Q&A with Willy Walker, with guest interviewer Peter Cook, Former Bloomberg Television Correspondent
Willy Walker: Good afternoon and welcome to the final Walker Webcast of 2024. It's my great pleasure to have my oldest friend on the planet, Peter Cook, as the interviewer today. It's also my great pleasure to not have to prepare for a Walker Webcast after having done so many of them this year. It's nice to have a week off where I get to show up and be ready for anything and everything to be thrown at me. Given Peter's background as an extremely successful reporter covering Capitol Hill in Washington, D.C. for Bloomberg for many years, then going to the Department of Defense and being the head of communications for Defense Secretary Ash Carter, and now running communications for the American Bankers Association, I have picked somebody who not only knows me exceedingly well, but is also one of the best reporters and questioners that we could find anywhere on the globe. And I entered this session both very excited for Peter's questions and at the same time with a tad bit of trepidation, given how well Peter knows me and also how well he will take the questions that were sent in to us by many Walker Webcast listeners and either ask them or not ask them to me. Pete, great to have you. Thank you for taking an hour out of your busy schedule to do this. And fire away.
Peter Cook: I'm honored to be on the Walker Webcast and truly surprised you asked me to do this given how much dirt I do have on you over the years, all the way back to the crib. But it is truly an honor to be here. This is a great platform. You've done a tremendous job stealing my job, basically asking questions of people. You've gotten really good at it. I'm happy to turn the tables on you today, and truly impressed with the sophisticated questions that were sent in by your audience members, not just about commercial real estate, although everyone's really excited about two people called Fannie and Freddie. So we'll find out about them in a little bit. But if I do my job right, we're going to touch on your personal life, your fitness, interests, and obviously commercial real estate and the economy. But we'll talk about some politics, and maybe a few other issues along the way. And I will sprinkle in a few of my own questions and perhaps I might have gotten a few questions from your colleagues, friends, and admirers through the years who might have shared a few suggested thoughts with me. I took a look at last year's Ask Willy Anything session that Danny Gabriel led. I thought he did a great job with it, and I thought I'd steal from his playbook and start with the speed round. If there are some folks who don't know you all that well, we could get to know you a little bit through some quick speed questions. We're going to start off here. What's the last movie you saw in a theater?
Willy Walker: Honestly, I don't know. I can't remember the last time I actually went to a theater. I think maybe Dune. I think I went to see Dune II with my kids.
Peter Cook: Chalk that one down as Willy doesn't go to the theater very often. Last time, Wills, you wrote a handwritten thank you note?
Willy Walker: Yesterday.
Peter Cook: And we don't need to know who, but what's your thought process behind that?
Willy Walker: Literally yesterday I handed between 75 and 100 handwritten birthday cards and somewhere between 6 and 8 handwritten thank you notes to Victoria, who helps me with those types of things here in our Denver. Every single day that I'm in this office, I'm handing Victoria some handwritten note or letter going out to someone either internally or externally to say thank you for something they've done for us. I'm very old school in that I find handwritten notes are a thing of the past and yet make a huge difference. It's something that I do. And quite honestly, a lot of people mention it. And it's interesting, I do it because I mean it. But at the same time, it also is noteworthy. A lot of people pay attention to it.
Peter Cook: Your friends always appreciate your handwritten notes. That's one of the reasons I put that question in there. A flip on you, Wills. When's the last time you used AI and what were the circumstances? Do you use it that much?
Willy Walker: I don't, actually. And I have a lot of people who do. We use it at Walker & Dunlop and have certain protocols for everyone at Walker & Dunlop to use it and also to fact-check it. I find that AI hallucinates a little bit more than I would like to be able to fully rely on it. And I think the other piece to it Pete is that, first of all, a lot of what I review at W & D is work that has been done by our team that is put in front of me. There's AI that's playing into them preparing things. But when it gets to me, I'm not the one going in to pull all that information together. But I do get asked as it relates to using AI for the Walker Webcast. And I'm super old school in that I don't outsource any of my research to anybody else on the W&D team, and then I also don't use AI. I think most of that is due to my desire to really get to know who my guest is and understand the data and that either whether they've written a book or whether they have published out of the way that they run their company. I don't take any shortcuts. If AI all of a sudden put a script in front of me on the question to ask the CEO of Avalon Bay in my interview I did two weeks ago, I wouldn’t think that I've pulled it all together. I would have to read the script rather than knowing the data. And that interview, for instance, I did for an hour in front of a live audience at a business conference and I didn't have a single note and I never looked at a piece of paper. The only way for it to get into my head so I can have a flowing conversation is if I've actually done the research and not if AI just spit out the answer for me.
Peter Cook: I share that though, Will. To really do an interview with someone, you really have to sort of know where you're going ahead of time. And I used to always have people ask me about those scripts that were prepared and handed to me and questions handed to me. And it never works like that on TV.
Willy Walker: And I'd also add, Pete, one thing having watched you on television for as long as I did. I think there was an article this morning about how The Washington Post is having a hard time finding a managing editor. And I think one of the things that a lot of people forget is how hard journalism is. AI can go and scrape and pull feeds together and try and collate it. But really good journalism, which you did when you were at Bloomberg, was being prepared for the interview. Then also not just accepting the answer they give you, but knowing enough about the topic to push beyond that, to push back a little bit in a very respectful way. But I watched you time and time again with political leaders in Washington who would give you their standard answer and you would push beyond it because of your knowledge of the issue. And at the end of the day, obviously, that's what we're all hoping for from good reporting.
Peter Cook: Agreed. All right. Let's keep you on track here with serious questions. Are you a good dancer? Yes or no?
Willy Walker: That's great. I used to be what I would consider to be a bad dancer, but my girlfriend, Sarah, is an incredible dancer. And as a result of her being an incredible dancer, I've gotten newfound confidence in my dancing abilities. And today I will dance anywhere at any time. Sarah says that I'm a good dancer. I think she's being nice to me. But at the same time, she is. And the other piece to it is that everyone just looks at her. I don't really have to worry about people looking at the way that I dance.
Peter Cook: Yeah. All right. Will, you are not a good dancer. I'm going to officially confirm that.
Willy Walker: You haven't seen me dance since your wedding in 1993. I'm not sure what you're talking about, but go ahead.
