Like, will they, will they, can I even do that? Like, is it, or do I need to have like some sort of weird regulatory thing or something?

Jacqueline Reses (06:55.978) If you wanted to go buy a bank, you could go do it.

Jacqueline Reses (07:13.398) Yeah, you can. No, no, no. So if you're keeping their business plan and you're keeping things as is, you could go buy a bank. But, but, but if you want to change things, so you have to write a business plan and submit the business plan because you always have to remember with a bank that the American taxpayers are your liquidity stack.

Auren Hoffman (07:23.048) Okay. but if you want to change things, if I want to make it more tech enabled in a way, or I want to have my own ideas.

Jacqueline Reses (07:40.502) meaning they're your liquidity preference. They, if something happens, you're, yeah, they're gonna basically take your bank over. so, yeah. And so I am beholden to American taxpayers. So I can't write a business plan that says I'm putting it all on red.

Auren Hoffman (07:43.348) Yep. They are the last resort. Yep.

Auren Hoffman (07:51.444) And it's the FDIC. that the organization that's my okay. Yeah.

Jacqueline Reses (08:04.334) and I'm investing all in Bitcoin, sorry American taxpayers if I screw this up and bet wrong, like that doesn't fly.

Auren Hoffman (08:10.548) Yeah, so there's a there's a conservatism that what you have to run as a bank, which kind of makes sense. can't you can't. Yeah.

Jacqueline Reses (08:17.034) It makes tons of sense because I don't, as a taxpayer, I don't want to be on the hook for a bunch of tech wackadoos who decide that they're putting, you know, all their chips on red. And now all of a sudden I'm beholden. And so the regulators actually control who buys it and what they're going to do with it. Now, who buys it? It's not like a country club membership where if they don't like me, they're deciding they're not going to take me.

There is a sound business logic to how they look at who a proper buyer of a bank is. And it's more aligned around financial acumen, financial plan, know, expertise. They just want to make sure that they're putting a bank charter in good hands.

It's not like they're vetting me for my personality and my good looks to say, I'm not letting you have a bank unless we're completely, that's not what's happening. But like when we went and bought LEED, we didn't change the business plan. They were doing banking as a service and we took over the capital base from the current family and just switched out the capital base. so,

And I had already started a bank before and I had spent 20 years running regulated businesses. And so, and I was involved with the Fed for 10 years. And so when you looked at my resume, my co-founder was the chief credit officer of Square Financial Services. My other co-founder was the general counsel of Square Financial Services.

I had been involved with the Fed for 10 years. And so that's a resume that's impressive. And they're willing.

Auren Hoffman (10:00.438) Why are there so many small banks in the US? the number of banks per capita in the US is, yeah, there's 5,000 banks. mean, there's in a lot of countries, even in fairly large countries, there's like 20 banks or something. And there's like in Canada or something, there's not that many banks in Canada. Like why are there 5,000 banks in the US?

Jacqueline Reses (10:06.862) 5,000.

Jacqueline Reses (10:15.125) I know, well.

I it's a history of who owns them. They're all these little families.

Auren Hoffman (10:24.278) Cause this is these little families who have some sort of like political connections in that little town or something.

Jacqueline Reses (10:29.932) But by the way, across the United, like, don't forget, United States is big, it's diverse. Like I'm on the Kansas City Federal Reserve's Community Depository Advisory Committee, CDAC. When I was first asked to do this, I thought the Fed was crazy. And I was like, you know, I don't know that I know anything about, you know, micro lending in small communities across the rural plains of the United States, but.

It has been so eyeopening for me because on this committee or banks from Wyoming and the Dakota, you know, amazing places where I have learned about ag banking and how ag banking works in the United States. And most of the banks in my region do some combination of ag banking and commercial lending. I had never been exposed to that in my entire life. These banks serve a purpose. And so there is no fintech that is financing steer.

Auren Hoffman (11:21.396) Yeah, real purpose.

Jacqueline Reses (11:27.326) in advance of the cattle season in the same way that these tiny $400 million asset-based banks are doing in Wichita. And so if ever you want to have your arrogance smashed out of you because you come from the world of tech and you think you've solved all the world's problems, show up in these local communities and understand the impact that these little banks have on those communities and some of these industries that were less

familiar with, and it is quite an eye-opening life learning about how these banks are part of a local community and how they lend to a local community. And without them, these communities and these businesses would die because they are the lifeblood of farming and other industries across the United States that when you step up in the 50-state world of tech where you're trying to aggregate your products to operate across the United States, you're certainly smoothing over these populations.

in the United States.

Auren Hoffman (12:28.598) Now the Fed has had a bunch of like, they have these new long-term debt requirements and those have challenged some of like the regional bank &A market and stuff. Like what happens to all these subscale banks if they can't afford to modernize, but they also can't sell? how does like walk us through like the next five years?

Jacqueline Reses (12:43.927) Yeah.

Jacqueline Reses (12:47.638) I do worry about it, to be honest with you. I worry about it for a few things. One, while I am a big proponent of stable coins and we've backed and wanted to support the growth of the stable coin industry, I also worry about what it does to local community banking across the United States. It's more this concept of when assets come out of the banking system, when money flows.

