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Speaker 1: From the Bloomberg interactor Burger Studios. This is Bloomberg day

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Speaker 1: Break for Thursday May fourth.

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Speaker 2: Coming up today, pack West is the latest regional bank

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Speaker 2: to plunge. Is that consider strategic options.

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Speaker 1: Big names on Wall Street say that FED deserves a

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Speaker 1: blame for the current crisis.

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Speaker 2: Jay Powell raises rates again, but leaves the door open

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Speaker 2: for a pause.

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Speaker 1: And Apple prepares to record earnings.

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Speaker 3: This afternoon, the Manhattan DA rules the death of a

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Speaker 3: subway rider who dined by a show called a homicide,

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Speaker 3: whilst the suspected gunman in a deadly Atlantis shooting has

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Speaker 3: been caught. I'm John Tucker, bore ahead, I'm John Stash.

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Speaker 4: Aaron sports a walk off win for the Yankees, the

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Speaker 4: Mets got swept.

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Speaker 2: The Devil's lost Game one at Carolina.

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Speaker 5: That's all straight Ahead on Bloomberg day Break, The business

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

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Speaker 5: fifteen minute podcast each morning on Apple, Spotify, The Bloomberg

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Speaker 5: Business Appen everywhere you get your podcasts.

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

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

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Speaker 2: We begin this morning with continued turmoil in the banking industry.

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Speaker 2: The regional lender PacWest Bank Corp. Has been weighing a

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Speaker 2: range of strategic options, including a sale. We get the

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Speaker 2: details from Bloomberg's Doug Prisner.

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Speaker 6: Yes, Packwest is open to a sale, although the company

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Speaker 6: hasn't started a formal auction process. We're also told the

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Speaker 6: Beverly Hills Bank is considering a breakup or a capital raise.

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Speaker 7: Now.

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Speaker 6: An outright sale has been hindered because there aren't many

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Speaker 6: potential buyers interested in the entire bank. Packwest compromises a

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Speaker 6: community lender called Pacific Western Bank, as well as some

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Speaker 6: commercial and consumer lending businesses. Also, a buyer would have

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Speaker 6: to potentially book a big loss on marking down some

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Speaker 6: of those loans in New York. I'm Doug Prisoner, Bloomberg.

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Speaker 1: Daybreak, All right, Doug, thanks well. Shares of pack West

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Speaker 1: originally fell sixty percent on the news, but just after

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Speaker 1: midnight on the East Coast, the regional bank confirmed its

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Speaker 1: in talks with several potential investors and said to posits

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Speaker 1: have increased since March. Checking shares a pack West right now,

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Speaker 1: they are down almost thirty seven percent in early trading.

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Speaker 2: And reaction is pouring into this latest chapter in the

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Speaker 2: banking crisis, Karen Pershing squares Bill Ackman says the US

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Speaker 2: regional banking system is at risk. He goes on to

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Speaker 2: say regulator failures to update and expand the insurance regime

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Speaker 2: has quote hammered more nails in the coffin.

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Speaker 1: And Nathan, the Federal Reserve deserves some of blame for

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Speaker 1: the banking crisis. That's the view from former New York

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Speaker 1: FED president and current Bloomberg opinion columnist Bill Dudley.

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Speaker 8: I think the FED broadly missed the fact that this

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Speaker 8: interest rate risk that they had created by being very

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Speaker 8: late to tighten monitary policy, that they created by flooding

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Speaker 8: the bank with deposits by doing quantitative easing, that they created,

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Speaker 8: part of the stress on the banking system that rose

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Speaker 8: when they had to tighten bi monetary policy by five

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Speaker 8: percent in a little over a year.

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Speaker 1: And former New York FED President Bill Dudley made the

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Speaker 1: comments just after the Fed's latest rate decisions. Stay tuned

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Speaker 1: for more of his inner with a Bloomberg coming up shortly.

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Speaker 2: Fed schir Jay Powell also addressed the banking termoil during

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Speaker 2: his news conference yesterday. Karen, that was before the latest

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Speaker 2: news on Packwest. Palell says issues in the banking sector

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Speaker 2: are not systemic.

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Speaker 9: Conditions in that sector have broadly improved since early March,

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Speaker 9: and the US banking system is sound and resilient. We

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Speaker 9: will continue to monitor conditions in the sector. We're committed

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Speaker 9: to learning the right lessons from this episode and will

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Speaker 9: work to prevent events like these from happening again.

