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Speaker 1: From the Bloomberg Interactive Burgers Studios. This is Bloomberg day

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Speaker 1: Break for a Monday May First coming up today.

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Speaker 2: First Republic is seized by regulators and sold to JP

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Speaker 2: Morgan Chase. We have the latest on this breaking story.

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Speaker 1: A busy week four investors with a FED decision and

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Speaker 1: jobs report.

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Speaker 2: We have a six billion dollar takeover in the drug industry.

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Speaker 1: And House Republicans put pressure on the Senate for the

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Speaker 1: next move on the death ceiling.

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Speaker 3: Two boys were rescued from a flooded tunnel in New Jersey. Plus,

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Speaker 3: the search continues in Texas for the man accused of

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Speaker 3: fatally shooting five of his neighbors. I'm John Tucker Moorehan, I'm.

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Speaker 2: John Stash Aaron's Fords.

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Speaker 4: The next lost Game one to the heat Rangers, Devils

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Speaker 4: Game seven tonight, and a lopsided loss for the slumpy Yankees.

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Speaker 5: That's all straight ahead on Bloomberg day Break, the business

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Speaker 5: news you need to start your day in just one

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Speaker 5: fifteen minute podcast each morning on Apples, Spotify, the Bloomberg

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Speaker 5: Business app and everywhere you get your podcasts.

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Speaker 2: Good morning, I'm Nathan Hager.

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Speaker 1: And I'm Karen Moscow. Here are the stories we're following today, Karen.

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Speaker 2: We began with the turmoil involving First Republic Bank. After

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Speaker 2: a weekend of wheeling and dealing, there is a last

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Speaker 2: minute buyer. Let's get the latest from Bloomberg's Jeff Bellinger.

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Speaker 2: First Republic Bank was taken over by regulators and will

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Speaker 2: be acquired by JP Morgan Chase. The transaction makes the

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Speaker 2: country's largest bank even bigger, and outcome government officials have

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Speaker 2: taken payings to avoid in the past because of regulatory restrictions.

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Speaker 2: JP Morgan size and its existing share of the US

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Speaker 2: deposit base would prevent it, under normal circumstances from expanding

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Speaker 2: its deposit base further. JP Morgan was a key player

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Speaker 2: throughout First republic struggles. The bank advised it in its

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Speaker 2: attempt to find strategic alternatives. Like other regional lenders, First

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Speaker 2: Republic found itself squeezed as the FED jacked up interest

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Speaker 2: rates to fight inflation, and depositors fled, partly in search

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Speaker 2: of better returns and then in fear as worries at

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Speaker 2: about First Republic's health. Jeff Bollinger, Bloomberg Daybreak.

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Speaker 1: All right, Jeff, thanks well. First Republic has had a

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Speaker 1: tumultuous history. The bank has been bought and sold several

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Speaker 1: times over the years. In two thousand and seven, Merrill

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Speaker 1: Lynch bought it for one point eight billion dollars. Ownership

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Speaker 1: passed a Bank of America when it bought Merrill Lynch

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Speaker 1: in two thousand and nine, changed hands again in twenty

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Speaker 1: ten when investment firms including General Atlantic and Colony Capital

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Speaker 1: purchase First Republic for one point eight six billion dollars.

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Speaker 1: After that, they took it public.

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Speaker 2: Man, We're going to have much more on the First

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Speaker 2: Republic story, Karen, in just a few minutes. We'll be

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Speaker 2: speaking with Bloomberg Intelligence senior US Regional banks analyst Herman Chan. First, though,

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Speaker 2: let's turn to the economy. Two big events for investors

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Speaker 2: to look forward to this week. There's the FED decision

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Speaker 2: on Wednesday and the April jobs report on Friday. Bloomberg

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Speaker 2: opinion columnist Muhammad Larian expects the FED to keep on

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Speaker 2: raising rates.

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Speaker 6: I would be shocked if the FED didn't hike interest

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Speaker 6: rates by twenty five basis points. The inflation data we

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Speaker 6: got suggests that it's hotter than what the where the

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Speaker 6: FED would like it, and wages at five point one

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Speaker 6: percent is going to worry to FED.