Peter Cook: Wills, I know things. Your parents, they're wonderful people. I've known them my entire life. They have great qualities and skills. What were you lucky enough to inherit or take away from them? You obviously got their genes, but what about their skills that you bring into your daily life every day that really stand out to you? And if Diane and Mallory are watching, Merry Christmas.
Willy Walker: First of all, I'm super blessed to still have both of my parents with us, and you lost your mom this year. And I know how challenging that has been. And thankfully, your dad, Phil, is still with us, which is incredible. He's in his mid-nineties. But first of all, I'm thankful that both my parents are still with us. Second, I would say, Pete, from my dad, it's a curiosity for knowledge. My dad is one of those people who has never stopped wanting to learn. He's a lifelong learner. He reads more than almost anybody I know. And he'll see you and come up and ask you a thousand questions about what you're doing, what you're seeing. And he'll have gone and done some work on something that he'll know something about (banking policy right now) or he'll be able to dive in with really good questions to you and engage in a really good conversation. I clearly get that desire or quest for knowledge from my dad. From my mom, I think it's relationships, in the way that she nurtures her friendships and invests in her friendships. You asked me previously about writing thank you notes. I learned that skill from my mom. She curates and maintains and invests in relationships in ways that I think few people do. I was in DC two weeks ago staying with my parents and my mom was sending a Christmas gift to the child of her goddaughter. And to remember to give your godchildren gifts at Christmas time is one thing, but to go to the children of your godchildren is at another level. She's one of those people who is generous with her time and her love. And I think that I'm not nearly as good as my mom at that. But I learned from her how important that is.
Peter Cook: Good things to say about both your parents and both absolutely true. Wills, what do you absolutely have to have when you travel?
Willy Walker: A gym. I literally this morning was talking to Sarah about a trip she wants to go on and she was talking about a hotel we were going to go to and I said, “Does it have a gym?” And she said, “Will you not go to a hotel that doesn't have a gym?” And I said, “I will not stay at a hotel that does not have a gym.” I work fitness into my life every single day, and when I go on the road, as my assistant, McCray knows very well. And every day I have time set aside to take care of my physical health, which is also taking care of my mental health.
Peter Cook: We'll get to more on your fitness habits in a little bit. What is guaranteed to tick you off?
Willy Walker: Arrogance.
Peter Cook: Favorite U2 album.
Willy Walker: That's so Achtung Baby, which surprises you as a U2 fan. Because I'm pretty sure that's not your favorite album. But Achtung Baby came out when I lived in Paraguay, and I listened to Achtung Baby every single day that I lived in Paraguay. And it's one of those albums that has such an important moment in my life. I worked out to the music on Achtung Baby. When they went and played at The Sphere, which you were nice enough to take me to because that whole concert was based off of Achtung Baby, I think all the people in that room were all big U2 fans and loved it more than most because that album is very special to me.
Peter Cook: Good choice, enjoyed the Sphere show. That was fun. What's the last thing you broke in your body and how did it happen? Broken bone, that sort of thing.
Willy Walker: I tore my hamstring off my pelvis three years ago, tore the entire hamstring off. There are three tendons that attach it to your pelvis, so they had to go in and put screws into my pelvis and then reattach the hamstring to it. I did it in a somewhat fluke accident while running, and three months after surgery, I was on my bike and climbed Mount Lemmon in Arizona three months to the day after getting my hamstring repaired. And while it was the most painful thing I've ever had happen, my friend, Dr. Jamie Gennaro, here at Steadman put me back together perfectly and with a lot of hard rehab, I was back on my bike three months later climbing Mount Lemmon, which was great.
Peter Cook: Yeah, impressive. I remember you telling me that that really was a painful one. Will, it's been a while, be careful stepping outside today because you could be done.
Willy Walker: The funny thing about that, Pete, if you pulled my medical insurance records, I have no cost whatsoever for anything. I take no prescription drugs. I go get my annual physical and do not have to go see a doctor for anything other than orthopedic surgery. And I do have, if you watch the chart as it relates to expenses, probably about every 3 to 4 years, I have some spike in my overall costs and that's just me getting injured and having to go to the orthopedic surgeon.
Peter Cook: Your friends, Will, are all happy to get you a brand new helmet every year when you go biking. What's your favorite indulgence in terms of food these days? And you're not allowed to say, “Brussels sprouts.”
Willy Walker: No brussels sprouts. There is a lobster sandwich place around the corner from our office here in Denver that serves fresh Maine lobster and lobster rolls. And it's the yummiest stuff in the world. As you well know, Pete, I love lobster. And having a place around the corner that gets fresh lobster from Maine flown in three days a week is a huge indulgence. And I love going there for a yummy lobster roll.
Peter Cook: Good, at least we know you're partially human. Foreign country you're most eager to visit in 2025. And why?
Willy Walker: Oh God. What's so interesting about that is 2024 has been filled with a huge amount of travel. I got back from being in Abu Dhabi and Dubai. I took my youngest son, Wyatt, to India earlier in the year. I went to F1 in Monaco. I was in France; I've been in Spain. I've been all over the place this year. But last night with my sons Charlie and Wyatt, we were talking about where we would like to go in the coming year. I took Charlie skiing in Chile in August and Charlie was like, “Let's go on another ski trip.” And we talked about going to Japan or to British Columbia. And my youngest son, Wyatt, really wanted to go to Afghanistan or Syria. And I question that. And I think it's because Afghanistan and Syria have been in the news so much recently. But I did put forth going to Pakistan. I have a great business school friend who lives in Pakistan, who has invited me numerous times to come to Pakistan. And so I’m trying to figure out whether we can go visit my friend Squibb in 2025 in Pakistan. Maybe that's on the travel schedule this coming year.
Peter Cook: Wills, before you book any of those trips to Pakistan, Syria, or Afghanistan, please check with me. I have some friends from my last job who could be very helpful and accommodating in terms of security.
Willy Walker: I would only say that, Pete, it's interesting. I've had a number of friends who've gone to Israel recently and I have some friends who are going to Israel next week. I talked to my friend Sam Rascoff, who's planning on going to Israel for the holidays. And it's interesting because you look at the headlines and you say, “Whoa, Israel is at war and it and their people have to go into bomb shelters all the time and how dangerous it is.” And at the same time, it's also an incredible time to see these places. It's an incredible time of change. And it's an incredible time where particularly in Israel, the sense of unity and nationalism and that they are fighting a worthy cause is something that everyone who's been over there recently comes back and says made it just a fascinating time to be there. And while the headlines certainly can make people shy away from that, I do think that in some of these places. Maybe not Syria. It will be very interesting to see how it comes together in its new whatever it ends up becoming. I remember when I lived in Paraguay back in 1989 and Alfredo Stroessner, who at that time was the longest-standing dictator in the world, was pushed out of power in August of 1989 by General Rodriguez, and I showed up in September of ‘89 to what was supposed to be a newfound democracy. And while Paraguay has remained a democracy since 1989, it was a big time of transition in that country. It will also be interesting to see what happens to Syria and other nations that seem to be in the midst of power change.
