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Speaker 1: You're listening to the Bloomberg Sound On podcast. Catch us

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Speaker 1: live weekdays at one Eastern on Bloomberg dot com, the

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Speaker 1: iHeartRadio app, and the Bloomberg Business App. We're listening on

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Speaker 1: demand wherever you get your podcast. From Washington, the investigations begin.

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Speaker 1: Headlines on the terminals say it all today Silicon Valley

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Speaker 1: Bank failure Executive trades probe by d j SEC. Yes,

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Speaker 1: authorities are now examining the collapse of SVB for misconduct

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Speaker 1: by officers, including whether stock sales by executives violated trading rules.

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Speaker 1: Those familiar with the matter speaking with Bloomberg. Of course,

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Speaker 1: the FED has its own investigation that's getting underway as well,

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Speaker 1: and Senator Elizabeth Warren is calling on j. Powell now

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Speaker 1: to recuse himself from that effort. As we know very well,

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Speaker 1: she is not a fan of J. Powell, issuing a

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Speaker 1: statement the FED chair's actions to allow big banks like

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Speaker 1: Silicon Valley to boost their profits by loading up on

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Speaker 1: risk directly contributed to these bank failures. You remember the

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Speaker 1: dangerous man from the hearing last year, renominating you means

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Speaker 1: gambling that for the next five years, a Republican majority

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Speaker 1: at the Federal Reserve with a Republican chair who has

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Speaker 1: regularly voted to deregulate Wall Street won't drive this economy

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Speaker 1: over a financial cliff again, And with so many qualified

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Speaker 1: candidates for this job, I just don't think that's a

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Speaker 1: risk worth taking. Your record gives me grave concern. Over

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Speaker 1: and over you have acted to make our banking system

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Speaker 1: less safe, and that makes you a dangerous man to

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Speaker 1: head up to FED. So not a huge shock to

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Speaker 1: see the statement. Of course, they've had their backs and

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Speaker 1: forths since then, just recently as last week when Pala

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Speaker 1: testified before the committee on Capitol Hill before the failures occur. Now,

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Speaker 1: remember we've got a meeting next week and a lot

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Speaker 1: to talk about today with Senator shared Brown. We spoke

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Speaker 1: a bit earlier, the Democrat from Ohio, chair of the

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Speaker 1: Senate Banking Committee, with us here on Bloomberg and started

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Speaker 1: by asking him about depositors insurance, a big part of this. Right,

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Speaker 1: The FDIC guarantees money up to two hundred and fifty

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Speaker 1: thousand dollars until now. Apparently no deposits are too big,

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Speaker 1: so questions about where that line is. Is it time

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Speaker 1: to change that number or suspend it? Since the government

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Speaker 1: is backing all deposits serious. Well, I think we look

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Speaker 1: at everything and we're going to investigate through the Banking

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Speaker 1: Housing Committee that I share, we're following what the regulators

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Speaker 1: are doing with oversight to make sure they investigate. I

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Speaker 1: don't think we know yet, but what we do know

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Speaker 1: is every time the Silicon Valley Bank and the bankers

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Speaker 1: so often come to Congress to weaken rules too often,

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Speaker 1: Congress goes along. And whatever we do here, we're going

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Speaker 1: to strengthen site rules. We're going to make sure that

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Speaker 1: the banks can't play with risk the way they do

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Speaker 1: and always make working families in Ohio pay. When when

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Speaker 1: I first when the story broke with what had happened

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Speaker 1: in California, and I knew that the CEO in California

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Speaker 1: had lobbied Congress and lobbied as friends and the regulators

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Speaker 1: for weaker rules, first thing I thought about was what

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Speaker 1: happened at East Palestine, Ohio with the railroads. The railroads

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Speaker 1: had lobby Congress, had lobbied the Trump administration. I had

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Speaker 1: used their pr campaign to weaken safety rules and to

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Speaker 1: hurt the communities. And who always pays, whether it's customers

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Speaker 1: at banks pay or whether it's customer or whether it's

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Speaker 1: people in places like East Palestine. So I think it's

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Speaker 1: all about corporate power at the end, and as we

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Speaker 1: look at deposit insurance and so many other things, we

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Speaker 1: have to keep that in mind. I thought you're going

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Speaker 1: to say that it brought you back to twenty eighteen

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Speaker 1: when portions of Dodd Frank were rolled back. I know

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Speaker 1: you didn't love that idea then. And as the President

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Speaker 1: asks to strengthen regulations now, Senator, I wonder what it

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Speaker 1: is specifically that your committee can do to prevent another SVB. Well,

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Speaker 1: I hope my committee can do it because we have

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Speaker 1: so many people in this committee that are at the

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Speaker 1: beck and call of the banking lobby, the financial services

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Speaker 1: in particularly Wall Street, and particularly the most powerful banks.

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Speaker 1: But I know what this committee did wrong a few

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Speaker 1: years ago in passing this, and then President Trump made

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Speaker 1: it worse by weakening the standards even further. But we

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Speaker 1: clearly need stronger capital standards, we clearly need stronger liquidity standards.

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Speaker 1: We clearly need to do the strengthen the stress tests.

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Speaker 1: I am pushing the Federal Reserve to do that. Now

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Speaker 1: I'm going to push Congress to do that. I'm less

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Speaker 1: hopeful that Congress will do that because I've seen the

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Speaker 1: influence of the bank lobby in Wall Street, and in

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Speaker 1: the end, again, Ohio workers always pay for this when

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Speaker 1: they get their way, Senator Brown. It wasn't just the

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Speaker 1: Trump administration though, several Democrats, including on your commit your colleague,

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Speaker 1: seventeen Democratic senators voted to loosen that oversight in twenty eighteen.

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Speaker 1: What gives you this optimism that potentially you can go

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Speaker 1: back to bringing back some of that regulation that we

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Speaker 1: saw ease under the Trup administration. Well, I think people

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Speaker 1: may have learned their lessons, and I talked to some

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Speaker 1: of the regulators and some of my colleagues. Their tone

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Speaker 1: was a bit different than it had been from what

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Speaker 1: it had been when I led the opposition to that

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Speaker 1: deregulation three, four or five years ago. But I'm also

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Speaker 1: pushing the Federal Reserve the regulators to do it. And

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Speaker 1: I spoke over the weekend with a person in charge

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Speaker 1: of that at the Federal Reserve. And I can't disclose

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Speaker 1: private conversations, but I do think that they understand how

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Speaker 1: important it is for stronger liquidity standards, stronger capital standards,

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Speaker 1: and stronger stress tests. So I'm always I mean, it's

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Speaker 1: the influence of the banks in wall streets as far

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Speaker 1: too much in this institution. Essentially among Republicans it's almost unanimous,

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Speaker 1: and among some Democrats, so we continue to push. I'll

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Speaker 1: continue to push the regulars. My job is oversight. My

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Speaker 1: job is to stop stop banks as trying to stop

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Speaker 1: railroads and East Balastine from doing what they do. Is

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Speaker 1: to stop banks from fleecing the public, from taking more risks.

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Speaker 1: And then when the risks blow up and something happens

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Speaker 1: like as Signature and at Silicon Valley Bank, again, the

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Speaker 1: public always days. I was on the phone. My wife

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Speaker 1: and I were coming home from church on Sunday. I've

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Speaker 1: been working on this all weekend. She said, listen to

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Speaker 1: this threat, and she read a thread from someone we

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Speaker 1: didn't know who has a small business and had a

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Speaker 1: banking relationship with Silicon. This is in Ohio and she

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Speaker 1: was worried to death about being he apparel. I then

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Speaker 1: called her and told her this is this is exactly

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Speaker 1: why I'm working on this, because too many people like

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Speaker 1: you are in a position. You did nothing wrong. You're

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Speaker 1: just trying to pay your employees. You might not be

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Speaker 1: able to pay them because of this, and she was

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Speaker 1: literally tearful on the phone call. So I mean, that's

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Speaker 1: why I make this fight because she was in. Another

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Speaker 1: gentleman I talked to had three hundred employees he started

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Speaker 1: with five ten years ago, and he was afraid about

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Speaker 1: making payroll. So to me, it's about those workers always

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Speaker 1: in those small businesses that were struggling, that did nothing wrong.

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Speaker 1: So that's why I make this fight. That's why I

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Speaker 1: will do oversight to make sure that the regulators do

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Speaker 1: their job, and to try to convince my members, that

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Speaker 1: my colleagues in Congress, and that's the harness to the right,

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Speaker 1: and yes, including members of your own party. But you know,

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Speaker 1: you and I both know it's a divided Congress. So

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Speaker 1: the fact that it's going to be very difficult to

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Speaker 1: get regulation through this Congress. So in that sense, should

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Speaker 1: could the Biden administration or should the Biden administration do

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Speaker 1: this with an executive order? It doesn't exactly take yes, yes,

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Speaker 1: and yes, I don't really care how they do it.