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Speaker 2: Mohammad Larian says Wednesday's expected rate hike will be the

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Speaker 2: tenth straight going back to March of last year.

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Speaker 1: Well, Nathan Investor is holding onto hopes that the Fed

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Speaker 1: will cut rates in the second half, maybe disappointed by

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Speaker 1: the Fed's message this week. That's according to Morgan Stanley

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Speaker 1: CHPUS equity strategist Mike Wilson and a note to clients,

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Speaker 1: he says a more hoggish measure message from the Fed

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Speaker 1: could provide a near term negative surprise for equities. Well.

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Speaker 2: In addition to the busy week of economic data, Karen,

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Speaker 2: we also get a full plate of earnings reports this week.

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Speaker 2: Let's get a preview now from Bloomberg's Charlie Pellett.

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Speaker 7: It has been a story of strong corporate results counteracting

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Speaker 7: concerns over persistent inflationary pressures. Lindsay Rosner is portfolio manager

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Speaker 7: at PGUM Fixed Income.

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Speaker 8: What we heard, I think resoundingly through the earnings that

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Speaker 8: we've received is that procession launch is going to have

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Speaker 8: to happen next quarter. The guide so far from companies

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Speaker 8: that we've heard are actually not terrible.

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Speaker 7: Apple will be closely launched on Thursday, earlier in the week,

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Speaker 7: it's Qualcomm and AMD. We'll also hear this week from

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Speaker 7: automakers Ford and Ferrari, along with Uber, Mariotrofizer, Starbucks, Young Brands,

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Speaker 7: and oil giants BP, Shell, Conico, Phillipson, Phillips sixty six

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Speaker 7: in New York.

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Speaker 2: Charlie Pellett Bloomberg Day Break.

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Speaker 1: All right, Charlie, thanks, So, what's the best way to

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Speaker 1: outperform the markets? Invest in defensive stocks Japan and Warren Buffett.

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Speaker 1: That's according to the latest Bloomberg Markets Live Calls survey

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Speaker 1: of finance professionals and retail investors. More than half ar

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Speaker 1: respondence in the survey are confident that Berkshire Hathaway's returns

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Speaker 1: over the next five years will beat the S and

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Speaker 1: P five hundred.

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Speaker 2: The corporate news this morning, Karen, we have a nearly

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Speaker 2: six billion dollar takeover in the drug industry. Japan's Estellas

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Speaker 2: Pharma has agreed to acquire New Jersey based iveric Bio.

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Speaker 2: That company develops drugs to treat age related blindness, and

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Speaker 2: shares of iviic Bio are soaring in the pre market

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Speaker 2: there nearly eighteen percent.

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Speaker 1: Well, let's turn to politics now, Nathan and get the

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Speaker 1: latest on the fight over the debt ceiling. House Republicans

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Speaker 1: are pressuring the Senate to come up with their own

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Speaker 1: bill after Speaker Kevin McCarthy's package of spending cuts past

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Speaker 1: the House last week. Majority Leader Steve Scalise says Democrats

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Speaker 1: need to make the next move.

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Speaker 9: President Biden maxed out America's credit card by spending trillions

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Speaker 9: of dollars over the last two years. What Republicans said is,

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Speaker 9: we're willing to work with the President on addressing that,

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Speaker 9: but let's also address the spending that got us here too.

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Speaker 1: Congressman'scalise says Republicans won't allow the US to go into

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Speaker 1: defall to Democratic Senator Chris Coons says the cuts Republicans

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Speaker 1: are demanding amount to hostage negotiations over the dead ceiling.

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Speaker 2: Look at what just passed in the House.

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Speaker 10: It would cut veterans healthcare.

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Speaker 2: We just passed landmark legislation to fund the healthcare for

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Speaker 2: burn pit victims. They cut that.

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Speaker 1: Senator Coons and Congressman Scalise spoke on ABC's This Week,

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Speaker 1: which you can hear Sundays on Bloomberg Radio.