Auren Hoffman (13:03.37) Why, sorry, Walkaster, what does the stable coin have to do with the local community banking?

Auren Hoffman (13:12.048) okay, got it. So because you're just going to flow it into a stablecoin instead of just having it flow through banks. Okay.

Jacqueline Reses (13:16.108) Yeah. Yeah, I worry about destabilization of local banking across communities. People might not feel it year one through year 10, but just like money markets over time. And I do worry about that for communities. Even, you know, I'm about as crypto forward, really involved in some of the legislation that's being written. Really, like we have a lot of crypto clients as customers. But I also worry about

Auren Hoffman (13:25.95) Yep. But at some point it just makes sense. Yeah.

Jacqueline Reses (13:45.046) the reality of our communities and feel, as I started this ironically with my self-made boss book, trying to help micro businesses, I don't wanna destabilize local communities because I think it's good for America to have these communities be strong. And so, that's something that's near and dear to my heart. And so I do worry about that.

Auren Hoffman (13:51.766) Mm hmm. Yeah.

Jacqueline Reses (14:09.774) But I think the reality is at some point, because of technology, if these banks aren't able to keep up, and there is a way for that to happen, there is a way, it's not hopeless. But if they're not able to keep up on tech, I think a lot of them will shudder. And so maybe we'll lose the smallest thousand banks in America over the next 10 to 15 years.

Auren Hoffman (14:32.438) Is that bad? Like, is that initially bad to go from 5,000 to 4,000 or?

Jacqueline Reses (14:37.114) No, but I do think it will have disparate impact across different communities. And so maybe it hurts rural communities a little bit more because who's going to be doing like ag banking and stuff like that. You know, it really matters. And so I do think it'll have unexpected consequences in ways that you and I sitting here can't predict, but it will have consequences.

Auren Hoffman (14:42.676) Okay, good point, yeah.

Auren Hoffman (15:02.4) Would you agree with me that FinTech has not been super disruptive to traditional finance to date?

Jacqueline Reses (15:10.638) So it's interesting. think there's $24 trillion of assets that sits in the banking system. Not a dollar of it has moved out of the banking system. But for money markets, I think fintech, which I also believe is hard to define at this point because it's hard to define what JP Morgan's products are doing and why things like ACH and FedNow aren't also financial technology products. The amount of money that moves over digital rails today.

Auren Hoffman (15:18.474) Yeah.

Jacqueline Reses (15:40.738) is the significant proportion of money that moves versus actually cash, despite cash actually continuing to grow year over year, about 6%, which I still find confounding. But digital banking is the preponderance of the way money moves. so FinTech, I think, changed the user interface, and it rewired some of the plumbing of how money moves and created some interesting new

rails around how money moves and disrupted some of the old rails like ACH and even Swift multi in a multinational setting. But there's still a lot of FinTech that uses traditional rails and it's just created this beautiful veneer on top of it. You know, like Robinhood is so beautiful and easy to use versus some of the older trading apps or Chime or CashApp for peer to peer or Affirm for buy now pay later.

Auren Hoffman (16:31.454) Yeah, yeah, it's great. Great. You I I.

Jacqueline Reses (16:39.352) It's just like so much better. You know, like RAM, if you've ever used RAM for expense management, beautiful. And it shames old school tech companies. But you know, the definition of what a FinTech is, I'm really challenged to truly believe that distinction still exists today, given how much of the money moves digitally, even in some of the most old school rails that exist in the world.

Auren Hoffman (16:43.254) I love RAM. Yeah. Yeah.

Auren Hoffman (17:06.118) It's interesting because even like great companies like JP Morgan or something, like if you log into your Chase account, it is a terrible experience. is like, it's so bad. It's like nothing works. breaks. It's just like the worst system. You end up having like hall customer success. It's like, it's kind of like if you went to a bank branch and there were like, there's mud everywhere and there was like,

Jacqueline Reses (17:15.776) I know they need to hire designers.

Auren Hoffman (17:35.582) rats like running around, you would just like run out of there. That's kind of what it's like when you go online to a chase kind of system. I can't believe that they even are like, I would be so ashamed of that if I was to see if I was Jamie diamond, I would literally be ashamed of this of what they do.

Jacqueline Reses (17:36.022) Yeah. Yeah. Yeah.

Jacqueline Reses (17:51.508) I more find the financial products like go get a debit card from a traditional bank and try to onboard to it. And it's such a bad experience versus an Atlas card or a, know, but having said that they have their advantages, which is when stuff hits the fan and you know, you can find a human. It's not a bad, that's not a bad.

Auren Hoffman (18:02.932) Yeah. Yeah.

Auren Hoffman (18:08.128) They have scale. Yeah. That's right. That's why people use them. That's why they use them. There's other things. Yeah.

Jacqueline Reses (18:19.222) And so I like, I think they have their pluses and minuses because I find like customer support in some fintechs abominable. And so the fact that you can't get a person is equally as challenging in my mind as how bad the user interface is in traditional banking. But I still bias towards more modern technology products, you know, and I would use them all day long.

Auren Hoffman (18:33.472) Yes, that's true.