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Speaker 1: I part of this is the Federal Reserve stepping up,

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Speaker 1: and those are appointees by the president. So you can

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Speaker 1: say the Biden administration. I want the Federal Reserve. I'm

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Speaker 1: talking to them about stronger standards. And interestingly, right before

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Speaker 1: this whole store, right before Silicon Valley Bank shot at stores,

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Speaker 1: or before they were closed down, I guess it's a

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Speaker 1: better way to say it. Share Pow. The head of

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Speaker 1: the Federal Reserve is in our committee. Every single Republican

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Speaker 1: and the committee, I believe, every single one, maybe one

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Speaker 1: or two dead and out of the eleven kind of

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Speaker 1: berated him, saying, don't don't increase capital standards. Don't I mean,

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Speaker 1: they're always doing the bidding of all street and I

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Speaker 1: don't say my party's innocent in this. There are some

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Speaker 1: that don't fight hard enough, and I'm not going to

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Speaker 1: mention names, but there are some that don't. But unfortunately

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Speaker 1: Republicans all saying one bird off a telephone wire, they

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Speaker 1: all flew off the telephone wire talking about weakening capital standards.

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Speaker 1: And that's where I think the Biden administration can come in.

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Speaker 1: I think they're going to We're going to continue to

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Speaker 1: push them and continue to do oversight. At the same time,

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Speaker 1: I'm optimistic about life enough to continue to work my

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Speaker 1: congressional colleagues of both parties to try to make this better. Well,

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Speaker 1: I'm gonna mention one name. Senator Elizabeth Warren is calling

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Speaker 1: on j. Powell to recuse himself from any investigation into

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Speaker 1: the SVB failure. Do you agree? My job is to

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Speaker 1: make sure that they do this investigation right. I believe

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Speaker 1: Poe's already sharing that investigation. I'm just going to make

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Speaker 1: sure he does it right. I think he will, but

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Speaker 1: I will watch him. I'll watch others to make sure

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Speaker 1: they are. I mean, my job, as I said earlier,

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Speaker 1: is oversight of these regulators, oversight of the industry itself,

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Speaker 1: including those crypto crypto people involved in crypto. I mean,

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Speaker 1: all of this is my job to do oversight. It

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Speaker 1: doesn't always work, but clearly sometimes when people do wrong,

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Speaker 1: you shine a light on them. I'm hopeful because of

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Speaker 1: what happened it's signature and what happened Silicon Valley Bank,

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Speaker 1: that and shining that light on will maybe change behavior

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Speaker 1: a little bit. Well, we've got a FED meeting next week.

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Speaker 1: I wonder when you think back to that thread you

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Speaker 1: describe breeding coming out of church on Sunday, should the

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Speaker 1: FED hold pad next week? No changing rates? I would

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Speaker 1: hope to food, would would not change rates next week.

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Speaker 1: What I've asked the FED to do is we know

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Speaker 1: during the pandemic that a handful of industry is the

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Speaker 1: drug industry, the meat packing industry, the transportation industry, in

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Speaker 1: the oil industry raised prices well beyond their costs. Well

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Speaker 1: as raised prices well beyond there was no real inflation

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Speaker 1: then that contributed a lot to inflation. What they did

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Speaker 1: by raising prices, they were immensely more profitable. They did

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Speaker 1: stock backs, buybacks all during this time of inflation. So

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Speaker 1: they have clearly contribute to inflation. I want the FED

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Speaker 1: to start calling them out, and I've asked Jaipal, then

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Speaker 1: I've asked others. I'm hopeful that they use their platform.

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Speaker 1: I know that they say they their tools are limited.

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Speaker 1: They can only area's interest rate, but they can be

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Speaker 1: a strong Morald voice against those corporations, at least the

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Speaker 1: public in those corporations that hurt the workers in my state.

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Speaker 1: And I will continue to call particularly those industries out,

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Speaker 1: meat packing, transportation, oil, in pharmaceuticals who frankly have used

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Speaker 1: a crisis the people dying from COVID to make even

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Speaker 1: more money and increase their profits and reward their Executives.

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Speaker 1: Senator Shared Brown, chair of the Senate Banking Committee, talking

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Speaker 1: with us today in Washington with myself and my colleague

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Speaker 1: and Marie Hordern, and I invite you to join us

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Speaker 1: for the full interview coming up later today five pm

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Speaker 1: Washington time on Bloomberg TV. He'll be featured on the

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Speaker 1: New Balance of Power, which I suggest you watch. Anyhow,

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Speaker 1: We've got a great program lined up for later and

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Speaker 1: want to assemble the panel for a bit more on

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Speaker 1: what we just heard from the Chair of the Banking Committee.

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Speaker 1: He's in a very very important position now as we

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Speaker 1: feel our way forward with SVB and whatever may follow.

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Speaker 1: Genie Schanzano is here along with Rick Davis. Bloomberg Politics

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Speaker 1: contributors are signature panel in place. Genie, what do you

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Speaker 1: think about this? We heard from a lot of Republicans yesterday.

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Speaker 1: This is the Democratic view, and he's clearly more concerned

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Speaker 1: with investigations. It sounds like getting to the bottom of

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Speaker 1: what happened before taking any action to keep it from

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Speaker 1: happening again. How did you read his response? You know,

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Speaker 1: I think I think Senator Brown has the right approach.

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Speaker 1: The issue now is what happened? Who is at fault.

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Speaker 1: Who let the ball drop? You know what happened? Was

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Speaker 1: this an issue of regulations that weren't enforced properly? If so,

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Speaker 1: who did not enforce them? Was this an issue of

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Speaker 1: you know, not having a risk management team in place

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Speaker 1: in this particular bank. Is this a black swan or

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Speaker 1: is this something that is you know, could permeate to

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Speaker 1: other banks and other sectors. So I think the question

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Speaker 1: now is what happened? And I think unfortunately, as often

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Speaker 1: happens in DC and in politics, we're seeing a lot

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Speaker 1: of finger pointing and blame going around before we really

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Speaker 1: have the facts. Some of that's coming into a point

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Speaker 1: at least from Elizabeth Warren. Should J Powell refuse himself

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Speaker 1: think she too, is similarly finger pointing. I think she

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Speaker 1: is right to say that we need to know how

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Speaker 1: many how much bonuses were given to these executives. I

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Speaker 1: think she's right to look into the management team to

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Speaker 1: ask these questions. But to cast dispersions or blame to

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Speaker 1: Jerome Powell at this point seems, you know, similar to

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Speaker 1: what's going on on the opposite side of the aisle,

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Speaker 1: which is finger pointing at Joe Biden and the Biden administration.

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Speaker 1: So I think that is going a step too far

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Speaker 1: at this point. I think Brown is right as head

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Speaker 1: of Banking Committee, his role is to figure out what

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Speaker 1: happened and then to figure out what, if anything Congress

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Speaker 1: can do to avoid it happening in the future, and

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Speaker 1: to make sure the system is secure. Rick the Senator

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Speaker 1: said loosening bank regulations in twenty eighteen was a mistake.

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Speaker 1: We knew he felt that way. Then, how does that

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Speaker 1: inform do you think his approach that will follow now? Yeah,

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Speaker 1: it would be interesting to see whether or not he

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Speaker 1: tries to put a bill into the committee that he

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Speaker 1: chairs to put those same regulation controls back onto banks.

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Speaker 1: I doubt, knowing what we know about the committee right now,

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Speaker 1: that he could find a majority in that, because there

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Speaker 1: were even some Democrats at the time who were opposed

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Speaker 1: to those measures and voted with Republicans. It was a

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Speaker 1: bipartisan effort to try and take some of the regulation

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Speaker 1: off the backs of the banks in order for them

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Speaker 1: to be able to better serve their constituents. So, as

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Speaker 1: Genie said, there's plenty of finger pointing for everybody, and

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Speaker 1: some old grudges like Elizabeth Warren versus Jerome Powell, Come

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Speaker 1: right to the surface. You're listening to the Bloomberg sound

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Speaker 1: On podcast. Catch the program live weekdays at one Eastern

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Speaker 1: on Bloomberg Radio, the tune in app, Bloomberg dot Com,

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Speaker 1: and the Bloomberg Business App. You can also listen live

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Speaker 1: on Amazon Alexa from our flagship New York station Just

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Speaker 1: say Alexa playing Bloomberg eleven thirty Russian fighter collides with

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Speaker 1: US drone over blacks See. Yeah, We've got news here

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Speaker 1: and want to just take a minute to consider this

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Speaker 1: with our panel Rick Davis and Jennie Chanzano here on

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Speaker 1: Bloomberg sound On. This is what we know at the moment,

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Speaker 1: according to US European Command. Because you know, there's always

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Speaker 1: room for breaking news Europe, Bloomberg to Russian SU twenty

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Speaker 1: seven aircraft went to intercept and Air Force unmanned MQ

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Speaker 1: nine aircraft. Think of this as a drone, right that's

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Speaker 1: flying around. It's propeller driven, operating with an international airspace

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Speaker 1: over the Black Sea. According to European Command, one of

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Speaker 1: the Russian aircraft struck the propeller of this drone, causing

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Speaker 1: the US to bring the drone down in international waters.

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Speaker 1: European commands in a statement today, several times before the collision,

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Speaker 1: the SU twenty seven's dumped fuel and flew in front

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Speaker 1: of this thing in a quote reckless, environmentally, unsounded, unprofessional

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Speaker 1: manner unquote. Of course, the Russians are really good at that.