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Speaker 2: Finally, Karen, Twitter co founder Jack Dorsey has changed his

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Speaker 2: mind on the sale of the social media platform to

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Speaker 2: Elon Musk. Riding on the Twitter alternative Blue Sky, Dorsey

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Speaker 2: said quote it all went south. He says Musk has

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Speaker 2: not proven himself to be the best possible steward for Twitter,

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Speaker 2: also that the company's board should not have forced the sale.

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Speaker 2: SMB futures right now are down one point, futures up

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Speaker 2: to Nasdaq futures down four, so little changed across the board.

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Speaker 2: To start this week, straight ahead your latest local headlines

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Speaker 2: in the check of sports. This is Bloomberg. Forty nine

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Speaker 2: degrees in New York. Going to be partly sunny today,

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Speaker 2: maybe a few showers this afternoon on our way up

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Speaker 2: to ten near sixty scattered showers tonight, heading down to

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Speaker 2: around fifty degrees. Time out to take a look at

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Speaker 2: some of the other stories making news in New York

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Speaker 2: and around the world. For that, we're joined by Bloomberg's

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Speaker 2: John Tucker.

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Speaker 3: Good morning, John, and Nathan. Heavy rain triggered flooding on

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Speaker 3: major highways around New York City, forcing drivers to sit

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Speaker 3: in traffic for up to four hours. In New Jersey,

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Speaker 3: crews rescue two teenagers from rising floodwaters in an abandoned

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Speaker 3: rail tunnel. On a rescue boat to Edgewater, firefighters spotted

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Speaker 3: the teens who went exploring when floodwaters rushed in. They

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Speaker 3: were trapped sitting on a pipe in the rail tunnel

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Speaker 3: in neck deep water. Edgewater firefighter Lieutenant Thomas Quinton.

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Speaker 10: They were sitting there and they were trying to stay

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Speaker 10: out of the water, and right away we asked him

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Speaker 10: how long they were there.

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Speaker 3: They said they'd been there for about two hours they

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Speaker 3: were saying. Lieutenant Quentin says the teens are in good condition.

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Speaker 3: A massive manhunt underway in Texas. Francisco Ropeza is accused

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Speaker 3: of fatally shooting five of his neighbors, including an eight

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Speaker 3: year old boy, in the city of Cleveland, Texas. Neighbors

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Speaker 3: say Orpezo began firing in Ar fifteen from his porch

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Speaker 3: for fun. When the neighbor asked him to stop. Police

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Speaker 3: say Ropesa stormed into the home and began shooting. Texas

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Speaker 3: Governor Greg Gabbett now facing criticism for identifying the victims

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Speaker 3: as undocumented immigrants.

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Speaker 6: A Gubin, who have.

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Speaker 9: Been deported six four times, is back.

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Speaker 5: Only the kilobody.

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Speaker 1: Now is on the run.

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Speaker 3: Well The Republican governor spoke about this shooting at an

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Speaker 3: event in Austin. The mayor of El Paso, Texas declared

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Speaker 3: a state of emergency as that city expects a wave

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Speaker 3: of migrants to cross the border from Mexico when Title

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Speaker 3: forty two expires in less than two weeks. Title forty

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Speaker 3: two was a health measure that sent migrants back across

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Speaker 3: the border during the pandemic. Mayor Oscar Laser says, migrants

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Speaker 3: have already started arriving at El Paso.

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Speaker 5: We need to make sure that we continue to protect

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Speaker 5: not only the asylum seekers but also our community.

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Speaker 3: Meanwhile, New York City bracing for the expiration of Title

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Speaker 3: forty two. Mayor Eric Adams says the buzzing of migrants

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Speaker 3: into the Big Apple from places like Texas and Florida

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Speaker 3: has destroyed the city. It's met Gallanite in New York City,

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Speaker 3: the world's most fashionable fundraiser takes place, benefiting the Metropolitan

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Speaker 3: muse to see him a vart. Roughly four hundred and

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Speaker 3: eight listers expected to attend. The event will pay tribute

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Speaker 3: to the late Carl Lagerfeld, who designed for Schadell and Fendi.