Jacqueline Reses (18:46.636) versus old school stuff. But, you know, I'm living in a more optimistic view and it's only when, you know, you don't know who to call in a crisis that you're like, damn, why didn't I keep that old school bank account?

Auren Hoffman (18:59.178) Yeah. In a crisis, you want to be okay with JP Morgan or Wells Fargo or something like that or whatever it might be. Would banking as a service for consumer fintechs even exist if the regulatory environment was less challenging?

Jacqueline Reses (19:05.134) Yeah, exactly.

Jacqueline Reses (19:17.952) So that's a complicated question for people who don't even know what Banking as a Service is. All Banking as a Service means is there's an underlying bank that provides a service to another company who has its bank rails embedded in its product. That could be Uber or Lyft, for example, you have your credit card stored in their app.

And when you get out, don't pay. It magically just works that the payment rail is charged. And then on the other end of that, their drivers are paid out also via a digital product and they get paid out probably daily or by the ride. And so those kinds of products typically ride on the rails of a bank like mine. And you would never know we exist. The way you know we exist is you find us in the disclosures.

of the financial products that you use or a credit card will say issued by issued by lead bank or a debit card. That's the only way you know my company operates. We're like hidden infrastructure. And I think today, banking as a service is needed because companies and there are all kinds of companies. It could be Apple, it could be Amazon, it could be Deere, it could be Lyft, it could be Uber.

those companies don't wanna deal with the regulatory environment of owning a bank. I understand that. Having started one and bought one, it's kinda hard. I can't even tell you how hard it is. But I think some companies can do some of these things themselves. Like they can go out and get licenses in every state and go do like money transmission if they want to. Some people just don't want the burden. So it really depends on the product that they wanna have.

and what kind of regulatory

Auren Hoffman (21:10.826) They can't even they're not even like a lot often allowed to buy a bank to go do it. Yeah

Jacqueline Reses (21:14.998) Well, there's this idea of separation of commercial activity and banking activity. And again, it's because if some company does stuff that's stupid and they run their company for growth, as American taxpayers, you don't want to be on the hook for that. Like you don't want to be on the hook for that. And so I think you have to understand both sides of that equation to have empathy for why banks are so controlled.

Auren Hoffman (21:43.094) When you think of a company like Mercury, they're very, very interesting model. They don't do lending. So they basically take deposits and they pay out, let's say, a 4 % interest and they make 4.1 % interest. then that's the vig on the vig and they can often make tens of thousands of dollars in an account if it's a big. so you're paying exactly.

Jacqueline Reses (21:58.924) Make the spread.

Jacqueline Reses (22:04.866) Yeah, by not charging, by not paying the interest out. Yeah, I...

Auren Hoffman (22:09.078) Exactly. Exactly. You're paying like $10,000 a year for a bank account, is often what you're paying if you're a startup and you've raised some money and stuff.

Jacqueline Reses (22:16.822) Yeah, ramp, Brex, Mercury, I think they all operate in that context where...

Auren Hoffman (22:22.038) It's an interesting model because traditionally you would take some deposits and then you would lend it out and that's the spread that you would make by lending. But in this case, they're not exactly lending. They're just putting in a money market somewhere else.

Jacqueline Reses (22:34.72) Yeah, that's exactly right. I think there are a lot of companies who are trying to create a really attractive user interface and underneath in the plumbing, they're using the advantage of their scale in order to get good deals with banks like us or others who are there supporting infrastructure and they are trying to make up the difference in the spread. I think you see that in so many different products.

even non-FinTech products where products are being aggregated in order to sell it to consumers at a higher price. think that's...

Auren Hoffman (23:11.08) And sometimes the spread is just like, there's a, they're holding the money for a day or two days and they get the interest on that day or two days. And so it's, like a hidden spread.

Jacqueline Reses (23:20.972) Yeah, no, that's exactly trading is a great example of that. Like, do you know what the trading fees are between the bid and ask? Nope. Or money markets are the same way you pay different fees on those money markets. And I think, you know, that's really the way financial services works. I think traditional fintechs have just created a more beautiful product for people and tried to abstract away some of that pain in order to make it easier.

Auren Hoffman (23:27.914) Yeah. Yeah.

Auren Hoffman (23:49.674) do that for the average consumer, they have a good sense of how Walmart makes money. Walmart buys goods for X, they sell them for, or Costco is usually like 1.13X, they sell it to you and then that's how they make their money. Then they've got all the expenses and they know that, okay, they got to pay their employees and you to pay their rent. I don't think most

Jacqueline Reses (24:00.269) Yep.

Jacqueline Reses (24:10.647) Yep.

Auren Hoffman (24:13.014) consumers like understand how Robin Hood makes money, how their bank makes money, how any of those types of things make make money.

Jacqueline Reses (24:19.65) Well, even Coinbase as an example, the spread and the custodial costs of holding assets somewhere. Like, I'm not sure people really know, you know, like all those companies, doesn't matter whether it's Coinbase or, you know, any bank or any fintech. I think there is some abstraction about how the value chain in those financial products works. I think the only thing I could say is that

Auren Hoffman (24:26.24) Yeah.