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Speaker 10: Well.

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Speaker 1: As far as monetary policy, powellan company did raise rates

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Speaker 1: for a tenth straight time, but open the door to

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Speaker 1: a June pause for rate hikes. We got this reaction

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Speaker 1: from former Atlanta Fed president Dennis Lockhart.

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Speaker 11: The focus is on inflation. They're trying very hard to

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Speaker 11: separate financial stability concerns system banking system concerns from monetary policy.

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Speaker 11: We'll see if conditions forced them to begin to combine

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Speaker 11: financial stability concerns with monetary policy decisions.

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Speaker 1: Former Atlanta Fed President Dennis locker Heart says overall, he

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Speaker 1: thinks j. Powell is taking a long term hawkish position

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Speaker 1: on policy.

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Speaker 2: Interest rates are also in focus overseas, Karen, the European

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Speaker 2: Central Bank is poised to slow the pace of interest

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Speaker 2: rate increases later this morning. It's after its preferred measure

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Speaker 2: of inflation eased for the first time in ten months.

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Speaker 2: Officials at the Central Bank are expected to raise the

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Speaker 2: deposit rate by a quarter point to three point two

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Speaker 2: five percent.

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Speaker 5: Well.

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Speaker 1: Staying in Europe here, Nathan Shares of Schaller at more

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Speaker 1: than two percent first quarter profit, beating estimates. In the

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Speaker 1: oil giants said it will repurchase a further four billion

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Speaker 1: dollars of shares. That's the same buyback size as in

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Speaker 1: the prior quarter.

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Speaker 2: And back here in the US, careen the earnings continued

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Speaker 2: to roll in as well, with Apple leading the way.

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Speaker 2: Today we get a preview from Bloomberg's Tom Busby.

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Speaker 12: Despite expectations of continued solid sales of iPhones, watches, MacBooks,

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Speaker 12: and other gadgets, Wall Street is bracing for what could

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Speaker 12: be a second year over year sales decline in a

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Speaker 12: row as consumers here in the US and all around

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Speaker 12: the world pull back a bit on their spending. But

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Speaker 12: Apple also expected to boost its dividends and increase its

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Speaker 12: share buyback program, which it did by ninety billion dollars

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Speaker 12: just a year ago. For the second quarter, look for

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Speaker 12: revenue of just under seventy two billion dollars forty nine

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Speaker 12: billion of that from iPhone sales and consensus calls for

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Speaker 12: innings per share of a dollar forty three. Tom buzzby

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Speaker 12: Bloomberg Daybreak. All right, Tom, thanks well.

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Speaker 1: Turning to politics, We're just days away from a key

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Speaker 1: meeting on the debt ceiling, and now economists at the

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Speaker 1: White House are issuing a new warning. The Council of

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Speaker 1: Economic Advisor says a short default on the debt would

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Speaker 1: cost a half million jobs and knock six tens of

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Speaker 1: a percent off GDP. If it lasted a full quarter,

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Speaker 1: GDP would fall more than six percent and the unemployment

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Speaker 1: rate would go up five percent. Democratic Congressman Henry Kuahar

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Speaker 1: is pushing for a clean debt ceiling increase.

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Speaker 13: We cannot have a default because that's going to cost

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Speaker 13: the US and we saw that at twenty eleven. We

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Speaker 13: did it at the very end, and what happened the

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Speaker 13: US credit was downgraded and that caused a lot of

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Speaker 13: more money where we're paying out billions of dollars on

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Speaker 13: interest because of the downgrade.

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Speaker 1: And Congressman Henry Quayar of Texas spoke with our Washington

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Speaker 1: correspondent Joe Matthew on Bloomberg's sound on Catch the show

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Speaker 1: weekdays at one pm Eastern on Bloomberg Radio or listen

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Speaker 1: on demand wherever you get your podcasts.

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Speaker 2: Tim now to take a look at some of the

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Speaker 2: other stories making news in New York and around the world.

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Speaker 2: For that, we're joined by Bloomberg's John Tucker. Good Morning, John,

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Speaker 2: and Nathan.

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Speaker 3: The New York Medical Examiners world The death of a

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Speaker 3: thirty year old subway rid a homicide. The NYPD says

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Speaker 3: the man had been shouting at people aboard a train

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Speaker 3: on Monday, then fellow writers tackled him and won a

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Speaker 3: US marine put him at a choke hold that lasted

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Speaker 3: until his body went limp. The medical examiners. His thirty

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Speaker 3: year old Jordan Neely, died from compression of the neck.

