WEBVTT - Banking Turmoil Continues to Create Uncertainty 0:00:01.280 --> 0:00:05.640 This is Bloomberg Business Week Inside from the reporters and 0:00:05.840 --> 0:00:09.400 editors who bring you America's most trusted business magazine, plus 0:00:09.480 --> 0:00:13.640 global business, finance and tech news. The Bloomberg Business Week 0:00:13.680 --> 0:00:18.600 Podcast with Carol Messer and Tim Stenebec from Bloomberg Radio. 0:00:21.440 --> 0:00:23.280 All Right, everybody, you know, there's a lot going on, 0:00:23.760 --> 0:00:27.160 certainly today again this week the last couple of weeks. 0:00:27.160 --> 0:00:29.960 When it comes to bank story, a bank under pressure. 0:00:30.080 --> 0:00:32.360 We've seen it down the most in three years and 0:00:32.400 --> 0:00:35.320 the cost of ensuring its debt against default rising in 0:00:35.400 --> 0:00:37.760 a sell off. Though that city grow battalists describe as 0:00:37.800 --> 0:00:42.080 irrational Clock two ticking up bids for Silicon Valley, Bridge Bank, APM, 0:00:42.120 --> 0:00:45.080 Wall Street Time tonight meantime shares a First Republic. We 0:00:45.159 --> 0:00:47.720 continue to wonder about what's next for this one. It's 0:00:47.760 --> 0:00:50.880 down about ninety percent year to date. So our next 0:00:50.920 --> 0:00:54.120 guest has been following and covering the bank sector for decades. 0:00:54.160 --> 0:00:56.760 He was a go to for many of us here 0:00:56.800 --> 0:00:59.160 at Bloomberg during the Great Financial Crisis, still is a 0:00:59.240 --> 0:01:01.480 go to when it comes to things in the banking world. 0:01:01.560 --> 0:01:04.920 Chris Whalen is institutional risk analyst at Whalen Global advisors, 0:01:04.920 --> 0:01:07.920 an investment banker who focuses on the banking, mortgage, finance, 0:01:08.200 --> 0:01:12.479 and fintech sect sectors. He's authors, let's try that again, 0:01:12.720 --> 0:01:14.960 author of several books. Chris, you have quite a resume. 0:01:15.319 --> 0:01:17.560 He's worked at the New York Fed, up on Capitol Hill, 0:01:17.600 --> 0:01:21.080 a bear Stearns at crawbonn Rating, at Institutional Risk Analytics. 0:01:21.080 --> 0:01:23.080 This is why we have him here on this Friday. 0:01:23.080 --> 0:01:25.040 He joins us on the phone in New York City. Chris, 0:01:25.319 --> 0:01:27.880 really grateful for you for joining us on what's been 0:01:27.959 --> 0:01:33.800 a busy, busy week. We all learned and leaned on 0:01:33.880 --> 0:01:36.960 you during the two thousand and eight bank and mortgage crisis. 0:01:37.000 --> 0:01:42.520 Are there any similarities to today and to then? No, 0:01:42.760 --> 0:01:46.880 it's actually quite different, Carol, and hello Hello. For decade, 0:01:46.920 --> 0:01:49.680 the FED made it so the credit credit didn't matter, 0:01:50.080 --> 0:01:53.200 so you didn't have to call me. Right, Yes, on 0:01:53.400 --> 0:01:56.360 market didn't matter. The Fed took it off the table, right, 0:01:56.720 --> 0:01:59.440 and now it's back on the table in a huge way. 0:01:59.720 --> 0:02:03.640 Would compare this more to December twenty eighteen, which was 0:02:03.680 --> 0:02:06.920 a crisis in the money markets, except this time the 0:02:07.000 --> 0:02:10.480 crisis is really measured by the ten year treasury. So 0:02:10.520 --> 0:02:12.320 if you go back to the third quarter when the 0:02:12.360 --> 0:02:16.400 banks reported that really ugly number for unrealized losses on 0:02:16.440 --> 0:02:20.040 their securities, and people finally started paying attention to that, 0:02:20.080 --> 0:02:24.280 and they said, oh, you know, eight hundred billion dollars, 0:02:24.280 --> 0:02:26.840 that's a lot of money. Right, It got better than 0:02:26.880 --> 0:02:29.480 a fourth quarter because we had a bond rally. This 0:02:29.560 --> 0:02:31.760 quarter is going to look a little better too. But 0:02:31.880 --> 0:02:37.560 the problem hasn't gone away because during twenty twenty twenty one, 0:02:37.680 --> 0:02:41.040 we packed three quarters of the mortgage market into a 0:02:41.200 --> 0:02:44.280 range of about two and a half three percent in 0:02:44.360 --> 0:02:47.679 terms of coupons. So