That's right.

Jacqueline Reses (24:46.922) financial products are usually so highly regulated that there is clarity of what the fee is you're being charged. And so at least there is pretty significant rules around that. think trading probably has the most opaque sets of fees around spreads. But for the most part, like if you're using a firm, you know what the fee is. If you're using ramp, you know what the fee is. It's pretty crystal clear and they come right out upfront.

Auren Hoffman (24:54.282) Yep. Yep.

Auren Hoffman (25:10.934) That's right.

Auren Hoffman (25:15.082) Yep. If, the fees are specific, like if there's like an interest rate or fee, but often they're like these hidden things that you don't know. Like most people don't know how, again, like a Mercury makes money. that's out there. Yeah.

Jacqueline Reses (25:16.556) and talk about it.

Yeah.

Jacqueline Reses (25:23.392) Yeah, yeah,

Jacqueline Reses (25:28.11) There's a cool company called Flex that we work with that does rent, rent payments, which rent is one of those weird things where, you you have a secure, big security deposit that most people can't pay for. It's usually a few months worth of rent. Then you get your paycheck every two weeks, but you have a big rent check upfront. And so the dynamic of how that money spreads, I think is super cool.

Auren Hoffman (25:50.357) Yeah.

Auren Hoffman (25:53.727) Yeah.

Jacqueline Reses (25:54.21) But like that's an example where like right up front and center, when you go to the website, like it couldn't be more clear about what's happening. I kind of like that actually. like, but like it's an example of a sector that hadn't been innovated before, even though everyone knows the chunkiness of inbound paychecks to outbound expenses is really often a mismatch for consumers and businesses. And that's probably the biggest mismatch that impacts.

Auren Hoffman (26:01.749) that's good. Yeah. Yeah.

Jacqueline Reses (26:23.762) us. Like you get paid every two weeks, but your expenses could be chunky at the end of any given month and you don't, you can't always pay it or you need a few days of spread. And those spreads I think have finally been innovated with kinds of companies like this or companies that are looking at mortgages. I think that's kind of cool.

Auren Hoffman (26:43.85) We're starting to see like state regulators almost compete, you know, whether it's your regulator or Wyoming, Utah, Nevada, they're all taking different approaches. In some ways it's cool because there's like different experiments that are happening. How do you see that evolving?

Jacqueline Reses (26:54.125) Yeah.

Yeah.

I think like to me, New York is the best example of someone who's done it well, even though I think in some cases they've been overreaching in what I consider to be like enforcement, enforcement actions that are like trying to create law and guidelines where, you know, you should have the guidelines first and then just enforce thereafter. Having said that, I think they have the best, most high quality team of all the

states who do novel technologies. So like the bit license is a great example of that, where I think it's a license for crypto companies to have special licensing in the state of New York. And so they created this thing, I think in 2015, called a bit license. People have gotten license. It's a pretty rigorous regime to go through in order to both get one and then comply to monitor it. I think they're exemplary in

Auren Hoffman (27:33.632) What's a bit license? I don't, I'm not familiar with it.

Okay.

Auren Hoffman (27:45.268) Mm, that cool.

Jacqueline Reses (27:55.66) how they operate. Exemplary with a little asterisk. I don't think having financial products built at a state level though is optimized. I think the FDIC and the OCC are better regulators because they manage across 50 states. And so there's things like money transfer licenses that are state by state, but the reality is...

Auren Hoffman (28:07.892) Yeah, of course not.

Auren Hoffman (28:19.254) Yeah, it's great. I mean, you, you, know, you're in Kansas city. There's literally, um, a road in Kansas city where one side is Kansas and the other side is Missouri. Right. So it's like, Oh, wow. It's like, I'm on one side of the road. have like a different like thing I have to do. It's like crazy.

Jacqueline Reses (28:26.796) Yes. Yes.

Jacqueline Reses (28:31.308) Regulate, yeah. So that's why I think I like the OCC and the FDIC as a more primary regulator to manage the complexity of 50 states. I think they're very easy to deal with. And if you wanna be a bank, go be a bank.

Otherwise, let the people who, you know, I dream every day of running my business. I think it's like the greatest thing I've ever done in my entire life. I love it. I love working with my stakeholders. And so, you know, that's, you know, let me deal with all that burden and manage my, my bank and let others go deal with dreaming up new products and being really creative on the creation of things that are pushing the boundary of products that we haven't seen before.

Auren Hoffman (29:21.526) We have a new administration and so we should expect to see a lot of changes in this world over the next four years or so. Where do you think things are, not necessarily where you want them to go, but where do think things will be going in this world?

Jacqueline Reses (29:36.172) Yeah, I'd say though, let me put a caveat on the impact of administrations in financial services, which is I think regulators in financial services have been some of the steadier hands across all of the functions in administrations. And so whether it be Obama or Trump's first administration,

or today, I actually think they're usually lawyers who come out of a deeply knowledgeable background and have been exemplary, you know, exemplary backgrounds. And so it's not true. They're a little bit more politicized. Having said that with my, with, one caveat that I've seen in recent years, which is the SEC recently was very polarized because of crypto.