Peter Cook: I would agree with you. Syria, when I was at the Department of Defense, was a big focus of ours. And to see what's played out in the last few weeks in Syria is truly amazing. And you can only hope for the Syrian people that some form of calm and a return to normalcy is not the right word, but the opportunity for refugees to come back, for Syrians to come back to a peaceful homeland. It is an amazing thing if it happens. But there are some tremendous challenges ahead. And I'm keeping a very close eye on the entire country. But the eastern third of the country where the U.S. forces who are there are spending most of their time is worth keeping a very close eye on.
Willy Walker: What do you think, Pete, about all the change that's going on geopolitically right now? You've got a no confidence vote that just went on in Germany. You've got a French government that's under huge strain. You've got the UK which has been somewhat in disarray since exiting the European Union, and everything going on in the Middle East with the changes going on in Syria. You were inside the Department of Defense. You were watching these issues every single day and knowing how the US military would react to the type of change that's going on in Syria today. What's your take on this in the sense of if you were still in the Defense Department today, would we be at a heightened alert level? What's going on in Western Europe, for instance, something that it's the political process and it'll work its way through.
Peter Cook: First of all, I would say, “Well, I'm not at the Department of Defense. I don't have the daily information, updates, intelligence and otherwise of the folks they do.” This is a complicated world and every day we see that. And it's a world that's not always easy to predict. And we're seeing populism rise in many parts of the world and the dynamic that occurs there. We're seeing change on the ground in places like Syria that we didn't necessarily expect even a few weeks or months ago. And I will tell you that's why we have the Department of Defense that we do, and the professionals there, civilian and military. It’s a planning organization, as Secretary Carter would say, on a regular basis to me and to many others, designed to plan for the unexpected. And we have tremendous people there capable and equipped to handle any number of scenarios, whether or not what's playing out has been accounted for fully. I'm not there to say with certainty, but I have great confidence in the people who are there in their ability to adjust. There are a lot of other factors, levers for the United States to pull other than the military lever, of course. But I've got great confidence that if that uncertainty, the unpredictability, leads to instability and U.S. interests being at risk and certainly U.S. people being at risk, that our military will be able to handle it no matter where it is in the world.
Willy Walker: I was really interested. Just one quick thing on that that was really interesting. Peggy Noonan last weekend in The Wall Street Journal wrote an article about how unique it is, if you will, the power that Trump has assumed or the limelight that Trump has taken so quickly as a president elect. And I think that speaks to both the strength of Trump coming into office and then the weakness of Biden leaving office. But one of the things that she said in the article, which made me take a quick breath and be a little bit shocked was her point that someone might take advantage of this vacuum of power in the sense that Trump doesn't actually have the power. He doesn't have the office yet. Biden is completely marginalized and someone might in this next month do something to take advantage of what is to some degree a power vacuum today of the United States being able to react to it. And then I had somebody who's very insightful and knowledgeable about the Middle East say to me yesterday, he wouldn't be surprised if we see something happen to the mullahs in Iran. And I'm sitting there running through my mind thinking about what would happen if Israel made an attack on Iran to try and push regime change in Iran right now and how the US would react to that given this vacuum right now of Trump having all the power but none of the tools at his disposal yet and Biden basically being marginalized. But to your point about the professionals of the DOD, it would be very interesting and somewhat scary to see how we would have to react if we have Trump with the voice, but Biden with the power.
Peter Cook: We have one president at a time and that person has tremendous power and tools at their disposal. And that's a hypothetical, Wills. The Israelis have conducted airstrikes on Iran. And in recent weeks, we all know the tensions that are out there. I have a hard time imagining that would happen under the current circumstances. But there are people gaming things like that out and that's their job at the Department of Defense. And we should all be pleased that they're there. No matter who is president of the United States, we have those people, many of whom will stay in that position for the next administration. And we should be thankful those people are there. Let me get you back on topic. We're going to get some questions from some of your ardent listeners here. This is from Jerome Johnson of Ivory and Ivory Capital. When did you first discover you were good at something? And have you had any discoveries like that recently?
Willy Walker: As you know, Pete, I was always a good athlete. And whether it was being a quarterback on the football team or playing youth hockey, I had that athletic field. You always get instant feedback. And I would put forth to you that that was early on something that I gravitated toward because there was early success there. And that feedback loop is very fast. I would fast-forward though from an academic standpoint, I don't need to tell you, Pete, I was a pretty average student in grade school, in high school. But I really started to focus on learning and doing a lot of learning outside of the classroom and all on my own and then ending up in business school. For me, a very seminal moment was our first major exam at Harvard Business School. And everybody in our class studied endlessly for this exam. And there's a force curve at HBS, 10% of the class gets A's, 80% gets basically B's or C's a passing grade, and 10% get an F. As you can imagine, going into the first major exam, which was an operations management exam, I was thinking that's the first ‘where do you rack up against everybody else.’ And obviously at HBS in your class, there are a lot of really smart people. And I'll never forget, I got an A on that exam. I was in the top 10% and all of a sudden I was like, “Whoa, I got this. Actually, I can do this.” And that was really one of those seminal moments where I realized that all the work that I'd done outside of the classroom to get myself prepared for the curriculum at HBS was paying off. And then I guess recently I spend a tremendous amount of time reading and trying to get to the bottom of issues. And I was on the phone yesterday with somebody working on Fannie Freddie privatization and where it's going, what have you. And the person said to me on the phone, “You know more about this issue than anybody else, not only in the industry, but potentially on the face of the planet.” I said, “That's not true, I know a lot about it.” But the reason I raise that it's not just to understand the issues, it's to triangulate and make the relationships to understand the differing points of view that then allow me to not have a conversation that's beneficial for W&D or for W&D industry, but to make sure I'm understanding what the tradeoffs are going to be and coming up with something that would be politically viable for both sides of the aisle. And that's the kind of learning that I'm doing today that I spend a lot of time on. And at the end of the day, you can never know enough. It's a matter of collating it and holding on to it.