if you know you own a 0:02:47.800 --> 0:02:51.440 Jenny May three and the fed rais has fed funds 0:02:51.480 --> 0:02:55.520 six points, what happens to that security? It trades in 0:02:55.560 --> 0:02:59.760 the seventies. And this is why pranks are having a problem. Now. 0:03:00.000 --> 0:03:03.760 Forget about the securities, which we can see. It's called 0:03:04.400 --> 0:03:08.760 accumulated other comprehensive income, and it's a number that's negative 0:03:08.880 --> 0:03:12.000 right now, a big number. Well, everybody's worried about the 0:03:12.000 --> 0:03:14.960 loan book too, because they have the same problem. The 0:03:15.040 --> 0:03:18.280 loans from that period when we were fighting COVID are 0:03:18.320 --> 0:03:22.240 now deep underwater. Twenty points underwater. You write, you have 0:03:22.280 --> 0:03:24.200 a note doubt that you put. I believe it was 0:03:24.280 --> 0:03:27.800 yesterday and you. By doubling the fed's balance sheet between 0:03:27.800 --> 0:03:30.200 twenty twenty and twenty twenty one from over four trillion 0:03:30.240 --> 0:03:33.320 to now nine trillion to nominal dollars, the FOMC has 0:03:33.360 --> 0:03:37.520 injected vast amounts of market risk into the US banking system. Okay, 0:03:37.680 --> 0:03:41.080 that's a lot of risk. So do we yet know 0:03:41.120 --> 0:03:44.960 how this ends? Well, the FED is going to have 0:03:45.040 --> 0:03:47.880 to drop rates, Carol, very simply. And I'll tell you why. 0:03:48.400 --> 0:03:51.360 The small banks out there, who are trying to hold 0:03:51.640 --> 0:03:55.200 the most important customers they have, which is their business customers, 0:03:55.960 --> 0:03:58.840 are fighting a losing battle because let's say I'm paying 0:03:58.880 --> 0:04:02.240 them two percent now on their balances, and I'm even 0:04:02.360 --> 0:04:05.200 arranging ways to give them yield on their ESK grows, 0:04:05.640 --> 0:04:09.320 the payroll balances, stuff that normally we don't pay interest on, right, 0:04:09.760 --> 0:04:11.680 But they can get four percent on a tea bill. 0:04:12.880 --> 0:04:14.920 And so they come into the office, they sit down 0:04:14.960 --> 0:04:17.000 with you, and they say, Carol, I can get four 0:04:17.040 --> 0:04:18.800 percent on a tea bill, why should I keep my 0:04:18.880 --> 0:04:22.720 money with you? Powell and the FED have been insensitive 0:04:22.880 --> 0:04:27.000 to the fact that they execute monetary policy through the 0:04:27.000 --> 0:04:30.640 bond market. And when they did QWE in twenty twenty 0:04:30.680 --> 0:04:33.200 and twenty one, not only did they cause a problem 0:04:33.200 --> 0:04:36.080 for the banks, but they tied their own hands. And 0:04:36.200 --> 0:04:38.560 yet they want to pretend that they didn't. You see, 0:04:40.040 --> 0:04:41.960 right now, if you look at the ten year, it's 0:04:41.960 --> 0:04:44.680 headed back to three percent. What should the FED be 0:04:44.760 --> 0:04:47.960 doing right now, Carol? They should be selling mortgage backed securities. 0:04:48.480 --> 0:04:51.159 They should peg that ten year to about three and 0:04:51.160 --> 0:04:53.120 a half and say to the desk in New York 0:04:53.480 --> 0:04:56.719 if it goes below three and a half cell. When 0:04:56.720 --> 0:04:58.800 I worked at the FED, we could do things like that. 0:04:58.839 --> 0:05:02.760 But the FED today is so bureaucratic and so assified 0:05:03.279 --> 0:05:05.520 that not only do they not know what's going on 0:05:05.560 --> 0:05:08.280 in the markets, but they model liquidity. You know how 0:05:08.279 --> 0:05:12.919 they model it versus GDP. Okay, the GDP model is 0:05:12.920 --> 0:05:15.480 not going to give you the answer you want. Right right, 0:05:15.680 --> 0:05:18.600 I'm going to get you into just come on in. Yeah, Chris, 0:05:18.720 --> 0:05:21.000 I was eager to hear from you about this because 0:05:21.000 --> 0:05:24.039 when I've been speaking with portfolio managers looking more longer out, 0:05:24.080 --> 0:05:26.120 some of them are thinking. When they're looking and seeing 0:05:26.160 --> 0:05:29.680 where certain banks are trading at even brokerages, they're kind 