Auren Hoffman (30:13.29) Right, they're probably more the same than they are different, which isn't probably true in many of other agencies. Yeah.

Auren Hoffman (30:32.885) Yeah.

Jacqueline Reses (30:33.27) And I think Gary Gensler in particular was a controversial figure because of his positions on crypto. And so he uniquely in my mind made the SEC more political than it had been in the past where I, you know, I always joke like the SEC is always run by a lawyer from Simpson Thatcher. I'm golden or a lawyer from Sullivan and Cromwell. We're good. We're good. As long as you've got one of those folks, we're golden.

Auren Hoffman (30:54.75) Yeah. Yeah. Yep. Yep.

Jacqueline Reses (31:02.196) And so, and you kind of don't know their politics. And so, so the SEC.

Auren Hoffman (31:04.566) Yeah, yeah, exactly. I mean, sometimes it was like, yeah, Chris Cox was an ex-Congressman and stuff like that. So you have those types of people too. Yeah.

Jacqueline Reses (31:10.828) Yeah, they're great. They're very knowledgeable. And so the SEC, it was like a moment in time where I don't think that was the case. And then the CFPB in my mind since Dodd-Frank when it was created has always been politicized. And I think that's largely the case because the way it came into fruition and because of the way its advocates have championed for very unique causes, which I consider

to be extremely left leaning in their origins. And so the creation of that entity in my mind was very politicized. Now, some of what the CFPB has done is fantastic. I'm a big fan. Some of it I'd say was a mismatch of how financial products truly work and unintended consequences coming out of things that they were passing.

And things like I just thought were beyond the scope of their mandate. And so I wasn't comfortable with some of the things they've done over time because I thought even if something was a good idea, not a good idea, I believe if someone's got to stick to the scope of their mandate. And once they go beyond that, I feel like, you know, they've got to stop. I'm like a true believer in the rule of law and call me crazy. And

Auren Hoffman (32:33.184) Ha!

Jacqueline Reses (32:38.966) And so that's where, you know, that institution has been a little bit politicized. And I think it'll be significantly curtailed even beyond where it was in the first Trump administration. And I think you're seeing that with what was done on day one and then what was done with the recent appointment that was being talked about. And so, you know, I do think you'll see significant changes there. The OCC, Treasury,

FDIC, these branches, I think, benefit out of a steady hand. And if you look at one of Scott Bessent's strengths, I would say he is steeped in the history of financial markets. And even though he might have been appointed in a Republican administration, that is someone who has spent his career understanding the depth and breadth and the history of how markets move. And so I think he is a very steady hand.

even with a political bias, but he is still a very steady hand across some of those administrations or some of those branches. Sorry.

Auren Hoffman (33:40.565) Yeah, yep.

Auren Hoffman (33:47.978) Now you, when I met you 12 years ago, you're working for Marissa Meyer, then you worked for Jack Dorsey. What did you learn from some of those people?

Jacqueline Reses (33:57.226) Yeah, you know, I'd say Jack was pretty instrumental in some of the takeaways I use as a founder. One of the things he did that I consider extraordinary was his ability to listen. I've never met anyone who can listen and synthesize in.

Auren Hoffman (34:14.582) Cause he's kind of like, that's kind of his brand is that he's kind of a little bit quieter and he kind of like jumps in and you know, more of a stoic and stuff.

Jacqueline Reses (34:24.522) Yeah, well the secret there is that he's more normal than I think a lot of media would like him to come across. He's like...

Auren Hoffman (34:30.07) I used to see him like walking like two miles every day to work. literally just see him. I'd be like in an Uber driving by and he would just be driving. And he wouldn't be, he never had like, he wasn't listening to a podcast. He was just walking and I'm like, what is he thinking about? Like he's got like a whole hour he's walking. You know, what, is he thinking about?

Jacqueline Reses (34:33.208) to work. Yeah.

Yeah, of course.

Jacqueline Reses (34:45.228) Probably enjoying the moment.

Jacqueline Reses (34:50.73) Yeah, no, but I think that's probably the time to synthesize everything he's heard and to think through like where the world's going. And so I don't know, I find that quiet time incredibly powerful. You know, there's nothing I love more than getting someplace where I really don't have Wi-Fi, putting headphones on, putting a hoodie on and kind of just disappearing into my own space and silence and to music.

Auren Hoffman (34:56.523) Yeah.

Auren Hoffman (35:15.727) huh.

Are you listening to some like deep techno music or something? you?

Jacqueline Reses (35:22.166) some combination of total girl pop, like Harry Styles and Taylor Swift. Although I do like like Oasis and Pearl Jam, Prince, Nirvana. I'm aging, I'm putting myself right striking in, in a certain age range. but Green Day, can't forget Green Day. but, I listened to that. I listened to podcasts.

Auren Hoffman (35:25.856) Uh-huh.

Auren Hoffman (35:31.184) yeah, okay. It's more my mind. Yeah, more my speed.

Auren Hoffman (35:38.078) Yeah, totally. Yeah, Nirvana definitely.

Jacqueline Reses (35:50.286) I listen to books on tape, which I really like, audible. And so I go into my Zen moments in order to just give myself time to think.