Peter Cook: Wills, we had so many questions about Fannie and Freddie. Let's knock that one out of here right away. What's going to happen to Fannie and Freddie next year under the first year of the second Trump administration? What's your thought on that?
Willy Walker: It's a super interesting topic, Pete, because you got to understand that we have a Republican administration coming in, but it's not a traditional Republican administration. And as a result of that, many of the things that have guided Fannie Freddie policy for decades are thrown to the wind. The president has said he wants to privatize Fannie and Freddie. That's a mandate that's out there. It's not top of the priority list, but it's on the priority list. The president has stated it directly. Then you say, “Okay, how does it happen and why does it happen?” If it is done because the president said he wants it done, they shouldn't be part of the federal government. Let's spin them back out. That would be a ‘26 or ‘27 effort after the tax bill gets worked on in ‘25. And the thinking around that would be, who's in the Treasury working for Secretary Bersin? Who is the FHFA director? And how do they run that process? But I've spoken to a lot of people, including Mark Calabria, who was the FHFA director in the last Trump administration. And the thinking here is that they need to be spun out of conservatorship, put back on their own feet. They both retain capital. They can operate as quasi-governmental or quasi-private institutions. They ought to go raise capital from private investors and run them the way that they used to be run. The shift in the narrative in the last week that is very interesting is there's a lot of talk about using the privatization of Fannie and Freddie to offset some of the costs of President Trump's tax cuts. And if the privatization of Fannie and Freddie stays in that framing, there are two very important things to that. The first one is it moves from being a ‘26 ‘27 event to being a ‘25 event because it's going to happen in conjunction with the tax bill that has to be done in 2025. So point one is it moves it up from a timing standpoint. The second thing to it is, if it is being used as an offset to tax cuts, the motivation is to raise the most money possible in the IPO of Fannie and Freddie. If you think about it in that context, what that then would do is say, “Okay, how do we raise the most capital for Fannie and Freddie?” Fannie and Freddie's return on equity has dropped significantly in conservatorship for one major reason: They're not retaining risk anymore. If you look back at Fannie and Freddie in 2007 pre-conservatorship, they were retaining a ton of risk on their single-family mortgage originations, as well as some of their multifamily mortgage originations. Today due to credit risk transfer and what the regulator has had them do, Fannie and Freddie have moved all of that risk off to private capital. They've sold that risk off. In selling that risk off, their return on equity has come down significantly. Right now, Fannie and Freddie are running ROEs around 4% to 6%. If you're going to attract private capital to make the IPOs go really well, you need to give Fannie and Freddie the opportunity to increase that ROE. There are two ways to increase the ROE. The first is to allow them to retain more credit risk. I don't think anyone inside the agencies at the regulator or on Capitol Hill wants Fannie and Freddie retaining more risk and going back to what got them into conservatorship in the first place. I think you push that to the side. The second thing then would be to allow them to do more in the mortgage market than they are doing today presently. For instance, the single family loan limit is at $867,000, I believe today. You could look at potentially raising the single family loan limit. Plenty of people in the private sector, your clients at the ABA, who would say, “Ah, that's our market. Don't let Fannie and Freddie come into it.” But if you want to see that ROE go up, they're going to have to do more in the single family market that might be doing more second homes, which is an area that now Chairman French Hill of the House Financial Services Committee literally told me face to face two weeks ago in his office, “I don't want to see Fannie and Freddie doing more in the second home market.” Then the final thing is allow them to do more multifamily. Fannie and Freddie in the multifamily market today are doing 40% to 45% market share in single families. They do about 80%, 85%. You could let them do more in the multifamily space to increase that ROE. The issue on that, Peter, as you well know, is what I said is anathema to traditional Republican thinking. Most people like Jeb Hensarling, who has an op-ed in The Wall Street Journal today, would sit there and say, “No, Fannie and Freddie should not crowd out private capital. They should be kept in a very tight box and they should provide liquidity predominantly to the affordable housing industry and not become the financier of the entire mortgage industry.” But given the setup for this and what the Trump administration wants to get accomplished as a potential offset to their tax bill if it ends up getting tied to it, it's a ‘25 event and it could be an expansion of what Fannie and Freddie do, not a reduction of what they do.
Peter Cook: And the other point is, if it's part of the tax bill and reconciliation, it only needs a simple majority.
Willy Walker: Right. The one other piece to that piece, which you know extremely well, is whether it goes down in a legislative process or whether it goes down in an administrative process. I don't want to get too far into the weeds as it relates to an explicit or an implicit guarantee. But I will say this. Fannie and Freddie have never had an explicit government guarantee on their paper, ever. They don't have it today and they didn't have it pre-conservatorship. There's a lot of talk out there that they must have an explicit guarantee or else that their cost of funds will go up and then that will get passed on to the US consumer. The bottom line is you can get them set up in a post-conservatorship way that gives the market the same confidence that they had of the implicit guarantee pre-conservatorship today. And so it has to do with having a line of credit to the Treasury and a lot of other things. But we can figure that out without actually getting legislation that puts an explicit guarantee on Fannie and Freddie's bonds.
Peter Cook: A lot to chew on there. We'll let the audience chew on it. I am reminded of Will's being there at that moment when they were placed in conservatorship and covering Hank Paulson that day and the look on his face when that action was taken, the fact that we're still talking about it still today, amazing. Although I'm not totally surprised, I want to keep a close eye on the clock, get to more questions. And I'm going to ask a question from your buddy, Danny Gabriel, who was in this seat a year ago. If you had 30 minutes with President-elect Trump, what message would you want to get across to him? And Wills, do we see you heading to Mar-a-Lago anytime soon?