0:05:29.680 --> 0:05:31.919 of eager to potentially step in and start buying. But 0:05:31.960 --> 0:05:34.160 what concerns them, and you brought it up, is that 0:05:34.279 --> 0:05:36.840 yield curve. How much more pain do you think even 0:05:36.839 --> 0:05:39.479 though we've seen some steepening happening there, do you think 0:05:39.560 --> 0:05:43.680 that really forebodes for banks right now? Well, like I say, 0:05:43.800 --> 0:05:47.240 until the Fed relents and has a discussion not only 0:05:47.240 --> 0:05:51.200 with us in the market, but with Congress. And I 0:05:51.240 --> 0:05:54.040 think they have avoided doing this because they don't want 0:05:54.040 --> 0:05:56.800 to talk to Congress. They think they can make decisions 0:05:56.839 --> 0:05:59.800 on their own. They're wrong. The biggest problem with the 0:06:00.120 --> 0:06:03.720 today is hubris. They have to realize that they are 0:06:03.760 --> 0:06:06.320 not allowed to make certain decisions, and when they don't 0:06:06.320 --> 0:06:09.839 have any answer, or if policy is tied their hands 0:06:09.839 --> 0:06:12.279 in some ways, they need to go back to Capitol 0:06:12.360 --> 0:06:15.800 Hill and get some guidance. You know, what they've done 0:06:15.800 --> 0:06:19.000 to the bond market, frankly, is almost bordering on the 0:06:19.040 --> 0:06:22.920 criminal because it'll take generations to fix this. I'll give 0:06:22.920 --> 0:06:25.200 you an example from my own world. I have a 0:06:25.200 --> 0:06:28.600 three percent mortgage to sitting in a Fanning may Pool. Right. 0:06:29.120 --> 0:06:31.000 That mortgage will not be in the money again in 0:06:31.080 --> 0:06:34.680 my lifetime unless we drive rates down to nothing. We'd 0:06:34.680 --> 0:06:37.560 have to drive rates back down to two percent for 0:06:37.640 --> 0:06:40.719 that three to be refinanciable. But Chris helped me out 0:06:40.760 --> 0:06:43.240 because part of the conversations in the narrative that we've 0:06:43.279 --> 0:06:45.320 certainly been having is that the low rate environment that 0:06:45.320 --> 0:06:48.920 we had was the abnormal environment that that's not typical. 0:06:49.320 --> 0:06:53.480 So how was the fad supposed to kind of come 0:06:53.560 --> 0:06:55.960 out of that and get back to a more normal 0:06:56.080 --> 0:07:00.200 rate environment. You can't. I mean, Ben Bernankey in the 0:07:00.440 --> 0:07:05.559 early conversations with the FOMC about quantitative easing, basically told 0:07:05.560 --> 0:07:08.400 them this. He said, once you put down this road, 0:07:08.760 --> 0:07:12.720 you can't come back. And it doesn't matter whether you 0:07:12.840 --> 0:07:15.600 talked about the balance sheet and reducing the size of 0:07:15.640 --> 0:07:17.760 the balance sheet. If you take too much liquidity out, 0:07:18.080 --> 0:07:20.520 the market seizes up because they got used to it. 0:07:20.920 --> 0:07:23.680 You know, you gave them five six trillion dollars that 0:07:23.760 --> 0:07:28.120 they didn't have before. Also, the price aspect of this, 0:07:28.200 --> 0:07:31.400 as we've discussed earlier, is very difficult to deal with 0:07:31.520 --> 0:07:34.280 because if three quarters of the mortgage market is locked 0:07:34.320 --> 0:07:37.680 up in these low coupons, not only is it impossible 0:07:37.720 --> 0:07:40.400 to fundness paper, you know, SOFA is at four and 0:07:40.400 --> 0:07:43.880 a half percent today. That means, you know, figure reposit 0:07:43.960 --> 0:07:46.000 at the point above it. How do you finance a 0:07:46.080 --> 0:07:50.880 Jinny May two? You don't. And the volatility of these 0:07:50.920 --> 0:07:54.680 low coupon securities because so much of the repayment is 0:07:54.760 --> 0:07:58.000 back ended. Right. You guys know this at Bloomberg better 0:07:58.000 --> 0:08:00.680 than everybody at low coupon securities. We're of all little 0:08:00.680 --> 0:08:03.480 bit of high coupon security. So nobody wants to own 0:08:03.520 --> 0:08:06.880 this paper, honestly. You want you want a solution, We'll 0:08:06.920 --> 0:08:09.120 fix us next week. The Fed should buy all that 0:08:09.200 --> 0:08:13.800 paper back wow