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Speaker 1: We've got a lot of years of experience with intercepts

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Speaker 1: here this time, though it didn't go the way they wanted.

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Speaker 1: Rick Davis, what's your thought on this if nothing more

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Speaker 1: than to remind us of how close we are to

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Speaker 1: something going wrong at all times here in this so

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Speaker 1: called proxy war. Yeah, that's why you try to avoid war, right,

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Speaker 1: because you can never see through the fog of that war.

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Speaker 1: And this is definitely a fog situation. Right. You've got

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Speaker 1: some rocket jockeys from Russia trying to play with a

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Speaker 1: Reaper drone. These things are big, they're dangerous, they're fast,

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Speaker 1: they're agile, they operate autonomously in some theaters, and it

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Speaker 1: was just a huge mistake by them to threaten this

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Speaker 1: kind of incursion at a time when if if your

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Speaker 1: Vladimir Putin, the last thing you want is the US

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Speaker 1: to feel like we should be doing more for Ukraine.

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Speaker 1: In our own defense then then less These are international

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Speaker 1: air areas that you should be able to fly in

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Speaker 1: without harassment. And this is this is going to cause

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Speaker 1: a lot of problems for Russia internally because they're trying

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Speaker 1: to keep focus on Buck Mootton, what's happening on the ground.

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Speaker 1: And now they've they've they've they've made a mistake by

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Speaker 1: bringing us directly into this thing. It could have gone

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Speaker 1: way worse. And we don't know, Genie, I don't know

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Speaker 1: if somebody ejected, I don't have the plane landed on

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Speaker 1: its own. We have very little information right now. But

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Speaker 1: these kinds of events can cascade, they can, I mean,

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Speaker 1: and that's really the question now, so many questions unanswered.

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Speaker 1: We know that Russia and US have been operating aircraft

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Speaker 1: over the Black Seas throughout the Black Sea rather throughout

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Speaker 1: the course of the war, but we really I believe

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Speaker 1: this is the first kind of you know, direct interaction

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Speaker 1: that they've had. And the question then becomes what happened,

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Speaker 1: you know, and is this could this potentially lead to

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Speaker 1: an escalation of some time? And of course this is

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Speaker 1: a really important point in the war, and you know,

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Speaker 1: we just have to wait and see and hope that

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Speaker 1: this isn't one of those incidents that leads to further escalation,

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Speaker 1: because that has always been the real concern of the

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Speaker 1: United States and led to the calls that we should

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Speaker 1: not be engaged at all over there, and we should

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Speaker 1: not even be operating drones or aircraft of any kind

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Speaker 1: over the Black Seat out of fear of these kinds

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Speaker 1: of incidents. So there's going to be a lot of

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Speaker 1: questions to be answered before we can figure out what

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Speaker 1: happened and to ensure it doesn't happen again. We are

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Speaker 1: headlining on the terminal that President Biden has been briefed

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Speaker 1: on this. John Kirby, the spokesman for the National Security Council,

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Speaker 1: confirming as much in a White House briefing. I suspect

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Speaker 1: we won't hear much more about this for a moment. Rick.

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Speaker 1: Is the response though from the US to actually do

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Speaker 1: nothing right now to learn more about what happened. Yeah,

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Speaker 1: there'll be a quick investigation to make sure that everybody

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Speaker 1: knows what the facts are. This is breaking news, so

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Speaker 1: you're hearing a lot of it for the very first

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Speaker 1: time right now. And look, there may not be a

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Speaker 1: specific response. This may not be something Joe Biden wants

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Speaker 1: to actually get in the way of the prosecution of

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Speaker 1: his efforts to support the Ukrainians. And so, you know,

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Speaker 1: just a deconflict by by not making a big deal

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Speaker 1: out of it. But I would say, you know, after

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Speaker 1: you know, hundreds of years of trying to create professional

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Speaker 1: army so that you know, civilians don't get to face

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Speaker 1: the brunt of war, you know, we have another example

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Speaker 1: of Russia in an undisciplined criminal activity that they've been

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Speaker 1: perpetrating on the Ukrainians now playing out in international airspace.

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Speaker 1: There's a bit more to get into with Ukraine that

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Speaker 1: we're going to touch a little bit later on in

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Speaker 1: the program. There's something else I want to ask you

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Speaker 1: guys about while you're here, Rick and Jeanie with us

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Speaker 1: on Bloomberg. If you're just joining us and it brings

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Speaker 1: our attention to Alaska with this whole story of the

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Speaker 1: Willow Oil project, I know that something has got to

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Speaker 1: be a big deal. When my fifteen year old tells

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Speaker 1: me they're talking about it on TikTok and Instagram. I

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Speaker 1: don't usually hear that, Genie, but this time the Willow

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Speaker 1: project has broken through. Look, this is clearly something that

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Speaker 1: the President must have thought long and hard about. Here

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Speaker 1: this basically is his decision to authorized Conico Phillips drilling

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Speaker 1: in Alaska, remembering what he said during the campaign. This

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Speaker 1: is Joe Biden candidate Biden on CNN in a debate

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Speaker 1: in twenty twenty. No more drilling on federal lands, no

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Speaker 1: more drilling, including offshore, no ability for the oil industry

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Speaker 1: to continue to drill. Period. Pretty much leaves no confusion

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Speaker 1: on that one. So, with many critics emerging here, the

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Speaker 1: Secretary of the Interior has taken to Twitter to talk

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Speaker 1: to US President Biden and I believe that the climate

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Speaker 1: crisis is the most urgent issue of our life. Now

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Speaker 1: they've got music behind this, and it basically devolves into

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Speaker 1: an apology. Genie, I don't know if you would agree

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Speaker 1: with me. Here's where we go with the secrety. The

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Speaker 1: clean energy transition will not happen overnight, but it will

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Speaker 1: happen with all of us working together. I'm confident that

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Speaker 1: we are on the right path, even if it's not

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Speaker 1: always a straight line. Won't want what is that? You know?

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Speaker 1: I think you nailed it when you first mentioned your child,

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Speaker 1: because this is something that really does engage particularly young people,

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Speaker 1: not just Democrats, not just liberals, but across the political spectrum.

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Speaker 1: This is an issue that Joe Biden promised he would

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Speaker 1: be committed to. He was going to, as you said,

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Speaker 1: stop drilling of any kind. Of course, there's a big

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Speaker 1: difference between candidate Biden running for president and then the

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Speaker 1: reality of a war in Europe and rising prices of

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Speaker 1: oil and gas, and of course being faced with this.

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Speaker 1: So I think you have an attempt the Biden administration

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Speaker 1: to explain their way out of a political predicament. On

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Speaker 1: the one hand, they've got to keep costs contained. They're

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Speaker 1: trying to make the case over and over again that

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Speaker 1: had this gone to court, they probably would have lost,

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Speaker 1: and Conico Phillips would have won because of the agreements

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Speaker 1: in place, so they had no choice to do this.

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Speaker 1: But that is not going to stop environmentalists, and it's

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Speaker 1: not just environmentalists, these are people from around the country

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Speaker 1: in the world who say this is an existential crisis.

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Speaker 1: You are making things worse for our children and our grandchildren,

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Speaker 1: and they're not going to find this a forgivable step

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Speaker 1: on the part of the administration. So tough politics for

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Speaker 1: them and I think the tape really really underscored that

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Speaker 1: because she sounded none too now Democrat. That's not going

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Speaker 1: to make any activists feel better? Is the secretary talking

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Speaker 1: like that. I don't think it's going to make anybody

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Speaker 1: feel better. You can put all the music you want

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Speaker 1: behind it. They are going to, you know, back pedal. Yeah,

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Speaker 1: it doesn't help the music. Rick, is this really about

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Speaker 1: about the lawsuit? It's reported that President Biden was told

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Speaker 1: this could be a five billion dollars settlement. Conico Phillips

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Speaker 1: owned the permits. They already had that cleared, and the

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Speaker 1: administration would have been sued in a heartbeat if they

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Speaker 1: blocked this. Yeah, you know this is people are going

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Speaker 1: to try and figure this one out for a long time.

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Speaker 1: I mean, it completely eviscerates the kind of gains that

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Speaker 1: he had in his Inflation Reduction Act. You know, over

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Speaker 1: six hundred million metric tons of carbon dioxide being put

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Speaker 1: away by this historic legislation, you know, and on one

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Speaker 1: felt swoop, this takes away half of that. And you

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Speaker 1: know it's so so Yeah, I can't imagine a lawsuit

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Speaker 1: for five billion dollars, which is a rounding air of

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Speaker 1: pocket change in the government purse, you know, would be

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Speaker 1: what would trigger this. Uh, maybe it's the concerns that

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Speaker 1: when he's running for president a year from now, gas

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Speaker 1: prices go up and he wants to be able to

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Speaker 1: say he's done everything he can, including this. But I'll

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Speaker 1: be honest, I mean this is perplexing to me. You know,

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Speaker 1: he spent so much time in political capital campaigning against

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Speaker 1: this exact thing, saying he would never do it, embedding

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Speaker 1: all his reputation on climate into the IRA and to

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Speaker 1: now sort of chuck all that to get sort of

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Speaker 1: cheap thrills on the Willow Project, which is just gonna

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Speaker 1: you know, make Conico Phillips more money, you know, after

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Speaker 1: a record year. I just don't see how it's offensible.