Auren Hoffman (35:58.654) And you think you're a better listener because of that experience you had with Jack?

Jacqueline Reses (36:04.302) He's amazing. And then one of the other things he did that I actually apply is that whenever there's friction between executives, you make everyone come to the same room. So you don't have one-on-ones with people. You try to hash it out openly in a room and make totally awkward, totally awkward. But if you're grownups, you need to hash this stuff out. Yeah.

Auren Hoffman (36:21.78) Yeah. Can they get awkward and stuff or how does one do it in a way? Okay. Yeah.

Auren Hoffman (36:30.558) You can't talk behind people's back. gotta tell them in their face, to their face what they think.

Jacqueline Reses (36:34.508) Yeah, and I think there's a great lesson there. Like don't do these one-off conversations and come to a decision on your own without a rationale. Like if you can go through things and try to explain why you're biasing in one direction or another, I think that's incredibly powerful and is a good lesson for the next step and where you have the next set of friction. I think people learn from those principles and move forward.

Auren Hoffman (36:39.765) Yeah.

Jacqueline Reses (36:59.114) into the next time they're going to prevent a crisis next time because they've seen how you've worked through that with them. And I think that's incredibly powerful too. And then I learned that Jack's incredibly normal. Like, so like he's a normal dude, just like anyone else.

Auren Hoffman (37:07.663) Block block me

Auren Hoffman (37:15.318) Well, I mean, I don't know, most of the people in the industry are not that normal. So I don't know.

Jacqueline Reses (37:18.958) Yeah, I guess so. I guess so. We all have our spikes of weirdness.

Auren Hoffman (37:23.72) Exactly. Now block, I thought made a very fascinating choice to keep. You got the square and the cash app as totally separate brands and products. Like it didn't combine them even as square was building out like a whole platform of financial products. Like what was the insight to keeping those separate?

Jacqueline Reses (37:41.548) You know, so Square is a company that had historically been uniquely inventive. There aren't that many companies that can create multiple multi-billion dollar products organically. One of the strengths, it's rare. It's really rare. Most of it's done by &A and Block has an ability to do that because Jack will take an idea. He'll fund it. He won't let anyone touch it.

Auren Hoffman (37:57.13) Pretty rare, yeah. Yeah.

Jacqueline Reses (38:11.66) He'll give it an independent team. That's the way my business around lending and financial services was built. The bank was built that way. You are completely given your own domain. And then because of financial services, there's usually, yep, which frankly is what a CEO should be. You're an asset allocator, right? That's what a good CEO does. And so in this case though,

Auren Hoffman (38:17.046) Mm-hmm.

Auren Hoffman (38:23.552) So he's almost like a venture capitalist funding things internally. And so some things fail and whatever, we just don't hear about the failures. Yeah, you're an S.L. locator. You're talent. Yeah.

So you almost have like a series A and series B internally and stuff like if you're heading more metrics you get more money and

Jacqueline Reses (38:42.893) Yeah.

And if someone has a good idea, even if it comes from a hack week, like my product came from a hack week and he basically said like, team, go build it. And you kind of start with a few people and go from there and you build these things in the multi-billion dollar businesses. And I think that is also an insight from working at Block that is pretty rare to see. you know, I describe, I describe companies when they get

Auren Hoffman (38:50.87) Mm-hmm.

Jacqueline Reses (39:15.01) they get bought in an &A deal, that they get loved to death. Meaning a company is acquired, it's its own brand, it's its own business. You try to keep it independent so that it could continue to thrive. But unfortunately, everyone wants to love it and show it some love. And they want little bits of attention from lots of people everywhere across the company. And it gets smothered by love.

Auren Hoffman (39:33.739) Hmm.

Auren Hoffman (39:41.334) Mm-hmm.

Jacqueline Reses (39:41.792) And so first it starts with the finance team, the HR team, the legal team, these foundational functions that also need control. And then product people want to get connected and engineers want to get connected. And all of a sudden you've lost the culture that you're trying to maintain with this gem of an independent company that is on fire and going and continuing to build its business because you've just smothered it with love. And so.

Auren Hoffman (39:45.598) Yep. Yep.

Auren Hoffman (40:09.162) Yeah.

Jacqueline Reses (40:11.16) For some of these divisions at Block, we tried to not smother them with love and we swatted people away.

Auren Hoffman (40:15.574) Lots of that's so insightful. Yeah, it's so interesting. I remember what my company got acquired and like the CIO of the company, Chief Information Officer. So I'm like, great, we're now we're moving you all to, you know, our Microsoft suite so you can interact with everyone else in the company. And I'm like, we're not doing that. And he was like, well, yes, you are. I'm telling you have to do it. I'm like, well, at least for the next, like, you know, 12 months, I can't be fired. So.

Jacqueline Reses (40:36.291) Yep.

Auren Hoffman (40:44.242) at least for the next 12 months, we are not doing that. And he was just like shocked that like someone could tell him now.

Jacqueline Reses (40:47.382) It's.

Jacqueline Reses (40:50.786) But stuff like that matters because even internal communication systems are part of a culture. Like if you were to move, yeah.