wow, Okay, yeah, par, they should buy 0:08:13.800 --> 0:08:15.760 it all back at par. And then they have to 0:08:15.760 --> 0:08:18.200 go up to Capitol Hill and say, we were trying 0:08:18.200 --> 0:08:20.960 to deal with a Dickey situation. We had people on 0:08:21.040 --> 0:08:24.160 the hill scream and do something, do something, save the economy, right, 0:08:24.360 --> 0:08:26.880 and we did, But now we have a mess. Well, 0:08:26.880 --> 0:08:29.800 what do you think Janet Yellen and Jay Powell and 0:08:29.880 --> 0:08:33.160 other regulators who are now meeting in an unscheduled meeting 0:08:33.160 --> 0:08:36.400 and we expect something out from them, do you any 0:08:36.400 --> 0:08:38.720 indications of what they're talking about? Because it does feel 0:08:38.720 --> 0:08:40.600 like there's been some shoring up in the markets for 0:08:40.640 --> 0:08:45.400 whatever reason. Yeah, they keep trying to throw solutions, but 0:08:45.480 --> 0:08:48.680 every time the FED takes a step, they create another problem. 0:08:49.200 --> 0:08:53.600 You see, they have a very blunt instrument. And honestly, 0:08:53.720 --> 0:08:55.760 you know, I deal with a lot of federal agencies 0:08:55.800 --> 0:09:00.080 in Washington. The Biden administration has the weakest team in 0:09:00.160 --> 0:09:04.480 terms of financial market knowledge and experience that I can 0:09:04.520 --> 0:09:07.600 remember in my lifetime. You know, the people I worked 0:09:07.640 --> 0:09:09.559 with at the FED in New York, like Paul Vulker 0:09:09.559 --> 0:09:12.920 and Jered Corrigan, they knew markets, okay, they knew how 0:09:12.920 --> 0:09:15.760 to clean up masses, and they also understood the limits 0:09:15.760 --> 0:09:19.880 of monetary policy. And again, remember the FED executes monetary 0:09:19.880 --> 0:09:22.920 policy in the bond market. So if you go big, 0:09:23.040 --> 0:09:25.679 which is what they did after twenty eighteen because they 0:09:25.679 --> 0:09:28.960 didn't want another liquidity crisis, right, their inventions were good, 0:09:29.640 --> 0:09:33.240 But by doing that today that three trillion dollars of 0:09:33.360 --> 0:09:36.480 mortgage backed securities that they own is really bigger than 0:09:36.520 --> 0:09:40.320 their treasury portfolio. If you measure the duration, it's more 0:09:40.360 --> 0:09:44.200 like twelve to fifteen trillion dollars. And that's one reason 0:09:44.240 --> 0:09:46.440 why that ten year note doesn't want to go above 0:09:46.480 --> 0:09:50.199 four percent. The FED owns all the duration and they 0:09:50.200 --> 0:09:54.360 don't hedge that book. It's entirely passive. So they've done 0:09:54.400 --> 0:09:58.679 structural things to our marketplace that will literally take generations 0:09:58.720 --> 0:10:02.400 to facts. And I'm very concerned about this. I think 0:10:02.440 --> 0:10:04.840 that we need to put some limitations on what the 0:10:04.880 --> 0:10:07.920 FED does. When the FED gets to those limits, they've 0:10:07.920 --> 0:10:09.680 got to go back up the Capitol Hill and have 0:10:09.720 --> 0:10:13.079 a public conversation. They can't do this behind closed doors. 0:10:13.160 --> 0:10:15.319 Because I want to bring jessin because we're talking in 0:10:15.360 --> 0:10:17.960 the break about what we're hearing from some of the 0:10:18.000 --> 0:10:21.840 FED speakers are former, if you will, and what they 0:10:22.080 --> 0:10:24.880 are talking about where the FED is going. Looking at 0:10:24.960 --> 0:10:28.640 Jim Bullard earlier this morning talking about a peak potential 0:10:28.760 --> 0:10:31.560 ternal rate a on five point six percent, it's interesting 0:10:31.559 --> 0:10:33.360 because you were talking about how you think the FED 0:10:33.520 --> 0:10:36.760 should cut rates. What sort of implications could there be 0:10:37.120 --> 0:10:39.200 if we don't actually see that from the Fed and 0:10:39.240 --> 0:10:43.760 what that means for equities. Well, if the FED takes 0:10:43.880 --> 0:10:46.520 rates up to where Jim Bullard has just said, then 0:10:46.600 --> 0:10:49.120 look out, I think we're going to have a meltdown 0:10:49.120 --> 0:10:52.840 in the banking industry. See