431
00:24:00,560 --> 00:24:03,080
Speaker 1: And if he's running for president, wouldn't you find a

432
00:24:03,119 --> 00:24:05,520
Speaker 1: way to not do this until after the election. I mean,

433
00:24:05,600 --> 00:24:08,840
Speaker 1: like this is the first sign I really see this

434
00:24:08,960 --> 00:24:11,200
Speaker 1: tangible that says I'm not running for president and I

435
00:24:11,280 --> 00:24:13,720
Speaker 1: don't care anymore. You know, that's a heck of a

436
00:24:13,720 --> 00:24:15,880
Speaker 1: way of looking at this, Genie, we're talking about six

437
00:24:16,000 --> 00:24:19,240
Speaker 1: hundred million barrels? Is that actually what's in the president's

438
00:24:19,240 --> 00:24:20,679
Speaker 1: mind right now is going to be in a debate,

439
00:24:21,119 --> 00:24:23,520
Speaker 1: and he doesn't want someone to accuse him of blocking

440
00:24:23,560 --> 00:24:27,680
Speaker 1: that from happening and costing people in Ohio more money

441
00:24:27,680 --> 00:24:29,960
Speaker 1: at the bump. You know, I think what he's assuming

442
00:24:30,040 --> 00:24:32,440
Speaker 1: is if he does run, which we suspect he will.

443
00:24:32,440 --> 00:24:34,560
Speaker 1: And although Rick may be making news here that this

444
00:24:34,640 --> 00:24:36,879
Speaker 1: is a sign he's not, he thinks the only debates

445
00:24:36,880 --> 00:24:38,879
Speaker 1: he's going to be facing are in a general with

446
00:24:38,920 --> 00:24:42,520
Speaker 1: a conservative Republican or a Republican for whom this issue

447
00:24:42,560 --> 00:24:46,400
Speaker 1: isn't going to resonate. If he was facing a Democratic primary,

448
00:24:46,600 --> 00:24:49,480
Speaker 1: this would be high on the agenda. And you know

449
00:24:49,520 --> 00:24:52,320
Speaker 1: what they're talking about. People are describing this as a

450
00:24:52,359 --> 00:24:56,040
Speaker 1: carbon bomb. That's how serious they are taking. They're saying

451
00:24:56,040 --> 00:24:57,879
Speaker 1: it's going to emit so much carbon, it's going to

452
00:24:58,000 --> 00:25:00,760
Speaker 1: double the amount he promised to reduce. But of course

453
00:25:00,840 --> 00:25:04,040
Speaker 1: he's only going to hear that if he's in facing

454
00:25:04,080 --> 00:25:08,000
Speaker 1: a Democrat. So one big question does this and some

455
00:25:08,040 --> 00:25:09,920
Speaker 1: of the other stuff we've been talking about, the DC

456
00:25:10,119 --> 00:25:12,919
Speaker 1: Crime Bill, some of the other things, you know, you know,

457
00:25:13,440 --> 00:25:16,639
Speaker 1: allowing some of these Silicon Valley bank people to you know,

458
00:25:16,840 --> 00:25:19,080
Speaker 1: get a quote unquote bailout, even though he's saying that's

459
00:25:19,119 --> 00:25:22,200
Speaker 1: not it does this sort of incite a progressive sort

460
00:25:22,200 --> 00:25:24,960
Speaker 1: of pushback. Do we see a progressive get in this race?

461
00:25:25,040 --> 00:25:27,240
Speaker 1: Just to challenge him on these things? Is he pivot?

462
00:25:27,280 --> 00:25:30,240
Speaker 1: Before you announce? We're spending time with Rick and Jeanie

463
00:25:30,480 --> 00:25:34,919
Speaker 1: on sound On. You're listening to the Bloomberg Sound On podcast.

464
00:25:35,280 --> 00:25:39,359
Speaker 1: Catch the program live weekdays at one Eastern on Bloomberg Radio,

465
00:25:39,480 --> 00:25:42,280
Speaker 1: the tune in app, Bloomberg dot Com, and the Bloomberg

466
00:25:42,320 --> 00:25:45,600
Speaker 1: Business App. You can also listen live on Amazon Alexa

467
00:25:45,720 --> 00:25:49,080
Speaker 1: from our flagship New York station Just Say Alexa playing

468
00:25:49,160 --> 00:25:53,480
Speaker 1: Bloomberg eleven thirty. Quite the revelation as we've been discussing

469
00:25:53,480 --> 00:25:56,360
Speaker 1: the banking crisis to learn the Russian fighter jets collided

470
00:25:56,400 --> 00:25:59,320
Speaker 1: with an American surveillance drone. A US drone had happened

471
00:25:59,320 --> 00:26:03,600
Speaker 1: in international airspace over the Black Sea. I'm Joe, Matthew

472
00:26:03,600 --> 00:26:06,879
Speaker 1: and Washington, joined by Kaylee Lions as we prepare to

473
00:26:06,960 --> 00:26:10,080
Speaker 1: hear from Congressman John Garamendi. Kayley, it's great to see you.

474
00:26:11,119 --> 00:26:13,240
Speaker 1: This is concerning These are the kinds of headlines the

475
00:26:13,240 --> 00:26:16,719
Speaker 1: White House worries about. Yeah, when there's a margin for

476
00:26:16,840 --> 00:26:18,639
Speaker 1: error and a lot on the line, a lot of

477
00:26:18,720 --> 00:26:23,440
Speaker 1: risk in this theater. They're being very careful, though nobody's

478
00:26:23,480 --> 00:26:25,159
Speaker 1: talking about this as we try to learn more in

479
00:26:25,200 --> 00:26:28,280
Speaker 1: the meantime. Right and we did hear from White House

480
00:26:28,359 --> 00:26:32,040
Speaker 1: National Security Council spokesman John Kirby calling it reckless, and

481
00:26:32,119 --> 00:26:35,160
Speaker 1: I think reckless perhaps is a good descriptor here, given

482
00:26:35,200 --> 00:26:38,440
Speaker 1: exactly what you just said, the intensity of this theater,

483
00:26:38,640 --> 00:26:40,720
Speaker 1: knowing that each and every headline has the potential to

484
00:26:40,760 --> 00:26:45,520
Speaker 1: move the markets and potential to lead to something far greater.

485
00:26:45,720 --> 00:26:47,359
Speaker 1: That is what the US has been trying to avoid

486
00:26:47,359 --> 00:26:49,600
Speaker 1: throughout the duration of the conflict over the last year,

487
00:26:49,680 --> 00:26:53,320
Speaker 1: is any form of escalation, hence them treading very very carefully,

488
00:26:53,480 --> 00:26:56,760
Speaker 1: escalation or mission creep. That's where we start our conversation here,

489
00:26:57,040 --> 00:26:58,880
Speaker 1: and we have a lot to talk about, in fact,

490
00:26:58,920 --> 00:27:02,000
Speaker 1: with Congressman John Amending, the Democrat from California. It's great

491
00:27:02,000 --> 00:27:04,160
Speaker 1: to have you, Congressman, as a member of the Armed

492
00:27:04,160 --> 00:27:06,600
Speaker 1: Services Committee. Is this something you've been briefed on or

493
00:27:06,640 --> 00:27:11,360
Speaker 1: are concerned about right now? Actually, I've not yet been briefed.

494
00:27:11,480 --> 00:27:15,159
Speaker 1: We are gathering information from the Pentagon, but I have

495
00:27:15,280 --> 00:27:17,560
Speaker 1: not yet had that information. What I basically know is

496
00:27:17,560 --> 00:27:22,600
Speaker 1: about on the various news reports and the existing report

497
00:27:22,680 --> 00:27:26,920
Speaker 1: from the Pentagon all in on it is one very

498
00:27:27,000 --> 00:27:32,480
Speaker 1: dangerous situation, and escalation beyond this is something we certainly

499
00:27:32,480 --> 00:27:35,840
Speaker 1: don't want to have, and at the same time, Russian

500
00:27:35,880 --> 00:27:39,040
Speaker 1: needs to be very much aware that these kinds of

501
00:27:39,080 --> 00:27:43,560
Speaker 1: incidents are not acceptable at all. But unfortunately they're not new.