Willy Walker: I will say a couple of things, Pete, on that response to Danny's question. The first thing is I have been extremely impressed with President Trump's demeanor since getting reelected. There is a certain calmness to him and his leadership style. I've watched him very closely. I watched him at the New York Stock Exchange last week and have been very impressed in that interview where Jim Cramer jumped up from the set and went over to interview the president, He asked him the most fundamental, but I think, telling things that the president responded where Jim Cramer said, “Do you think it's a good time for people to buy into the stock market?” And I believe President Trump won in 2016 would have said something very sort of like, “Of course, it's going to be great. Everything's going to be perfect. Invest behind me, invest in America.” And instead, the president-elect said, “Markets go up and markets go down. The bottom line is long-term, we as a country and the US equity markets will go up and we will do very well.” But it was a measured response, not a bombastic response to the question, which I think we saw a lot of in President Trump's first term. First of all, I would say congratulations and quite honestly, thank you for being more measured in the way that he is expressing himself. The second thing is I would try, and I know many people with much bigger voices than I have tried, to get him to back off of his tariff stance. And I would try to tell him, like many have to tell him, that tariffs at least in the short term are going to be wildly inflationary and that could have some real impact to where interest rates go, and to try and temper some of his rhetoric as it relates to it. It may not be rhetoric. It may be actually policy as it relates to across the board tariffs of 25% on Canada, Mexico, and China to start with. And the third thing, I would make some comments as it relates to housing. The president is a real estate developer. The president understands multifamily housing very well. And I would probably make a comment as it relates to using the leverage of Fannie and Freddie and the borrowing cost at Fannie and Freddie to try and reduce the cost of borrowing for the American consumer and play into his thought of America first and focusing on the US consumer and trying to make it so that people can continue to live the American dream, which is having a very good job being able to save and own a single family home. The dream of a single family home is fully unattainable for a wide swath of the American public today. President Trump has the opportunity with his administration to make it an achievable goal for millions of Americans. And I think that getting single family home construction and getting the regulatory burden or the entitlement burden at the local level somehow sorted out, that could be both carrots as well as sticks from the federal government to make it so that some of this red tape gets out of the way at the local level to allow for more land to be entitled and for both single family and multifamily housing to be built, can bring down the cost of housing in America. And then the other one is interest rates. If tariffs come in and if rates move up, I don't care how many new homes you build, housing is still going to stay unaffordable from an interest expense standpoint. He's got to stay mindful of the fact that if tariffs come in and the Fed has to turn around and start raising rates again, and the ten year runs, that cost of borrowing to the consumer is going to go up precipitously. He's got to be very mindful of what his broad macro strategy does on rates, because he knows as well as anyone on the face of the planet that lower interest rates drives everything through the economy with over $1 trillion of credit card debt outstanding and a $13 trillion single family housing mortgage market in America. Rates go down and the economy starts running.
Peter Cook: Wills, you answered about 7 or 8 of the questions that came in various fashion. Some folks asked what it's going to take to revive the housing market? What policies could the Trump administration embark on? There were a number of questions related to immigration and tariff policy and the impact those decisions could have in terms of inflation and ultimately on the commercial real estate marketplace. Anything else you want to add on that how, let's assume you're 30 minutes at Mar-a-Lago, aren't successful and some of those actions come. How are you thinking about that in 2025 and beyond?
Willy Walker: I think, first of all, the president does watch the markets. It should not surprise anyone that he went to the New York Stock Exchange last week. And he's only the third president since Ronald Reagan. Ronald Reagan, George W Bush, and Donald Trump are the only three presidents since 1980 who have gone to the New York Stock Exchange. And the president does watch the markets. Ten year has started to run. And I can guarantee you the president is watching that and understands the impact on the economy that a ten year run is going to do. Now, there are only so many things that he can do to control that. And one of the biggest issues is the 30 plus trillion dollars of US debt and the deficits that are planned to continue to grow. If the president and his administration were to work with Congress to try and significantly reduce our debt position and the deficits that we're running, I'm certain the market would rally upon that. But there's only so much they can do. But look what Elon Musk and Vivek Ramaswamy are going to focus on with their Doge efforts. Anything they do there to make the government more efficient and to try and reduce our federal fiscal deficit on an annual basis will be very well received, I believe, by the markets. The other issue you brought up was immigration. And I think one of the big things to keep in mind here is the following: We know that there is going to be a big crackdown on illegal immigration into the country. We also have questions today as it relates to deportations and how much the Trump administration is going to really lean into deporting people beyond convicted felons and other people who I don't think anyone is going to have an issue with really focusing on that. I think the real question is legal immigration. And does the new Trump administration either say we've stopped illegal and we now want to allow for significantly more legal immigration or whether they bring down the numbers on legal immigration? We need more legal immigrants to the United States. We need their talent and we also need their population growth. If they do those two things, I think the illegal immigration deportation issue is somewhat of a non-issue. If they simultaneously cut off illegal immigration and bring down legal immigration at the same time, we're going to have a very difficult time finding growth from a population standpoint and from an economic standpoint and could find ourselves in the same place that Japan has been for the last 20 years, which is negative population growth. We're not making babies in the United States right now at a point we're going to get the type of population growth that will drive the GDP growth that we are all used to. And immigration has a big role to play there. And I'd love to see them say cut off illegal and raise legal.
Peter Cook: Let's go into a couple of quick, specific questions that definitely came in from the commercial real estate side of your audience. This one comes from Scott Fishbone of Avalon Bay. If you were starting your career in real estate now, what segment of the real estate industry will provide the greatest training around in the near-term and growth opportunities over the long term?
Willy Walker: Any company in any part of the commercial real estate industry is going to give you good training as it relates to how you underwrite assets, how you determine credit, etc. I would tell you, if you look at some of the enormous leaders in our industry today, off the top of my head, Barry Stern and Bob Faith are two of the most outstanding commercial real estate investors, owners, capital formation executives, and money raisers that you will find anywhere. Bob and Barry both came out of business school right into the real estate crisis of the late ‘80s, early ‘90s and the Resolution Trust Corporation. And both Bob and Barry cut their teeth on workouts. And you look at why the two of them are such amazing investors in good times, it's because they learned the industry in bad times. If you really want to have some guts, I would say, “Go to someone who owns a bunch of B and C class office buildings and spend two years figuring out how you work out those assets because how those assets get worked out is going to be super difficult. And you'll learn all sorts of things from a capitalization standpoint, from a valuation standpoint, from a tenancy standpoint, etc.” But if you don't want to go to the deep end of the swimming pool quite that fast, I would also say that data centers are an incredible emerging industry today. There are only a few players in it. Most of the data centers are being built by the hyperscalers. And it's not an industry that is nearly as large and developed as the big four food groups of office, retail, hospitality and multifamily. But clearly, if you can get a good job in data centers, it is the future. It's where the capital is going to go. And hopefully it's not completely where our economy is going to go because I'd love to see humans having buildings that they can actually work in and live in. But boy, data centers are a hot spot.