Auren Hoffman (40:56.63) Yeah, of course. Yeah. And I could see it from his perspective why it was so important. And, you know, it just it's a trade off that you have to kind of figure out. There's no there's no right answer sometimes.

Jacqueline Reses (41:06.094) But that evolution could kill a company. And so as things get love to death.

Auren Hoffman (41:12.246) Yeah, I'd have some of my best engineers would have just quit the next day if they were on the Microsoft stack for no good reason. They would have just quit. So I didn't want to lose them.

Jacqueline Reses (41:19.496) I know, I know. Well, they don't like the tools. And if the tools aren't good for their business, it's just every day they come in and they're now annoyed and frustrated. And no one wants that. No one wants that. Yeah, no, agreed. And so, you know, I think it was pretty fun to do. Like we created multiple products from nothing. And, you know, as long as you're kept alone and funded.

Auren Hoffman (41:28.916) Yeah, exactly. Yeah, yeah, especially when they have lots of options.

Jacqueline Reses (41:49.134) You really can grow these massive businesses and know, Cash App is the perfect example of that.

Auren Hoffman (41:55.606) Now you are a few personal questions. Your younger brother, Jacob, is the chief of staff to vice president, JD Vance. Um, was there something in the water when you two were raised? I know you, you know, like, like that, you know, you're both super incredibly successful people. Like what, what did, what did you guys learn from your father? Like how did, how did, how did that kind of come about?

Jacqueline Reses (42:15.53) Yeah. So, yeah, my brother has worked with JD Vance since before his Senate run. And I'll be honest, I didn't see this coming. My brother is really, really, really, really smart. He's inf... Yeah, he's really, he's much smarter than me. I'm scrappier, he's smarter. And...

Auren Hoffman (42:30.036) Yeah, I've met him before. He's one of the smartest guys I've met.

Auren Hoffman (42:37.534) Okay, yeah, I mean, he definitely has a huge brain on him. When you meet him, you realize that immediately.

Jacqueline Reses (42:42.398) Yeah. But we're from Atlantic City, New Jersey, which is not exactly the bastion of success. And so, I mean, I think the poverty rate is double, the welfare rate is double.

our family owned local businesses, which I think is why small companies are near and dear to my heart. And I want to see the fabric of communities continue to thrive in like little tiny communities. And so, and by the way, I did grow up going to Tyson fights with Donald Trump when I was a kid, which is mind blowing in retrospect. That is in fact true.

Auren Hoffman (43:22.294) That's cool.

Jacqueline Reses (43:28.502) And my stepmother was his head of PR in Atlantic City. But I think the commonality for my family was intensity around hard work and this scrappy work ethic of being a local entrepreneur. There was no such thing as nine to five, no such thing as five days a week. And so this idea and ethos around work ethic and not having anyone

Auren Hoffman (43:50.038) Mm-hmm.

Jacqueline Reses (43:57.388) be able to advance you without you doing the work yourself. Like we didn't have someone to help us get us into college and we didn't have all the fancy trappings of wealth in the same way that a lot of families do. And so I had summer jobs every summer. He had summer jobs. And I think that makes all the difference in the world to be honest. I try to do it with my own kids.

So my son was a busboy at a Mexican restaurant in Aspen, Colorado this summer. And he was 15, but I'll be damned if he wasn't gonna have a summer job and not work for his entire summer. And so...

Auren Hoffman (44:36.47) Yeah. You learn so much. remember like going in, you know, I'm my first kind of job I got when I was 14. I'm going in and I'm like cleaning the, the, machines and the, worked out like, you know, like a ice cream place. You're cleaning the machines and you're, you're dealing with annoying customers and you're in the back, like someone threw up and you're in the back just like cleaning it up or the toilets. I mean, you learned and you have to show up on time and you've given a lot of responsibility for your age. It's like a

Jacqueline Reses (44:46.796) Yes.

Jacqueline Reses (44:57.986) Gross.

Auren Hoffman (45:04.958) You, I learned way more than I learned in probably most of my college classes or anything like that.

Jacqueline Reses (45:08.652) It's amazing. It's amazing. So my son's first day of work and he's 15, he got paid $70 in tips and he came home and said, it's Aspen. So he couldn't even buy dinner. so he rode home on his bike from work, said, I don't understand. How am I supposed to buy anything? I said, yes, that's a good lesson. No, isn't it?

Auren Hoffman (45:17.974) Whoa. Okay, it's Aspen. okay. All right, okay. All right, that's only an Aspen thing,

Jacqueline Reses (45:36.77) How are you supposed to buy anything? Like you better put your money away in the bank and add it all up and see what you get at the end of the summer. Stuff's expensive. So work very hard and you're gonna learn every year. Hopefully you'll start to make more and more money as a summer job, but things are expensive, have some appreciation. And so that was his learning over the summer.

Auren Hoffman (45:44.862) Yeah. Yeah.

Auren Hoffman (46:01.339) That's amazing. A couple more questions. What is a conspiracy theory that you believe?

Jacqueline Reses (46:08.302) Um, so I'm not convinced that the video of the moonwalk from July 20th, 1969 is real video.