502
00:27:43,720 --> 00:27:49,560
Speaker 1: Over the Black Sea, all of the area around Russia,

503
00:27:49,680 --> 00:27:55,600
Speaker 1: wherever we have these observation platforms, the Russians are hazing

504
00:27:55,800 --> 00:28:00,919
Speaker 1: and trying to disrupt the operation. Well to that point,

505
00:28:01,280 --> 00:28:05,160
Speaker 1: the administration has acted to try to deter Russia from behavior,

506
00:28:05,200 --> 00:28:09,400
Speaker 1: including from its ongoing aggression awards conducting in Ukraine, through

507
00:28:09,440 --> 00:28:11,600
Speaker 1: the form of sanctions and other matters. Is this just

508
00:28:11,640 --> 00:28:17,960
Speaker 1: a sign that the Kremlin doesn't really respond to US policy. Well,

509
00:28:17,960 --> 00:28:21,199
Speaker 1: here's the thing, this is not new. These kinds of

510
00:28:22,840 --> 00:28:29,560
Speaker 1: near fly buys by Russian jets of various kinds has

511
00:28:29,720 --> 00:28:34,800
Speaker 1: been ongoing for decades. You see most of it we

512
00:28:34,840 --> 00:28:41,080
Speaker 1: see over the Baltic Sea very common, and there's a

513
00:28:41,120 --> 00:28:45,120
Speaker 1: protocol that is that should be observed by both Russia,

514
00:28:45,160 --> 00:28:49,040
Speaker 1: the United States, and any other country, and that is, yes,

515
00:28:49,640 --> 00:28:55,280
Speaker 1: fly buys are not inappropriate unless they're too close in

516
00:28:55,320 --> 00:28:58,040
Speaker 1: this case, there were two jets apparently, and they replied

517
00:28:58,080 --> 00:29:03,320
Speaker 1: too close. They actually hit m Q nine. So the

518
00:29:03,520 --> 00:29:07,760
Speaker 1: issue really is one of how do we now put

519
00:29:07,840 --> 00:29:12,960
Speaker 1: Russia on notice that this is totally unacceptable. We will see,

520
00:29:13,000 --> 00:29:15,040
Speaker 1: but at the same time, we want to be very careful,

521
00:29:15,080 --> 00:29:18,240
Speaker 1: because of the war in Ukraine, that this does not

522
00:29:18,440 --> 00:29:23,640
Speaker 1: lead to further engagement between the United States and Russia.

523
00:29:23,760 --> 00:29:25,480
Speaker 1: So it's time to be calm. It's time to be

524
00:29:25,760 --> 00:29:31,920
Speaker 1: collected and knowledgeable. Calm is probably not a not possible

525
00:29:31,960 --> 00:29:36,040
Speaker 1: with twenty four seven three sixty five media, but it

526
00:29:36,240 --> 00:29:40,320
Speaker 1: is time just to step back what happened here and

527
00:29:40,360 --> 00:29:44,720
Speaker 1: then simultaneously make sure that Russia is aware that this

528
00:29:44,880 --> 00:29:47,840
Speaker 1: is not acceptable and there will be consequences I should

529
00:29:47,840 --> 00:29:51,440
Speaker 1: it continue, well, we certainly will keep everyone posted as

530
00:29:51,440 --> 00:29:53,600
Speaker 1: we learn more. Congressman. Maybe we'll have a chance to

531
00:29:53,640 --> 00:29:55,360
Speaker 1: talk about it as we learn more. But we want

532
00:29:55,360 --> 00:29:58,959
Speaker 1: to acknowledge how little is aware at the moment, and

533
00:29:59,000 --> 00:30:01,640
Speaker 1: I appreciate your bringing us up to date with things

534
00:30:01,640 --> 00:30:04,440
Speaker 1: on your end. You're of course representing California. It's been

535
00:30:04,480 --> 00:30:07,400
Speaker 1: a heck of a week. I'm guessing your phone's blowing up. Congressman,

536
00:30:07,720 --> 00:30:09,880
Speaker 1: how many people have you heard from. How many people

537
00:30:09,920 --> 00:30:12,160
Speaker 1: are businesses have you heard from the last seventy two

538
00:30:12,160 --> 00:30:17,200
Speaker 1: hours about confidence or lack thereof in their bank deposits. Well,

539
00:30:17,240 --> 00:30:19,040
Speaker 1: one would be too many, but I will say this

540
00:30:19,200 --> 00:30:22,680
Speaker 1: far more than one. The faction matter is that the

541
00:30:22,760 --> 00:30:28,640
Speaker 1: Silicon Valley Bank was an extremely important financial institution in

542
00:30:28,880 --> 00:30:36,920
Speaker 1: the technology and advanced systems of all kinds of biotech, biopharmaceutical,

543
00:30:37,760 --> 00:30:41,400
Speaker 1: all of the various communication technologies and apps that are

544
00:30:41,440 --> 00:30:47,920
Speaker 1: out there, and also extremely important bank for American security systems.

545
00:30:48,400 --> 00:30:55,000
Speaker 1: And so the problem that has plagued the bank really

546
00:30:55,000 --> 00:30:57,480
Speaker 1: has repercussions not only in the Bay Area, but really

547
00:30:57,520 --> 00:31:02,280
Speaker 1: across America. What I'm so happy about is it the

548
00:31:02,360 --> 00:31:10,120
Speaker 1: Biden administration, within thirty six hours, devised a mechanism to

549
00:31:10,120 --> 00:31:15,160
Speaker 1: provide the financial backing so that the depositors in the

550
00:31:15,240 --> 00:31:19,160
Speaker 1: Silicon Valley Bank and other banks that might be similarly

551
00:31:19,440 --> 00:31:24,400
Speaker 1: situated would have the financial security to meet whatever their

552
00:31:24,400 --> 00:31:28,840
Speaker 1: obligations are. Did that within thirty six hours. That's remarkable leadership.

553
00:31:29,280 --> 00:31:34,360
Speaker 1: And yes it's controversial, and Republican terms would make controversy

554
00:31:34,360 --> 00:31:37,680
Speaker 1: out of nothing, but they're working hard to try to

555
00:31:37,680 --> 00:31:40,640
Speaker 1: create a controversy here. The reality is this bank was

556
00:31:40,680 --> 00:31:45,880
Speaker 1: in trouble for at least two reasons. One is management,

557
00:31:46,200 --> 00:31:49,360
Speaker 1: and secondly is the very rapid rise in interest rates.

558
00:31:49,480 --> 00:31:53,480
Speaker 1: The bank was holding apparently one of its principal assets,

559
00:31:54,080 --> 00:31:56,720
Speaker 1: or American government bonds, which are thought by the entire

560
00:31:56,760 --> 00:32:00,600
Speaker 1: work to be the safest. However, if interest rates are

561
00:32:00,680 --> 00:32:03,720
Speaker 1: rapidly rising and you got to sell those bonds, you

562
00:32:03,840 --> 00:32:07,240
Speaker 1: can sell them at a deep discounting. And right there's

563
00:32:07,280 --> 00:32:10,440
Speaker 1: the duration gap question here, which we've discussed at length

564
00:32:10,480 --> 00:32:13,680
Speaker 1: over the last several days. Congressman, you talked about kind

565
00:32:13,680 --> 00:32:16,520
Speaker 1: of the controversy here and perhaps the optics of this.

566
00:32:16,680 --> 00:32:19,480
Speaker 1: We know that there are some who are painting this

567
00:32:19,600 --> 00:32:22,360
Speaker 1: as a bailout, and not just a bailout of any

568
00:32:22,400 --> 00:32:26,120
Speaker 1: kind of depositor, but venture capitalists, tech startups. I'm just

569
00:32:26,200 --> 00:32:31,200
Speaker 1: wondering what your pushback is to some of that criticism.

570
00:32:31,360 --> 00:32:35,400
Speaker 1: That's the future economy of America and so that criticism

571
00:32:35,440 --> 00:32:37,280
Speaker 1: goes right to the heart. You want to go back

572
00:32:37,280 --> 00:32:39,760
Speaker 1: and go soy beans and that's all. Is that what

573
00:32:39,800 --> 00:32:41,720
Speaker 1: they really want here? Or do they want the future?

574
00:32:41,760 --> 00:32:44,920
Speaker 1: The future is in these tech startups and they're all

575
00:32:45,040 --> 00:32:48,600
Speaker 1: kinds part of the there's a whole new industry being

576
00:32:48,640 --> 00:32:53,280
Speaker 1: created in the Bay Area called the biotech industry. It's biopharmaceutical,

577
00:32:53,280 --> 00:32:57,160
Speaker 1: it's bio material, it's biofuel, and it is a way

578
00:32:57,200 --> 00:33:01,200
Speaker 1: of avoiding the problems at the petroleum taking oil out

579
00:33:01,200 --> 00:33:03,920
Speaker 1: of the ground. And so this is the future, and

580
00:33:03,960 --> 00:33:06,760
Speaker 1: it's only part of it. All of the communication systems

581
00:33:06,760 --> 00:33:10,120
Speaker 1: that we use, all of the social media, all of

582
00:33:10,160 --> 00:33:15,600
Speaker 1: the and also in the area of national security, dealing

583
00:33:15,640 --> 00:33:21,480
Speaker 1: with the problems of hacking and cyber all cyber cyber war,

584
00:33:21,600 --> 00:33:24,280
Speaker 1: all of those things are come out of this area. Well,

585
00:33:24,320 --> 00:33:26,840
Speaker 1: let's talk about the way the deposits are held here, Congressman,

586
00:33:26,880 --> 00:33:29,200
Speaker 1: because I understand your point very clearly. But what's the

587
00:33:29,240 --> 00:33:31,719
Speaker 1: point of a two hundred and fifty thousand dollars limit

588
00:33:32,160 --> 00:33:36,000
Speaker 1: on FDIC insurance? Should there be no limit? I mean,

589
00:33:36,240 --> 00:33:38,600
Speaker 1: if another bank were to fail, I can't imagine that

590
00:33:38,600 --> 00:33:41,280
Speaker 1: they would They would cut people off at a certain point.