Peter Cook: Will, a couple other quick ones. I had to do my quick check of acronyms here in the commercial real estate space. How do you see the expansion of build to rent affecting the single family housing market. And that comes from Patricia Curley of BHHS Verani Realty.
Willy Walker: Let me go back to the interview that I did with the CEO, Ben Schall of AvalonBay two weeks ago. AvalonBay owns 381 apartment communities across the country and today the delta between being a renter in an AvalonBay community and owning the median-priced home in the area around one of their apartment buildings across the nation is $2,000 a month. The cost of ownership is so far away from most renters today that they can't jump to own a single family home. But they certainly can go from being a renter in an AvalonBay apartment community to being a renter of a single family home. And so the dynamics of SFR, single family rental or BTR build to rent are fantastic. And as long as that delta between living in an AvalonBay community and buying the median price, a single family home stays as wide as it is today, that space will do exceptionally well.
Peter Cook: Again, we had a bunch of questions in that area. I think your interview a couple of weeks ago prompted a number of questions in that space. Let me ask you a different question. Fraud is something that we are talking about and working on every day at the American Bankers Association with our members across the country from smallest banks in the country to the largest. You had a very thoughtful question from John Bain of W&D about the increase in mortgage fraud and the sophistication of that fraud in terms of people submitting applications and the ability to cause mayhem in there with bogus applications and everything that has to be done in the underwriting process to be able to identify it. And John's question is, to what extent do you see W&D, the agencies, the financial services industry in general, getting AI or other systems in place that can screen sketchy or fraudulent deals before they go under application? He has a follow up question, basically about the opportunity for collaboration among competitors within the industry to share information and try and fight this problem before it gets out of hand.
Willy Walker: We could spend a whole hour on this topic, Pete. Clearly there are the pros and cons to artificial intelligence and what it does. My friend David Faber at CNBC gets concerned that some chat bot is going to replace David in doing the news and I've told David that's not going to happen any time soon. But he and Cramer actually did something on CNBC where they had these mockups of them that could imitate the two of them almost perfectly. And you got to sit there and say, “Okay, if that's coming to live television, what's going on with the documents that we underwrite every single day to understand whether a loan is a good loan to make or a bad loan to make?” Clearly, the use of technology is extremely important and we're investing a lot in technology. I would also say that the agencies, Fannie and Freddie, as well as their regulator, are all over this issue and have raised new standards across the board to make sure that we are being vigilant to protect both us and them against mortgage fraud. And then the final thing I would say, “It's somewhat analogous to the media industry/newspaper industry in that people want to go to trusted brands.” People want to know that the news that they're getting comes from a trusted brand, which is why there are only a certain number of publications out there today that have the name of The Wall Street Journal or The New York Times, to use two of them. And I think there is massive value in those brands. Similarly, if you were a new borrower to Walker & Dunlop, the diligence we're going to have to do to write you a new loan is significantly higher than a repeat borrower. We have a long track record and we know how they operate and how they manage their assets. I think that not only is there increased vigilance at the front end to make sure that we're making good loans and I have to take my hat off to the people in our underwriting group, as well as our technology group of all that we put into place. We caught something last week on a pretty significant attempted fraud, a borrower who was attempting to borrow fraudulently on an asset. And it's amazing what our team is doing, but it's making every loan we do more complex. It's raising the cost of doing the loan, hence why we want to use more technology to help us do that. And I'm very certain, Pete, that you're seeing it all across the ABA's member base as it relates to people using technology to be fraudulent on the front end that we've got to be able to catch on the back end, if you will.
Peter Cook: We're doing a tremendous amount in this space. And this has been a priority for our CEO, Rob Nickels, and really a challenge. I would say that our members feel they're doing a tremendous amount to protect their customers. We have national industry-wide campaigns that we're launching. But there's a real push to challenge this next administration to come up with a national strategy for fighting fraud. It has become such a huge problem, Wills. I'll give you one stat. We'll move on to some other questions. I don't know the last time you wrote a check, but check writing in this country has gone down. The use of checks is 25%. But check fraud has doubled since 2021. It is an incredible problem right now. And that's one small example of what's going on out there. Wills, I want to be mindful of the clock. We have about maybe a little less than ten minutes left in the webcast. I want to get to your predictions at the end. A couple of other quick questions for you. How do you see remote work, e-commerce influencing Walker & Dunlop's lending strategies over the next few years? The evolving trends in commercial real estate. Is everyone going back to the office, Wills, or what's going to happen there?
Willy Walker: I think everyone is going back to the office. I've been pretty outspoken on this. You can't create culture. You can't build a sustainable culture inside of a company if you don't have people interacting with one another face to face and sharing experiences and brainstorming together. Zoom's great. We're on a Zoom call right now. You're in Portland, Oregon. I'm in Denver, Colorado. Awesome. But I saw you. And when I see you in person, it's fundamentally different than it is over a Zoom call, no matter how close you are as friends. And there's something that is missed by being over technology. I do believe that we're coming back to the office. I think President-elect Trump gets in office and one of the first things he does in his first 100 hours is mandate that all federal employees come back into the office. And I think he will use that not only to get federal workers back into the office, but then also to potentially spur some people stepping away from their jobs at the federal government because they don't want to go back into the office, which is going to help in those efforts that Elon Musk and Vivek Ramaswamy are focused on. But I think that once the federal government gets back in there, I think everyone's going to sit around and say, “Well, the federal government's back at it. We have to get back at it.” And I think technology can be used to make lives more convenient. I woke up this morning and made two Zoom calls from home because they started early. I jumped on them. I did them from home. But then I jumped in my car and came into the office. And I'm here for the rest of the day engaging with my counterparts at W & D. I think it's coming back. I have not given up on the office at all, and I think that an A-class office is actually a really great asset class. And I think that's the future, AI technology, all of that. There's a lot of talk out there that AI is going to disintermediate tons of jobs. That was the same thinking that was there when Microsoft created Word and Excel. You may recall, Pete, when I was working on Wall Street at Morgan Stanley, there were a lot of people there who'd grown up using slide rules and doing math on their Hewlett-Packard 12C or 18B. And they sat there and said, “Man, you've really got to be able to do this stuff and this Excel stuff's just going to drive away jobs on Wall Street.” All it did was drive more jobs on Wall Street. All it did was make Wall Street that much more relevant to what's going on in our economy and create massive jobs. I'm one of the believers that technological innovation grows the economy, not shrinks the economy. There will undoubtedly be winners and losers. But I think one of the biggest things that CEOs particularly have to keep in mind is, how are you making your operations more efficient by the use of technology and making your own at it? Walker & Dunlop bankers and brokers are more insightful to our clients by the use and effective application of technology. And I think it's that application piece that's so tricky. I was in New York at the JPMorgan Asset Management Conference, Pete, and Michael Chambliss was talking about all the investment that's gone into AI, and he put some stat up there that basically says that we built enough AI capacity to have 9,000 ChatGPTs. There's this massive amount of investment and that it actually hasn't turned into actual applications, actual economic growth. And the bottom line is we're going to find ways to use this technology to continue to grow the economy. And companies have to figure out the ways to apply the technology, not necessarily develop the technology.