what's happening right now is 0:10:52.880 --> 0:10:55.959 even if you ignore the price action in these securities, 0:10:56.520 --> 0:10:59.640 a lot of banks are underwater on some of those 0:10:59.640 --> 0:11:02.679 paper and so the treasurer of the bank's going to 0:11:02.720 --> 0:11:05.400 walk into a room at some point screaming and saying, 0:11:05.720 --> 0:11:07.800 you got to sell this paper. Now, I have to 0:11:07.840 --> 0:11:10.000 reinvest at a higher rate or we're going to go 0:11:10.080 --> 0:11:13.080 out of business. And then when you have instability on 0:11:13.080 --> 0:11:16.680 the funding side, that makes life even more complicated. So 0:11:16.840 --> 0:11:19.440 the clock is ticking, and the Fed can provide all 0:11:19.480 --> 0:11:22.240 sorts of liquidity measures and everything else, but they're going 0:11:22.280 --> 0:11:26.760 to expand their balance sheet, as we've already seen. I think, honestly, 0:11:26.800 --> 0:11:31.080 there's a kind of a false conversation, a false narrative 0:11:31.120 --> 0:11:33.720 in the US that's somehow we can keep inflation low. 0:11:34.000 --> 0:11:37.640 The society loves inflation. Come on, you know, we have 0:11:37.720 --> 0:11:39.920 to get to the point where we can actually get 0:11:39.960 --> 0:11:44.360 Congress to fix Humphrey Hawkins. Drop the full employment part 0:11:44.360 --> 0:11:47.040 of the mandate. And let's remember the third manddate. But 0:11:47.160 --> 0:11:50.840 we never talk about, which was stable long term interest rates. Okay, 0:11:51.240 --> 0:11:53.680 in the old days when inflation was a problem, when 0:11:53.679 --> 0:11:56.160 I was a kid, were worried about such things. We 0:11:56.160 --> 0:11:59.320 don't do that now because everybody just assumes we could 0:11:59.320 --> 0:12:02.559 do whatever we one. You know, the dollar one after 0:12:02.600 --> 0:12:04.240 two thousand and eight. You can see this on the 0:12:04.240 --> 0:12:08.400 Bloomberg what happened to swaps dollar fixed floating swaps that 0:12:08.480 --> 0:12:12.640 went into a discount. There's no other country in the 0:12:12.679 --> 0:12:16.000 world that has that gift, Okay, but we have it. 0:12:16.600 --> 0:12:20.640 So we keep pushing the limits on spending, on deficits 0:12:20.640 --> 0:12:23.000 and everything else, we're going to lose that. We're going 0:12:23.040 --> 0:12:25.520 to be like everyone else. So I think that this 0:12:25.559 --> 0:12:28.959 conversation about inflation versus growth has got to come back 0:12:29.440 --> 0:12:32.520 to Washington, go back up the Capitol Hill and say, 0:12:32.559 --> 0:12:35.200 how can we give the Fed a mandate that they 0:12:35.240 --> 0:12:38.560 can actually accomplish, Because let's be fair, the two percent 0:12:38.640 --> 0:12:41.120 target for inflation is a joke, which is we're not 0:12:41.160 --> 0:12:42.839 going to get back there. Yeah, and we've had a 0:12:42.840 --> 0:12:45.280 lot of conversations about that that that doesn't make sense. 0:12:45.440 --> 0:12:47.080 We've also talked about, you know, Chris, and I don't 0:12:47.120 --> 0:12:48.840 know how you think about what this means for the 0:12:48.920 --> 0:12:52.760 US dollars specifically. We've got a great Simon White did 0:12:52.760 --> 0:12:55.240 a great column on Bloomberg and he just talked about 0:12:55.280 --> 0:12:58.120 the dollar being the liability of the central Bank, and 0:12:58.280 --> 0:13:01.960 if we continue to see what we're seeing in terms 0:13:02.000 --> 0:13:04.800 of what feels like, you know, certainly moral hazard for 0:13:04.840 --> 0:13:08.680 banks that he talks about further erosion of the dollar's value, 0:13:08.800 --> 0:13:12.559 and that how that would really kill the purchasing power 0:13:12.559 --> 0:13:15.160 that we've seen of the US currency over the last century. 0:13:15.200 --> 0:13:17.959 I mean, there's so many implications, so I don't know 0:13:18.000 --> 0:13:21.800 the complicated message. There is not one answer here, and 0:13:21.840 --> 0:13:24.160 it's very important to state that. And we got to 0:13:24.200 --> 0:13:27.560 realize that folks at the FED are trying very honestly 0:13:27.600 --> 0:13:29.960 and I think in a very genuine way to do 0:13:30.080 --> 0:13:34.280 their jobs. But imagine sitting behind those closed doors dealing 0:13:34.280 --> 0:13:36.400 with what they're looking at today. So what don't we 0:13:36.440 --> 0:13:39.720 hear from What would you like to hear from Janet Yellen? 