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Speaker 3: Neeling is known to some New Yorkers as a Michael

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Speaker 3: Jackson impersonator in Times Square. Mayor Adams was ansd on

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Speaker 3: CNN about the investigation.

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Speaker 14: Well, now it's still ongoing, and really our hearts go

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Speaker 14: out to the family and this terrible incident, and the

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Speaker 14: disc attorney, as you stated, the Medical Examiner's office just

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Speaker 14: bruth the case and now it's in the hands of

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Speaker 14: investigators that determine exactly what happened. There's so many unknowns

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Speaker 14: at this time.

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Speaker 3: For now, the Manhattan DA has not charged anyone. Police

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Speaker 3: in Atlanta say they caught the suspected gunman who shot

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Speaker 3: and killed one woman and wounded four others at a

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Speaker 3: medical center. The mother of the alleged suspect, twenty four

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Speaker 3: year old m Patterson, says he was upset or a

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Speaker 3: medical mix up and wanted a drug to deal with

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Speaker 3: anxiety and depression. Atlanta Mayor Andre Dickens.

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Speaker 15: It's the guns that we're talking about. We live in

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Speaker 15: a state and in a nation where people have easy

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Speaker 15: and wide access to firearms that are used to kill

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Speaker 15: other fellow Americans. We need immediate action that meets the

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Speaker 15: urgency of this crisis.

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Speaker 3: Mayor Dickens says a citizen's tip Lanta Patterson's arrest. People

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Speaker 3: are dead, including a seven year old girl, after a

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Speaker 3: shooting in Newark, New Jersey, last night. Two others were

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Speaker 3: wounded in what polease say is a domestic dispute, and

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Speaker 3: a home on Johnson Avenue. The SATs back to gunman

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Speaker 3: was also killed. A judge dismissed Donald Trump's one hundred

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Speaker 3: million dollar lawsuit against the New York Times and its

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Speaker 3: reporters over a twenty eighteen expose on his taxes. The

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Speaker 3: New York State Supreme Court judge also ordered the former

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Speaker 3: president to pay the news outlets attorney's fees. Prosecutors is

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Speaker 3: said to be nearing a decision on whether to charge

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Speaker 3: President Biden's son Hunter with tax violations. The Washington Post

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Speaker 3: says that's according to people familiar with the matter. Global

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Speaker 3: News twenty four hours a day, powervine more than twenty

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Speaker 3: seven hundred journalist and analysts, you know, over one hundred

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Speaker 3: and twenty countries. I'm John Tucker. This is Bloomberg, Nathan.

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Speaker 2: Thank you, John. Time now for Bloomberg Sports Update. For that,

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Speaker 2: we bring in John Stanshower.

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Speaker 4: All right, Nathan.

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Speaker 2: It was a long day.

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Speaker 4: I'm not a good one for the Mets in Detroit

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Speaker 4: at day night double ahead of the Tigers won the

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Speaker 4: openers six to five, scoring twice in the eighth na

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Speaker 4: A Bada Montevino. Detroit catcher Eric Pass had five hits

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Speaker 4: and then he hit two home runs in the nightcap,

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Speaker 4: won by the Tigers eight to one. Max Schurzer, back

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Speaker 4: from his suspension, gave up six runs and eight hits.

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Speaker 4: This afternoon, Justin Verlander makes his Mets debut. Yankees are

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Speaker 4: off before starting a weekend series at Tampa Bay. The

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Speaker 4: raised just one again. They are twenty five and six,

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Speaker 4: sixteen and two at home, the eight and a half

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Speaker 4: games ahead of the Yankees, who did rally to win

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Speaker 4: a second straight over Cleveland at the Stadium. The Yanks

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Speaker 4: trailed two nothing, got home runs in the fifteen from

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Speaker 4: Willie Calhoun and new Yank outfielder Jake Bowers. Calhoun drove

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Speaker 4: in the tiny run bottom of the ninth inning, and then

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Speaker 4: the Yanks won four to three on the Jose Travino

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Speaker 4: hit in the tenth. Before the game, Yankee GM Brian

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Speaker 4: Cashman said the reason his team is in last place injury.