591
00:33:41,280 --> 00:33:46,280
Speaker 1: The government's backing all deposits now, yes, it is. Should

592
00:33:46,360 --> 00:33:48,880
Speaker 1: that be the case or should that number move up

593
00:33:48,960 --> 00:33:52,800
Speaker 1: to say five hundred thousand or a million, Well, let's

594
00:33:52,840 --> 00:33:55,840
Speaker 1: back away use the word government. It is a government

595
00:33:57,200 --> 00:34:01,760
Speaker 1: order that the bank industry itself back up these deposits.

596
00:34:01,800 --> 00:34:04,120
Speaker 1: It is the banking industry that is backing it up.

597
00:34:04,120 --> 00:34:07,000
Speaker 1: This has been the model in the insurance industry for

598
00:34:07,160 --> 00:34:10,480
Speaker 1: well over thirty five years now, where the insurance industry

599
00:34:10,719 --> 00:34:18,399
Speaker 1: backs up the claims of a failed insurance company, and

600
00:34:18,480 --> 00:34:22,000
Speaker 1: now the same thing is happening in the banking industry. Now,

601
00:34:22,040 --> 00:34:26,000
Speaker 1: will this be a taxpayer issue? Doesn't appear that way.

602
00:34:26,560 --> 00:34:31,320
Speaker 1: It appears to be a fee on the banking industry

603
00:34:31,400 --> 00:34:35,360
Speaker 1: to support its brethren. And that's to the benefit of

604
00:34:35,400 --> 00:34:38,720
Speaker 1: the entire banking industry that they would be able to

605
00:34:38,760 --> 00:34:42,040
Speaker 1: shore up a bank that has failed. Now they're going

606
00:34:42,080 --> 00:34:45,200
Speaker 1: to be losers in this. Clearly the stockholders of Silicon

607
00:34:45,280 --> 00:34:48,000
Speaker 1: Valley and the other bank that mont Bailly up are

608
00:34:48,040 --> 00:34:50,960
Speaker 1: going to lose, probably lose everything, as they should, and

609
00:34:51,120 --> 00:34:54,760
Speaker 1: certainly the management is out. Questions have been raised about

610
00:34:54,800 --> 00:34:56,879
Speaker 1: the bonuses that have been paid in the near term.

611
00:34:56,920 --> 00:35:00,560
Speaker 1: Those should be returned, no doubt about that. And Congress

612
00:35:00,600 --> 00:35:02,399
Speaker 1: needs to do its things. They need to go back

613
00:35:02,440 --> 00:35:06,800
Speaker 1: and revisit the removal of these mid size and small

614
00:35:06,800 --> 00:35:12,480
Speaker 1: banks from the restrictions and requirements of the Dodd Frank legislation. Yeah,

615
00:35:12,640 --> 00:35:15,480
Speaker 1: to that point, Congressman, we have heard conflicting views on

616
00:35:15,520 --> 00:35:19,279
Speaker 1: the role that those twenty eighteen changes really played here,

617
00:35:19,320 --> 00:35:21,680
Speaker 1: because it's not that these banks weren't subject to any

618
00:35:21,680 --> 00:35:24,920
Speaker 1: supervision at all. Just if they were under two hundred

619
00:35:24,960 --> 00:35:27,880
Speaker 1: and fifty billion dollars in assets, they weren't subject to

620
00:35:27,920 --> 00:35:30,719
Speaker 1: those strictest levels. So how much should we be questioning

621
00:35:31,080 --> 00:35:34,320
Speaker 1: just whether or not that supervision they were subject to

622
00:35:35,360 --> 00:35:38,800
Speaker 1: was done was done accurately by the regulators supposedly overseeing

623
00:35:38,800 --> 00:35:42,680
Speaker 1: this bank. Well, isn't that a good question for a

624
00:35:42,960 --> 00:35:48,760
Speaker 1: useful investigation by Congress? Right now? I'm on Jim Jordan's

625
00:35:48,800 --> 00:35:52,479
Speaker 1: weaponizing the federal government a subcommittee where we go round

626
00:35:52,480 --> 00:35:54,600
Speaker 1: and round on things that are come on. There are

627
00:35:54,680 --> 00:35:58,680
Speaker 1: really important things too investigate this business? What is what

628
00:35:58,920 --> 00:36:02,600
Speaker 1: was the gen of the problem was that the regulators

629
00:36:02,600 --> 00:36:04,359
Speaker 1: weren't doing what they were supposed to do, even though

630
00:36:04,400 --> 00:36:06,239
Speaker 1: it was less than they should and they would have

631
00:36:06,280 --> 00:36:11,840
Speaker 1: done underdog rank Or is it that the regulation system

632
00:36:12,000 --> 00:36:16,319
Speaker 1: is insufficient for a ord banks of all kinds and

633
00:36:16,360 --> 00:36:19,000
Speaker 1: all sizes. That's what we ought to be doing, and

634
00:36:19,040 --> 00:36:22,799
Speaker 1: that would be a very important investigation, and in the

635
00:36:22,880 --> 00:36:27,840
Speaker 1: process will come to a conclusion, well, we need stronger regulation, okay,

636
00:36:27,960 --> 00:36:31,600
Speaker 1: or we need stronger regulators, and we also need a

637
00:36:32,520 --> 00:36:36,279
Speaker 1: federal reserve that is thinking about what are all of

638
00:36:36,320 --> 00:36:38,799
Speaker 1: the implications, all of the implication you're going to fight

639
00:36:39,160 --> 00:36:43,160
Speaker 1: inflation by raising interest rates? Yeah, you're going to do that,

640
00:36:43,360 --> 00:36:46,080
Speaker 1: but at what costs? Right now? Maybe two million people

641
00:36:46,080 --> 00:36:49,160
Speaker 1: who lose their jobs if the FED continues, and so

642
00:36:49,200 --> 00:36:52,600
Speaker 1: would you like here, you don't want them to hike

643
00:36:52,680 --> 00:36:57,279
Speaker 1: next week on I would want the Fed to recognize

644
00:36:57,360 --> 00:37:02,400
Speaker 1: exactly what it is doing and the implication, the unintended consequences.

645
00:37:02,440 --> 00:37:07,440
Speaker 1: It's absolutely clear that the Silicon Valley Bank used as

646
00:37:07,440 --> 00:37:12,279
Speaker 1: an asset federal bonds. Now, what they didn't anticipate and

647
00:37:12,400 --> 00:37:16,919
Speaker 1: didn't properly account for was the very rapid rise in

648
00:37:16,920 --> 00:37:20,680
Speaker 1: interest rates and the devaluation of the phenomenal the daily

649
00:37:21,200 --> 00:37:24,200
Speaker 1: devaluation of that bond. If they had to sell it,

650
00:37:24,880 --> 00:37:28,359
Speaker 1: that was That's the problem. The problem. Genesis of the

651
00:37:28,360 --> 00:37:31,680
Speaker 1: problem is event very rapid rise in the interest rates

652
00:37:31,719 --> 00:37:34,480
Speaker 1: and quite probably the we don't know all of this,

653
00:37:35,000 --> 00:37:38,719
Speaker 1: but for me, clearly where the situation now where the

654
00:37:38,800 --> 00:37:43,160
Speaker 1: FED recognizes that another interest rate rise wild lead to

655
00:37:43,280 --> 00:37:46,600
Speaker 1: significant unemployment, and was call it a recession, either a

656
00:37:46,600 --> 00:37:49,600
Speaker 1: big one or a little one. But there's but perhaps

657
00:37:49,640 --> 00:37:52,200
Speaker 1: two million people will lose their jobs and drew and power.