0:13:39.880 --> 0:13:43.000 What does she need to say? Maybe today? I think 0:13:43.000 --> 0:13:45.720 she needs to announce she's going back to the private life. 0:13:46.120 --> 0:13:48.920 Meet another Secretary of the Treasury. And I got the candidate, 0:13:48.960 --> 0:13:54.320 Sheila Bear, a nice you know, progressive Republican from Kansas 0:13:54.400 --> 0:13:57.720 who could easily be confirmed by the Senate tomorrow, who 0:13:57.760 --> 0:14:03.080 understands finance. There's only two people at senior agency levels 0:14:03.080 --> 0:14:05.560 in Washington today that know what's going on. What is 0:14:05.600 --> 0:14:08.920 Marty Grumberg at the FDIC who's most senior regulator in 0:14:09.000 --> 0:14:11.800 the system. And the other is Sandra Thompson over at 0:14:11.800 --> 0:14:15.400 the FHFA, who's a veteran at the FDIC, worked at 0:14:15.400 --> 0:14:19.000 Resolution Trust, worked at Goldman Sachs. These people know what's 0:14:19.040 --> 0:14:23.160 going on. The rest of this cast of characters are politicians. Well, 0:14:23.200 --> 0:14:25.880 they really don't have the shoes for this. During the crisis, 0:14:25.880 --> 0:14:27.680 we know Jamie Diamondt Well, first of all, has gone 0:14:27.760 --> 0:14:32.160 up and talked with the Treasury Sector Secretary this time around. 0:14:32.200 --> 0:14:34.320 During the crisis, I think there was a lot of conversations, 0:14:34.320 --> 0:14:37.880 as you well know, between government and the banks and 0:14:37.920 --> 0:14:39.760 the private sector, if you will. Is any of that 0:14:39.800 --> 0:14:42.720 happening now that you're aware of, Not as much as 0:14:43.120 --> 0:14:45.280 it needs to happen. You know, when I worked at 0:14:45.280 --> 0:14:48.040 the FED, we always talked to the people in bank supervision. 0:14:48.280 --> 0:14:50.960 They don't do that now. FED governors never talked to 0:14:51.000 --> 0:14:53.400 the people down the hallway at soup and reag and 0:14:53.440 --> 0:14:56.840 say how is our policy impacting the financial markets? How 0:14:56.920 --> 0:15:00.520 is our policy impacting banks? They never asked that question. 0:15:01.120 --> 0:15:03.960 So I think there's a level of isolation and a 0:15:04.040 --> 0:15:07.320 lack of information in this data dependent central bank of 0:15:07.360 --> 0:15:10.640 ours that's really something we need to work on. They 0:15:10.760 --> 0:15:13.280 need to know how their policies are going to affect 0:15:13.320 --> 0:15:15.920 the bond market. You know what happens if this ten 0:15:16.000 --> 0:15:18.760 year goes below three percent and we're sitting here talking 0:15:18.800 --> 0:15:23.520 about low Yeah, now you're right and looking at the 0:15:23.600 --> 0:15:26.200 two year as well, where that's treating. When you're talking 0:15:26.200 --> 0:15:28.880 about the potential pain that could be on the way, Chris, 0:15:29.200 --> 0:15:32.120 what other cracks are you seeing beginning to emerge under 0:15:32.120 --> 0:15:36.000 the hood when it comes to financial institutions right now, Well, 0:15:36.040 --> 0:15:40.000 anyone who owns bonds would leverage has a problem, so 0:15:40.160 --> 0:15:44.880 reads other types of investment vehicles, private funds. Anyone who 0:15:44.920 --> 0:15:48.320 applies leverage to these here to four risk free securities, 0:15:48.400 --> 0:15:52.400 right Treasury is the mortgage bacts is really in a 0:15:52.480 --> 0:15:54.800 tough spot because they have to make a decision to way. 0:15:55.160 --> 0:15:56.800 You know, let's say we have this rally. Now the 0:15:56.840 --> 0:15:59.760 ten year is your benchmark, by the way, for pain 0:16:00.200 --> 0:16:02.360 on all of these securities. If we get down to 0:16:02.440 --> 0:16:05.840 three percent, that may be a big zelly opportunity the cleanhouse, 0:16:06.080 --> 0:16:08.120 not that