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Speaker 16: Were banged up so bad right now. If it was

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Speaker 16: a short seat and we'd be taken out. But we

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Speaker 16: have time to make up ground and we're gonna compete

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Speaker 16: with who we have here, and we look forward to

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Speaker 16: getting who we need back, you know what, a later date.

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Speaker 4: Thanks ok Toad Aaron Judge back next week. Stanley Cup

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Speaker 4: flaff Carolina an easy game one win over the Devils

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Speaker 4: in Raleigh five to one. That's the same score of

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Speaker 4: the games one and two losses by the Devils against

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Speaker 4: the Rangers, and of course they came back and won

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Speaker 4: that series. Vegas beat Edmonton sixty four. The Oilers Leon

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Speaker 4: Dreizeido scored all four in defeat. NBA Boston blew out

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Speaker 4: Philadelphia by thirty four. That series tied at one. The

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Speaker 4: Jets have signed veteran whiteout Randall Cobb, a longtime teammate

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Speaker 4: of Aaron Rodgers in Green Bay.

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Speaker 2: John Stash Edwin. Bloomberg Sports.

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Speaker 17: Live from coast to coast, from New York to San Francisco,

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Speaker 17: Boston to Washington, d C. Nationwide on SIRIUSXAM, the Bloomberg

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Speaker 17: Business app, and Bloomberg dot Com.

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Speaker 2: This is Bloomberg day Break. Good morning. I'm Nathan Hager.

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Speaker 2: Let's continue the conversation now on the latest rate hikes

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Speaker 2: from the Federal Reserve and the continued turmoil in the

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Speaker 2: regional banking sector. If we've learned one thing over the

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Speaker 2: past years monitary tightening cycle, it is that there are

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Speaker 2: no guarantees. There was no guarantee that the Fed would

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Speaker 2: raise interest rates as fast as it did, and it's

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Speaker 2: not guaranteed they're now going to pause Fed chaired jer

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Speaker 2: Own pal signal the Central Bank could stop hikes after

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Speaker 2: yesterday's quarter point increase, but that the Central Bank will

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Speaker 2: remain data dependent and at the same time, the Feds

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Speaker 2: not just following the data, it's also closely watching continued

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Speaker 2: turmoil in the regional banking sector. Bill Dudley, ran the

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Speaker 2: New York Fed, is currently a Bloomberg opinion columnist. He

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Speaker 2: says the Central Bank should keep an eye on how

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Speaker 2: this turmoil unfolds, but he thinks it's also time to

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Speaker 2: own up to the way interest rate increases may have

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Speaker 2: fueled the crisis. Bill Dudley discussed that along with Jpalll's

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Speaker 2: news conference yesterday with Bloomberg's Tom Kean, Lisa Abramowitz, and

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Speaker 2: Jonathan Ferrell. Let's bring you that discussion now.

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Speaker 18: If they pause, is it asymmetric or symmetric? Does a

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Speaker 18: pause mean rate cuts to come or they can say

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Speaker 18: we're going to pause and we can go either way.

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Speaker 8: Well, I think they can pause and then continue to

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Speaker 8: tighten again if the data turns out to support that.

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Speaker 8: But obviously when they do pause, they're making a pretty

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Speaker 8: strong statement that they've gotten enough information that they're confident

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Speaker 8: that policy is sufficiently restrictive to use German policy terms

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Speaker 8: to bring inflation down to two percent over time. So

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Speaker 8: a pause is going to be a pretty significant event

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Speaker 8: from the Fed. Now. Obviously contact matters that we're in

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Speaker 8: the middle of a debt limit ceiling fight at the

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Speaker 8: time of the June FMC met.

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Speaker 19: You might take a pause for.

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Speaker 8: Other reasons, but I would say a pause will be

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Speaker 8: pretty important event. What the Fed was trying to do

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Speaker 8: today was say, look, we don't know if we're going

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Speaker 8: to pause or not at this point. The message, I

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Speaker 8: think in the statement and in the Prescombe was pretty clear.

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Speaker 8: We think we're getting close to a level that's sufficient restrictive.

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Speaker 8: We're not absolutely certain data's going to tell that we

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Speaker 8: have to do a little bit more. We're clearly not

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Speaker 8: going to cut yet. So I think the pushback that

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Speaker 8: the Fed is making is really to the markets price

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Speaker 8: seeing rate cuts. The FED thinks that the process of

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Speaker 8: getting inflation done to two percent is going to take some.