Peter Cook: Let’s get to the final speed round. Here are some of your predictions. An interesting question from Stephen Wang of Build Start. Real estate companies were the miners during the California Gold Rush focused on transactional wins and localized efforts competing fiercely for rewarding opportunities, navigating unpredictable market conditions, and hope their decisions yield returns despite countless variables beyond their control. Do you agree with this analogy? How can real estate companies break free from this mindset and position themselves more strategically like Levi Strauss or Wells Fargo? Again, going back to that gold rush comparison.
Willy Walker: What is real estate? Real estate is where people live, shop, work, and play. That's what real estate is. If you don't think that people are going to live, work, shop, and play going forward, real estate isn’t a great place to be. I happen to think that human beings are going to continue to populate this earth. And I happen to believe that people are still going to want to live somewhere, shop somewhere, or work somewhere and play somewhere. I don't think it’s analogous to the exploration of the West and those miners. There was a finite amount of gold that was in the ground that got mined and then you don't have a mine anymore. Yes, it makes sense that Levi Strauss endured beyond that because they could take their clothing that was designed for miners and make it applicable to other people in other industries. But there's no finite amount of space to be developed. There's no finite day to day population growth globally. There's no finite amount of humans to house to create office jobs, to be able to have them go play at a Disneyland or to have them go shop at a mall or online. Don't forget that online shopping requires 4X the amount of industrial space that bricks and mortar shopping requires as it relates to actually going to a store and buying it. And while Amazon and online sales may continue to grow, don't forget, they are are less than 20% of US retail sales today. Less than 20% of retail sales are online; 80% is still bricks and mortar. But even that growing segment of online sales requires a huge amount of physical infrastructure to be able to get those products and services to people where they work and where they live. Count me as somebody who is very bullish as it relates to future needs for commercial real estate. And one of the things that goes back to as it relates to the United States is that question on population growth and legal immigration which we need a lot more of in the United States.
Peter Cook: Will, a couple of quick ones on your predictions. Biggest surprise in the commercial real estate sector in 2025?
Willy Walker: Wow. Biggest surprise in ‘25. Why not? Fannie and Freddie get privatized in conjunction with the tax bill.
Peter Cook: We'll be watching closely. How far did the Commanders go in the playoffs?
Willy Walker: What I said on the biggest surprise, I'll go with the lose in the NFC championship game. Don't make it to the Super Bowl. The Eagles end up going to the Super Bowl.
Peter Cook: Wills, you can be so wrong on that, by the way. The Dow, the ten year at the end of 2025. Your question is, how are you dusting it off?
Willy Walker: The Dow is around 43,000. We've had 220 plus percent growth years on the equity markets. I don't think we can go for a third, but we are in uncharted territory. And the one thing in President Trump's first term as far as an economic indicator that was off the charts throughout his entire four years was consumer confidence. And so if you have a very competent consumer, you are going to get an increase in spending whether people can afford it or not, which is going to drive GDP. It's going to drive retail sales, and a bunch of other things. I would say the equity markets are up on the year. I don't know. I'll swag it and say somewhere between 5% and 10%. The Dow goes from 43,000, up 5%, I'd say on the one---an easy one for me to go at. But positive growth on the Dow. As it relates to the ten years, the JP Morgan Bank CEO conference was the week before last. They did one of those little clicker things for all the CEOs in the room and 60% of the bank CEOs said that they expect the ten years between 4 and 450 in 2025. That's an easy range. But it makes sense, Pete, if you've got the Fed cutting and whether the Fed goes to a 4% Fed funds rate or cuts further than the 4% Fed funds rate, you got to get to a normalized yield curve at some point. The short end of the curve is lower than the long end of the curve. I would say a ten year period between 4 and 450 and a Fed funds rate that hopefully gets down to four and potentially drops below four to get back to a normalized yield curve would be a great development throughout ‘25.
Peter Cook: I am sure everyone watching is writing those predictions down. We’ll check with you back in December of 2025 to see where things stand. Wills, as you and I talk, the Fed is going to be deciding on interest rates later today. The forecast is that the Fed will have another cut today. And then there's some question about what happens after that. If you're in Jay Powell’s shoes right now, what are you doing? What are you thinking.?