rid of all of this stuff and go 0:16:08.280 --> 0:16:13.120 buy higher coupon securities. That may be an opportunity. But 0:16:13.160 --> 0:16:15.000 I think for a lot of little banks. For example, 0:16:15.080 --> 0:16:17.480 they don't have the capital to take the losses. And 0:16:17.520 --> 0:16:20.280 there are some agencies like the federal homelan banks who 0:16:20.280 --> 0:16:23.400 own this collateral. Two we don't talk about that. So 0:16:23.640 --> 0:16:26.280 the Fed has put stress on the system as they 0:16:26.320 --> 0:16:30.120 have pursued monetary policy. But they forgot that if they 0:16:30.200 --> 0:16:34.080 moved things too quickly and too much, you know, six points, really, 0:16:35.040 --> 0:16:39.480 then everybody's insolvent. Is there an investment play for you 0:16:39.640 --> 0:16:42.680 right now? Oh, I've been buying bank stocks. I bought 0:16:42.720 --> 0:16:45.720 some cs which was clearly a mistake, but I'll keep 0:16:45.760 --> 0:16:48.280 it and buy some more ubs. They are the last 0:16:48.320 --> 0:16:51.560 man standing in Europe. What abouts of these regional banks? 0:16:52.680 --> 0:16:56.240 I bought Western Alliance. That was one of my favorites. 0:16:56.280 --> 0:16:58.440 I wrote about them two years ago. They went up 0:16:58.480 --> 0:17:01.680 two hundred percent during the motgage boom thanks to J. Powell. 0:17:02.360 --> 0:17:05.480 They had bought a portfolio company from Apollo called a Marahome, 0:17:05.880 --> 0:17:08.520 which is one of the most efficient conventional lenders in 0:17:08.560 --> 0:17:12.080 the country. Really good team, by the way, And I'm 0:17:12.080 --> 0:17:14.960 looking at New York Community Bank. I've been following them 0:17:15.000 --> 0:17:17.000 for years. They just bought some of my friends at 0:17:17.000 --> 0:17:20.919 Flagstar Bank, which is a large mortgage player, second largest 0:17:20.920 --> 0:17:24.560 warehouse lender in the country after Chase. So there's a 0:17:24.640 --> 0:17:27.080 lot of deals out there, you know, but you know what, 0:17:27.960 --> 0:17:30.600 it teams me and I have to wait for deals 0:17:31.119 --> 0:17:36.720 to result. The policy mistakes. Which banks are you staying 0:17:36.720 --> 0:17:39.560 away from? Don't want anything to do with? Well, look 0:17:39.560 --> 0:17:42.360 in twenty I sold all my common and I went 0:17:42.400 --> 0:17:47.280 and put my financial allocation into bank preferreds so my 0:17:47.320 --> 0:17:50.040 feet wouldn't get wet, I would higher up to capital structure. 0:17:50.320 --> 0:17:53.880 I'm starting to nibble on some of these common situations. 0:17:53.880 --> 0:17:56.280 So because I love Western Alliance or one of the 0:17:56.280 --> 0:18:00.320 great mortgage shops in the country, Wholesale Bank New York 0:18:00.320 --> 0:18:03.520 Community Bank, I think is very interesting because they just 0:18:03.600 --> 0:18:07.160 bought all those assets from Signature. When you buy assets 0:18:07.160 --> 0:18:11.800 from the FDIC, they have no cost basis. Okay, yeah, 0:18:11.840 --> 0:18:14.600 so why not I'm yum, So that's going to be 0:18:14.680 --> 0:18:17.200 very creative for them. I believe Chris just got about 0:18:17.240 --> 0:18:22.480 forty five seconds JP Morgan City, Goldman be of ay, 0:18:23.840 --> 0:18:27.560 they're fine. Well, Goldman doesn't have to mark the market 0:18:27.560 --> 0:18:30.399 problem because they're a broker dealer, but they have a 0:18:30.480 --> 0:18:33.680 funding problem. As I've written for my subscribers, because they 0:18:33.760 --> 0:18:35.920 have to go out and compete with Ally in American 0:18:36.000 --> 0:18:39.960 Express and everybody else for broker deposits. They don't really 0:18:40.000 --> 0:18:43.240 have a strong core deposit base. And I've always argued 0:18:43.320 --> 0:18:45.320 that David and the boys should go buy a bank, 0:18:45.640 --> 0:18:49.680 go buy key. They love commercial real estate, love commercial 0:18:49.720 --> 0:18:52.919 real estate, you know. But the other guy, the other 0:18:52.960 --> 0:18:56.439 big guys. Twenty seconds left, they're not worried about. The 0:18:56.520 --> 0:18:59.199 US Bank is the strongest of the top five. You know. 0:18:59.359 --> 0:19:02.480 They're the little money center, but very well run. I 0:19:02.560 --> 0:19:04.760 don't I don't bother with the others except to bother 0:19:05.119 --> 0:19:09.320 preferred Raincome listen, so appreciate it. You took me back, 0:19:09.760 --> 0:19:12.240 and it was so good to reconnect. No, we're got 0:19:12.320 --> 0:19:14.640 to do this to getting Carol. We can't wait another decade. 