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Speaker 19: Time, a lot longer than what the market thinks.

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Speaker 18: What is a cumulative effect of where we are right now?

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Speaker 18: Give in how you nailed the need for higher rates

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Speaker 18: to fight inflation.

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Speaker 8: Well, we're certainly in the vicinity of what's sufficient. I

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Speaker 8: think in my mind whether they have to do another

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Speaker 8: you know, increase or two it's hard to say at

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Speaker 8: this point.

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Speaker 19: You know, we've come a long way in the last year.

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Speaker 8: As puppet cheer Paul said in his press covers, you

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Speaker 8: go five hundred basis point five percent increase in short

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Speaker 8: term rates.

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Speaker 19: That's a lot in a year.

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Speaker 8: And we're also starting to see some of the effects

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Speaker 8: of that on the on the banking system, so that

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Speaker 8: the FED has a whole nother source of restraint, which

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Speaker 8: is a credit conditions are going to tighten because some

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Speaker 8: banks are going to pull off. Now the hard part is,

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Speaker 8: he said in his press covers, it's very hard to

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Speaker 8: access how important that a channel is going to be.

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Speaker 8: My own personal view is it's going to be fairly weak,

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Speaker 8: because the problems that these banks face were not that

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Speaker 8: they went out and made bad loans. The problem that

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Speaker 8: these banks spaces they went out and took a lot

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Speaker 8: of interest rate risks.

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Speaker 7: Bill, were you satisfied with the explanations or the answers

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Speaker 7: to the questions about the supervisory of some of these

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Speaker 7: banking institutions that have failed, Well, I.

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Speaker 8: Don't think the FED is, you know, taking the full

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Speaker 8: responsibility for being pretty slow on this process. I mean,

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Speaker 8: if you go back and look at the November Financial

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Speaker 8: Stability port, which I did this morning, there's there's basically

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Speaker 8: no mention of any kind of you know, interest rate

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Speaker 8: risk mismatch, any prime kind of potential liquidity problem in

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Speaker 8: the bank. So it wasn't just a question of the

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Speaker 8: supervision not being more aggressive with Silicon Valley Bank.

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Speaker 19: I think the FED basically missed the risk.

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Speaker 8: Here that the posits could flow out very very quickly

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Speaker 8: because of the marked and market losses on some of

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Speaker 8: these banks balance sheets.

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Speaker 7: Do you think, then, Bill, they're still missing it, that

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Speaker 7: they don't appreciate the full extent of it, based on,

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Speaker 7: for example, the preliminary look that they got to the

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Speaker 7: Senior Loan Officer opinion survey, which seemed to indicate just

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Speaker 7: an ongoing trend of what they had, are then underappreciating

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Speaker 7: a new pressure in the market.

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Speaker 8: I think that his answer on the Senior Loan Officers

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Speaker 8: servey was that it's moving in the same direction that

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Speaker 8: it was upward and the tightening of credit conditions, but

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Speaker 8: not in a way that would suggest that the problems

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Speaker 8: of the banking system since mid March have led to

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Speaker 8: a significant further tightening of credit conditions. So I think

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Speaker 8: he's basically saying there's not really any new information in

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Speaker 8: the senior loan officers survey.

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Speaker 19: That was my sense of his response to that question.

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Speaker 18: Doctor Dudley, what you just said is extraordinary. You said, basically,

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Speaker 18: the FED missed the ramifications of new digital technology the

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Speaker 18: speed with which we can move deposits out A delicate question,

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Speaker 18: if I may, Bill, and that is basically they want

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Speaker 18: Mary Daly's head. There's no other way to put it nicely.

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Speaker 18: You've had experience being a president of a FED. Do

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Speaker 18: you go after the president of any given regional FRED

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Speaker 18: when there's a major blow up like this? Or is

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Speaker 18: it much more down the food chain looking at the

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Speaker 18: process of supervision and regulation, I think it's.

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Speaker 20: A much broader issue about supervisors finding finding problems with

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Speaker 20: banks and then not forcing the banks to remedy those

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Speaker 20: problems in a timely way. The second issue here was

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Speaker 20: I think the FED broadly missed the fact that that

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Speaker 20: that this interest rate risks that they had created by

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Speaker 20: being very late to tighten monitary policy that they created

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Speaker 20: by flooding the bank with deposits by doing quantitative easing

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Speaker 20: that they created part of the stress and the banking

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Speaker 20: system that rose when they had to tighten.