Willy Walker: First I saw the chairman on the shuttle flying from New York to D.C. two weeks ago. He was sitting across from me and I congratulated him on a job exceedingly well done. I think a lot of people forget how challenging the past two years have been, how dramatically they raised rates and when they did it at that rate and at that pace that everyone said, “This economy is going to crash.” Something like 60% of economists in January of 2023 said that without a doubt the US was going into a recession. The fact that we've gotten through this massive tightening and gotten away without going into a recession is incredible. And I take my hat off to Chairman Powell for all the great work that he has done. And then I would say they cut today because there's no reason for them to be in and out and bouncing all over the place. Obviously, the most important thing is, does he say, “We're going to take a break? Does he say we're going to continue forward?” As you probably know, Pete, right now the Fed has on the Dot Plot an average of four cuts in 2025. We'll see what the revised Dot Plot says. Wall Street right now is predicting, I believe, two cuts in 2025. But also, remember, a year ago right now, the prediction was seven cuts in 2024. And we might get three today. And one side to all of that is if we get the third cut today, on January 15th, I will be in Philadelphia, Pennsylvania, with my dear friend, Peter Linneman, a legendary Wharton professor who comes on the Walker webcast quarterly, in May of this year. When everyone had given up on the Fed cutting at all, Peter Linneman came out and said, “They're going to cut three times this year.” And I got email after email from a Walker webcast listener saying, “I love Peter Linneman, but I've given up on him now if he thinks we're actually going to get three cuts.” There are plenty of people who could say that we've actually already gotten three cuts because they did the 50 basis points in their first cut. But holding that aside, if they cut again today for the third time, I have to go to Philadelphia and kiss Peter's feet because I told them that they actually cut three times I'd go kiss his feet. If they cut in a couple hours, I'm going to have to put on some good lip gloss and go and kiss Peter's boots on January 15th in Philadelphia. But I would say that they cut today. And then obviously, what is very important is going to be the wording about what they're saying as far as future cuts. There's clearly the ability for people to say the economy's growing really well. Why would you continue to cut? I would say to you that if they cut down to 4 or even 375, they've got plenty of dry powder for future cuts. One of the big question marks was the Fed had gotten so tight that there was nowhere for them to go to be able to stimulate the economy if the economy were to falter. If they get to a 375 run rate or a 350 run rate and they sit there, they've got plenty to go as it relates to stimulating the company in the future, should they need to. And the only fear I would think they have is that it gets just too hot. But good luck tempering that consumer confidence that's stood out there throughout the entire first administration of President Trump, who on the second time around is coming in with more confidence, a team that's going to hit the ground running and with a real game plan that they are going to execute on, I think, with incredible haste. Somebody I was talking to last week at the Harvard Kennedy School said, “The talk at the Harvard Kennedy School right now is not the first hundred days, which is what most people focus on when a new administration comes in. They're focusing on the first 100 hours.” There are going to be executive orders that come out in flurries after January 20th that I think will take some time for everyone to digest and figure out where this administration is actually going to take us. But boy, does it feel the Trump administration has a strong mandate behind them right now.
Peter Cook: Wills. I'm keeping an eye on the clock. I want to be respectful of everyone's time and your time as well. This is normally an hour long webcast. I want to give you a final word. I know you've probably had a message, probably already delivered or planned to deliver to your employees. My apologies to all the WD employees who sent excellent questions. I couldn't get to all of them here. What is your message to them in the New Year and what message do you have to your audience in the New Year? Is there a message of optimism that you are trying to share with your staff regarding questions about the future? There are uncertainties out there, a whole host of them. But what are you trying to convey to your team right now that you might share with your wider audience?
Willy Walker: First, Pete, thank you for doing this. I greatly appreciate you spending the time and asking all these questions that were so good and so important at this time in our world and what we're doing. Second of all, I'm a very optimistic person by nature. I wake up every day thinking, what are we going to do tomorrow and how great is today going to be? And I have a lot of optimism about where we're headed. There's plenty to be concerned about. I think that one of the things that people have somewhat forgotten about is that during the last Trump administration, there were a lot of things that went on in Washington that were difficult for corporations to respond to and to react to. There were some things as it relates to general culture that came out of Washington that companies had to deal with. How do you deal with that statement? How do you deal with that policy statement? And there are a lot of things that are very important to a lot of people that this administration will not focus on, and will not put time into. And people have to be focused on what is important to the people who work in their company, what is important to the people who live in their community, and how do you stay true to what your values are and to what you think is important for the people who are around you all the time? And dealing with that will be challenging. At the same time, I have great excitement and optimism as it relates to what's going to happen to the US economy under the next administration. This is a very pro-business administration and I think that we will be in a high growth mode for the next couple of years. Should the United States economy be 70% of global capital markets? There's a lot resting on the United States and our growth. All eyes are on the US. Europe is down right now. China is really troubled. It's interesting where people can put capital and right now everyone's saying capital should come to the United States. The Trump administration has an incredible opportunity here. And let's hope it is all for the better. We know it won't all be for the better, but I would say, “Be ready for change. Our world changes every single day.” And the final thing, Pete, I would say is, AI come in. We talked a little bit about it as it relates to fraud. A lot of people are nervous about AI. A lot of people are nervous about their jobs as it relates to how AI impacts what they do. I think the best way for job security is to figure out how you can use the technology to make you better at what you do. And if you're taking that on, not waiting for someone to come and show you how the technology is changing your job, but are exploring the use of it and how it makes you more effective. At the end of the day, it was Ben Affleck, I think, who was interviewed by David Faber, where Ben Affleck, David Faber basically say, “Is AI going to take away movies and is it going to take away the movie making industry?” And Ben Affleck's response to that? If anyone hasn't seen it, I would strongly encourage you to go see the back and forth between Ben Affleck and David Faber. But what Ben Affleck basically said is, “Moviemaking and the brilliance of moviemaking is knowing when to stop, not what to create. Anyone can write the script. It's knowing when you stop something to start the next part of it.” And he said, “I can't do that. That's uniquely human. The ability to have a script and edit it, to have a moment where it's a punch line to make it so that it is unique and creative.” And as I listen to Ben Affleck talk about the movie industry, I think there are lots of parallels to the industries that we all work and live in, that those people who embrace the technology and figure out how it's going to make them more insightful, more efficient, they will be the winners long term.
Peter Cook: Ben Affleck and AI, not on my bingo card for this conversation, Will, got to be honest.
Willy Walker: There you go.
Peter Cook: Always a pleasure, Wills. Thanks for letting me play on the Walker Webcast. And I look forward to having you take me to the Commanders in the Super Bowl this year when they get past the Eagles.
Willy Walker: I didn't tell you they were going capacity. I said they lose in the NFC championship game to the Eagles. I already said that. They're not. And you think they're going to get beyond.
Peter Cook: Yeah. And you're going to pay for my ticket.
Willy Walker: I beat you on Commanders go to the Super Bowl. I'm taking you and paying for your ticket. Done.
Peter Cook: Everyone listening?
Willy Walker: Best money I'll ever spend. Thanks, Pete. Happy holidays to everyone. I have to say, a quick shout out to my colleague and partner in crime in all of this, Susan Weber. She does an amazing job of making the Walker Webcast tick on a weekly basis. There's a whole other crew of people at W & D who help us tremendously, Katherine and Sam and Kokko and others. But Susan, thank you very much for all of your help throughout the year. And to all of my guests on the Walker Webcast, it honestly is all about you. And I'm honored and privileged to have such incredible people come and join me on a weekly basis. And that includes you, Pete, for taking the other side of this one and taking the microphone this year to ask me some really good questions about the world we live in. Thanks very much.
Peter Cook: You bet. Merry Christmas, Wills. Happy holidays to everyone.
Willy Walker: See you buddy. Thanks.