0:19:14.800 --> 0:19:17.360 Deal deal, deal, not another crisis. All right, Chris, well 0:19:17.400 --> 0:19:19.800 and be well. Have a great weekend. Chris is, of 0:19:19.800 --> 0:19:22.520 course institutional risk analyst at Whale and Global Advisors, as 0:19:22.520 --> 0:19:24.760 I said earlier, worked for the New York Fed, work 0:19:24.840 --> 0:19:27.720 for Bear Stearns, worked in up on Capitol Hill. But 0:19:27.760 --> 0:19:31.560 a great voice for us to check into on. Certainly 0:19:31.560 --> 0:19:33.639 this Friday with a lot going on, this is Bloomberg 0:19:34.119 --> 0:19:37.679 you're listening to the Bloomberg Business Week podcast. Catch us 0:19:37.720 --> 0:19:41.080 live weekday afternoons from three to six Eastern Listen on 0:19:41.160 --> 0:19:44.400 Bloomberg dot com, the Ion Radio app, and the Bloomberg 0:19:44.480 --> 0:19:49.520 Business App, or watch us Live on YouTube. I was 0:19:49.600 --> 0:19:53.000 just bringing up a Bitcoin clothes today. Yeah, we're just 0:19:53.080 --> 0:19:56.600 below twenty eight thousand, although we did see it pop 0:19:57.040 --> 0:19:59.120 above that like it was I think early on Monday. 0:19:59.200 --> 0:20:01.840 For the first time since June. We have also seen 0:20:01.920 --> 0:20:05.600 jess I feel like the largest digital coin, Bitcoin and 0:20:05.640 --> 0:20:07.520 some crypto stalks come back to life this week a 0:20:07.520 --> 0:20:09.800 little bit. We definitely have because there was a particular 0:20:09.880 --> 0:20:11.720 point when you were looking at the span over the 0:20:11.720 --> 0:20:14.200 past couple of weeks, we're going to surge more than 0:20:14.240 --> 0:20:16.879 thirty percent. So now the past couple of days seeing 0:20:16.920 --> 0:20:19.080 it come back to reality, like you were talking about, 0:20:19.119 --> 0:20:22.520 still below thirty thousand, now close to twenty eight thousand, 0:20:22.520 --> 0:20:25.080 but still it was on a tear despite what was 0:20:25.119 --> 0:20:27.320 going on a lot of these banks. The past feet 0:20:27.359 --> 0:20:29.479 was kind of interesting, right with the volatility. All right, 0:20:29.480 --> 0:20:32.760 So let's get to our weekly crypto segment. We reach 0:20:32.840 --> 0:20:37.040 out to Thomas Kralow. He is Carlow. Excuse me, an investor, 0:20:37.080 --> 0:20:41.160 influencer and trader, founder and CEO of Carlo Enterprises. He 0:20:41.400 --> 0:20:44.600 joins us via zoom from Dubai. Thomas, good to have 0:20:44.720 --> 0:20:49.400 you here on this Friday. Tell us what you make 0:20:49.440 --> 0:20:52.200 of some of the trade this week when it comes 0:20:52.240 --> 0:20:55.159 to cryptocurrencies and bitcoin in particular, and even some of 0:20:55.160 --> 0:20:59.439 the equity plays. Yes, hello everyone, Thank you very much 0:20:59.480 --> 0:21:02.439 for having me. Very happy to be here, and quite frankly, 0:21:02.480 --> 0:21:05.800 this has been one of probably best weeks so far 0:21:05.840 --> 0:21:07.920 in a very long time when it comes to bitcoin, 0:21:08.520 --> 0:21:12.240 and that is because of you know, bitcoin following global liquidity, 0:21:12.400 --> 0:21:15.760 and we were saying Japan injecting liquidity, so with China 0:21:15.840 --> 0:21:18.600 and US was taking the liquidity out of the system. 0:21:18.640 --> 0:21:21.359 But now in light of the collapse of the banking system, 0:21:21.800 --> 0:21:25.240 we're actually seeing it come back. So those of us 0:21:25.240 --> 0:21:29.480 who are actually into crypto, this is just a fantastic time. 0:21:29.800 --> 0:21:31.960 So let's take a step back because not all of 0:21:31.960 --> 0:21:34.080 our audience may be familiar with who you are, So 0:21:34.200 --> 0:21:35.840