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Speaker 8: Monetary policy by five percent in a little over a year.

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Speaker 8: So the Federal Reserve has some culpability here, both in

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Speaker 8: terms of the monitary policy policy policies that they pursued

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Speaker 8: over the last few years, and also on the supervisory.

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Speaker 21: Sid's certainly culpability. They're not really looking to go out

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Speaker 21: and acknowledge in a major way, that's for sure, based

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Speaker 21: on some of the statements we've heard.

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Speaker 19: They have to a degree.

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Speaker 8: I mean, I thought I thought the dead report from

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Speaker 8: Michael Barr that came out last week was what did.

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Speaker 19: Acknowledge that there was a lot of improvement on the

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Speaker 19: supervisory side that that needed to be made.

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Speaker 8: But I don't think the Fed has acknowledged the fact

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Speaker 8: that the monitary policy regime that they followed, which was

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Speaker 8: to be purposefully late and tightening monitary policy meant you

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Speaker 8: were encouraging banks to take on more interest rate risk,

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Speaker 8: and then those banks.

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Speaker 19: Got caught and the Federal Reserve heavy ring raised by

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Speaker 19: five hundred.

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Speaker 8: Basic points, you know, I mean, at the end of

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Speaker 8: the day, what they're trying to do is assess what

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Speaker 8: is sufficiently restrictive in order to get inflation back down

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Speaker 8: to two percent. Before the banking system problems, they thought

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Speaker 8: sufficiently restricted was higher than what we are today, And

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Speaker 8: in fact, Paul was talking about potentially even doing a

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Speaker 8: fifty base ap point Radhi cup not too long ago.

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Speaker 8: And then the banking problems hit, and so that caused

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Speaker 8: the BED to lower their estimate of what sufficiently restricted is.

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Speaker 8: So the data will inform them about what's sufficiently restrictive is.

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Speaker 8: If the data is really strong, they'll revive up their

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Speaker 8: notion of what's sufficiently restrictively.

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Speaker 21: Well, Bill, are they going to put more weight on

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Speaker 21: financial sector data or are they going to put more

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Speaker 21: weight on the data coming from traditional indicators.

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Speaker 8: Think they're going to put a lot of weight on

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Speaker 8: what they're seeing in terms of the labor market, wages

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Speaker 8: and inflation. You know, that's really where they haven't made

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Speaker 8: much progress yet. They're also going to probably take some

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Speaker 8: signal by what's having in the housing sector, because if

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Speaker 8: you look at the single family housing sector, it looks

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Speaker 8: like it's actually stabilizing. So the policy restraint that's already

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Speaker 8: been put in place. Looks like it's the effects of

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Speaker 8: that on housing are starting to feed.

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Speaker 21: But just a final question from us all this is

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Speaker 21: something my the Key's brought up over the last week

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Speaker 21: in my conversations with him, whether this would be a

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Speaker 21: nod to June two thousand and six. You obviously have

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Speaker 21: a deep understanding of the history of the Federal Reserve.

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Speaker 21: Back in June O six, they wrote in the statement,

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Speaker 21: the extent and timing of any additional firming that maybe

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Speaker 21: needed to address these risks will depend on the evolution

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Speaker 21: of the outlook and et cetera, et cetera, inflation and

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Speaker 21: economic growth implied by incoming information. Now, Bill, do you

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Speaker 21: think it's a deliberate nod to JUNEO O six when

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Speaker 21: essentially that decision ended up being a pause.

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Speaker 18: No.

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Speaker 19: I don't think they know yet.

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Speaker 8: I think Pow being true is very honest when he

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Speaker 8: said that we haven't made any decision about whether we're

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Speaker 8: going to pause it. I think they think that the

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Speaker 8: probability is highed that they're going to pad, but they

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Speaker 8: haven't actually got there yet.