658
00:37:52,239 --> 00:37:54,840
Speaker 1: When he was questioned about this by Senator Warren, he

659
00:37:55,000 --> 00:37:57,680
Speaker 1: just said, well, that's the price. Well, that's fine if

660
00:37:57,680 --> 00:38:00,200
Speaker 1: you're sitting on top of the heap of money, if

661
00:38:00,200 --> 00:38:02,239
Speaker 1: you're out there earning twenty bucks an hour and you're

662
00:38:02,239 --> 00:38:03,960
Speaker 1: going to be out of a job because of FED

663
00:38:04,040 --> 00:38:07,000
Speaker 1: thinks that the only way to go after inflation, By

664
00:38:07,040 --> 00:38:08,560
Speaker 1: the way, you want to go out inflation at the

665
00:38:08,600 --> 00:38:12,200
Speaker 1: gas pump. Let's talk about the extraordinary profits of the

666
00:38:12,239 --> 00:38:15,440
Speaker 1: petroleum industry, higher than ever. Well, before you move on

667
00:38:15,440 --> 00:38:17,560
Speaker 1: to oil, though, Congressman, I want to ask you about

668
00:38:17,600 --> 00:38:19,839
Speaker 1: the depositors that because you made a really important point

669
00:38:19,840 --> 00:38:24,080
Speaker 1: about about California's innovation industry, and Bloomberg reports that a

670
00:38:24,120 --> 00:38:27,480
Speaker 1: lot of the SVB customers were not depositors, but they

671
00:38:27,560 --> 00:38:30,759
Speaker 1: actually had lines of credit that funded their businesses, and

672
00:38:31,480 --> 00:38:34,680
Speaker 1: those businesses don't get the protection. Do you worry about

673
00:38:34,719 --> 00:38:37,160
Speaker 1: that as a double standard or the effect it might

674
00:38:37,200 --> 00:38:41,640
Speaker 1: have on the California economy. Well, we do know that

675
00:38:42,040 --> 00:38:47,120
Speaker 1: the Silicon Valley and the venture capitalists and the financing

676
00:38:47,160 --> 00:38:52,760
Speaker 1: programs that are developed there are very very complex, and

677
00:38:53,440 --> 00:38:58,719
Speaker 1: this action taken by the Widen administration deals with a

678
00:38:58,840 --> 00:39:02,759
Speaker 1: very specific part of the problem, which are the deposits

679
00:39:03,480 --> 00:39:08,120
Speaker 1: in the bank. Now, those deposits are related to many

680
00:39:08,600 --> 00:39:14,719
Speaker 1: other additional transactions that deal with the funding of all

681
00:39:14,840 --> 00:39:17,719
Speaker 1: kinds of programs, including I guess the mom and pop

682
00:39:17,800 --> 00:39:23,640
Speaker 1: shore store on the corner. So right now, the effort

683
00:39:23,760 --> 00:39:27,680
Speaker 1: is to deal with the specific problem of the deposits

684
00:39:27,680 --> 00:39:32,080
Speaker 1: in the bank. Now, money moves rapidly through many different mechanisms,

685
00:39:32,160 --> 00:39:34,960
Speaker 1: not only Silicon value but really around the world, and

686
00:39:35,040 --> 00:39:40,600
Speaker 1: so all of those secondary things are secondary. The initial

687
00:39:40,680 --> 00:39:46,560
Speaker 1: issue dealt with very aggressively fulsomely by the Biden administration

688
00:39:46,640 --> 00:39:49,640
Speaker 1: deals with the deposits at the bank. Can people get

689
00:39:50,040 --> 00:39:53,040
Speaker 1: can they access that money? Yes, as the money will

690
00:39:53,080 --> 00:39:56,000
Speaker 1: additional money flow into the bank. Yes, But the bank

691
00:39:56,200 --> 00:39:59,040
Speaker 1: is operating. That's the point here. And one more thing

692
00:39:59,160 --> 00:40:03,719
Speaker 1: is this bank just got thirty seconds. This bank has

693
00:40:03,760 --> 00:40:08,919
Speaker 1: an enormous franchise. Now, if that franchise has maintained, somebody

694
00:40:09,560 --> 00:40:12,480
Speaker 1: or some organizations will want to buy that franchise. That

695
00:40:12,680 --> 00:40:14,759
Speaker 1: will be the next leg in this story that we

696
00:40:14,800 --> 00:40:17,759
Speaker 1: look forward to telling it. Right, Kayley, the auction can

697
00:40:17,800 --> 00:40:21,560
Speaker 1: still happen thanks to Congressman John Garamendi. I'm Joe Matthew.

698
00:40:21,600 --> 00:40:24,400
Speaker 1: This is Bloomberg. Well, the good news is here. No

699
00:40:24,520 --> 00:40:26,440
Speaker 1: other banks have failed. I feel like we need to

700
00:40:26,520 --> 00:40:29,240
Speaker 1: keep reminding people of that. We don't have that update

701
00:40:29,280 --> 00:40:32,080
Speaker 1: for you, but banking regulators are still watching for contagion,

702
00:40:32,600 --> 00:40:35,880
Speaker 1: with investigations underway now by the DOJ and SEC, of

703
00:40:35,880 --> 00:40:39,359
Speaker 1: course the FED. I'm Joe Matthew in Washington, joined by

704
00:40:39,480 --> 00:40:43,600
Speaker 1: Kaylee Lines here in our Washington studios as we prepare

705
00:40:43,640 --> 00:40:46,760
Speaker 1: to have a conversation with Senator Marshall Blackburn. It's really interesting,

706
00:40:46,800 --> 00:40:51,280
Speaker 1: having come off that conversation with Mike Dorning, how Republicans

707
00:40:51,520 --> 00:40:57,080
Speaker 1: and Democrats actually might see ida eye on this when

708
00:40:57,200 --> 00:40:59,160
Speaker 1: or at least their concerns can align in a lot

709
00:40:59,160 --> 00:41:01,440
Speaker 1: of areas well. When it comes down to the question

710
00:41:01,480 --> 00:41:05,680
Speaker 1: of depositors being protected both insurers, ensured and uninsured. It's

711
00:41:05,680 --> 00:41:07,680
Speaker 1: a question of precedent, right if you have on the

712
00:41:07,680 --> 00:41:12,760
Speaker 1: West Coast venture capitalist tech companies getting maybe not bailed

713
00:41:12,760 --> 00:41:15,040
Speaker 1: out as the word some which choose to use, but

714
00:41:15,239 --> 00:41:17,799
Speaker 1: protected in this instance and at least two instances do

715
00:41:17,840 --> 00:41:20,279
Speaker 1: you then have to apply that across the rest of

716
00:41:20,280 --> 00:41:23,000
Speaker 1: the country, So if a bank in Middle America fails,

717
00:41:23,400 --> 00:41:30,320
Speaker 1: those constituents and depositors are protected to Senator Marshall Blackburn,

718
00:41:30,400 --> 00:41:34,200
Speaker 1: Republican from Tennessee, joins us right now on Bloomberg Radio.

719
00:41:34,200 --> 00:41:36,160
Speaker 1: It's great to have you back with us. Senator. I

720
00:41:36,200 --> 00:41:38,719
Speaker 1: know that you're watching this very closely as well. What

721
00:41:38,760 --> 00:41:43,480
Speaker 1: do you think of this idea of essentially making insurance

722
00:41:43,520 --> 00:41:46,960
Speaker 1: available for deposits of any size, suspending the limit, and

723
00:41:47,040 --> 00:41:50,440
Speaker 1: allowing the government to protect people's or companies money in

724
00:41:50,480 --> 00:41:53,360
Speaker 1: the bank. Is that a smart move. One of the

725
00:41:53,480 --> 00:41:56,920
Speaker 1: things that we're going to do is look at is

726
00:41:57,480 --> 00:42:01,960
Speaker 1: what is transpiring from this. You don't want the government

727
00:42:02,040 --> 00:42:05,839
Speaker 1: to be on the hook at position number one, and

728
00:42:06,080 --> 00:42:10,279
Speaker 1: it should be there as a backstop. And one of

729
00:42:10,320 --> 00:42:14,160
Speaker 1: the questions that we have is finding out what happened

730
00:42:14,200 --> 00:42:18,000
Speaker 1: with the supervisory role in all of this. I think

731
00:42:18,040 --> 00:42:20,879
Speaker 1: that's going to be one of the first things that

732
00:42:20,920 --> 00:42:24,800
Speaker 1: we do, because if you're going to put the government

733
00:42:24,960 --> 00:42:28,240
Speaker 1: in position number one, then the taxpayers on the hook

734
00:42:28,280 --> 00:42:31,040
Speaker 1: for this. And in Tennessee we have a lot of

735
00:42:31,080 --> 00:42:35,879
Speaker 1: state chartered banks we have regional banks and they don't

736
00:42:35,920 --> 00:42:40,040
Speaker 1: want to be paying for the mistakes that were made

737
00:42:40,400 --> 00:42:46,759
Speaker 1: by a SVB, and because of that, we're going to

738
00:42:46,800 --> 00:42:51,719
Speaker 1: watch this very closely. We're also concerned. We know that

739
00:42:51,760 --> 00:42:58,160
Speaker 1: there are Chinese business interest that we're also involved in

740
00:42:58,360 --> 00:43:03,200
Speaker 1: that that had money there at SVB, and we want

741
00:43:03,239 --> 00:43:07,040
Speaker 1: to make certain that there are no businesses that are

742
00:43:07,239 --> 00:43:10,719
Speaker 1: connected to the CCP that are going to be bailed out.