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Speaker 3: Global News twenty four hours a day, power by more

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Speaker 3: than twenty seven hundred journalist and analysts had more than

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Speaker 3: one hundred and twenty countries. I'm John Tucker, and they

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Speaker 3: see his Bloomberg Nathan.

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Speaker 2: Thank you John for the Bloomberg Sports update. For that,

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Speaker 2: we bring in John stash Hour. All right, Nathan.

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Speaker 4: There was a game seven Sunday with one in the NBA,

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Speaker 4: two in the NHL. Who's got another game seven tonight?

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Speaker 4: Rangers and Devils from the Prudential Center, the Knicks and

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Speaker 4: Heat at the Guard and only game one, but with

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Speaker 4: Miami's one o eight one oh one victory, puts the

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Speaker 4: pressure on the Knicks to win tomorrow. As it is,

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Speaker 4: Nicks have never won a playoff series after losing Game

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Speaker 4: one at home, They'll need to shoot better. Just seven

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Speaker 4: of thirty four on three pointers. Jalen runs and was

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Speaker 4: zero for seven. He called his play horrific. Steph Curry

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Speaker 4: much better fifty points. That's the most ever scoring a

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Speaker 4: game seven Golden State one going away at Sacramento and

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Speaker 4: Ta the Lakers on the ice, Panthers and Bruins. Bruins

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Speaker 4: had the greatest regular season in NHL history, led the

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Speaker 4: series three to one, fell behind last night two nothing,

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Speaker 4: but led three to two with a minute to go.

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Speaker 4: Florida scored and Game seven went to overtime.

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Speaker 2: Along the Nearports benefies.

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Speaker 11: It to a circle for Hackey, shun top Tovy scores

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Speaker 11: Cardivor Hagey top shelf, and.

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Speaker 2: The Panthers wined over time.

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Speaker 5: The Panthers stunned the Bruins in Boston and the Panthers.

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Speaker 3: Car moving on of the round two Cardivor.

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Speaker 10: Hagey, the Panthers have winted it over time four three

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Speaker 10: the final.

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Speaker 1: The Panthers take Game seven head.

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Speaker 9: There, moving on you.

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Speaker 4: I am just the Panthers' second series wins since nineteen

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Speaker 4: ninety six. The Seattle Kraken won two to one at

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Speaker 4: Game seven at defending Cup champion in Colorado Rangers Devils tonight.

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Speaker 4: It's the first Game seven between them since the epic

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Speaker 4: double overtime of nineteen ninety four. The now tied for

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Speaker 4: last place Yankees lost to Texas fifteen to two. They

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Speaker 4: come home having lost six to the last eight. In

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Speaker 4: those six losses, they've scored a total of only eight runs.

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Speaker 4: John Stashawa Bloomberg Sport.

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Speaker 5: Live from coast to coast from New York to San Francisco,

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Speaker 5: Boston to Washington, DC nationwide on siriusxam, the Bloomberg Business

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Speaker 5: app in Bloomberg dot Com. This is Bloomberg Daybreak. Good morning,

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Speaker 5: I'm Nathan Hager.

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Speaker 2: We want to get right back to the breaking news

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Speaker 2: to start off a very busy week for investors. First

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Speaker 2: Republic Bank is being taken over by JP Morgan Chase

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Speaker 2: after a weekend of wheeling and dealing that has led

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Speaker 2: now to the second biggest bank failure in US history.

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Speaker 2: For more on this latest chapter in the regional banking turmoil,

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Speaker 2: we are joined once again by the analyst who has

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Speaker 2: been chronicling it all for US, Herman Chan, Senior US

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Speaker 2: Regional Banks analyst at Bloomberg Intelligence. One less regional bank

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Speaker 2: to analyze now, Herman, good morning. We should talk about

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Speaker 2: the scale of this collapse and what JP Morgan Chase

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Speaker 2: now is going to be taking on its hands.

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Speaker 10: That's right. First Republic was sitting on about one hundred

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Speaker 10: and seventy six billion dollars in deposits at the end

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Speaker 10: of the year, and now JP Morgan's assuming ninety two billion,

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Speaker 10: so roughly half of the deposits left. First Republic's balance sheet,

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Speaker 10: which is really a stark decline and something I don't

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Speaker 10: think anybody would have expected. But unfortunately, with the SBB fallout,

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Speaker 10: the contagion risk did did shift over to First Republic.