Auren Hoffman (46:19.166) Uh-huh. okay. So you're not, you're not necessarily saying they didn't go on the moon, but you were saying that least the moon walk itself may have been a doctored. Yeah.

Jacqueline Reses (46:28.258) The video. No, I believe they were there. I believe they planted the flag. I believe all that. But the video is a little bit too good for that era. And I don't understand that. I've had the UFO stuff disproven. So like my questions about UFOs recently were disproven by a friend of mine.

Auren Hoffman (46:31.775) Yeah.

Yeah.

Auren Hoffman (46:40.256) Yeah. Okay.

Auren Hoffman (46:55.412) Hmm, okay.

Jacqueline Reses (46:57.568) Like, all right, that was good. But the moonwalk thing still sits with me. The video, the video. Random. Go research it and you'll see what I mean. Totally weird. But I don't think about, I'm not a conspiracy theory person. Like, I'm so happy. I wake up every morning and after thinking about my kids,

Auren Hoffman (47:05.44) Yeah, the video. Yeah. I gotta, I gotta, I gotta watch that again. I'm kind of forgetting, but yeah. All right. I like it. Yeah.

Jacqueline Reses (47:25.362) I, all I want to do is go to work. have so much fun. I love my friends. I love my kids. Like I'm pretty happy. And I think I'm kind of changing the banking industry. And so I don't spend any time thinking about conspiracy theories, but I do find them funny when people talk about it. Sometimes they make me feel dumb though, because I feel like

Auren Hoffman (47:37.344) Well, I love it.

Auren Hoffman (47:47.254) There's a lot of them in banking. There's like thousand conspiracy theories in banking and stuff.

Jacqueline Reses (47:52.588) Maybe, but I don't, maybe I'm not a deep thinker. As I said, I don't think of myself as that smart. So I'm not a deep thinker enough to be insightful enough to find these things. I have to wait for someone to point them out to me. And then I'm like, I got hit by the idiot stick. Why didn't I know that? I don't know.

Auren Hoffman (48:06.804) Well, yeah. All right. Last question. We ask all of our guests, what conventional wisdom or advice do you think is generally bad advice?

Jacqueline Reses (48:19.295) wow, I love that. What's bad advice? my God.

Jacqueline Reses (48:31.134) well, so what's bad advice is probably advice that's given to women about how to think about managing their career for their own kind of like reality of life timeline if you want to have kids. And I always advise people to just lean into the job at hand and what they're doing and what they love and stop worrying about that stuff.

Auren Hoffman (48:48.122) Mm-hmm.

Jacqueline Reses (48:57.888) Like if you're in a great job and you put your head down and you're doing really well, you'll do just fine. Like having kids is never convenient for any parent. You just kind of have it, have kids, you figure out how to make that happen. It's always like a, so the advice is don't try to pre-plan your life around that timeline because you have to think like, what career should I go into?

Auren Hoffman (49:09.269) Yeah.

Auren Hoffman (49:12.924) Super, what's the advice that's bad I'm not following?

Auren Hoffman (49:24.198) so you're saying people are giving him advice the other way. you have to pre plan. You have to kind of think it through. You have to, and you're just saying, just, just do it. Just if you want to have kids have kids like, don't think about the other stuff. Yeah.

Jacqueline Reses (49:27.638) Yeah, yeah, stop it.

Yeah, have kids, but like, and don't take yourself out of the game before you should. Like do your best work. Like don't pre-think, my God, if I'm not at this point in my career, like should I go to business school because then I'll be 30 by the time I get out of business school, just stop it. Like just go for it, head down, get it done.

Auren Hoffman (49:39.679) Yeah.

Auren Hoffman (49:48.404) Yeah, yeah.

Auren Hoffman (49:52.169) Interesting.

Auren Hoffman (49:56.374) Hmm. That's really interesting. I don't think I'm having a lot of these conversations with people about that, but I have heard quite a bit of these types of things, where people start having like angst about stuff and yeah.

Jacqueline Reses (50:09.89) know the timeline in their career. And I think at all moments, give it your all and stop psyching yourself out of the best available opportunity right in front of you at that time. Just go get it done. And honestly, I believe that if you put your head down and do great work, and if you work at a company where you're not recognized, leave, like don't wait for them to change. Like you got to get out of Dodge.

Auren Hoffman (50:31.338) Yeah. Yeah. Yeah. Yeah. If you have a bad boss, get, get, yeah. Yeah. Yeah. Yeah. Yep.

Jacqueline Reses (50:35.97) Bad boss, like leave, get out of there. You're never gonna convince them that they're a moron. Like it's never gonna work or like move to a different team. But like, if you put your head down and just make stuff happen for yourself and maneuver yourself constantly, take the best available opportunity that's right in front of you. And magically, when you look back 10 years later, you're gonna realize you made a lot of progress.

Auren Hoffman (51:00.98) Yeah, I love that. All right. Thank you, Jackie Reese's for joining us on world of daas. I follow you at Jackie Reses on X. I definitely encourage our listeners to gauge with you there. This has been a ton of fun.

Jacqueline Reses (51:12.162) Thank you, thank you, see you later.