743
00:43:10,760 --> 00:43:13,799
Speaker 1: On that point, if we could return to the point

744
00:43:13,800 --> 00:43:17,360
Speaker 1: of the idea of other banks having to pay for

745
00:43:17,640 --> 00:43:21,360
Speaker 1: the mistakes of one of their peers, isn't there an

746
00:43:21,440 --> 00:43:23,879
Speaker 1: argument though, that they would have ultimately had to pay

747
00:43:23,880 --> 00:43:27,799
Speaker 1: a price should this contagion be allowed to have a

748
00:43:27,880 --> 00:43:32,479
Speaker 1: ripple effect across the financial system. I'm just wondering how

749
00:43:32,560 --> 00:43:34,920
Speaker 1: you think this would have played out had regulators in

750
00:43:34,960 --> 00:43:37,920
Speaker 1: the administration not taken the action that they did. It

751
00:43:38,000 --> 00:43:40,800
Speaker 1: wasn't it just the lesser of two bad outcomes? Potentially

752
00:43:41,400 --> 00:43:44,839
Speaker 1: they took an action, but they took an action light

753
00:43:44,880 --> 00:43:48,239
Speaker 1: in the process. I think some more appropriate question, and

754
00:43:48,320 --> 00:43:52,959
Speaker 1: one that we will look at as we look at

755
00:43:56,239 --> 00:43:59,640
Speaker 1: as we go through the review process, will be what

756
00:43:59,719 --> 00:44:04,680
Speaker 1: would have happened or why was it missed when you

757
00:44:05,160 --> 00:44:08,719
Speaker 1: look at the deposits, the ramp up in deposits, the

758
00:44:08,880 --> 00:44:14,200
Speaker 1: lack of the lack of those retail or consumer deposits,

759
00:44:15,360 --> 00:44:21,839
Speaker 1: the amounts of money from some of these depositors, consulation,

760
00:44:22,520 --> 00:44:25,960
Speaker 1: that's right. The concentration in the tech and the energy,

761
00:44:26,760 --> 00:44:30,719
Speaker 1: the green energy sector. I think that those are going

762
00:44:30,760 --> 00:44:36,000
Speaker 1: to be questions about the due diligence and the supervisory

763
00:44:36,160 --> 00:44:42,240
Speaker 1: role there for the San Francisco fat you mentioned Chinese company. Senator,

764
00:44:42,280 --> 00:44:43,799
Speaker 1: just a transition a bit. I want to ask you

765
00:44:43,840 --> 00:44:46,239
Speaker 1: about this latest TikTok bill, or maybe it's not a

766
00:44:46,239 --> 00:44:48,759
Speaker 1: TikTok bill. The Senator Warner bill, which I realized has

767
00:44:48,800 --> 00:44:53,239
Speaker 1: bipartisan support, would not specifically ban TikTok, but would give

768
00:44:53,280 --> 00:44:55,560
Speaker 1: the Treasury the tools to do that with any foreign

769
00:44:55,640 --> 00:44:59,400
Speaker 1: entity that meets certain criteria. What's the right path. What

770
00:44:59,560 --> 00:45:04,759
Speaker 1: we want to do is make certain that some of

771
00:45:04,760 --> 00:45:09,120
Speaker 1: these platforms like TikTok, which are basically a surveillance tool,

772
00:45:09,719 --> 00:45:13,759
Speaker 1: and we know that they aggressively surveil, They can go

773
00:45:13,880 --> 00:45:17,840
Speaker 1: into your key strokes, they can collect all this data.

774
00:45:18,080 --> 00:45:22,239
Speaker 1: I term it as a virtual you, and that is

775
00:45:22,280 --> 00:45:26,920
Speaker 1: what the CCP is doing through some of these apps,

776
00:45:26,960 --> 00:45:30,000
Speaker 1: and through some of their participations through the Belton Road

777
00:45:30,080 --> 00:45:33,600
Speaker 1: Initiative and Debt diplomacy, the way they're working with some

778
00:45:33,680 --> 00:45:37,080
Speaker 1: of these countries where they trade off access to a

779
00:45:37,320 --> 00:45:45,000
Speaker 1: port for utilization of their technology, their cameras to surveil

780
00:45:46,040 --> 00:45:51,520
Speaker 1: this is of tremendous concern to us. The bill that

781
00:45:51,719 --> 00:45:57,359
Speaker 1: Senator Warner and Senator soon have these or things that

782
00:45:57,440 --> 00:46:00,719
Speaker 1: are going to focus on how do we look at

783
00:46:00,719 --> 00:46:05,319
Speaker 1: these protections and find the right way forward. Now, I

784
00:46:05,360 --> 00:46:09,919
Speaker 1: will say this as we go through with this bill

785
00:46:10,000 --> 00:46:13,480
Speaker 1: being filed and the work we will do it Commerce Committee,

786
00:46:13,480 --> 00:46:16,520
Speaker 1: the work we will do it Judiciary Committee, the work

787
00:46:16,560 --> 00:46:20,359
Speaker 1: that will be done at Intel Committee. What you're going

788
00:46:20,400 --> 00:46:24,960
Speaker 1: to see our provisions that will come forward that may

789
00:46:25,040 --> 00:46:28,200
Speaker 1: not end up in one big bill, but they're going

790
00:46:28,280 --> 00:46:32,440
Speaker 1: to give us a series of smaller bills that will

791
00:46:32,480 --> 00:46:35,240
Speaker 1: help to protect our children, that will help to protect

792
00:46:35,280 --> 00:46:41,480
Speaker 1: consumer privacy, that will prevent our adversaries from conducting surveillance

793
00:46:41,920 --> 00:46:47,279
Speaker 1: on the American people on an ongoing, daily, hourly basis,

794
00:46:47,320 --> 00:46:49,799
Speaker 1: every time they pick up their phone, every time they

795
00:46:49,840 --> 00:46:53,880
Speaker 1: conduct a transaction. I have to ask you about Ukraine

796
00:46:54,080 --> 00:46:57,399
Speaker 1: while you're with us, Senator Blackburn, with Russia today now

797
00:46:57,440 --> 00:47:01,200
Speaker 1: apparently colliding one of its jet with a US drone,

798
00:47:01,840 --> 00:47:04,160
Speaker 1: sending it into the Black Sea, and reminding us of

799
00:47:04,200 --> 00:47:07,880
Speaker 1: this very precarious situation that we were in with hopes

800
00:47:07,920 --> 00:47:11,080
Speaker 1: of not escalating this into something more than it is.

801
00:47:11,520 --> 00:47:14,640
Speaker 1: Do you believe that the US presence of money and

802
00:47:14,880 --> 00:47:20,279
Speaker 1: arms is justified still in this conflict. We know that

803
00:47:20,600 --> 00:47:27,000
Speaker 1: we cannot have Vladimir Putin win. We also know that Russia, China, Iran,

804
00:47:27,440 --> 00:47:30,359
Speaker 1: North Korea, they are the axis of evil and they're

805
00:47:30,400 --> 00:47:34,480
Speaker 1: the ones. You've got drones that are being supplied from

806
00:47:34,560 --> 00:47:40,040
Speaker 1: Iran to Russia and even now Irani's manufacturing drones in Russia.

807
00:47:40,080 --> 00:47:42,520
Speaker 1: You've got rockets that are going to the Russians that

808
00:47:42,560 --> 00:47:46,600
Speaker 1: are coming out of North Korea. And of course you've

809
00:47:46,640 --> 00:47:50,040
Speaker 1: got China with their deepwater navy providing a lot of

810
00:47:50,040 --> 00:47:56,439
Speaker 1: the navigational help to Russia. We cannot let Russia win.

811
00:47:56,640 --> 00:47:59,680
Speaker 1: At the same time, I'm one of those that wants

812
00:47:59,719 --> 00:48:04,440
Speaker 1: to see more transparency, more accountability, and make certain that

813
00:48:04,520 --> 00:48:12,480
Speaker 1: this money is going to be used properly. And I

814
00:48:12,640 --> 00:48:16,320
Speaker 1: also want to see the EU and the NATO country

815
00:48:16,480 --> 00:48:21,279
Speaker 1: step up because they have not participated to the level

816
00:48:21,360 --> 00:48:25,120
Speaker 1: that they should be participating. This is on their doorstep.

817
00:48:25,200 --> 00:48:28,840
Speaker 1: They should be in the lead. Do you not still

818
00:48:28,920 --> 00:48:30,920
Speaker 1: feel though that those allies are in line with the

819
00:48:31,000 --> 00:48:35,000
Speaker 1: US on this policy? The Allies are in line, but

820
00:48:35,080 --> 00:48:39,120
Speaker 1: the Allies are not contributing as much as they should

821
00:48:39,160 --> 00:48:43,120
Speaker 1: be contributing in the defense. So this is there in

822
00:48:43,160 --> 00:48:46,560
Speaker 1: their neighborhood. Yeah, and it would be helpful if they

823
00:48:46,600 --> 00:48:50,920
Speaker 1: step forward and were more aggressive in their defense of Ukraine.

824
00:48:51,280 --> 00:48:54,080
Speaker 1: Senator Marshall Blackburn, we appreciate you're covering a few topics

825
00:48:54,080 --> 00:48:56,359
Speaker 1: with us today. The Republican from Tennessee back with us

826
00:48:56,880 --> 00:48:59,600
Speaker 1: on Bloomberg Radio. Learn a lot here, Kayley, about a

827
00:48:59,640 --> 00:49:01,879
Speaker 1: lot of from topics. Thanks for listening to the Sound

828
00:49:01,960 --> 00:49:04,560
Speaker 1: On podcast. Make sure to subscribe if you haven't already,

829
00:49:04,680 --> 00:49:07,480
Speaker 1: at Apple, Spotify, and anywhere else you get your podcast,

830
00:49:07,920 --> 00:49:10,600
Speaker 1: and you can find us live every weekday from Washington,

831
00:49:10,640 --> 00:49:21,719
Speaker 1: DC at one pm Eastern Time Bloomberg dot Com