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Speaker 2: That was former New York Fed President and current Bloomberg

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Speaker 2: opinion columnist Bill Dudley speaking with Bloomberg Surveillance following yesterday's

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Speaker 2: FED decision. If you missed any part of that conversation,

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Speaker 2: you'll be able to hear the full interview on today's

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Speaker 2: Bloomberg Daybreak podcast. Download the show every weekday morning wherever

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Speaker 2: you get your podcasts. This morning, we continue to watch

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Speaker 2: banking stress play out in the pre market, with shares

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Speaker 2: of PacWest now down about thirty eight percent. That regional

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Speaker 2: bank has confirmed Bloomberg News reporting that it is exploring

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Speaker 2: strategic options, including a possible sale. Assurances that the bank

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Speaker 2: has not seen unusual deposit outflows. Don't seem to be

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Speaker 2: offering assurances to investors this morning. So let's bring in

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Speaker 2: Herman Chan to get more analysis on this been analyzing

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Speaker 2: the regional banking turmoil throughout. Herman is a senior analyst

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Speaker 2: for US regional bank at Bloomberg Intelligence. Herman, Good morning.

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Speaker 2: What is prompting paquest to explore strategic options? What is

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Speaker 2: going on with this bank?

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Speaker 19: Sure?

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Speaker 22: So, Packwest is an institution in California. Much like SVB

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Speaker 22: and First Republic, it does have some exposure to the

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Speaker 22: tech companies, the startups, and the venture capital community. Much

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Speaker 22: like SVB, but to a lesser extent, so it's not

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Speaker 22: the entirety of its business like SVB, but as a

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Speaker 22: subset and that part of the business that suffers some

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Speaker 22: deposit outflows in the first quarter. The bank did mention

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Speaker 22: in March that it was looking at strategic alternatives, but

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Speaker 22: refrain from doing so given the market uncertainty. I think

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Speaker 22: that this is just another revisit of that notion that

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Speaker 22: it's looking to either sell itself or or sell certain

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Speaker 22: sets to shore if it's balance sheet, is.

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Speaker 2: That where this is going to go? Are we going

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Speaker 2: to see assets going to other institutions here? Could there

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Speaker 2: be other shoes to drop in the regional banking sector,

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Speaker 2: particularly out west.

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Speaker 18: Yeah, you look at.

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Speaker 10: What's happening and the market.

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Speaker 22: It has this mentality of shooting first and asking questions

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Speaker 22: later after uh the failures of really large regional banks

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Speaker 22: and strong institutions.

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Speaker 10: Before this whole banking turmoil.

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Speaker 22: SVB, First Republic and Signature also had some operations on

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Speaker 22: the west coastern California. It's it's unfortunate, but the playbook

443
00:21:44,680 --> 00:21:49,120
Speaker 22: for for shorts and the market terminal has been evident

444
00:21:49,400 --> 00:21:51,560
Speaker 22: and and it.

445
00:21:51,240 --> 00:21:52,240
Speaker 10: Is working out well.

446
00:21:52,440 --> 00:21:57,440
Speaker 22: So the market's just going down the list of potentially

447
00:21:57,840 --> 00:22:02,400
Speaker 22: weaker banks, and peck West is firmly in that picture.

448
00:22:02,840 --> 00:22:06,240
Speaker 2: It seems like this list is being gone down in

449
00:22:06,440 --> 00:22:10,640
Speaker 2: pretty rapid fashion here. When we see these kinds of

450
00:22:11,280 --> 00:22:16,080
Speaker 2: shaky situations for these banks happening almost day by day

451
00:22:16,200 --> 00:22:18,639
Speaker 2: here at this point, does that raise the risk that

452
00:22:18,680 --> 00:22:21,160
Speaker 2: we are seeing something systemic playing out here?

453
00:22:22,320 --> 00:22:26,560
Speaker 22: You know what, when the whole SVB situation was playing out,

454
00:22:26,800 --> 00:22:32,960
Speaker 22: I was thinking this was more a idiosyncratic issue because

455
00:22:33,200 --> 00:22:35,000
Speaker 22: SBB managed.

456
00:22:34,600 --> 00:22:35,920
Speaker 10: They're balancing a bit differently.

457
00:22:36,280 --> 00:22:40,520
Speaker 22: They had much more deposit inflow during the pandemic period

458
00:22:40,640 --> 00:22:45,199
Speaker 22: versus other regional banks because of who they cater to,

459
00:22:44,880 --> 00:22:49,040
Speaker 22: the strength of the startup market and the activity there.

460
00:22:49,800 --> 00:22:53,680
Speaker 22: They invested at the height of the pandemic when interest

461
00:22:53,760 --> 00:23:02,840
Speaker 22: rates were zero into security mortgage backed securities, treasuries, et cetera.