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Speaker 2: And in the statement from Jamie Diamond this morning, he

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Speaker 2: says that jpm's financial strength, capabilities and business model allowed

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Speaker 2: them to develop a bid to execute the transaction in

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Speaker 2: a way that would minimize costs to the Federal Deposit

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Speaker 2: Insurance Fund. Is that ultimately what led to JP Morgan

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Speaker 2: being the winning bidder here over PNC Citizens Financial Group

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Speaker 2: we had heard had also been in the running for this. Yeah.

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Speaker 10: My assumption is that some of the regional banks like

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Speaker 10: PNC and Citizens that you mentioned probably didn't want all

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Speaker 10: the assets, the loans that were underwater and the securities

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Speaker 10: that had some paper losses. JP Morgan's assuming all of

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Speaker 10: them and taking over all of them. So it's a

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Speaker 10: better deal for the FDIC and regulators. It minimizes the

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Speaker 10: loss to the FDIC insurance fund. The regulator said only

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Speaker 10: about thirteen billion in losses. You compare that the twenty

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Speaker 10: billion that they assume with the SVB, So it does

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Speaker 10: minimize some of the losses for the regulators, which is

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Speaker 10: ultimately a great thing for them and for the citizens

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Speaker 10: of the United States.

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Speaker 2: But it is the kind of deal that the government

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Speaker 2: has tried to avoid the past, just because JP Morgan

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Speaker 2: Chase is already the biggest bank in the country. Now

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Speaker 2: with this deal, it's going to get even bigger. I mean,

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Speaker 2: what are the risks here of having you know, yet

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Speaker 2: one more mega sized bank in this country and potentially

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Speaker 2: finishing you know, what's left of a lot of these

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Speaker 2: small and regional or small and medium sized regional lenders.

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Speaker 10: Yeah, that that was the surprising part to me. JP

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Speaker 10: Morgan's well over the ten percent positive deposit limits that

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Speaker 10: that's in place for the US banks, meaning that any

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Speaker 10: bank over ten percent wouldn't necessarily be allowed to acquire

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Speaker 10: another bank institution under normal circumstances. Obviously, these circumstances now

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Speaker 10: are not normal, so they made an exception for this

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Speaker 10: particular transaction. What happens next is a good question. If

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Speaker 10: we do see potential bank failures, does that mean other large,

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Speaker 10: systemically important banks now are open to do these deals.

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Speaker 10: It creates an interesting scenario where where other banks now

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Speaker 10: could could do these deals. This is something that wasn't

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Speaker 10: in our calculus before. But as I mentioned before earlier,

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Speaker 10: any large bank that does probably would be a better

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Speaker 10: transaction for the regulators because they would assume much more

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Speaker 10: of the deposits and would leave less of the underwater

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Speaker 10: securities to the regulators to deal with themselves.

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Speaker 2: Now that leads to the next obvious question here, Herman,

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Speaker 2: which is after First Republic, I mean, are there other

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Speaker 2: shoes to drop in the regional banking sector? Are there

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Speaker 2: other banks that are on the cusp here that you're

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Speaker 2: watching that could potentially be in trouble?

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Speaker 10: Sure, I would say that the first quarter earnings reporting

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Speaker 10: across the regional bank space really showed resilience across the group,

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Speaker 10: and even the banks that were in the spotlight along

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Speaker 10: with a First Republic, like PacWest and like Western Alliance,

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Speaker 10: demonstrated a clear path forward unlike First Republic, so that

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Speaker 10: they talked about increasing their capital ratio, selling assets, increasing

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Speaker 10: the deposit insurance across their deposit base, and noted deposits

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Speaker 10: came back in April. So all these areas point to

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Speaker 10: me that the region bank space has stabilized a bit,

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Speaker 10: and really the contagent risk was really relegated to signature

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Speaker 10: and with First Republic after the SBB failure.

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