462
00:23:03,400 --> 00:23:07,240
Speaker 22: And as interest rates rose those securities went down in value,

463
00:23:07,480 --> 00:23:11,920
Speaker 22: they had much more exposure to that dynamic. What's happening

464
00:23:12,000 --> 00:23:16,800
Speaker 22: now is that adiosyncratic nature initially has seemed to have

465
00:23:17,080 --> 00:23:21,879
Speaker 22: evolved to hit other banks that didn't have necessarily the

466
00:23:21,880 --> 00:23:26,040
Speaker 22: same amount of risk that SBB did. So it seems

467
00:23:26,040 --> 00:23:29,800
Speaker 22: like we need a more holistic solution from Washington, perhaps

468
00:23:30,280 --> 00:23:33,720
Speaker 22: to do something to really stem the nature because if

469
00:23:34,640 --> 00:23:37,720
Speaker 22: we've already seen the domino effect of three banks bail

470
00:23:38,200 --> 00:23:40,800
Speaker 22: and a few banks now teetering, so there needs to

471
00:23:40,840 --> 00:23:44,680
Speaker 22: be some sort of response, it seems, from government.

472
00:23:44,280 --> 00:23:47,160
Speaker 10: Authorities to really address the situation as a whole.

473
00:23:47,359 --> 00:23:49,520
Speaker 2: Well, we have gotten something of a response from the

474
00:23:49,560 --> 00:23:54,960
Speaker 2: FDIC of you know, calling for further cap increase in

475
00:23:55,000 --> 00:23:59,520
Speaker 2: the cap of insurance for some of these deposits. Here

476
00:24:00,040 --> 00:24:05,320
Speaker 2: what more can be done to provide some further confidence

477
00:24:05,480 --> 00:24:08,159
Speaker 2: in the regional banking sector. What could it look like?

478
00:24:09,280 --> 00:24:11,360
Speaker 10: What could it look like? I think it could look

479
00:24:11,440 --> 00:24:12,879
Speaker 10: like a few different areas.

480
00:24:12,960 --> 00:24:16,040
Speaker 22: I think the FDIC have sort of paved the way

481
00:24:16,080 --> 00:24:21,359
Speaker 22: with their report of changing deposit insurance, putting some options

482
00:24:21,440 --> 00:24:27,360
Speaker 22: on the table in terms of increasing the insurance on

483
00:24:27,680 --> 00:24:33,800
Speaker 22: business deposits, perhaps even a blanket insurance guarantee.

484
00:24:33,240 --> 00:24:37,520
Speaker 10: Across all deposits. Maybe that's something that needs to be

485
00:24:38,800 --> 00:24:44,120
Speaker 10: acted upon more forcefully and more quickly. Maybe government can

486
00:24:44,160 --> 00:24:49,480
Speaker 10: do something in terms of guaranteeing deposits for a period

487
00:24:49,520 --> 00:24:53,800
Speaker 10: of time to calm the markets. So that's something perhaps

488
00:24:53,840 --> 00:24:56,359
Speaker 10: that's on the table, and something that we're looking forward

489
00:24:56,400 --> 00:24:57,600
Speaker 10: to hear more about.

490
00:24:58,160 --> 00:25:00,679
Speaker 2: So our last thirty seconds here, what about the assurances

491
00:25:00,680 --> 00:25:03,119
Speaker 2: we heard from Chairman Powell that the First Republic takeover

492
00:25:03,160 --> 00:25:05,480
Speaker 2: can put a floor on all this. Are there further

493
00:25:05,520 --> 00:25:06,720
Speaker 2: shoes to drop potentially?

494
00:25:08,760 --> 00:25:12,399
Speaker 22: I appreciate those comments, but I think that markets has

495
00:25:12,880 --> 00:25:17,040
Speaker 22: their mind made up that the market turmoil hasn't really

496
00:25:18,240 --> 00:25:23,960
Speaker 22: has it really quelled at this point. So it seems

497
00:25:24,000 --> 00:25:29,320
Speaker 22: like based on first quarter reporting that the deposit outflow

498
00:25:29,680 --> 00:25:35,520
Speaker 22: that happened with First Republic was much stronger and First

499
00:25:35,520 --> 00:25:36,960
Speaker 22: Republic was an outlier with.

500
00:25:36,920 --> 00:25:40,520
Speaker 10: The pop down. We didn't see that across the other band.

501
00:25:42,920 --> 00:25:45,840
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502
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503
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